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Dubai: Just a sideshow?

Stephanie Flanders | 13:20 UK time, Friday, 27 November 2009

The smart money is still saying that Dubai is a sideshow. Fears of a "new financial meltdown" as a result of what amounts to a family feud in the United Arab Emirates look seriously overdone.

Aerial view of the The World and Palm islands off the coast of Dubai

Especially since it may only be the subsidiary, Nakheel Construction, that is affected by the standstill, not the whole of Dubai World.

But as Argentina, LTCM and Hong Kong all learned after Russia defaulted on its debt in 1998 - and we all relearned with subprime - the global financial system has a rear view mirror quality to it. Events can turn out to be closer than they appear.

If the Asian markets are anything to go by, we're in for another nervy day. As I said on the Ten O'Clock news last night, that's partly due to worries about particular institutions' exposure to Dubai. But the Dubai saga is also a reminder of two unpleasant realities, that investors have lately seemed to forget.

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The first is that there is still plenty of bad news still to come - including for the major banks. And Dubai is not, by any stretch, going to be the worst we get.

The sheer range of estimates out there for European banks' exposure to Dubai shows how little anyone really knows.

On the basis of some fairly sketchy assumptions, Credit Suisse has suggested that European banks may have $40bn exposure to Dubai debt.

They say a 50% loss on that - who knows how much it could turn out to be - would be equivalent to a 5% rise in provisions in 2010, or a hit of about 5 bn euros after tax.

That's not nothing, but - assuming the losses are fairly broadly spread - it's a rounding error on the losses of the past two years.

Certain London-based hedge funds who had bet on Dubai World being bailed out could have an uncomfortable few weeks ahead.

And big banks like HSBC and Standard Chartered will face some irritating losses if all the Dubai debt ends up being restructured.

But this isn't an Iceland. Let alone a Lehmans. And that's if the restructuring extends to most or all of Dubai's debt. It's very hard to believe that Abu Dhabi and Dubai will not, eventually, do a deal.

We don't know for sure what is happening in the ongoing negotiations between the two. But one usually reliable source tells me that they have been running into the night over the past few days - and fraught, as you would expect.

As this source put it:

"[B]oth sides have a bargaining chip. For Abu Dhabi it's 'we will bail you out'. For Dubai it's 'if you take us down, you take down the UAE' - just look at the rising cost of borrowing in places like Saudi, Kuwait and Bahrain."

It's also worth noting that Abu Dhabi itself owns a large chunk of Dubai World bonds.

They will surely do a deal. The question will be how many "flagship" assets Dubai might have to give up in the process, and how much it is forced to change its usp. (Its tolerant relations with Iran are especially resented by the Abu Dhabi. Not to mention the US.)

In the meantime, the markets will have been reminded of that second unpleasant fact they'd rather not think about in the lead-up to Christmas.

All of the money borrowed by governments in the past two years will eventually have to be paid back. And not just in Dubai. That could make for an interesting few weeks.

Thanks to Dubai, the likes of Latvia and Greece are now paying more for their borrowing. And they may have rather less chance of getting bailed out.

Comments

Page 1 of 2

  • Comment number 1.

    An optimistic interpretation Stephanie. In reality Dubai World is the tip of a very substantial and nasty iceberg in the waters ahead of the good ship SS Recovery (aka Titanic). The basic premise underlying 'the recovery' was that developed western economies would be rescued by the seemingly infinite growth capacities of emergent markets. But what the Dubai model demonstrates is that these markets are in fact very fragile; many are on the edge crisis themselves. The banking bailouts last year, and the continuing bank bail-outs through QE (that is in pratice what QE is all about), have not solved the problem. The same institutions (and others) will be back for more. The question will then be how will western voters and taxpayers react to being squeezed for more and more cash with no decernible improvement to their own situations?

  • Comment number 2.

    Good idea to hedge your bets on this one Stephanie. An interesting few weeks may be the understatement of the year. If not Dubai then there will be another wobblerly and another. We have seem to have forgotten that one of the problems of the 2008 crisis credit crunch was that nobody seemed to know just how much financial detritus was (and is) out there.

  • Comment number 3.

    When you ask for a new name for capitalism a few weeks ago Stephanie, I jokingly came up with 'Suckandseeism' because we really do not know whats going on...It's getting a bit frightening don't you think ?

  • Comment number 4.

    Update - the size of Dubai's default and the exposure of western banks is likely to be significantly higher than the published figure, due to substantial and undisclosed 'off-balance-sheet' positions held by Dubai finance (Bloomberg).

  • Comment number 5.

    The popular perception is that Dubai and all its development had been paid for in cash from oil revenues. Were that the position it would have created an element of security as there would not be a problem with servicing debt. Given the facts that Dubai's main economic markets comprise of westerners wanting to go on shopping holidays in airconditioned malls and property speculators looking to make an easy turn and those two markets have collapsed in a spectacular fashion what is the surprise? The fact that they have so much debt? or the fact that even in the separate reality of the world of the super rich that life and indeed economic activity is a feeding circle and not a linear path.

  • Comment number 6.

    'Especially since it is Nakheel Construction that has asked for a standstill, not the whole of Dubai World.'

    So are you stating that your 'reporting' yesterday was a bit lightweight and knee jerk and you had not ascertained all the facts?

    Surely if there was not a big problem Dubai World would just have given the money to Nakheel on the assumption this is just one part of Dubai World (the actual relationship is not explained in the article?)

  • Comment number 7.

    If £50 billion is a bit of a side show, makes you wonder where the main event is.

  • Comment number 8.

    Further to Comment #5
    Yes, whilst petrodollars are recycled to the West as weaponry for the Saudis or castles in the sands of Dubai, it does not have an adverse effect if both go unused. If however the petrodollar spending is further leveraged by borrowings and then default, - then there are costs in losses to the Western economies.

    Such a pity the oil revenues are not recycled via investment in third world infrastucture, - where true new wealth might be created to the benefit of all.

  • Comment number 9.

    Just like Ireland, Dubai has relied too heavily on property and construction and it has now become its downfall. It was another case of profit margins for banks in the UK in relation to Dubai, just like the subprime industry crashed the world economy it looks like Dubai may have a part to play in out apparant recovery.

  • Comment number 10.

  • Comment number 11.

    #10 Ian_the_chopper wrote:
    How much to buy back the QE2?


    I don't know. You had better ask Philip Hampton. No doubt RBS are the owners.

  • Comment number 12.

    Ms Flanders said

    All of the money borrowed by governments in the past two years will eventually have to be paid back.

    Does it.................. well no it doesn't really, we can simply print more and pay it back that way. Unfortunately what we give them back won't be worth that much though.

    You know that the BOE has just magically created an extra £200 billion.
    You also know that sterling has tanked in recent times and that the cumulative debt mountain of the UK Government is enormous and growing at an alarming rate.

    Would you really risk placing your investment in sterling on a fixed interest over five years? If the BOE starts to print more money again Sterling will fall and you’re stuffed aren’t you.

    The Bank of England and the Debt Management Office will likely already know this, having consulted with the GEMM’s (Gilt Edged Market Makers), and right now as we sit here blogging, they are probably planning what to do next.

    Do they stop QE and risk a very likely shortfall in the take up of gilts?
    Or
    Do they continue QE in the hope that the Government will dramatically reduce its expenditure in the near future?

    My guess they’ll be too nervous of risking the failure of gilt auction and QE will continue.

    As regards the UK’s AAA rating:

    The first is A is given because you pay back the capital.
    The second A is given because you honour the interest payments
    The third A is given because you don’t water down the value of the gilt by printing more money.

    Hence the warning from the credit agencies. The only reason we have not down to two A’s (AA) is because of the exceptional economic times.

