The day the bill arrived
Since the onset of the credit crunch in August of last year, there have been bad days, worse days and today.
What a horrible coincidence of accidents and emergency resuscitations we've seen.
Here they are, in no particular order.
1) The collapse and nationalisation of Bradford & Bingley, set to cost our cash-strapped banks at least £9bn over the coming years (see my notes of this morning).
2) The injection into Fortis, a continental bank rather bigger on one measure than the Belgian economy, of £9bn of Benelux taxpayers' cash.
3) The takeover, with US taxpayer support, of Wachovia - the huge battered US retail bank - by Citigroup, a bank which has had capital-deficiency problems of its own.
4) A massive penny dropping on Wall Street, the recognition that Congress will extract back from financial firms in a few years the $700bn to be injected into banks to keep them alive.
It's the day when no-one could be under any illusion about the costs of rebuilding our structurally impaired financial system.
That cost will fall directly on taxpayers and on banks.
Indirectly it will hurt businesses - some of which are already being starved of vital capital by banks' inability to lend.
And for millions of people in the US and Europe, there's the double blow of an erosion in the value of their wealth (through declining property prices and the falling value of long term savings in pension funds) and of an increased risk of redundancy.
Or to put it another way, for most of us, there's little in the way of shelter from the storm.
Don't forget that last week we had a massive injection of one-week loans into the banking system by the Federal Reserve and Europe's troika of leading central banks. And in the UK, the Bank of England auctioned £40bn of three-month loans.
That was supposed to calm nerves and reduce the price of money for banks.
But the cost for banks of borrowing from each for three months in sterling, euros or dollars has risen again.
Banks are as worried as they've ever been about the credit-worthiness of their peers. Trust and confidence are almost extinct qualities.
Share prices too are falling hard - which in part is a belated recognition that the crisis in money markets will have an impact on the prospects for most companies.
If economic growth was going to be slow before the events of the past three weeks, it's going to be a lot worse now.
And if you wish to know which economies are perceived by global investors to be most flawed and vulnerable, you could do worse than look at the price of insuring sovereign debt in the credit default swap market.
Those CDS prices tell you that Austria, Belgium, Denmark, Finland, France, Germany, Sweden, and the Netherlands are all perceived to be more credit-worthy - to be in a better position to service their national debt - than either the US or the UK.
PS. Silly me. In my list of financial firms in receipt of massive first aid, I forgot to mention Germany's Hypo Real Estate, the commercial property lender, which has received a whopping £28bn in credit guarantees from the German government in collaboration with a consortium of banks.
Oh, and Iceland's third largest bank, Glitnir, has been nationalised.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~20~RS~)
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Any one of these events a year ago would have been headline news for a week!
We do live in interesting times!
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So could this be the nadir?
It was clear once the voter friendly measures had been put into Paulson's bail out that it was going to be a bitter pill for the banks to swallow, hence the drop in share prices today (which have mostly been lead by financials).
But now we've seen the conclusion to sagas of the three latest names to be bandied about over the last few weeks as the next failures and will soon start to see some money from the US hit the system (albeit with strings attached).
There's a saying about the benefit of buying when everyone else is at their most desperate to sell. My (admittedly relatively uneducated) guess is that yes this is probably the worst day of the crisis so far but in a few months time we might just look back at today as the low and turning point.
Assuming we don't see any more huge shocks in the next few days which is certainly a big assumption.
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Robert
Can you please explain to your readers that for a bank a deposit is a liability and a mortgage loan is an asset for them.
This basic accounting principle seems to be lost on most of them.
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Small and medium sized companies have been laying off staff in increasing numbers over the last few months and it seems this will increase further in the coming months.
Companies that didnt do so are now finding funds running out and one can only forsee many companies going down, resulting in massive job losses to follow
The fall in tax and NI revenues coupled with the increase in benefits for those out of work will be reap even more misery on the Country.
Meanwhile this inept Government keeps spending, employing more and more consultants and advisors whilst pouring billions (ours) into failed banks.
I cannot see anything other than a long hard time in front of us.
The experts continue to claim they didnt see it coming, including Prudence himself. Anyone with an ounce of common sense could see the bubble building. All caused by borrow and spend and spend, spend again.
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RBS is the next name on the list, but given the lesson of B+B I reckon that the banks may actually get together and do something about them on quiet, if indeed there is a problem.
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In the immortal words of someone, "we're all doomed"
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The August lending figures announced today make for very interesting reading.
Why should we be surprised that no one wanted a mortgage in August as they waited for Alistair darling to make up his mind re stamp duty.
Expect more problems this week and every week for the foseeable future.
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This comment was removed because the moderators found it broke the House Rules.
RE 3:
So that means that depositors should immediately withdraw their deposits to reduce the banks' liabilities?!
Don't think so!
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#2
Erm... no. You miss the most fundamental point of all - that most people do not have the resources to buy without borrowing, which they cannot. People do not sell on the basis of fear of owning the asset. People sell out of fear of needing cash instead of the asset at a time when the price is even less favourable. This is nowhere near the nadir of this particular recession. This is the brink. From here-on in, it is a desparate race for the bottom, until prices are actually low enough for people to be able to risk their own money.
Mark my words, the lady is not for turning just yet.
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#1,
Whats interesting about it? We are in deep trouble.
Peston, pass me the razor blades.
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The mind boggles at how much of these loans have been made against leverage rather than real value of assets. But then again what is real value any more?
I still like to think of them as phantom assets for no one seems to know what really exists and what doesn't.
In the meantime both taxpayers and banks continue to pour money into the dark abyss hoping there is something tangible at the bottom.
What will happen to the value of our currency in the meantime can only be left to the imagination.
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next victims:
- ambac
- dexia
- the us dollar
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Passing more pain onto the banks unders these condidtions was bound to cause their shares to crash and put them under more pressure. How daft was that, Darling?
Lloyds must now be thinking about pulling back from HBOS. Is that possible?
Is anyone else wondering how safe the last four banks are and whether or not we will all end up in HSBC?
Isn't it about time the Treasury put a halt to this by g'teeing the top 4+ or is this not possible?
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Robert - could you do a recap of who owns what now in the financial space. Also, who has gone too? The big names are obvious but it would be helpful to see all the names in one place. kthxbai.
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Some list Robert. Heard the other day one reporter saying how B and B was a victim of troubled times. Oh dear how sad for them.
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#7
Despite what RICS would have you believe, I really doubt that 1% stamp duty affects the market that much. I also doubt the that dissapearance of 100% mortgages had a huge direct affect on it.
The reason no one is buying is obvious: who would buy at this point in a obviously plummeting market? We're a way off the bottom yet. If the last cycle is anything to go by we'll reach that when the average price is back down to £110,000 or so. And I suspect that will happen sooner than most people think.
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Robert - unlike you to make things sound better than they are, but you forgot Glitner and Hypo Real Estate on you list of today's banking failures.
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The bill arrived in the form of the laughing policeman ,informing us that what we call society is now an open debtors prison ,with no means of paying up to get out .
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I do wish someone would explain to your audience that any loan is only an asset if someone is repaying it. Once there is no repayment it is a liability. If the asset the loan is secured against is falling in value it is a double liability.
Sharpen your pencil Mr. Peston the day is not over yet. Another one may go soon. It is a deck of cards.
A Newmarket bookmaker can run his business better than GovUK. He can balance his book.
With Brown and Darling in charge it is no wonder we have no credit-worthiness.
regards
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...'Those CDS prices tell you that Austria, Belgium, Denmark, Finland, France, Germany, Sweden, and the Netherlands are all perceived to be more credit-worthy - to be in a better position to service their national debt - than either the US or the UK.'
As a US citizen, I will not speak about UK politics or policy--not my place to do so.
But as a US citizen, I will say that Mr. Peston's statement quoted here is due to the fact that our government--executive, legislative, and judicial--is a ship of fools adrift in a sea of nonsense.
I oppose this bailout with all my heart, because it is immoral to reward fraud with borrowed money for which the taxpayer is on the hook.
