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YummyCarolKirkwood

Listed below are comments made by YummyCarolKirkwood between Tuesday, 18th November 2008 and Tuesday, 25th November 2008.

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Massive mortgage squeeze 7:32pm on 25 Nov 2008 I've been saying it FOR MONTHS: you can either have NO LENDING at low interest rates, or REASONABLE AMOUNTS OF LENDING at higher interest rates.

Lower interest rates are not the solution to the UK's current economic crisis; in fact, they will exacerbate it. The only solution is HIGHER INTEREST RATES. But, as they said on this week's episode of "Apparitions", the patient often prefers the disease to the cure.

Higher interest rates will necessitate substantially lower property prices... which, in case you hadn't noticed, is happening (and will continue to happen) anyway - again, as I have been banging on about for months and months.

I should also like to bring a rather salient point to your attention: the BofE recently slashed Bank Rate to 3% and has indicated that it fully expects it to fall close to 0%. Savers can therefore expect a negligible return from their deposits (if indeed they decide to grace the bank with them - don't discount a savers revolt). And yet, the Government recently forced the banks to issue them with preferred shares YIELDING 12% in return for an injection of liquidity - funds which they then expect the banks to lend out at ~4%! So, having rescued the banks from the brink of bankruptcy, they are now pretty overtly forcing them to pursue policies which will result in bankruptcy! Yep, great business model: borrow at 12% and lend at 4%.

And so the New Labour Alice in Wonderland economics continues...
Taxes to fall and then rise 4:13pm on 21 Nov 2008 What do you know? Tax and spend from a (New) Labour Government!

Welcome back to the 1970s...
HBOS: Burt and Mathewson to withdraw 11:55pm on 19 Nov 2008 Personally, I would have liked to have seen China buy HBOS.

And then put its mortage rates back UP to levels consistent with market interest rates.

That would have brought into sharp focus the real situation regarding the current demand-supply balance for money in this country, rather than the artificial one (slash Bank Rate then force the banks to drop their mortgage rates) that the Govt seems to think can be a solution to over-indebtedness.

They never seem to learn.
Darling v Mathewson and Burt 11:55pm on 19 Nov 2008 Personally, I would have liked to have seen China buy HBOS.

And then put its mortage rates back UP to levels consistent with market interest rates.

That would have brought into sharp focus the real situation regarding the current demand-supply balance for money in this country, rather than the artificial one (slash Bank Rate then force the banks to drop their mortgage rates) that the Govt seems to think can be a solution to over-indebtedness.

They never seem to learn.
G20: Good and bad for UK 11:33pm on 19 Nov 2008 Re: #256 MunichMadrid7980

It seems that you really believe that an article by William Rees-Mogg is enough to change the basic facts of this mess.

The legal requirement for the US banks to provide a sub-prime mortgage market as a consequence of the US Community Reinvestment Act IS A BASIC FACT OF THIS MESS. It was not the lack of regulation that created the sub-prime mortgage market - IT WAS REGULATION THAT CREATED IT!!!

Another basic fact of this mess is that central banks in the developed countries slashed interest rates to ARTIFICIALLY LOW LEVELS after the September 11 attacks to prevent the then nascent recession.

And a more recent fact of this mess is that at the beginning of this month the MPC of the BofE slashed Bank Rate to 3%, and the UK mortgage lenders were then forced to reduce their SVRs by a similar amount even though their cost of funds was still considerably higher. The result is that companies are now having to pay for this subsidy to mortgage holders through higher rates for loans and overdrafts.

All of this is interference in free-market economics. It is preceisely this sort of interference that causes the crises, especially the current credit crunch.

Whether you like it or not, neither socialism nor communism is compatible with human nature at its current level of development. Such a "Star Trek" utopia may be achievable in a few centuries' time, but for the forseeable future capitalism is unfortunately the best way for human society to develop.

And finally, I am no apologist for the banks. It is purely their nature to take maximum advantage according to the prevailing rules and regulations. It is do-gooders' constant interference in these rules and regulations that provides the loopholes and artificial conditions for the banks to exploit.
G20: Good and bad for UK 01:52am on 19 Nov 2008 Re: #224 MunichMadrid7980

So, monetarist gurus of finance, can you please answer:

Do you hold the UK Govt. responsible for the overleveraged actions of every major bank in the developed world over the last 5 years, including UBS and Citibank, two of the worst culprits?

Of course not. But we do blame the UK Govt. for allowing UK banks to participate in the madness. And for massively reducing the role of the BofE in controlling the UK banking sector.

How exactly was the UK Govt. expected to burst the global credit bubble without destroying the City's pre-eminence as a financial centre, at great cost?

Again, the UK Government could have severely limited the participation of the UK banks. But then it all comes down to whether your priorities are short term or long term.

Every time Brown tried to increase taxation, by tiny amounts, during the 'boom' years, why did every free-market punter yell 'stealth tax' at him, when they all now bleat that he should have taxed us all far more?