    However if everyone else is pulling out of recession and we don’t then ultimately one A will have to go if we print more money.



  • Comment number 13.

    "Certain London-based hedge funds who had bet on Dubai World being bailed out could have an uncomfortable few weeks ahead."

    Respectfully Stephanie, if you are going to make this type of comment imo you should state whom the hedge funds are and how much of an exposure gamble they are taking, if its a big one then i will start using the casino banking phrase i dislike so much.

    i read today that property in Dubai rose c80% between mid 07 to mid 08 alone, did our banking leaders not think that this may be a buble and that prices may be close to the peak and either get out or at least make sensible provisions, or maybe did they think of course this is crazy but i'm going to get a few million in bonuses before it all colapses.

    At least nobody so far has tried to tell us its all GB's and AD's fault behind a family feud in the UAE!.

  • Comment number 14.

    Dubai worlds problems are a symptom of the credit crunch, not a cause. They're basically selling luxury property and you may have noticed that the property market has taken a nose-dive. Doubtless the 'market price' of all those pretty little islands will be about half what they were when they started building them.

  • Comment number 15.

    "The smart money is still saying that Dubai is a sideshow"

    Not the smart money I talk to .............

    25 -30,000 residential units due for completion in Dubai by the middle of next year.......with NO buyers. As a consequence property prices to be driven down a futher 10-20% in Dubai.

    Hundreds of thousands of sq ft of office space being completed during 2010 with companies either closing or mothballing office space in Dubai during 2010.

    At least 4-5 large property developers in Dubai, unrelated to Dubai World, with debts potentially in the region of $20-40 billion. Some of which is with soft balance sheet Club Med European banks in Greece, Italy and Spain.

    Along with a number of central and east European banks Dubai is going to be the main show on and off throughout 2010.

  • Comment number 16.

    The 'smart money' - it's as if it isn't controlled by human beings.

    How clever have we been so far?

  • Comment number 17.

    "Especially since it is Nakheel Construction that has asked for a standstill, not the whole of Dubai World. "

    So mis-information being provided by the media? - I thought there were rules by which financial journalists are bound?

    "[B]oth sides have a bargaining chip. For Abu Dhabi it's 'we will bail you out'. For Dubai it's 'if you take us down, you take down the UAE' - just look at the rising cost of borrowing in places like Saudi, Kuwait and Bahrain."


    This sounds like a familiar story - but maybe last time it was Banks - 'Bail us out or we'll take the Economy down with us'

    ....and who says the moral hazard is dead?

  • Comment number 18.

    Expect some real winter sun margains in Dubai over this winter season.

    Only an hour longer flight that Tenerife and lots of luxury hotels that will be virtually empty and its not in the Euro.

    Post 11 you are probably right re RBS. Wouldn't it be easier though to buy up some RBS debt at a big discount and offer to buy it back using that?


  • Comment number 19.

    15. At 3:43pm on 27 Nov 2009, Doctor Albion

    ....and from a source I have who lives there - the rents have been going through the roof all year as there is no rent control or guidance on rent levels.

    In order to fill the credit gap the landlords are jacking up the cost of living. It sorts out the short term problem but creates a long term one as people depart your country or demand higher wages to stay there.

    However what Stephanie says is actually true - this is a sideshow, as was Northern Rock, HBOS, RBS, Lloyds, AIG, Lehmans, GM etc. they are all sideshows to Capitalist overproduction which is the cause of all the forced destruction of Capital as the diminishing profit margin is finally discovered by the realisation that credit was being used to fill the gap created by the contradictions of Capitalism.

    ....however I don't expect the BBC to be so insightful - they would rather concentrate on the who, what, where and how - never the why.

  • Comment number 20.

    I have said this before but the people who control the prices are the people who get the bonuses - so what would you do in their position with their pay structure.

    Say you are rewarded for above average growth in valuation and say average growth is 2.5% a year and for simplicity in this example I ignore compounding the figures.

    In example 1 - no bonus for any of the 5 years.

    Yr1,2,3,4 & 5 - the shares, property, pension fund whatever grew by 2.5% a year and was 12.5% higher at end of 5 years.

    In example 2 - mega bonuses in years 1,2,3 & 4 and nothing in year 5.

    Yr 1,2,3 & 4 growth of 5% a year followed by a drop in value of 7.5% and was 12.5% higher at end of 5 years.

    This is what is happening - the market is being manipulated by the people who control it for their own gain while we watch on.

    In actual fact what happens is that markets do overall grow by slightly more than they would simply due to human nature because in years 1 to 4 in my example the growth tends to fuel higher numbers but when it gets to year 5 the drop off is slightly less than it should be simply because prices are 'sticky' downwards.

  • Comment number 21.

    5. At 2:17pm on 27 Nov 2009, Slungiehill

    I agree - Dubai and many Middle Eastern countries are employing the 'Las Vegas model' of Economic management.

    This works fine during boom times as it's effectively tourism - but when the tourists dry up you need to find another USP. In Vegas they engage in activities which are illegal elsewhere (gambling) - but the strict law in Dubai isn't going to allow that - oh dear.

    Still, it might prove the adage once and for all that you cannot build a house on sand! (and indeed nor an Economy)

  • Comment number 22.

    Dubai: Just a sideshow?


    iiicicicicicicicicicicicicicicciciciciciciciciicicicicici


    Would it be a back one to get the diddle doe up and running?

  • Comment number 23.

    "Dubai house prices will fall by up to 70 percent from their peak levels in the fourth quarter of last year, Swiss investment bank UBS has predicted." This prediction was made in April after property prices had reduced by 40% in the first quarter alone.

    I recall this as i e-mailed my friend who just moved out there to say whatever you do don't buy thinking your getting a bargin. He e-mailed back saying that the colapse was very conspicious and that he thought the 70% decline was a conservative estimate. When he was doing his budgets, planning to go out there, he was worried weather he could afford very basic accomodation, he ended up renting the height of luxury, just so the owner could get some money in.

    how could anyone have been caught on the hop over this?

  • Comment number 24.

    I was slightly surprised by the FTSE's reaction today (although the reaction of the FTSE no longer bares any relation to the actual state of the Economy).

    However, having seen the Dow today (they're back from holiday) they see it as a little more than a sideshow.

    Don't be surprised if we get a ping-pong effect as each market triggers the next one to start down the following day. If it's really bad you get the Asian markets pulling down the European ones and then the American ones - and back to the Asian....

  • Comment number 25.

    I'm sorry to keep picking on you Stephanie - but it's my job.

    "But this isn't an Iceland. Let alone a Lehmans."


    ...nor was Iceland, until Iceland happened, and nor was Lehmans, until Lehmans happened.

    In fact, nor was LTCM until LTCM happened - the point being that none of these events were 'like' another until they actually happened - and each one was effectively unique - making prediction impossible and consequences disasterous and unexpected.

    I wonder when we reach the end of the world some smart journalist will say "it's no end of the wor...."

    The most frightening thing about this whole episode is that they were able to keep it quiet. This must have been brewing for a while and it goes to show how free information is crucial to make sensible investment decisions.
    If I were an investor I would be running for the hills - if they can keep this quiet then what else is hiding under the stairs....

  • Comment number 26.

    posts 10,11 and 18 - money trail.

    UK citizens pay taxes some of which are paid to Royal Family.

    Royal family have QE2 built with some of that money.

    QE2 comes to end of useful life and is sold to Nakheel Construction (proceeds to UK govt? or Royal Family).

    RBS loans money to Nakheel Construction which is secured by assets including QE2.

    RBS gets into financial difficulties and UK govt bail out using UK citizens tax money.