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The only way out of this is a does of out of control inflation. Not pain free, not everybody's cup of team, but its the best way to erode the mess of debt we're in.
Britain best placed to ride out the economic storm? Ridiculous assertion that has come from increasingly ridiculous looking men.
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Did anyone ever believe the claim that we were the 3rd biggest economy prior to the crunch?
I for one didn't because the economy was built on debt.
Yet even now its spend, spend, spend by the government.
The question now is how long before we need to go to go cap in hand to the IMF?
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Robert:
Your list of bad news is missing one big item - the news today of a 98 percent decline, year on year, in new mortgage funds issued in August. The mortgage business has either collapsed or seized up, whichever you choose to call it. The housing market will do the same.
Those other countries being rated more highly does not surprise me one bit. They have more sound financial principles.
We have been living in a party of illusory wealth based on a borrowing binge and asset sales. This is wake-up time; the party is over.
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#10
Sorry, slight misunderstanding I think.
I was talking about the possibility of share prices bottoming out right about now, I think you thought I was talking about house prices which clearly have a way to go yet.
And I'm basing that on (maybe) the worst news now being out of the way and the worst expectations being priced in but maybe I'm just being a little too optimistic.
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As Robert Says its 'pay day'. All things have to be paid for and we are going to pay for the last few years? excess. We are not doomed but we have to consume less and save more which is bad for economic growth...........but is that a bad thing? Lets debate that now we have the chance to build a new economic model.
Lets not be too downhearted, this could be a positive lesson; this is the most environmentally positive news we have had in a decade. We must stop over consuming so lets take the hint and look forward in a different way.
This financial 'Armageddon' or payback time is similar to what we are going to shortly face with our planet - take note and lets fix that now as well.
Think positively everyone - we are creative people lets learn and move forward responsibly.
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@9
Thats not what I am advocating but that is essentially the problem.
The banks have there assets tied up in mortgage loans, That gives them a liquidity problem.
If all depositors were to request their money back the bank couldn't pay its liabilities.
Hence the reason why now they have swapped some of those mortgage assets with the Bank of England for cash they are not willing to tie that cash up with the risk of issuing another mortgage asset or lend the money to another institution.
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I thought that the FSA had banned the 'spivs and specs from short-selling?
Why then is the market dropping like a stone??
Oh, I forget the real money managers are getting rid of their toxic shares just as quickly as they can. (Which was always the reason the share prices were falling.)
What next? A ban on share sales? Seems like a logical step to me.
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Interesting - I had a call from my bank earlier to tell me about a great new savings product and whether I wanted to take them up on it......
Desperate for deposits or merely the usual marketing?
First time it's ever happened, and no I'm not telling who it was!
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"Banks are as worried as they've ever been about the credit-worthiness of their peers. Trust and confidence are almost extinct qualities."
Lets rephrase that "Consumers are as worried as they've ever been about the credit-worthiness of their Banks. Trust and confidence .........."
Banks and the stock market ensured my endowment was not on target to repay our mortgage. (60% shortfall).
Stockmarkets investments are for the long term so they say. Regarding our pensions, we are nearly at the end of "our long term."
Retirement is just 10 years away.
Banks aren't lending. Last time this happened my partners working week was halved. It still is. The company is hanging on by the skin of its teeth.
Banks aren't lending - rumours abound Banks want a u.s. bailout. Are they all insolvent?
Banks aren't doing anything to help themselves, they expect governments and consumers to do that.
Banks aren't lending. Are Banks indulging in a turf war, survival of the fittest scenario? Not in fact saving other Banks but asset stripping? Superbank creation, too big to fail?
Pity. The drive for profit got us into this mess. The drive for profit and survival of the fittest will have the last superbanks standing over the rubble of an economy they helped kill.
I cannot put into words how angry I am.
golfball1000
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10 or so years ago, UK seemed a fairly quiet place where I live in Birmingham. Over the years it's got busier and overcrowded. Perhaps a decline in economic fortune is a positive. All the immigrants will go home.
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Initially I want to congratulate Robert Peston, he is doing an excellent job. His family can hardly be seeing him of late- so it cannot be easy. Secondly might I suggest that in future self cert mortgagees declare their income in the knowledge that the information will be forwarded to the tax office-or is it not that income is being overstated- and that subsequently mortgages cannot be paid that is, at least in part responsible for the problems.
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>>
brownandout wrote:
In the immortal words of someone, "we're all doomed"
>>
I find the song 'MacArthur Park', memorably sung by Richard Harris, apt and strangely comforting in these Gotterdamerung days:
MacArthur park is melting in the dark
All the sweet green icing flowing down.
Someone left the cake out in the rain.
I don't think that I can take it
'cos it took so long to bake it
And I'll never have the recipe again
O-o-h N-o-o!!
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So what does all this mean for the beleagured Building Companies ?
In fact the complete seizure in the Housing Market can't continue much longer ?
Or will we see them go the same way as B and B?
Bosses saying all is well, then days later, collapse!
I still ask will Mr Pym keep his job after claiming on the 25th that all was well?
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Could Lloyds theoretically still walk away from HBOS? I assume it would instantly generate a cataclysm in the markets and neccessitate Messrs Brown and Darling scrabbling around in their pockets for more money whilst still insisting that we 'are well placed...'
Could the govt afford to bail out someone the size of HBOS?
Will the govt be able to sweeten the deal enough to keep Lloyds on side?
What would be the wider picture for UK banks and RBS in particular?
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How can anyone hope to conduct a business in this atmosphere of deceit and fear?
In fact where were the Non Executive Directors of these firms when all the shenanigans was going on ?
Who can the Private Shareholders trust ?
Is there anyone ?
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Never mind, there was a blast from the past on today, a Halifax ad, jingle n all - Just pop in and see us and you can relax.
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Wrt to number 2 and 10 - I agree with number 2, there is a lot of cash about and people are wondering what to do with it. At some stage somebody will decide that western civilisation isn't going to end tomorrow, the sun will rise and at some stage things will recover - at that point the stock market (very undervalued) will rise dramatically.
It's better to be there 3 months early than 1 day late.....
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I was speaking to an acquaintance of mine who has been saving in a series of Private Pensions.
Her first Pension folded (Equitable Life), and her second Pension scheme wrote to her updating her on her likely benefits, and she said to me it was a third less than her original estimate!
Running her own business means she doesn't have to retire, but she wanted to in the next five years or so.
No chance now.
In fact she said to me she would have been better off just paying the money into a Deposit Account (she really meant that).
Enough to make one dread the future.
But hey, being English perhaps I should just make more Potato jokes!
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The capitalist system has collapsed.
Any financial institution (including Banks) that have any 'asset' that consists in any way of mortgages has worthless assets - that is what the capitalist free market system is saying. It may be extremely silly, but that is what the free-market is saying.
So that trade can resume all dubious mortagages are being nationalised in the US, the UK and Europe - That is the cataclysm that is within the 100 pages of Poulson's bill.
The two question that arise now are:
1. How the state manages the mortgages it now owns?
2. As all savings and deposits are in effect state guaranteed what regulation should be in place over the deposit takers?
Oh, and some damn silly commentators still think a manipulation of the interest rates downwards will make a difference - they are wrong. (Any reduction will be wrong, in fact given the state of inflation rates should rise!)
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@20
It doesnt become a double liability if the housing market falls. What it becomes is an overvalued asset.
The problem in the system is that because the assets have been overvalued the banks are keeping any liquidity to themselves.
Love them or hate them Bush and Paulson have this correct in that the banks themselves have got themselves in a tizzy where they dont trust each other to lend to each other.
What both they(the USA) and us (Brown and darling) have done wrong is that they didnt force these banks to audit all there mortgage assets and write them down properly in the first place. They missed the lesson of Japan circa 2002
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We keep hearing all the bad news about banks, are there any who you would recommend as having a solid foundation to put money into......
Are all the Building Societies on rocky ground as well ???