Because all of his tax increases WERE by stealth, rather than honestly and overtly. And I don't recall anybody claiming he should have taxed us more (could he have???); rather, he should have SPENT LESS.

Which public services should Brown cut in order to fund tax cuts to help those on the lowest incomes stay warm this winter?

You seriously can't see truly MASSIVE amounts of fat that can be cut from the public sector? Even when it comes to productive members of the public sector, we get pretty poor value for money. For a start, I don't think a single GP should be paid above £80K pa.

Perhaps the NHS? Most monetarists wouldn't be seen dead being treated in the same hospitals as the proles, so who cares if we have to go back to the days of 2 year waiting lists for hip replacements?

Yep, ENORMOUS amounts of fat that could be trimmed in the NHS.

Has it not sunk in yet, we're in this predicament because the banks followed your free-market policies to the nth degree, and when it all went wrong came running to tomorrow's taxpayer for help?

Actually, I'm afraid I have to correct you on this point. On Monday night I read a very enlightening article by William Rees-Mogg in The Times. Let me quote you a bit:

"This Act [US Community Reinvestment Act] was originally passed in 1977, when Jimmy Carter was President; it was inspire by the Democratic Party's belief in liberal interventionism for social purposes... The Act imposed an obligation on the banks to provide sub-prime mortgages for social housing."

That's right. I must confess I was left pretty speechless too. It actually turns out that the banks were forced to create a sub-prime mortgage market through legislation passed by liberal do-gooders. The sub-prime crisis was not, as is the current popular view, the result of a lack of regulation. So, once again, it is interference in genuine free-market economics that is the fundamental root of a major problem. Surprisingly, free markets only work when they are allowed to operate as free markets.

Free-market muppets, Georges Bush and Osbourne, now is not a good time to spout your discredited views on the world economy and on the value of currencies etc.

Yep, refer to previous comment re free-market economics.

At least have the decency to wait until the taxpayer has finished bailing you out, before you tell us again how great monetarism and the free market are.

And again.

In the meantime, a bit of humility from all you free-market bloggers wouldn't be a bad thing.

Hoisted by your own petard, no less.
G20: Good and bad for UK 01:02am on 19 Nov 2008 Re: #207 laughingblacksheep

#198, the general consensus is that usually a country will not default on debts in it's own currency as it can simply print more money and inflate those debts. One seems to forget in all the excitement that credit agencies measure just one risk and that is default risk, if for example Zimbabwe inflates the currency to worthless then it hasn't defaulted but your investments are worth less.

I didn't mention anything about defaults in post #198, but while you're on the subject, if it came to a choice I thinks the odds are firmly in favour of the US defaulting on the enormous amount of debt that China holds, rather than subjecting Americans to the extreme pain of inflation that would be necessary to get the country out of its hole.
G20: Good and bad for UK 03:26am on 18 Nov 2008 This country is about to commit economic suicide.

And it would appear that nobody can do anything to stop it.

And this is what happens in a democracy?
G20: Good and bad for UK 02:56am on 18 Nov 2008 Re: #133 Friendlycard

Globally, the biggest danger is Peak Oil. Most experts seem to agree that there is no imminent danger of oil decline, but I suspect that Peak Oil is rather nearer than most people think. Without abundant oil, our present economic system cannot function, and feeding a world population of 6 billion might not be possible.

I would suggest that Peak Oil is a secondary issue to climate change. If the planet develops a severe greenhouse effect (not quite on the scale of Venus, hopefully) - and, after watching "The Mathematics of Chaos" that was on a couple of weeks ago, this would apear to be a frighteningly unquantifiable possibility - then frankly it doesn't really matter how much oil you have: the human race will come close to extinction.

But hey, fingers crossed and all that, let's just have a bit of fiscal stimulus to try and maintain current levels of consumption...
G20: Good and bad for UK 02:48am on 18 Nov 2008 One rather important point that nobody as yet (either here on anywhere else in the media, from what I've seen) seems to have considered is this: it's all very well Mr Prudence deciding that the country needs a fiscal stimulus through lower taxes and higher public spending, but surely he first needs to check that someone will actually lend him the money to allow him to do this...

(Aside: for someone who preaches - or at least used to preach - prudence at every turn, he doesn't half like to rack up vast mountains of debts.)

A LOT of people (the vast majority, probably) actually believe that Governments are all-powerful, that they can fix - one way or another - any economic problem with which they are confronted. But in reality, a Government can basically do 3 things: print money, set domestic tax rates, and (to some extent) set interest rates for their own currency. (Writing large, long-dated IOU's are another, but that effectively boils down to printing money and/or setting tax rates) And they can only wield these three tools effectively if they can convince the majority (of their own citizens and the Governments of other countries) that they offer correct stewardship of the economy.

I would suggest that the tactics used by Enron to give the impression of a fundamentally strong, profitable company are the antithesis of correct stewardship.

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