    If Nakheel Construction goes bust presumably UK citizens (through UK govt ownership of RBS) will then own 80% of something that we paid for in the first place!

  • Comment number 27.

    Dubai have already given up Emirates and the Burj to Abu Dhabi - there's not a lot left to bargain with....

  • Comment number 28.

    I hate to appear self-flagelating but.....

    The countries with the biggest property bubbles seem to be the UK, Spain, Dubai and the US.

    The countries with the biggest number of ex-pat British are Spain, Dubai and the US (i'm assuming this, it's not a fact)

    ....does anyone else think we might be exporting our obsession with housing bubbles?

    ....or am I speculating without really knowing what I am doing???

  • Comment number 29.

    Stephanie,
    So more exposure to risky debts by the grandees in the City of London.
    I have no doubt that the oil-rich arab countries will bail Dubai out, but at what cost? Where is the money coming from?
    Once again we see the world's stock markets drop as another wave of bad news hits the headlines.
    Will this be another call to the now over-stretched pockets of the tax-payer?
    Will, once again, the financial experts come crawling back, apologising for their failure?
    Who knows, Stephanie.
    I think that there is still more to come!

  • Comment number 30.

    I just checked the UK debt clock and we're at:

    £820,875,870,541

    Have a good weekend - you might not get many in the future as we'll all be working to pay it back.

  • Comment number 31.

    #26 GRIMUPNORTH77

    I think you may be confusing QE2 with Brittania.

    As far as I know Phil the Greek didn't have any equity in the QE2.
    Queen Elizabeth the second yes but QE2 no ;-)

  • Comment number 32.

    I've seen a few family feuds over money in my time and they've never ended prettily. Batten down the hatches. Our banks will be overexposed there no doubt - Gordon said we weren't so we must be!

  • Comment number 33.

    10. At 3:02pm on 27 Nov 2009, Ian_the_chopper wrote:
    How much to buy back the QE2?

    --------------
    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6671257/Dubai-may-sell-QE2-to-tackle-debt-crisis.html

  • Comment number 34.

    Whaaats money sh!....its an I0U dont tell!

    Whats Gilts shh!....its an I0U made out of an I0U dont tell!

    Whats derivatives shhh! its an IOU made out of an I0U of an I0U dont tell!


    Whats toilet paper shhhh! its recycled for the last time I0US before its fed to soylentaxpayers

    Sh! its you know what on its way to meet its maker..at pan.... downing street

  • Comment number 35.

    Dubai: Just a sideshow?

    Since sea levels are rising, because of this sideshow and the whole of the rest of the side show, relativistically Dubai is sinking. All that property at the water line will go under the sea. It is one huge folly just like the rest of the huge folly.
    The bubble continues to burst globally. The CRASH is ongoing.

  • Comment number 36.

    Stephanie,
    Please don't tell me that a major financial institution in the U.K. has investments in Dubai.
    If so..I may as well book an appointment with the euthanasia clinic in Switzerland....because I've just lost the will to live!

  • Comment number 37.

    Millenium dome build cost £800,000,000.... sale price £1


    Dobuy build cost £35,000,000,000.... sale price £40 INKLUDING DEHIDRAAATED WAAATER


    Banking ...co[s[mic level in[k]sanity and financial neut[e]ron packing for themaaases, purrrrrfect for the feeaaart cheese hire cats looking for the last laugh as Gordlov rings the bell of feedom to make them saaa
    livaaate both ends .




  • Comment number 38.

    It IS a really naive intro--- in this 'new age' anyway. Whatever else we have learnt over the last 2 years is that there is no such thing as smart money, anymore.

    It's a phrase that shows how much things have changed--- just like the shock to deference delivered by the First World war ---the last two years have delivered a fundamental change to perceptions and there is no going back.

    There are no 'smart money people' just greedy people --- some may be lucky; and some like old Madoff and the Maktoums aren't lucky any more--but none of them are smart.

  • Comment number 39.

    33 KitGreen

    Dubai would be well advised to keep the QE2 as a lifeboat.

  • Comment number 40.

    Is that the same 'smart money' that got us all into this global situation?

    or someone else we have not heard of yet who actually knows what they are doing and behaves responsibly??

  • Comment number 41.

    35 billion for a glorified man-made sandspit that projects merely several metres above sea level. All those high carbon air-conditioned 'elite' lifestyles will raise sea levels and wash their own sand castle investments into the sea = genius.

    Any other 'smart' ideas on how to spend your petro-derived dollars? How about investing in some science and the creation of a smart low carbon oil replacement energy source that would actually help the people of the world.

  • Comment number 42.

    writingsonthewall 2 Stephanomics 0

  • Comment number 43.

    I write this blog because Mr Peston’s article sees the further loss of billions by British Banks as bearable. And I realise that at the front of this loss is likely to be the RBS & Lloyds.

    So consider this:
    The banks take Government money to survive.
    The Government increases tax on its citizens to pay for this.
    The extra tax you now pay means that you can no longer keep up with your mortgage payments.
    The bank in receipt of the government money then repossesses your house.

    Now for those who think throwing a family out of their home is to be considered bearable, I say to you it is not bearable.

    I have seen repossessions, and more than I wish to remember, I have seen families thrown out on to the streets, the eyes of worried children wondering where they are going to sleep tomorrow.

    If this is considered bearable, then those who would consider it so, lack both morals and compassion.

    Is there anyone out there who has morals and compassion?

  • Comment number 44.

    #43 Dempster wrote:

    Is there anyone out there who has morals and compassion?

    -----------------------

    Yes...his name is Guy Croft (guycroft)!

    He used to regularly post on here about a year ago...highlighting the very same issues that you have above, regarding repossessions and personal bankruptcies.

    But everyone at the BBC just ignored him....so he stopped posting.

  • Comment number 45.

    43. At 9:39pm on 27 Nov 2009, Dempster wrote:
    I write this blog because Mr Peston’s article sees the further loss of billions by British Banks as bearable. And I realise that at the front of this loss is likely to be the RBS & Lloyds.

    So consider this:
    The banks take Government money to survive.
    The Government increases tax on its citizens to pay for this.
    The extra tax you now pay means that you can no longer keep up with your mortgage payments.
    The bank in receipt of the government money then repossesses your house.

    Now for those who think throwing a family out of their home is to be considered bearable, I say to you it is not bearable.

    I have seen repossessions, and more than I wish to remember, I have seen families thrown out on to the streets, the eyes of worried children wondering where they are going to sleep tomorrow.

    If this is considered bearable, then those who would consider it so, lack both morals and compassion.

    Is there anyone out there who has morals and compassion?

    ---------
    I'd like to think I have, but my compassion is a bit strained at the moment, as my Children's future is now at stake, my savings are all but gone and all the 'sensible' things I did to provide for the future of my family are turning to dust in front of my eyes. So Justice requires that Bankers and Politicians hang, no compassion.

    At times like this, Atheist though I am, the words of Jesus in the Gospels ring out as he whipped the money lenders out of the temple.

    "you have turned my Father's house into a den of thieves'

  • Comment number 46.

    So our Bankers who are each paid over a million don't actually know what they have invested in Dubai World. Now that should be scary, but I guess we have all become immune to Bankers incompitence to the point where we now expect and accept it as the norm.

  • Comment number 47.

    #28. writingsonthewall wrote:

    "...or am I speculating without really knowing what I am doing???"

    I'd say that this, as usual, is the correct answer.

  • Comment number 48.

    46. At 10:22pm on 27 Nov 2009, RedundantHippie wrote:
    So our Bankers who are each paid over a million don't actually know what they have invested in Dubai World. Now that should be scary, but I guess we have all become immune to Bankers incompitence to the point where we now expect and accept it as the norm.