Where should depositors look for solid advice,because all we are hearing is where we shouldn't risk money .
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So once again it is back to the old question of
'Who is the Patsy ?'
For £612 million, Santander have got access to £20 billion of depositors cash.
That works out at a one-off 3% payment for access to £20 billion.
I suppose that quite a few UK banks would like to get £20 billion at that price of 3% even as an annual payment, never mind as a one-off payment.
Chuck in the fact that Santander also get 197 branches and 2.7 million depositors; and also consider that the UK Taxpayer picks up all the Debt, then it all starts to look like Darling and Brown have been falling over themselves to give Santander the 'real-cash' jewels.
And Santander is operating mainly in the Spanish Building and Mortgage Market which evidently is even worse off than the UK mortgage market.
So how secure does that make it ?
No doubt the UK depositors £20 billion will come in handy for Santander if it needs to prop up a few Spanish mortgage Defaults.
So the British Taxpayer gets well and truly knobbled with yet another load of Brown and Darling 'no-more bust, economy management' tripe, whilst they themselves off-load the real money to Santander and leave the UK Taxpayer with yet more debts.
ergo...The UK Taxpayer is the Patsy
An absolute disgrace from our Dumb Duo
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Post 41 was meant to refer to Post 20 not sure if I did that
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The whole financial equation is worked out arround bankers perception of their required bonuses [the goal standard within the egonomic system ']
Or to put it another way all bets [cds]are on the bankerrs bonus index going up
Theirfore if bankers bonuses are cut the system colapses and we all lose [what we do not really have]
If we wish to continue apearing wealthier than we are ,bluffing the sovereign wealth funds out of their assets ,we shall have to continue paying bankerrs more than they are worth
A small price to pay to keep the ponzi on its last legs ,until mathematicians formulate how to join the small end of the pyramid to the big end
Its all about maintaining cyber wealth delusions of grandeur
Millionaire status is shared by both the debt holder and the credit card holder
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#25
No, I understood. You missed one huge point, and that is that share price is not dictated by what the market thinks the shares are worth, but by who is selling, and how may are being sold, i.e. how much can traders fleece the sellers for. Far and away the biggest impact on share price is whether or not the pension funds have to bail out. Any true collapse (rather than the current price corrections) will happen once they have to sell.
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Post 7 and 17, I hope you are right with average price of a property 110,000, that would certainly make a lot of first time buyers happy, myself included.
return of FTB in my opnion is the only way the market can move forward.
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26:
Great points. I addressed some of these issues on Robert's previous blog.
Which way we go from here depends on an issue that no one seems to be discussing yet - the very different nature of our society from here on.
Very many assumptions have now been blown away. Houses as investment. Mortgages. Trusting banks. Trusting regulators. Pensions. Gradually getting a bit better off each year. All exposed as either history or illusion.
My view is that our economy has been weakening for years, but we have lived an illusion of wealth paid for by debt, and by selling off assets. Despite what some economists say, consumption isn't wealth. The main reasons for economic underperformance have been easy credit, excessive bureaucracy and interference, plus short term thinking.
Initially, we are likely to lapse into the national habit of blame-shifting. Look at who has been blamed over the years. Government. Europe. Benefit claimants. Immigrants. Foreigners. And so on. Now, bankers. Anyone but ourselves, in fact.
Instead we should see this as an opportunity to rethink our values. Sound finance, very constrained borrowing, encouragement of saving, greater emphasis on non-material values, importance of manufacturing industry, trying to break away from material greed if we can. Reduce bureaucracy, encourage constructive (rather than speculative) enterprise. This is a wake up call - do we respond, or lapse into the blame culture?
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I have been reading the draft of the bill for the bail-out, that was published by CNN this morning, and I am worried by the following section that seems to give Mr. Paulson carte blanche to let banks cook their books!
What does anyone else think of this:
"
8 SEC. 132. AUTHORITY TO SUSPEND MARK-TO-MARKET AC
9 COUNTING.
10 (a) AUTHORITY.?The Securities and Exchange Com
11 mission shall have the authority under the securities laws
12 (as such term is defined in section 3(a)(47) of the Securi
13 ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to sus
14 pend, by rule, regulation, or order, the application of
15 Statement Number 157 of the Financial Accounting
16 Standards Board for any issuer (as such term is defined
17 in section 3(a)(8) of such Act) or with respect to any class
18 or category of transaction if the Commission determines
19 that is necessary or appropriate in the public interest and
20 is consistent with the protection of investors.
21 (b) SAVINGS PROVISION.?Nothing in subsection (a)
22 shall be construed to restrict or limit any authority of the
23 Securities and Exchange Commission under securities
24 laws as in effect on the date of enactment of this Act."
source: O:\AYO\AYO08C04.xml
[DISCUSSION DRAFT]
110TH CONGRESS
2D SESSION H. R.
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Why don't the US and UK governments just suspend the trading in financials for two weeks, or even a month?
It's probably going to come to that in two week's time away, so why not get it over with now?
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We are all floundering- none of us can possibly know where and when it will end. To talk of one of the big 4 banks as next on the list is crazy- they are all too big to let go and they have strong balance sheets by any normal measure. However we are in crazy times.
What the US is doing will work as is what UK Gov are doing but what is the hot money in the City doing to try and make a buck? Perhaps they want to destabilise the West? Bank shares are not good news as they will not be able to pay good dividends and I suspect their profits will be lacklustre for some time.
The system is broken - we all knew it but were happy to take the money. Now we have to get back to building real businesses and make the capital markets work for wealth creation for businesses and society not for those who deal in bits of paper.
Once we are through this crazy spell- we really do need to review market capitalism from top to bottom. Markets are still better than intervention but they must be free markets not ones that are manipulated by governments, sovereign funds and cash that sloshes around the world trying to make a buck on a turn. I suspect the first step is to create a new baseline currency- dollar is a dead duck and the Euro not strong enough yet so I think a new mechanism is warranted.
Back to panic and worry!!
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On the affordablity of homes:
I heard on the Radio 4 Today programme today about a 36 year old full time laboratory employee of the NHS who could only afford a rented room, not even a rented flat. The cheapest homes in her area are 24 times her income. This is social insanity.
We MUST engineer circumstances whereby people on the average income can afford a family home - if we do not then only the most dire of results will occur. Another few years of this and there will simply be no blue or white collar familys - no blue or white collar children of two parent families - and no society!
(I know that Mrs Thatcher said society did not exist but for myself I prefer not to live in her choice of a human jungle.)
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@43
By taking on Bradford and Bingleys depositors Santander have taken on 20B of liability not 20B of cash
The asset that Santander got to sweeten the deal was Bradford and Bingleys buildings
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Anyone else finding that certain messages cannot be posted?
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#43
Surely Santander hasn't got 20bn cash out of this? If B+B had 20bn knocking about they wouldn't have been in that difficulty.
Santander have taken on the liabilites for the 20bn to improve their share of the retail market (ie branches and depositors) surely not the cash itself.
Or have I really missed something
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50:
Good idea to suspend trading. They won't do it, though. They'll cite 'confidence', but actually it is slavish devotion to the market ideal.
52:
So true. In rural areas of England, average house prices are GBP 230,000, average incomes less than GBP 18,000. In some areas the multiple is even worse. Yet those of us who campaign for affordable housing are told "no, people buying second homes are good for the local economy"!
Where I live, jobs are mostly retail and leisure, low paid stuff. Before the recent falls, even little terraced houses were over GBP 300,000. If you work here, you cannot afford to live here. This is dreadful and absurd.
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I run a recruitment business and we have had our best month ever in September. We place Accountants staff and Secreterial staff in central London.
Our job order book is up our client database has expanded....I have not come across one candidate in the last 6 months who has been made redundant apart from those at Lehman's, the vast majority of whom have now informed us they have been offered employment as part of the new deal.
Our competitors are doing the same kind of business but no-one wants to know..no-one is interested in businesses that are recruiting and expanding
It annoys me that the press concentrates on bad news and job losses. These have simply not happened on the scale they suggest. I understand some people will loose their jobs but so far this has been on a much smaller scale than the "100,000 job losses" headline I saw last week.
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It's insightful to see the complete misreading of what is occurring by the Tories. The idea that someone somewhere will take all the losses without Govt intervention is just wishing for a fairy godmother to turn up.
Like it or not we are all either going to pay more tax in the short term to shore up the banks. Or pay no tax and be living in cardboard city. Most of us will opt for the former.
Maybe another causalty will be Tory economic credibility this week.
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This is the end of the begining and it is downhill from now on.
In some ways I am relieved as the phoney recession is now over so we can now get on with the real one.
Unemployment will now begin to seriously aggregate and it will not just be finance and building sector jobs. Retail is already badly hit and the media is starting to crumble at the edges. How high will it go is anyone's guess.
We now need demand in the economy and that has to come from tax cuts: not simple freezes as articulated by the Tories.
Mind you, the illusion is not over as when I arrived at work this morning I went into one of the offices to ask a question and they were all discussing a game with a ball that had taken place over the weekend. I remarked that whilst western capitalism is collapsing the British people can only articulate concerns about football.
The masses have their opiate so GB need not worry too much about DC.
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The FSA's and SEC's ban on short sales will now exacerbate the markets fall, as no one will be allowed to control their trading books.
It just shows how dumb not only the regulator but the government actually is.
Ok they may speak well and even l;ook slick but whats the point when the fundamental solutions offered clearly show a total lack of understanding of the problem to hand.
We are now in a sublime case of lunatics running the asylum compounded by paying them over the odds to what now looks distinctly like totally screw it up.
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55
I would expect Santander to now have the deposits. Thus B and B no longer have 20 billion of liabilities.
Don't forget though, the money isn't theirs - it belongs to the depositors.
What it does do is deleverage Santander nicely!
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55:
Right. As I see it, depositors are the part of the banking biz that's worth having. Mortgages are the bit you don't want. Santander have been canny.
Though I wonder what the state of their domestic business is, because the Spanish economy is nearly as bad as ours and housing, apparently, is even worse.
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I don't want to sound doom and gloom but the simarities to the Secondary Banking Crisis in '73-75 become greater day by day
1. A significant run up in oil prices. Check
2. War in the Middle East. Check
3. Years of large increases in property prices. Check
4. Lax lending policies. Check
5. large increases in public expenditure/debt
Check
6. Banks bailed out in Govt. Check
7. Sudden tightening of Credit. Check
8. Uncertainty after Collapse of Bretton Woods System (Proxy: Dollar's fall as reserve currency) Check.
9. City culture that encourages speculation. Check.
5 years of Stagflation followed, culminating in the short sharp shock of a deflationary monetary policy of 1980's.
If our policy makers read their history books we can avoid a protracted recession.
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Before I get picked up for it I will ammend post 53
Santander do get some cash
19.1B to cover the liability of 20B
So essentially you can add 900M to the price they have paid for the branches.
The government get all the mortgage assets which are currently valued at 25B i beleive so they have picked up 25B in asset for 4.5B of government cash,
The rest of the cash given to Santander being picked up by the depositors insurance scheme which the banks themselves pay for.
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@55
the full deal was Santander pay 650M for the branches
They take on the liability for 20B depositors and get 19.1B cash to do that net result they pay 900m for the customer base.
the 19.1B is 4.5B from government the rest from the depositor insurance scheme
So total cost to Santander for the buildings and customer base is 1.55B net
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Great point from no. 32 re tying up claims of income for mortgage purposes with Inland Revenue returns.
I'd go further. What government protection there is for bank deposits ought to depend upon how carefully they've weighed up the risks of lending money in the first place.... perhaps involving a factor of what they've lent individually against what that individual has declared to the Inland Revenue.
And in turn the amount of guarantee for deposits in any bank ought to relate to the tax paid to the Inland Revenue on previous declared profits by the banks in question.
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A friend of mine was phoned up by his bank and asked whether he had considered paying his fixed term loan off early to save on interest payments. I won't mention the bank but it is one generally regarded as being better capitalised. They must be desperate for cash.
I sold my shares.
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fractional reserve banking is based on the *assumption* that all of the depositors will never ask for all their money back at once.
as history shows, this assumption is *wrong*.
therefore, the theory of fractional reserve banking is invalidated.
it thus follows that systems built on this theory will be unsustainable.
fractional reserve banking creates money out of nothing.
what we are seeing now is all that money returning from whence it came - nowhere. it is evaporating before our eyes, because it never existed in the first place.
it was not really money at all. it was a token of DEBT - banknotes are simply a promise by the bank to pay.
the difference between money and currency is that currency actually exists.
examples of currency include salt, camels, and gold.
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Reference whether savings account balances are assets or liabilities... firstly look at a bank statement, and you'll see which side of the ledger the Banks have always thought of credits into an account...as an increase in their liabilities. But I am struggling to work out what Santander have actually got, because they certainly haven't got a pot with lots of twenty pound notes in it, what they have got is all the account balances of all the savers, which they, Santander, now owe to all the savers. Now, if all those savers withdrew their money, then Santander will certainly be under no illusions as to whether they have an asset or a liability. Might be fun to watch that scenario, worth an extra bag of patatas frittas, eh what. Bring it on.
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This reminds me of the Sir Richard Mottram comment.
I can't repeat it as the Mods don't allow swear words but look it up at:
http://en.wikipedia.org/wiki/Richard_Mottram
I understand that Northern Rock and the toxic part of B and B will be re-named the Brown and Darling Bank, shortened to The BAD Bank.
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59:
Tax cuts - yes, that has to be the right idea. Nick Clegg and Vince Cable have said this. I am not a Lib Dem, but they have been so right on the economy.
On earlier blogs I have highlighted bureaucracy - the ever-rising number of state pen-pushers in an era in which IT should be replacing them. I think we could shed half a million pen-pushers, then hand out the savings.
And we should target who we give it to. Ignore Labour's "poorest in the community" nonsense, because that just means giving more to benefit claimants. The people who really need and deserve help - and should get tax cuts - are working people on low incomes, struggling with higher costs.
Labour might do well to remember what the party's name means - work. Working people.
Working people on low incomes spend most of what they earn - it goes straight into demand for goods and services.
We have a public sector which is so big that we cannot afford it any longer. Time to change direction.
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#38
Sorry I don't think the stock market is under valued at all. In fact I think totally the reverse. It's been over valued for a while now.
I think the stock market will definately go below 4500 maybe, probably below 4000 and if things get marginally worse 3500.
Why ? Un-employment, PFI, national debt, private debt, commercial debt, inflation, weak currency and the olympics. Top this off with the fact we don't make anything any more because the wise and wonderful exported all the jobs abroad. Yep we are in quite a pickle.
It's just a matter of time before the penny drops again. Except, strike the penny and think more 10 tonnes of lead.
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Times are tough and getting tougher, and people are still arguing about what Santander have got out of BB.
What they have bought is a liability since they need to give the cash back to the depositors if asked. The reason they have paid money to acquire a liability is because they calculate that they wont be asked to pay it all back in the short term.
This being the case they get to use money and extract value for themselves, value that they calculate will be greater than the cost of buying the liability in the first place.
The British get to keep the assets of BB - the mortgage book. This is because no-one wants it and whilst technically an asset it is also a real loss and is value destructive to anyone that owns it
This is why the whole BB deal represents a transfer of value to Spain. Santander have only acquired a liability in the technical accounting sense of the word. In the everyday world they have access to 20 billion of cash, and will have unless and until depositors demand it back.
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Not an economist, but I am interested in complex systems in transition (in the life sciences). So my perspective could be very wrong; but it looks to a humble metabolomics geek as if the growth of the money supply, thanks to the 2nd and 3rd generation financial derivatives, has vastly exceded the growth of the real world asset base over the last decade or so. If so, collapse is inevitable once the limiting (including environmental) factors to asset growth start to pinch, leading presumably to a rash of currency devaluations as vast amounts of money chases dwindling real assets. If we get to that stage, hold on to your hats. I doubt the social concensus / fabric is strong enough to deal with the ensuing pain, or that our political elders and betters will handle the resulting disruption at all well.