    ---------
    I once argued that whatever our Politicians were, it wasn't stupid. Well, the same goes for the Bankers.

    Let us consider a mythical Banker from a mythical bank. Let us call him Sir Shred-the-lot, from the Royal Bank of Spendalot.

    He effectively bankrupts his bank, but then says to the Munificence of Spendalot (also known as the Saviour of the World) if you don't rescue the Royal Bank, we are all doomed. His Munificence isn't too bothered that we are all doomed, but he is a bit concerned that the 'We' encompasses his tenure as Munificent, and so pours money into the Royal Bank, but decides it doesn't look good that Sir Shred-The-Lot is still in charge, so he sends his enforcers to suggest Sir Shred falls on his sword, except that since Spendalot is now a civlised Socialist society, falling on swords is banned (well swords were first because they were sharp, so falling on them was simply banned by accident, which was allowed as it was a safe accident), so it is suggested Sir Shred retires. Sir Shred then says why should I?, the Bank is saved, I can go on now his Munificence is providing money, so the enforcers add a sweetener, 'we'll give you another big whack on top of your pension. Hmm thinks Sir Shred, that will go on for the rest of my life, wherease his Munificence will run out of money in a year maybe. So off goes sir Shred with an enhanced pension the Peasants of Spendalot probably couldn't even dream of.

    Now, when people wondered why Sir Shred ruined his bank, it was because he got great bonuses for it, and having ruined it, he got an additional sum on his pension. So, just as with Politicians, before you can accuse them of either Stupidity or Incompetence, you have to first ask the question.

    Whom do they serve?

    We all think they served us, hence our accusations of stupidity, incompetence etc. However, if they served themselves, suddenly they don't look so stupid or incompetent do they, and us, well we voted for his Munificence and we've accepted his taking from the poor and giving to the rich, so what does that say about us?

  • Comment number 49.

    #48 DevilsAdvocate

    Great post!

    There's an old saying in continental Europe that goes along the line of...'the British can be be easily bought off'...for the right price.

    They certainly have us sussed!

  • Comment number 50.

    45. At 10:18pm on 27 Nov 2009, DevilsAdvocate wrote:
    "I'd like to think I have, but my compassion is a bit strained at the moment, as my Children's future is now at stake, my savings are all but gone and all the 'sensible' things I did to provide for the future of my family are turning to dust in front of my eyes."

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

    Im afraid your "wealth" that is turning to dust in front of your eyes, as it is for so many of us, was only ever there because of the smoke and mirrors act politicians and bankers have been pulling for the last god knows how many years.

    That "wealth" was never really there.

    Rising property values, increasing pension pots, ever-upward stock market indices, profit growth - it was only an illusion, magiced by the easy credit era and the bluff of said ignorant (crooked even?)politicians and bankers.

    And as for claims that there are never any true smart money people, well there are. Lots of them. They are the ordinary men and women of this parish who foresaw this house of cards tumbling.

    So, yes, it is tough to see your "wealth" disappearing. Just console yourself with the fact it was never really there in the first place.....

  • Comment number 51.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 52.

    50. At 11:29pm on 27 Nov 2009, yukapataya wrote:
    45. At 10:18pm on 27 Nov 2009, DevilsAdvocate wrote:
    "I'd like to think I have, but my compassion is a bit strained at the moment, as my Children's future is now at stake, my savings are all but gone and all the 'sensible' things I did to provide for the future of my family are turning to dust in front of my eyes."

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

    Im afraid your "wealth" that is turning to dust in front of your eyes, as it is for so many of us, was only ever there because of the smoke and mirrors act politicians and bankers have been pulling for the last god knows how many years.

    That "wealth" was never really there.

    Rising property values, increasing pension pots, ever-upward stock market indices, profit growth - it was only an illusion, magiced by the easy credit era and the bluff of said ignorant (crooked even?)politicians and bankers.

    And as for claims that there are never any true smart money people, well there are. Lots of them. They are the ordinary men and women of this parish who foresaw this house of cards tumbling.

    ==========

    So what did they do with their foresight?

    --------

    Not a reply to your post, but I though this link interesting.

    http://newsvote.bbc.co.uk/1/hi/uk_politics/8375544.stm

  • Comment number 53.

    48 Well done DA ,PREENTITLEMENT TERMINOLOGY CUTS TO THE QUICK of the DobuyAAA'Salot ruinaaa'sencealot

  • Comment number 54.

    God forsaken Dubai is not the real Islamic Middle-East...for there they allow drinking and usuary.

    Their Islamic 'brothers' will let them squirm and choke before lifting a finger.

    Allahu Akbar!

  • Comment number 55.

    #50


    "And as for claims that there are never any true smart money people, well there are. Lots of them. They are the ordinary men and women of this parish who foresaw this house of cards tumbling.

    So, yes, it is tough to see your "wealth" disappearing. Just console yourself with the fact it was never really there in the first place....."

    You may THINK that there are "smart money people" but that has yet to be proved - todays position can easily be tomorrow's loss. However, many people forsaw th end of the bubble but were in no position to defend themselves from the ravages of the squeeze on savings.

    It's really great to see the milk of human kindness flowing through your last paragraph!

  • Comment number 56.

    I've been busy for the last few days so I'll start backwards.

    Dubai World is probably safe for now, it will be bailed by it's bigger brothers.
    Nakheel Construction will probably limp on.
    The subcontractors and investors who can't get out will pay the price (now who are they ?)

    Not much support for 47bn tax rises, not much support for 47bn spending cuts, not much support for anything really. Now if a party was to offer 47bn tax cuts and 47bn spending increase then they would probably get lots of support.

    Winners - banks, they can now increase charges and also charge annual fees, credit card companies also win as their £12 capped charge was predicated on the OFT assertion, expect them to revert to £35 + annual fees
    Losers - the general public (as usual, why did we even entertain that this might not be so)

    QE is toxic. It is a cumulative poison, the symptoms will not show until it is too late.


  • Comment number 57.

    ~28 "The countries with the biggest property bubbles seem to be the UK, Spain, Dubai and the US.

    The countries with the biggest number of ex-pat British are Spain, Dubai and the US (i'm assuming this, it's not a fact)"

    You forgot one very important bubble - Hong Kong !! It, too, has one of the highest levels of British expatriates since it was a former colony (until 1997) !! However, its economy is still going well despite all this crises !!

    Still, smart money there say that the bubble will burst soon for two reasons.

    (1) the pressure exerted by Mainlanders going to HK for economic reasons are falling due to the rising economy "back home" !! Many economic migrants are "going home", leaving empty flats and pressing rentals downwards.

    (2) the HK government have realised that too high property values are causing the peasants to be revolting and they have been selling government land to dampen the property market.

  • Comment number 58.

    #38 "It IS a really naive intro--- in this 'new age' anyway. Whatever else we have learnt over the last 2 years is that there is no such thing as smart money, anymore."

    If you think so, then you haven't met any. The world has not ground to a screeching halt, there's still money moving around; therefore there's still smart money moving to where it's safest !! Although, admittedly, there's not that much smart money left in Britain since all the smart money moved out when the bubble was peaking.

    Try travelling beyond the next village and you'll find that the world is a lot bigger than you think !!

  • Comment number 59.

    #39 "Dubai would be well advised to keep the QE2 as a lifeboat."

    Wasn't there some Jewish bloke called Noah who was told about 40 days and 40 nights of rain...?

  • Comment number 60.

    #40 "or someone else we have not heard of yet who actually knows what they are doing and behaves responsibly??"

    Think Buffet !! :-)

    I'd bet *HE* didn't get *HIS* crown jewels caught in *THIS* particular wringer !!