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Cheer up, one day we'll all be dead. I cast my mind back to the time following the bursting of the DotCom bubble and the rapid reduction in US interest rates to under1%. And there they stayed for month after month and, of couse, the housing market rocketed. Alan Greenspan was lauded by almost all the commentators for saving the world. Anyone who was brave enough to criticize the policy of near-free mortgage rates was either ignored or ridiculed.
I am so angry that my fears have proved justified. Here, in the UK, Gordon Brown told us that the economic cycle had been abolished. His gargantuan public sector spending spree, coupled to hefty off balance sheet borrowing, caused hardly a ripple in the stockmarket. The prices of bank shares reached the stratosphere. He now tells us that he is the best man to steer us through the forthcoming slump. Perhaps he is - he knows where the mines are buried.
Anyone who believes the fallout from the banking crisis will be short and shallow is either ignorant or insane. If we are smarter than the leaders who allowed the crash of 1929, then why are we here? Please don't say it's different now - it never is. Those who ignore the lessons of history, are doomed repeat them. God help us all.
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Judging by the quality of the posts on here, Brown and Darling must have spent far too much time taking advice from the "Great British public". The deal with Santander is as absrdly simple as it is disadvantageous to the Treasury. Santander has acquired the high street deposit taking business for 600m pounds. It is also taking on the 21bn of deposits due to BB's depositors (i.e. liabilities) and will receive 21bn from Treasury for accepting this liability.
If Brown had not presided over the catastrophic inflation in house prices over the six years 2001 to 2007 (i.e. after he started throwing billions at the public sector) then we would not all be in this mess.
And to try to blame Thatcher for this beggars belief!
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#49
It appears that it has (quietly) been acknowledged that one of the causes of the crisis is the Accounting Principle of Marking to Market in respect of financial investments. Although the Subprime issue is clearly the snowball that started the avalanche, M2M has turned it into a thundering wall of Ice.
By requiring companies to value their financial investments on a M2M basis, they are required to value at each year end their assets and liabilities at the open market value on the balance sheet date, but as we all know this is currently zero. By removing M2M then they can value them at value to maturity - which (in my opinon) will more accurately reflect the value of these companies in the current situation.
On the plus side (discounting the view that many will see this as an accounting fudge) the rise in profits from such an accounting adjustment should give lots of windfall profits, the tax on which should go some way to making good the US Govt $700bn...
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66:
Superb idea.
63:
Spot on. We did survive the 1970s, but not until we'd had stagflation, three-day week, power cuts, wage escalation, secondary inflation, widespread labour disputes, winter of discontent. Let's hope, as you say, that politicians remember and learn.
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Look at it from a different angle - after Fortis was sorted, someone attacked Dexia in Belgium. Find that someone and you find who's playing the world economy against the wishes of the Governments. Is it possible the Western Banks have become puppets dancing to a different tune, Chinese, or Russian, or Indian, or Saudi/bin Laden Group?
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The inverted Pyramid collapse is gathering pace! In 4,5 or maybe 10 years we can pick throught the rubble of financial ground zero and build again!!
Anyone still going to talk about supply and demand of houses as a 'light at the end of the tunnel/prices will soon start going up again' line of argument.
Some guy on the BBC news earlier sent an e-mail asking whether he should start trying to look for replacements for his 4(!) buy to let mortgages with B+B - the fixed rates expire in 2009!!
There is still a long way down before we reach the bottom!
The Army will be on the streets yet!
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I'm a UK worker and taxpayer and I demand a 100% loan to value mortgage from the banks that I now part own, at the Bank of England base rate, as I've been having trouble even getting a mortgage - people like me are paying to clear up this whole mess, it's only fair we have something to show for it.
Personally though, I'd rather my hard earned tax quids went to the deserving rather than those who through their own stupidity, greed and sheer arrogant short-sightedness have brought this on us all and expect the rest of us to just pay up and bail them out.
Sorry, my cost of living is soaring and it's a daily struggle to make ends meet.
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#53 and #55
The depositors 20 billion is now under the management of Santander.
The toxic loans and the deposits have now been separated - UK taxpayer gets the Toxics - Santander gets access to the Deposits
Santander only need to keep a small % of the 20 billion available as cash for depositor withdrawals and they can then 'invest' the rest as they see fit.
Whether you call it an asset or you call it a liability, Santander has still got themselves access to the best part of 20 billion to play around with.
Of course depositor cash in the accounts is a 'liability' to balance against those 'assets' which can be withdrawn (deposits).
But it is still 20 billion of real money, the best part of which, Santander can use how they want.
And 'investing' and 'lending' investors cash for the benefit of the Banks is what got the Banking system into the mess in the first place.
But if you say that the 20 billion of investor deposits are not there, then besides running a bad business model, B and B have frittered away the Depositor cash as well.
Brown and Darling are the Patsies at the financial poker table, playing with the Depositors and Taxpayers cash - and losing heavily
Or as the failed gambler quoted
'Send more depositor money, system nearly working well - just a few more hands and I think I will have cracked it'
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Another viewpoint on the BB housing portfolio - if that lot had gone bad without intervention, local Councils would have ended up with a load more on the Housing Lists and nowhere to put them on the one hand, and a load of empty unsalable property on the other. This way, anyone who defaults simply gets put on the Rent rolls and the Council Housing stock gets rebuilt on the quiet and on the cheap, as it's at the marginal cost of the defaulter.
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@41 pot-kettle
I just passed a block of flats the other day. Completed and sold. Most are up for resale.
No residents therefore no insurance.
They are being vandalised, someone may consider them assets, I dont. An asset has a value, they dont, no one will buy them.
There is lots around now, they are liabilities not assets in anybody's book.
You are indeed correct they are overvalued but they are not assets
regards
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76:
Yes. The key point is surely throwing billions at the public sector. Just think how much better it would have been if half of that same money had been handed out as tax cuts to working people on low/average incomes, and the other half saved from government borrowing.
Things would have been better still if Brown had imposed sensible credit policies (cautious multiples and LTVs, limits on self-cert) and managed interest rates with reference to asset inflation rather than just CPI. These measures could have prevented over-inflation of the housing bubble.
Brown is clueless.
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In the modern world every company needs a mission statement or a pharse that sums up their ethos.
The Bradford and Bingleys is, or was, we'll help you get where you want to be.
If it wasn't so sad it would be funny.
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#10
The advice I got from my first stockbroker was "never invest what you can't afford to lose and never, ever borrow to invest"
A major problem that none of this inter-bank stuff is not solving is that the average Brit or American is so deep in debt that no sane bank will lend to them (and we are seeing what happens to the insane ones now). Until the net debt of the US and UK consumers has been reduced or converted into savings there will not be any consumer driven recovery.
IMHO House prices will continue to fall for a while yet and will then sit at the bottom for a long time as people will not be able to borrow the extreme amounts that they have borrowed in the last few years. I expect the stock market will suffer a similar fate.
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Quick point.
The issue with fractional reserve banking to my mind isn't that it exists (I can't see a genuine working alternative for the modern world) but that the fractions held in reserve have been too low.
Hence the drive to recapitalise / deleverage and the reluctance to lend.
Once this process works it's way through and (assuming) banks maintain a higher fraction of reserves it will also reduce the money supply - slowing growth certainly but reducing inflation.
I'm no expert but my prediction would be that stagflation isn't going to happen but worst case we could find ourselves in a deflationary situation in the medium term - which is going to make those debts worse I suppose
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The more I think about the govt's populist gimmick of unloading the BB liability onto the other banks, the more daft it seems.
With the principle established that the banks could be similarly penalised if BB is repeated, how on earth are businesses going to be able to borrow for normal day-to-day purposes?
Economic idiocy. Thanks Gordon.
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Mr Preston, if you are trying to cheer me up you are failing by some margin. In the past a government might have looked to cause some foreign upset or tension to distract the populace. Unfortunately we have that as well. So is it stagflation, deflation or hyperflation ??
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Post 74,Isoflavon,
Excellent comment,and don`t worry about being "qualified" .
This was all indeed predicted many years ago.
Please read Professor Hubbert`s prescription for survival,the steady state economy.
I defy anyone to fault his analysis,or his proposals.
http://www.hubbertpeak.com/hubbert/hubecon.htm
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#57
I agree. I run a medium sized retail business and August was our best month in 3 years (by far). We're only one business, but even the government's retail figures keep showing "surprising" growth. It's not a surprise if it keeps happening!
Just because a few high street retailers are seeing some chickens coming home to roost after churning out low quality crap for years it doesn't mean that the whole economy is screwed. The technical recession we're about to enter is entirely caused by the removal of the phantom profits from the stats that the banks have been providing.
Despite the predictions of impending financial catastrophe, anecdotally this particular bust seems limited to the financial services and property sectors at the moment, along with any business that was in severe debt (ie going under anyway). If liquidity can be sorted out in a reasonable amount of time, so that small businesses do not have borrowing restricted in their unseasonal months (march/april for many), then I can't see any reason for this to spread far outside the sectors that have had such a ridiculous bubble in the last 10 years.
I predict a golden xmas for retailers! (and I predict that the economic pundits will be flabbergasted, proving Taleb's assertion that none of them really know what they're talking about).
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PS
Is it really true that not just other banks have to pick up the tab for BB, but govt is making building societies contribute as well? Crazy.
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#52
If you must retread that quote from Margaret Thatcher, at least get it right:
--Quote Starts
I think we have gone through a period when too many children and people have been given to understand"I have a problem, it is the Government's job to cope with it!" or"I have a problem, I will go and get a grant to cope with it!" "I am homeless, the Government must house me!" and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first. It is our duty to look after ourselves and then also to help look after our neighbour and life is a reciprocal business and people have got the entitlements too much in mind without the obligations, because there is no such thing as an entitlement unless someone has first met an obligation and it is, I think, one of the tragedies in which many of the benefits we give, which were meant to reassure people that if they were sick or ill there was a safety net and there was help, that many of the benefits which were meant to help people who were unfortunate?" It is all right. We joined together and we have these insurance schemes to look after it" . That was the objective, but somehow there are some people who have been manipulating the system and so some of those help and benefits that were meant to say to people:"All right, if you cannot get a job, you shall have a basic standard of living!" but when people come and say:"But what is the point of working? I can get as much on the dole!" You say:"Look" It is not from the dole. It is your neighbour who is supplying it and if you can earn your own living then really you have a duty to do it and you will feel very much better!"
--Quote Ends
But getting it right is *so* much duller isn't it? And it doesn't allow you to score cheap points.
To me, Lady Thatcher's words seem apposite to the current situation.
http://www.margaretthatcher.org/speeches/displaydocument.asp?docid=106689
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Mr. Preston...you FINALLY have it right today! No one wants to be a pessimist, but many of us Americans wanted to WARN you. WE TRIED FOR YEARS!!! We had "golden parachutes", now they're giving us "golden showers" and still calling this SELL OUT a "deal"... it's a bad deal, I believe it is a crime. The worst part about this $700 Billion beginning of this "deal" is that it will not work. I think that the blind spot that our British cousins can not or will not see is the obvious racism, greed, theft that has gone on with the our government knowing it. Citizens in America have seen how foolish and wrong this was for years. We saw the destruction coming...do you actually believe the fraud that caused this breakdown can be used to correct it? I really fear you folks are in for it too, and as a LOYALIST American, I'm sorry for it.
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#52
Oh dear, "...no such thing as society". This is one of the most over-quoted-but-out-of-context attributions ever made. You really need to look at the totality of the whole quote;
"I think we've been through a period where too many people have been given to understand that if they have a problem, it's the government's job to cope with it. 'I have a problem, I'll get a grant.' 'I'm homeless, the government must house me.' They're casting their problem on society. And, you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves and then, also to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There's no such thing as entitlement, unless someone has first met an obligation."
Prime minister Margaret Thatcher, talking to Women's Own magazine, October 31 1987
This is very relevant to the current problem. If there is a 'silver-lining' to this crisis then perhaps more people will be inclined to live (and, only when necessary, to borrow), only within their means. Personal debt is not society's fault, it is in many cases down to (lack of) personal responsibility and in a small number of cases personal misfortune. That is their obligation.
That the Government has been the chief cheerleader (and also the main culprit i.e. PFI obligations, public sector pension liabilities, increased borrowings), behind the decade of credit growth and the associated personal debt is shameful.
We, as taxpayers, will be paying for this for many years, not only in higher taxes but a generally lower standard of living.
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#87
Sensible man. I'm guessing that this was more than 20 years ago, if you could find yourself an ethical broker in London, rather than one that would not only advise you it was perfectly safe to borrow to invest, but also provide you the cash...
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82, 53 and 55
My understanding (it's great being an armchair banker) is that when a loan goes bad, it's written off against equity.
So, in Fractional reserve banking terms,
Say B and B had 50bn of loans and 20bn of deposits, they are leveraging those deposits at 2.5 times.
However, say 10bn of loans go bad, the 10bn shortfall has to be made up from equity (i.e. the deposits) and thus they are now leveraging 4 times (40bn of loans to 10bn of equity)
Take it to it's extreme (and it doesn't need to be much of an extreme) say 20bn of loans go bad......errr there's no equity left.
And that's my understanding of what has happened (don't think it quite got to 20bn of bad loans, but you can see the pyramid effect)
This then meant B and B were no longer viable and thus invoked the FSCS (financial services compensation scheme) which guarantees depositors money.......
Only there wasn't enough money in the FSCS to cover £20bn. In fact I don't think there was very much at all in the scheme.
Thus in charge B and D on their white horses to save the day.
I believe the treasury has leant the FSCS the money to be transferred to Santander.
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There is usually someone that comments about Roberts blogs as being too pesermistic...where are the optimists today?
Surely something will happen overnight and we'll have a 500 point bounce back tomorrow??????
As for house price over inflation...haven't we all forgotten what has been preached over the last 5 years. Things are different this time around. It's not a bubble. Strong fundamentals, strong demand and all that.
Anyone seen Kirtsy, Phil or Sarah Beeny recently? Lets see them come out and face the music from the unfortunates that listened to them!
On the plus side, most people have a tent and a camp bed left over from the festival season!!!
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A bank deals in money so depositors are like suppliers. What they supply remains an asset even though their bill (interest and the right to take back the goods) represents a liability. So liabilities v assets is all well and good providing we understand this nuance otherwise we will be calling cash in hand a liability.
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Does the nationalisation and takeover of all these financial institutions aggregate risk into fewer and fewer companies, meaning that, in the future they can be allowed to fail even less (than they are now)?
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Surely the real beneficiaries of this immense disaster have been all the people who own homes which are grossly overpriced - bought with other people's money as a one way bet.
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re#70
"I understand that Northern Rock and the toxic part of B and B will be re-named the Brown and Darling Bank, shortened to The BAD Bank."
Brilliant!!!
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I note that the ban on short selling was completely ineffectual.
You cannot clothe an emperor by banning comments on their nakedness, which is basically what the government was trying to do. It's time they showed an understanding of the markets more appropriate to a government rather than a tabloid.
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Sarah Beeny over Kirsty anyday!
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If "restructuring" means "politics", then we might reflect on Abe Lincoln becoming US President in 1861 when the South had already seceded, Jefferson Davis already been installed as President of the Confederacy. The biography I read, by Carl Sandburg the poet, had Lincoln the dark-horse all the way, the compromise candidate of competing political machines. I like to say we accidentally on purpose elected a competent administrator.