    Just because a load of attention-craving, self-professed "celebrities", no more than jumped-up salesmen and barrow-boys, got caught in insane risk-taking, it does not mean that *EVERYONE* was doing the same. The smart money usually does *NOT* follow the herd !!

  • Comment number 61.

    #55 FDD - "It's really great to see the milk of human kindness flowing through your last paragraph!"

    You can only milk human kindness so far and then it runs out !! If Britain got done by its own "elected" government, then it got what it deserved !! Such is democracy !!

    As for Dubai, many who went there were a grasping lot who were only in it for the potential profits. If they got caught out, then they have no one to blame but themselves !!

  • Comment number 62.

    52. At 00:05am on 28 Nov 2009, DevilsAdvocate wrote:

    So what did they do with their foresight?

    ---------------------------------------

    Aha.....that is for only the truely smart money people to know ;)

  • Comment number 63.

    58 ishkandar

    There isn't any money moving around, just paper which rustles a bit when it is stacked high.

    But if you listen carefully, you can hear the clink of gold coins here and there.

  • Comment number 64.

    52. At 00:05am on 28 Nov 2009, DevilsAdvocate wrote:

    So what did they do with their foresight?

    -------------------------------------

    Aha.....that is for only the truely smart money people to know ;)

  • Comment number 65.

    Is this the same "smart money" that encouraged thousands of Brits to pour money into the Dubai property bubble in the first place?

  • Comment number 66.

    AudenGrey @ 3wrote:
    "When you ask for a new name for capitalism a few weeks ago Stephanie, I jokingly came up with 'Suckandseeism' because we really do not know whats going on...It's getting a bit frightening don't you think ?"

    As this particular castle-built-on-sand is funded according to Islamic Financial instruments, it's more a case of 'Sukuk-and-seeism".

    It will be truly interesting to see whether this 'usury-free' financial system is robust enough to survive market crashes and serious financial downturns.

  • Comment number 67.

    At the risk of schedenfreude, I must confess that the lack of aesthetic taste exhibited by purchasing a vulgar 'Palm' or 'World' property has now been seen to be accompanied by lack of financial acumen.

  • Comment number 68.

    67. At 09:56am on 28 Nov 2009, MaxSceptic wrote:
    At the risk of schedenfreude, I must confess that the lack of aesthetic taste exhibited by purchasing a vulgar 'Palm' or 'World' property has now been seen to be accompanied by lack of financial acumen.

    --------------------------------------------------

    Yes, it was symptomatic of the time: new and easy money being thrown at something glittery but lacking substance.

    I would add: anyone clueless enough to buy a very expensive house built on sand deserves all the financial bad luck that is undoubtedly coming their way!!!

  • Comment number 69.

    45. At 10:18pm on 27 Nov 2009, DevilsAdvocate

    For what is worth DD this week having paid the running costs of business I made the grand total of £75.00 pre tax. I quoted on one job, and didn’t get it.

    And when I hear Mr Peston on his post telling me it’s bearable, I have to admit that even I am now thinking that a long drop on a short rope for those who created and profited by this mess would be a reasonable penalty.

  • Comment number 70.

    #67 "At the risk of schedenfreude, I must confess that the lack of aesthetic taste exhibited by purchasing a vulgar 'Palm' or 'World' property has now been seen to be accompanied by lack of financial acumen."

    No one had ever accused our, and other, "celebrities" of taste or financial acumen. They may have other talents but financial acumen is not one of them !! The whole thing was based on the Barnum Principle, named after a famous American, Phineas T. Barnum !!

  • Comment number 71.


    If nothing else it's good to see people waking up and finally realising that all their money isn't actually there at all.

    I've been saying for at least five years what people are saying now - the equity in your property - the "profit" if you will - is only yours once you sell. And if you sell you need to buy somewhere else, and if you buy a bigger place then high property prices mean you need more money, a bigger mortgage, more taxes, more fees to the agent and so on. So for the average person high property prices are bad, but we've been sold the lie that they are good. So we crow at middle-class dinner parties about how clever we've been when the bottom line is we're sitting on a paper profit we can't spend through good fortune and nothing more.

    Now as more and more of what the coneheads and rocket scientists have developed is turning to dust around us it's time to look at what underpins all these things.

    A bond is an IOU, a promise to pay at some time in the future. The value of the bond depends on the rate of interest promised and the perceived likelihood of actually getting the future value at all. I say "future value" rather than "money" because getting a specific amount of money is of limited value if the spending power of that money has devalued. As Warren Buffett said many years ago, if you've got a 5% savings account then a 100% income tax with zero inflation has the same net effect as 5% inflation and no tax. We've been lied to there as well, focussing on the tax treatment rather than the net increase in spending power.

    In other words, if we invest enough money to buy a pizza now, when we get it back we need enough money to buy a pizza and have something left over. If what we get back is less than it takes to buy a pizza we've lost out, regardless of what the numbers say in isolation.

    So it is with building castles in the sand. Lots of property built in the hopes of selling it, when the buyers it seems were mostly people with lots of pretend money who only bought because they figured someone else would come along with more pretend money and they could earn a quick profit. It doesn't take a rocket scientist to see that the only difference between an upward spiral and a downward spiral is confidence. The upward spiral stops when confidence expires, the downward spiral won't stop until confidence returns.

    So, the $64000 question, who's feeling confident right now? If we aren't feeling confident in the future the coneheads can pull whatever numbers they want to show us the "recovery" but it's not real until we all believe in it again.

    For myself, I don't believe in things unless I can see some substance. And unfortunately even our money no longer has any substance, given that "the full faith and confidence of the government" isn't worth anything.

  • Comment number 72.

    52. At 00:05am on 28 Nov 2009, DevilsAdvocate wrote:

    So what did they do with their foresight?


    mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm

    I suspect that they swapped it for 20/20 hindsight so they could dock with the FReB horn of plenty whilst they were still in reverse orbit within the AAAsterroid belt

  • Comment number 73.

    What an expensive way to learn some very basic facts! In the long term only substance and quality prevail. Well, if this is the only way people can learn, So Be It!!!

  • Comment number 74.

    19. At 4:03pm on 27 Nov 2009, writingsonthewall wrote:

    The comment above is spot on.

    -Certain people tend to forget last year when everything came to light with Northern Rock and we know the rest.

    -The organizations that rated financial institutions got it really wrong as well.

    -This week the head of the IMF said: there is still a lot of burden of debts under the banks' umbrella but we don't know how much.

    -This week the Governor of the Bank of England announced that they had provided banks with emergency loans but of course we did not know about it at the time.

    - The British Government injected 200 billion pounds into the economy so far but I would rather say into the pockets of bankers.

    - Now Dubai is emerging as the place for the next trouble.

    - Certain media is assisting by not asking the right questions.


    The real issue here is we cannot trust these people around because they are manipulative.

  • Comment number 75.

    Posts 67 & 68 I seem to remember a large number of famous footballers having purchased properties in Dubai which seemed to be at the top end of the market eithert thst or being used to "sell the Dubai lifestyle".

    "Glittery but lacking substance" seems to sum up them and their lifestyles just about right.



  • Comment number 76.

    55 foredeckdave

    You could have bought gold dave.

    Anyway NuLab will try inflation and cuts, BluLab will try cuts and inflation. And a well hung parliament will ... , ah well better not go there. Inflation erodes wealth, cuts erode services. Further assults on savings due. When inflation does kick in then interest rates will go up and houses will be interesting. Thing is just how deep can the cuts go, because if they can't cut enough which is quite likley in view of the size of the problem, then inflation is the only real option, despite what Merve the swerve at the BoE tries to tell us via the wish for low interest rates. Imports are going up in GBP.