"Everybody knew" there was a structural anomaly in the US Constitution, but "everybody" had pushed it into the future until the future filled up and backflowed into the present--then it was time to fix the house that could not stand.
I can't think of an anomaly analogous to slavery in the current credit crisis, except perhaps that "international cooperation" seems, what, a term most honored in its mockery (of a sham of a travesty, as Woody Allen says somewhere). When you have a Global War on Terror (The Great Game-The Sequel) enrapting "The West's" attention, it's hard to deal with banking regulation.
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Re #79, so now the short sellers can't be used as scapegoats we're blaming the Bin Ladens, the Russians and the Chinese, is that where we're at now? Just a mad thought but could it be fundamental problems (ie too much bad debt) casuing all these banking collapses rather than some bogeymen?
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#71
I understand what you are saying, but I don't think that you have thought this through.
500,000 further people without jobs in an already deflated means, at least temporarily, 500,000 more Jobseekers allowance to be paid out.
The savings made by losing these jobs will in turn be paid out in increased benefits claims (housing, jobseekers, income support etc). The scope for tax cuts becomes limited.
500,000 in financial difficulty has a knock-on effect on the rest of the economy. Tax cuts are pointless if there is less and less income to tax. Large unemployment figures means less money being spent means lower profits and pay all round.
These "pen pushers" do vital jobs. Just who do you propose cutting? Because, cutting jobs does not increase efficiency, as you imply. Rather what it does is place increased pressure on people and IT systems.
Regarding the IT systems. With all the cuts you are talking about, just how will these be paid for? We are regularly told the ones in place are not fit for purpose, so it's clear more than a patch would be needed.
Finally, and most importantly, why is your tax cut more important than someone's job? Are you going to be the one to tell the families of the 500,000 that "sorry, a 2p in the pound income tax saving for me is more important than a home for your children". This is in effect what you are stating.
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The economic growth in the UK and US in the past 10 years was mostly driven by speculation, greed, cheap money and huge debt.
Most people have lived beyond their means by simply borrowing more than they could afford. The banks lent them the money to make quick profits.
The banks also designed schemes like CDOs that sounded like serious things, but in fact these schemes are no more than pyramid selling schemes!
The era of cheap money and easy credit is over!
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Why has my post not appeared seemed okay the question was partly retorical.
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Just want to see if my current computer is able to post a comment at the moment.
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#94 , #96
I disagree about the Thatcher "There is no such thing as society".
She might have included the quote in a reasoned speech - but once a thing is a sound-bite it gains a life of its own. It may slightly annoy her biographer but it is the one thing she will be remembered for the rubbishing and destruction of the society that had existed in the UK up until her arrival.
The enormous disruptive effect of destroying the job security of very manual blue collar workers was a definite policy - she set out to destroy the coal industry and she did it. She did it without much evidence of thought about the destruction of the coal mining communities. She did not give a hoot what happened to a miner and his family. (Now produce any evidence in he speeches that she did!)
She did not care who she hurt in the name of his daft economic policies. You cannot possibly argue that the effects of he policies as carried on by he successors up to Blair and Brown were not to destabilise and casualise the British work force. She passed into legislation huge number of bills that reduced workers protection - she even abolished the Truck Acts (that stopped employers paying staff in company tokens.)
This woman is one of the greatest destructive forces ever unleashed on British Society. She alone did more to set in play the destructive forces that we are now suffering. It is not unreasonable to see her philosophy as the cause of our present ills.
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88. Cheese_Me_Too wrote:
"The issue with fractional reserve banking to my mind isn't that it exists (I can't see a genuine working alternative for the modern world) but that the fractions held in reserve have been too low."
Take a sober look around you. The banks are buckling under the weight of all the debt-based magic money they conjured with such rampant hedonistic enthusiasm.
Do you think if the reserve ratios had been increased by a few percent here and there it would have made the slightest bit of difference?
Or that if they had, the banks themselves wouldn't have tried their utmost instantaneously to push them back down so they could claw themselves bigger and meatier profits?
Now is not the time to be crowing about the merits of the fractional reserve system, when whatever benefits it might claim to have, seem a tad dubious, when compared with the current disaster to say the least.
Especially now as it seems to be failing more and more spectacularly with each passing day.
You might seriously have to start looking for a 'genuine working alternative for the modern world', (it's not as if there aren't a few of them about, a couple do spring to mind), because the game is up, the trick is revealed and pretty soon the audience are going to start wanting their money back.
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In what conceivable sense can my wealth have been eroded by the decline in property prices, when these prices were themselves the result of the biggest asset bubble in history, created by an unprecedent explosion in consumer debt. Although people thought they were rich at the time, how can Robert at this time continue to maintain the fiction that this represented real wealth in any sense?
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How do we know that some of the instability is not being "manufactured" to undermine confidence and who knows even making some money somewhere?
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#110 teaching_bee
The most common reason for a post not appearing is that you included an & (it has to be specially coded to appear). Use "and" instead.
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108:
What I'm saying is that the dramatic expansion in bureaucracy over the last decade (and more) has become an unacceptable burden on government finances, the taxpayer, businesses and the economy.
And I'm not suggesting that I should get a tax cut from it - I would like to see all tax cuts channelled to working people on below-average incomes. But I am quite annoyed about the cost of bureaucracy to taxpayers. Paying high taxes to provide services, particularly for those in need, is one thing; paying ever-higher taxes to run ever-expanding government is quite another.
If we cut bureaucracy, the savings needn't all go on tax cuts - savings could be diverted to front-line services, or a combination of both. Most voters would probably agree with a programme of "less administrators; more policemen, doctors, nurses, teachers".
Government waste is huge. Government advertising (alone) costs GBP 1.5 bn annually, I understand. The two-tier system of local government is another example of waste. We can't afford the luxury of such waste any more. Go into a health centre and you can hardly move for leaflets and notices. The number of practice managers (etc) has increased steadily. I would rather see fewer leaflets and managers, and more medical staff instead.
And yes, the savings would be offset by the tax and benefits effect, but there would still be a substantial net saving. The spending power of those affected would fall, but this would be matched, surely, by the increased spending power of low-income working families enabled to keep more of their income?
Ever since 1945, our bureaucracy has been getting bigger. It's time we reversed part of that, to help those on low incomes.
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RP - on B and B - I agree with the government that the taxpayer needed to be protected and we should not reward market failure. But our other remaining Banks are clearly not in a position to pay this interest at present.
I have a suggestion, which I am happy to have kicked into touch if considered unworkable. I realise an equity investment was not possible in these circumstances, but could HMT make their loan an Islamic Loan? That shares in the losses and profits of the banks concerned rather than forces interest payments on banks already suffering a severe liquidity squeeze.
To protect the taxpayer it would have to be for a fixed term, otherwise the banks will simply refinance when the corner has been turned and the taxpayer will simply have shared in a period of losses. What do the rest of you guys think?
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Are city financial institutions and the stock market worthwhile having ?
My endowment mortgage was a failure.
My private pension(s) were failures.
The house price bubble has stopped me raising a family. Too poor to afford a house, too rich to get handouts.
My job prospects keep decreasing as industries leave this country for the east.
My pensionable age has gone up.
My children will have to fund their education on the never never.
Public Finance Initiative scares me to hell.
Why do we have a financial system that has done nothing but ruin this country ?
For the sake of future generations - get rid of these institutions and the people behind them.
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I'd be delighted if Robert could take a few minutes on the news tonight to explain the dow jones index and its movements today, specifically the plummet to 10,500 and the subsequent bounce back above 10,800 that happened in about 20 minutes.
There are obviously rumours sweeping the traders as we sit here, but these don't get reported at all.
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One problem is surely that private small investors have virtually no say in how a company is run. Vast salaries, dodgy loan practices and accountability etc depend on large investors like pension funds who often couldn't care less if a bank is making lots of money. Suggest small shareholders in all companies have an elected representative who can vote for them all en-mass to counter the wave it through culture.
Note that traders only really make money when prices fluctuate - the more the merrier.