    Hmmm, afraid those with a lack of activity had better get used to it because it aint gonna go nowhere. I have suggested ways of dealing with the new environment but many do not want to hear, so be it. Darwinism will sort.

    I still dont understand why you came back, do you find it different. Bit like a film set with too many extras perhaps?

  • Comment number 77.

    75 Ian the chopper

    That'll be an own goal then, followed by a penalty shootout. League relegation for Dub. I never really understood the concept of building islands shaped like palm trees, just came across as a bit console game-ish. Megalomania and SimCity all in one. Or the vanity of saying we have made a tiny map of the world - you can buy a tiny country and say at your next dinner party - I've bought Brazil. Arh well. Somebody has turned the on-off switch to off. Never does to try and build in real life what is entertaining in virtual reality. The sooner this sort of egocentric rubbish falls the better, propping it up is just propping up a unbalanced fantasy.

  • Comment number 78.

    What is the deal with the BBC. We all pay them money and they feed us sophistry.

    Dubai is not the harbinger of a new financial meltdown. Dubai is a symptom of the ongoing financial meltdown. It merely heralds a new phase.

    Sure Abu Dhabi will probably ultimately shore up some things in Dubai - but only after it has secured access to assets at some new lower prices. This is what rich people do in times of a deflationary debt spiral. No doubt the BBC stands ready to spin news of any cash from Abu Dhabi as a great victory for the stability of the financial system.

    There will be no more "growth" out of Dubai, only a continous downward spiral in asset prices. As soon as Dubai is stabilised on a downward trajectory (perhaps sooner) some other part of the system will start to fall apart - Look to Eastern Europe as a red hot favorite.

    How might the boys from the Middle East look to recover their costs/losses? Maybe they will see what they can do about moving the oil price higher. A bit of a death race really - they need to move oil prices up faster than the US$ goes down. Every time oil goes up there will be downward pressure on the US$, meaning that oil prices need to go up some more. This will create ongoing pressures in the US. How long before someone decides that a bit of missile enhanced supply destruction might make everyone feel better.

    There is no hope. More losses for Britains finest banks.

    Maybe a bunch of drunken members of the underclass forced British banks to lend vast amounts of money for castles built on sand. Maybe greedy British home owners insisted that they would only take out liars loans from banks that guaranteed to max out their exposure on garbage in the Middle East. Maybe it was my fault, maybe it was your fault - It certainly couldn't have been the air miles junkies from British banks. "Oh what a tangled web we weave when at first we practice to deceive."

  • Comment number 79.

    76 glanafon - Yep everyone will try inflation, problem is they may not make it. Not looking promising at the moment, methinks you need a lot more supply destruction before you can stoke the inflationary fires.

    Tis a dangerous game they play. Their money printing cannot forestall the destruction to the supply base. But once a currently unknown but sufficient amount of supply is destroyed then its hello Zimbabwe.

    Assuming that the men with the guns can stay confied to barracks (a big assumption) then the only hope is to sit on something of value (gold and silver spring to mind) and then exchange that for hard assets as close to the bottom as you can time things. The window of opportunity is likely to be small.

    Every other strategy leads to wipe out.

    Things are not promising as most people don't seem to realise that one of the first things to be wiped out will be the ability of government to provide for its citizens. People are going to be on their own, and only a fool would think there will be someone coming to rescue them. The big danger is that a fool will come to rescue them and the people will mistake the fool for a messaih. I believe Mssrs Cortes and Pizarro once benefitted from a similar misunderstanding - although I will spare you the quotes.

  • Comment number 80.

    I don't know how much this is worth but here are some figures that might interest you guys -

    http://www.bloomberg.com/apps/news?pid=20601208&sid=abFTDi7T0.VE

    Also notice the spin to divert attention from RBS - It was pointed out that HSBC had the greatest exposure in the UAE. However, its exposure to Dubai World is - "Goldman Sachs Group Inc. analysts led by Roy Ramos estimated potential credit losses at HSBC related to Dubai World may be $611 million"- whereas no mention what RBS's total exposure to Dubai World is !!

  • Comment number 81.

    Stephanie, the picture at the top of this blog really highlights the problem. Instead of investing in 'real' assets for the future, we have seen frivolous spending and speculative borrowing.

    Castles have been built on sand - literally.

  • Comment number 82.

    My apologies for those that have previously commented but I haven't the time to acknowledge...

    Stephanie - You're supposed to be reporting an unbiased and objective based economic comment.

    Thus could you please confirm:

    1 What are you defining as 'the smart money'? Who are they?

    2 Where is the evidence that this is 'just a family feud'?

    3 What have you based your view on the fact that this is 'just a sideshow'?

    4 How much evidence and knowledge have you investigated to believe that you have all the facts in hand?

    5 And where is your analysis to provide a probability of whether there is potential for wider spread of contagion in the market risk/ credit markets, never mind the impact closer to home due to the UK's over-exposure both in banking and in other industry terms?

    There is no smoke without fire. Do we know the extent of Dubai World's off-balance sheet indebtedness? What is it that we don't know for this announcement to have taken place?

    Family feud? Get real.........who ever is feeding you this nonsense needs a reality check........

    Seriously if you're being paid by tax-payers' money to report then at least provide a decent analysis. This is not the frst time this is in question.

    If you can't then I suggest that you go back to college and learn a little more about your trade.......



  • Comment number 83.


    Is there anyone out there who has morals and compassion?
    You are all regular bloggers:
    GRIMUPNORTH77
    SpartacusmartyrAAAs
    BankSlickerminustheR
    ishkandar
    glanafon

    Curiosity prompts me to ask this question.

    I have read your blogs, but I’m not 100% sure about you, so I ask you to consider the following, it is a previous post, but nevertheless I ask it anyway:

    The banks take Government money to survive.
    The Government increases tax on its citizens to pay for this.
    The extra tax some families have to pay means that they can no longer keep up with their mortgage payments.
    The bank in receipt of the government money then repossesses their house.

    Families lose their homes, children their stability and security.

    In short those who have done nothing wrong, and more particularly the young, are likely to suffer considerably in the future.

    For those working in the public sector, a sector that may well see massive job losses, then again the same applies, income lost, home lost, families destitute.

    Where do you stand on this? ………. Which is a poorly phrased question, perhaps I should have said what’s your position from the humanitarian point of view?

    In any event if you have no view there is no need to respond, if you are unsure of the question, let me know.

  • Comment number 84.

    83 Dempster. The western financial system is systemically bankrupt. Like a cancer banks grew their balance sheets in an uncontrolled and uncontrollable manner.

    Their ultimate hedge was capture of governments and democratic institutions. They have leveraged their capture of government to force the sequestration of wealth from the general populace in order to temporarily shore up their balance sheets.

    One consequence of the foregoing is the situation as you describe it.

    Whether the general population has done nothing wrong is a mute point. They could have resisted the forces that led to the capture of democratic institutions, just as their forefathers fought to create, develop and maintain institutions that could assist the general population. They did not do so. Who should protect the young if not their parents? So, if the young are to suffer then, perhaps it is self evidently obvious that they have been failed by their parents.

    No force of nature has led to the present situation, it is man made. Some were guilty of acts of comission and others guilty of acts of omission. Does it matter?

    As Bob Dylan sang - A hard rain is gonna fall, so it would be best if people prepared themselves to survive as best they can. Full spectrum meltdown is coming, meet it like a man, and do not expect governments to save you. The only thing that is to be done with government is to seek to weaken it sufficiently so that it dare not follow the next orders of their paymasters which will be to ramp up the war effort.

    Regretfully the population remains deluded and it does not seem likely that they will use their power to derail the slow march to the final meltdown.

  • Comment number 85.

    78/79 Arm n Leg

    I am worrying, you are slipping into quotes. You are also apparently showing signs of disambiguation which is of concern. Is this due to playing chess with Marvin from the hithchikers guide too often. I have said stay away from the ol' Friends Reunited.

    No, the likely outcome is neither extremity, but somewhere inbetween usually with the worse mix of entanglement to slow dynamic. Like a marble in a bowl slowly orbiting we are heading there. When so much is style over substance then when the style is brushed away little is left.

    The most important thing is simply that there is equality in decline between nations then diferentials are maintained. As the culture here is so expert in the management of decline we may even have an advantage. Meantime new activity can initiate. The digital medieveal scenario. Gold is just a token - the important thing is trading something people are prepared to make themselves poorer to get. In a world geared towards oversupply, value has collapsed for many products. It is easily dealt with. Is being dealt with. It was also inevitable, but people would not listen. Most still do not want to recognise the process and wish for the re energising of what was.

  • Comment number 86.

    Armagediontimes

    Apologies for not including you, but thanks for responding.

    Would you make a verbal stand for the average Joe & Jane and their kids. Irrespective of whether by their ignorance they have unwittingly caused the problem that is now coming?

  • Comment number 87.

    I really hope that that Dubai World and other leveraged entities will default so that we can address the serious moral hazard problem created (in the West) by ex-post guarantees and bailouts. Anyone visiting Dubai in 2006 / 2007 and did not wonder who would occupy all those castles being built on the sand must have been seriously mentally challenged. And, if they then lent money to build more such edifices, surely deserve their fate if the loans are not repaid. The only innocent victims in this whole scam are the exploited migrant workers, who could not have known better.

  • Comment number 88.

    83 Johnny Demp

    ''The banks take Government money to survive.''

    No, the govnmt supplied money to the banks to stop overnight foreclosure which would have bankrupted the banks and de facto all borrowers. In the absence of wholesale interbank funding there was no escape. A lack of governance lead us there. Short term money borrowed from overseas was fed into long term domestic borrowing. When short term borrowing was not renewed the gap had to be filled. this situation wqas created by greed on the aprt of the banks which was unregualted by the government and pushed along by the public in general. The hooks are into the banks and they have to repay in due course. Markdowns are too high on some books, maybe. Property book writedowns 8 cents in the dollar summer 2008 because nobody knows where the toxic bit is and nobody knows what the property will end up being worth.

    ''The Government increases tax on its citizens to pay for this.''

    This has not happened. Historically total tax take has been between 43 and 46 percent the figs are held by ONS. Brown ran at 46 most of the time, particularly at the end ie he followed the boom curve. Public sector growth continued at 2 percent whilst all was falling apart in the private sector. Tax increases if they occur will be small.

    ''The extra tax some families have to pay means that they can no longer keep up with their mortgage payments.''

    Not necessarily. The hardest hit will be those coming to the end of a fixed package, or finding they do not meet new criteria handed down as part of reforms.

    ''The bank in receipt of the government money then repossesses their house.''

    It depends if sufficient people default and what deals are cut.

    ''Families lose their homes, children their stability and security.''

    There is a statuary provision on housing etc, in many cases this cost is higher than keeping people in their existing housing but across budget accounting is not allowed by statute. The trigger to repo a house is set by a level of default and the desire to claim shortfall against the insurance paid for by the borrower (this insurance protects the bank not borrower and is nothing to do with optional insurance deals). From what I can see. Therefore the key is to make negative equity transpostable or unsecured, breaking the link between insurance payout to the bank and repo changing timescale.

    ''In short those who have done nothing wrong, and more particularly the young, are likely to suffer considerably in the future.''

    Yes, in process. That is the mechanism, nothing new I am afraid.

    ''For those working in the public sector, a sector that may well see massive job losses, then again the same applies, income lost, home lost, families destitute.''

    Unless different funding or working practise is adopted this is likely. Where direct or indirect if govrnmt income stalls and the drop is premanent then it is impossible to avoid job losses somewhere. It doesnt matter whether you are in the private or the public sector the process is the same.

    ''Where do you stand on this? ………. Which is a poorly phrased question, perhaps I should have said what’s your position from the humanitarian point of view?''

    The decisions are not mine and cannot in large part be avoided. They will be implemented, probably. I blog to say what I think is happening that is all. The problem is psychological not physical in most outcomes. The humanitarian problem is elsewhere in the world and there is along way to go before equality on this is likely.

    In a systematic failure social structures are broken.

    The young are the most likely to suffer and will in turn likley become a demographic time bomb, disenfranchised.

    Manufacturing has shrunk by about 90 percent from 4 decades ago. In order to create work more 'manufacturing' has to develop. The cracks between corporate activity and the far east tell you where this can be done. Brown isn't up to the job, his knee jerk is to invite more of the same, Chinese big business, if they will come. But he does what he is advised, by the sort of people who got us here. imho.

    It is about what can be done locally. Low on transportation, high on value added, low on overheads, high on individuality. Privacy has been destroyed then next thing is the destruction of individuality. Therefore the objective has to be to supply individuality, effectively.

    Its got nothing to do with what I think or do or believe, it is simply what a critical mass of people will do, and most probably will do not a lot becasue they believe a benevolent demi god who does not exist will do something. Therefore you have to do what you think best whilst telling others what you think is going on.

    Debt is simply borrowing from the future so that you have more money 'now'. So when you get to the future you are poorer by defintion, unless you have asset growth. Get to the poorer future and the only way to recover the standard you would have had there without the pre existing borrowing is to borrow again. Turn off the debt supply and you remain poorer. That is what has happened. The main problem has occured in this century under BlairBrown UK and Bush US. Others affected but not as badly it would appear. Coincidentally the two worst affected were also the two keenest to go to war.

  • Comment number 89.

    86 Johnny Demp:

    ''Would you make a verbal stand for the average Joe & Jane and their kids. Irrespective of whether by their ignorance they have unwittingly caused the problem that is now coming?''

    I assume this is coming my way as well.

    It makes no differnce what I say. There is a democratic process. I have already said I mean no harm in response to a previous question. The issue(s) remains education as to outcomes, decisions made in knowledge, and commnuication. Why on earth are you bothered what any one individual says. The recessionary process means individuals are lined up and fired arbitarily. That is what happened in the last recession, the one before, the one before..... I attended one vote a couple of decades ago where the proposal was that free coffee and tea where abolished so a job could be saved, budget sufficient. The majority voted against the cut, that is the way people behave. Its Darwinism. I am not saying it is right or wrong, it just is what goes on. That is all I am saying - this is what I have seen and this is what I think is going on, in view of the deafening silence from interested parties.

  • Comment number 90.

    Post 83 Dempster wrote: "Is there anyone out there who has morals and compassion?"

    The quick answer is yes - I do and I'm sure many others here do too. I note in post 69 your increased frustration "... I have to admit that even I am now thinking that a long drop on a short rope for those who created and profited by this mess would be a reasonable penalty" ... and I am sure many bloggers here feel the same sense of frustration (and have expressed similar views previously here) too ...

    Following on from your question with regard to those who have acted in 'ignorance', for me I find I have to differentiate between Type 1 Ignoromics (Ignorance) and Type 2 Ignoromics (Apathy) - the former I do excuse (but attempt to educate), the latter I struggle to excuse ... as it is these people (who "duck" rather than "do something about it"), that allows the politicians/bankers etc to get away with murder/daylight robbery (i.e. apply Poweromics) ... see http://poweromics.blogspot.com/2009/06/for-evil-to-flourish.html for instance ... and the following pertinent quote below too ...

    'For evil to flourish, all it needs is for good men to do nothing' [Edmund Burke]

    ... noting that the 'battle' ahead initially involves reducing both ignorance and apathy! Apathy will reduce as the situation gets much worse, but reducing apathy sufficiently without yet more people feeling more pain is one of the difficulties we currently face.

    David Clift

  • Comment number 91.

    89. At 10:37pm on 28 Nov 2009, glanafon wrote:

    'It makes no differnce what I say'.

    Only if you believe that it is so.
    galanafon I am an average working Joe, help me, help us, help them, irrespective of what you are or were or would be. If no one makes a stand for the that which is right……. What then?

  • Comment number 92.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 93.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 94.

    A property in a mountain? Why not a off shore flat in Dubai? Need a loan? Here we go again!

  • Comment number 95.

    Lets look on the bright side. Life without money will have it's upside but we don't need it. One of its main uses was as an efficient way for the state to remove 50% of everybody's wealth. I'd like to see them try and tax 50% of output instead.

    Wasn't it Shumacher that proposed small self-sufficient communities looking after eachother ? Sounds idyllic.

    Of course the one main problem is that the public sector, as we know it, would have to go and I'm not sure how we would pay the television licence fee but these are minor issues.

    Dempster I take the humanitarian point and you are right but you have to admit that the public sector is a big part of the problem. I'm curious if you would consider, as a partial solution, removing all public sector pension liabilities from future taxpayers. I understand these are currently in the region of £1 trillion.

  • Comment number 96.

    91 Dempster:

    ''glanafon wrote:

    'It makes no differnce what I say'.

    Only if you believe that it is so.''

    You continue to be emotional. My experience is it will not help.

    I am not attempting to belittle you, but - You appear to continue to look for somebody to tell you what to do. This is because the ruling party want you disengaged from decisionmaking so you have become accustomed to being in that state.

    Do you think the questioning of actions is welcomed, look at the fight about expenses. Look at what is to come from the Iraq inquiry. The only way forward is for individuals to think about their actions and accept responsibility for the resulting outcomes.

    Blair went to war without a clear public majority believing it was right. His outcome was re-election. Paddy Ashdown has publically said he advised Blair that in his opinion there could be a quick in and out with Afghanistan, a country that Alexander the Great, Ghengis Khan, the British Empire, Soviet Russia all have historically had problems with, Alexander and Ghengis did not hang about but passed through, its called a hint. Now Paddy says we could be there for sometime. He is still reported as his opinion being valuable. I am not aware he has apologised for his wildly optomistic comments and their part in the outcome. This might be unfair to Paddy I dont know. Paddy is not actually the problem the whole approach was and stil is. BTW I am not aware of the population figures for Afgahnistan but the US are reported as spending a Million USD per soldier. The UK spend to date, which I take as direct not indirect, is reported as 14 Billion GBP for Iraq and Afgahnistan. This looks rather like Vietnam. There are more effective ways to spend money on a country(s).

    However. Your problem right now is not me or whether I speak out. Your problem is the same as everybody elses. Brown's national debt is of such as size, that as well as trying to keep public services afloat, each individual in the private sector - which is where the wealth is initially generated - has to find something in the region of towards 30K GBP plus interest to repay the debt alone.

    Debt repayment being on top of keeping the services going.

    As many private sector workers do not pay much tax and some are on tax credits where is the money going to come from. Typically historical interest rates give a doubling plus of the starting lump sum so the debt over 25 years will be in the region of 2+K pa per private sector worker to get rid of. This is a problem.

    So then take a look at Local Govmnt Authority figures. Roughly one third of LGA income comes from local rates. The other two thirds from central funds. It is estimated that one third of LGA income goes to plug the LGA pension funding problem. So any rates you pay are simply paying public sector pensions effectively.

    The whole system is going to heel over unless we are lucky, this has been warned about since the 1970s, and the only outcome I can see is public services being cut. It has nothing to do with what I want or think is right. Your MP is supposed to represent the views of constituents, go along to their weekly surgery (appointment usually needed) and ask what they think. Specifically ask what public sector cuts they are expecting, and what steps they are supporting to encourage the private sector. Then move on to social issues. No answers go back next week. Most MPs want dialogue with the public. Most want the questions to ask. If they dont get another MP.

    Other than that, businesswise the growth for small business is imho predominately on the internet. Niches are not niches when they are worldwide. There are a huge number of them. To quote an oddball - LARP, live action role play, which I have absolutely nothing to do with, but watch the growth of out of curiosity, is getting significant, The international fairy LARP business is international and has its own British based magazine and national and international conventions. This is where gurls dress as fairies and guys as pixies to accompany them, must love them, thats for sure, but they do it. I am trying to picture you as a pixie provision provider and failing. But I am sure there are other things you could develop. Specialist forums will give you some insight. There are a billion odd english speaking western culture people worldwide you can potentially address through the web. That is without China which is now the most english speaking nation on earth. Just how many customers do you want.

    We never go near Facebook or Twitter refuse to, never advertise to speak of, but we are discussed as topics on both, we get the advisory emails. If we went on FB or twitter we could not cope with the communication flow, thats why we stay away.

    ---

    You keep trying to tie public services and private business together. They are seperate in structure and objective. Get the private sector healthy and the public sector follows. Just a point of view. Personally I would not wish politics on anybody as a job.

  • Comment number 97.

    #82 "Family feud? Get real.........who ever is feeding you this nonsense needs a reality check........"

    If you had done a little research into the history of the "United" Arab Emirates, you'd find that it's, quite literally, very bloody !!

    Wars and assassinations were the order of the day, if they weren't intermarrying for dynastic or political purposes, until the Brits "stepped in" to "unite" them, for the administrative convenience of the empire !! Even so, these Arabs have very long memories and it's mostly within the related ruling families of those various sheikdoms !!

  • Comment number 98.

    #83 "Is there anyone out there who has morals and compassion?
    You are all regular bloggers:
    GRIMUPNORTH77
    SpartacusmartyrAAAs
    BankSlickerminustheR
    ishkandar
    glanafon"

    Your question has no significant meaning unless you define exactly what you mean by "morals" and "compassion" !! One man's morals and compassion may be another man's repugnance !!

    Furthermore, you'll have to define *who* that "morals and compassion" are directed at and *why* !!

    Failing which, that question is like those loaded questions in those "surveys" and "questionnaires" that have *pre-determined* outcomes !!

  • Comment number 99.

    #84 "As Bob Dylan sang - A hard rain is gonna fall, so it would be best if people prepared themselves to survive as best they can."

    And he also sang - "The answer, my friend, is blowing in the wind !!" :-)

    "The only thing that is to be done with government is to seek to weaken it sufficiently so that it dare not follow the next orders of their paymasters which will be to ramp up the war effort."

    I can't remember who said this but - "Governments, like fire, are good servants and terrible masters !!" Perhaps this might suffice !!

  • Comment number 100.

    #85 "The most important thing is simply that there is equality in decline between nations then diferentials are maintained."

    In order for there to be equality between nations, there has to be equality in thoughts and actions. When one nation acts like the prodigal son, then it cannot expect be equal to the others who worked hard and saved; nor can it expect to get the fatted calf when it's blown its wealth on riotous living !!

    "In a world geared towards oversupply, value has collapsed for many products."

    It is not the "oversupply" per se but rather an oversupply of unwanted goods !! Don't see anyone complaining about an oversupply of Mercedeses or BMWs while disused airfields are *carpeted* with unsold Vauxhall products !! If people insist on producing unsalable (for whatever reason) products, they have only themselves to blame !! Unless they say, "The grapes were sour, anyway !!"

    "Most still do not want to recognise the process and wish for the re energising of what was."

    Market forces will force the recognition of their folly, as they did with GM/Vauxhall, so they had with Dubai World/Nakheel !!

 

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