What happens when the number of banking institutions left is very small and those that are are terribly weakened by having taken over their weaker brethren?
Why not allow building societies / banks / Northern Rock / BB to rent out repossessed houses either to private tenants or Councils - that way, housing problem reduced rents being paid and NR can wait until asset recovers value thus small or no loss.
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How on earth did Brown and Darling claim to be "Economists" . I wouldn't trust them with my Kid's pocket money
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121:
Good point about small shareholders, and combining their votes.
We could introduce new rules going further than this. There could be a mandatory requirement for one or more directors to represent them. This would be like the German idea of having employee representatives on the board.
Non-exec directors are meant to protect small shareholders, but the system isn't ideal.
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Breaking News: The House of Representatives have voted down the Bail Out preposal - Now what?
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BBC is reporting that the House of Representatives has voted down the rescue bill by 228 to 205.
Wall Street plunged immediately, and is now down by 550 points (almost 5 percent).
This looks grim.
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"88. At 5:08pm on 29 Sep 2008, Cheese_Me_Too wrote:
Quick point.
The issue with fractional reserve banking to my mind isn't that it exists (I can't see a genuine working alternative for the modern world) but that the fractions held in reserve have been too low."
For a genuine working alternative Google for "Full Reserve Banking". Then Google for "Certificates of Deposit", or "bonds". Both forms of lending work fine as 100% reserve lending.
The first royally sanctioned Fractional Reserve Bank, the (privately owned until 1946...) Bank of England began 300 years ago with a reserve ratio of 2:1. They were allowed to loan out twice as much money as actually existed. The ratio now is closer to 30:1. Yup, they only hold 3% of money as reserve. 97% of your money is imaginary... That's a long long way down...
Do you remember the 80s boom? That was the Tory chancellor changing the reserve ratio from 9% to 3%, all of a sudden all the banks were allowed to loan out 30 times more than their cash rather than (only) 10 times more. The reserve ratios have only been going in one direction...
Since Fractional Reserve Lending was made universal in 1694 we have had "The business cycle" where boom and bust follow an irregular cycle based on the expansion and contraction of bank loans. When banks loan out money, times are good, when they don't the economy tanks. It's that simple.
Ludwig von Mises explained it all around 1912 "The theory of money and credit". He predicted the "Great Depression"; not the exact time, but the fact that it would happen.
It will continue to happen as long as banks are allowed to practice fractional reserve lending.
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124:
Now someone needs to start inventing the banker proof umbrella and fast! Because it's about to start raining men!
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But as a US citizen, I will say that Mr. Peston's statement quoted here is due to the fact that our government--executive, legislative, and judicial--is a ship of fools adrift in a sea of nonsense.
That quote from #21 just about sums it up ... the only difference with the UK is we don't even have a ship our leaders are just bobbing around without Boat or paddle.
Hopefully the US Executive will return with a plan that helps the householder (still de-toxifying the debts) but not the banks ... if they do then perhaps a consortium of Bank executives will pool the last few years bonuses and their share options profits, Golden parachute payments and so forth and launch their own "payback" scheme to rescue their mates still in a job?
Thought not.
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err I know you're tired Robert, but based on the plunges we've seen today (which may have assumed the passing of the bill).....now what ?
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"119. At 6:59pm on 29 Sep 2008, JackMaxDaniels wrote:
Are city financial institutions and the stock market worthwhile having ?
My endowment mortgage was a failure.
My private pension(s) were failures.
The house price bubble has stopped me raising a family. Too poor to afford a house, too rich to get handouts.
My job prospects keep decreasing as industries leave this country for the east.
My pensionable age has gone up.
My children will have to fund their education on the never never.
Public Finance Initiative scares me to hell."
Caveat Emptor. You seem to believe that the financial system exists for your benefit. No, it exists to capture as much of your money and hard work as it can. Think of it like a giant bloated tick, or leach sucking the life out of the country. About as accurate an analogy as I can come up with.
I suggest you read Mises... Understand the fundamental nature of money and you don't need the leeches:
http://www.mises.org/money.asp
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Bank Santander and other Spanish Banks.
Spanish Bankers are a canny lot. They know we are like greedy children at a party and whill eat until we are sick as far as money matter are concerned, so they act accordingly.
No rolling forward Credit Card debt. First working day of the month the whole balance is taken from your current account. Every last Euro And if one goes overdrawn? Well the ATM card no longer works nor the Credit Card.
Same with Mortgage and other loan payments. They take the lot each and every month.
Granting mortgages. There are no commissions paid by the commercial or saving banks on arranging a mortgage. So no mortage brokers or other intermediate. Self Certification? Heaven forbid such a thing. You apply for a mortagage from your Bank Branch. It is up to the Manager to say what you may borrow and on what terms
On the wider issues, the Prsident of Bank Santander said at a recent shareholders meeting. Advice to bankers:
1) Never buy an instrument that you do not fully understand.
2) Never sell to anyone something you would not buy yourself.
Sound advice I would think although I am no banker.
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When middle class USA says no ...or else, Politicans up for election this Fall also say no.
Expect an action replay tomorrow and for markets to lose another 5%+ from todays reduced postion.
Blood-bath, soiled underwear, tears... and not necessarily in that order.
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My flat deposit is all in one bank and I need to spread it around. But I'm really confused as to which banks are from different groups. Not only do they all seem to come from a few umbrella groups, all these seem to be merging.....
How do I keep my deposit safe until I have a chance of getting a mortgage again?
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132
Don't forget some UK banks are traded on the New York exchange.....there may be trauma even before tomorrow!
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We would like an update Mr. Peston.
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Rather fun watching the House vote Poulson down in a sort of gory voyeuristic watching a train crash way.
What is plan B?
come on bloggers everywhere - everyone speculate...
Our combined view of Plan B is probably quite a good one after all our consensus was that Plan A would fail.
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I'm not sure we should wait for salvation, re: rules to prohibit fractional reserve banking.
I mean, if fractional reserve banking is such a bad idea (and it certainly appears to be) then it won't take a lot of effort to blow it away.
Eg., market pressure can be used to out-compete fractional reserve banks.
A privately-held "money storage facility", which charged depositors fees, rather than paid them interest, could make a big song and dance about the minimal risks involved, the prudence of its policies etc.
Sure, it's not as much fun as being paid 2% p/a to lose all your money...
Don't wait for laws to make fractional reserve banking illegal. The customers will come naturally to a more sustainable model, and fractional reserve banking will die a quiet, lonely death.
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Well - look on the bright side - I now know what a Credit Swap Derivative is.
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133- check out the How to keep your money safe on moneysavingexpert.com
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#133
Spread between HSBC (least exposed private/world/high st. bank) and Northern Rock (guaranteed by HMG-UK).
Intrest rates that just about keep you a pace with inflation but ...save as houses! ha ha!!!
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#138
"Well - look on the bright side - I now know what a Credit Swap Derivative is. "
Go on then. I will bite.
Don't you mean Credit Default Swap ?
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Gordon to invoke the powers of Labour's Enabling Act (Legislative and Regulatory Reform Act 2006) this week I reckon.
No elections for quite a while due to the National Emergency...this is no time for beginners!
Any objections? See the Civil Contingencies Act...
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So the House of Representative, mainly the Republicans, have voted down the Bail Out preposal. What happens next? Does anyone have a clue?
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Post 133
Why not invest with the Nationwide Building Society? They are safe from speculators.
You will be covered with them, as with the banks, for up to £35000 and if you save with them you might even get a better mortgage deal when the time comes.
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You can bet your bottom dollar the Wachovia deal is off now
Citigroup will have made the bail out being passed a pre requisite.
The inability of the banks to fund the general publics credit card spend is the demon they cannot beat.
Cash rationing at the banks is only days away!
It is THAT serious
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I'm scared !
Can anyone advise on whether I should move my savings out of IceSave and LloydsTSB and into National Savings or Northern Rock instead ?
This whole thing is starting to look like we are heading into a great depression with big banks collapsing all round us, like trees being felled in a forest.
The more I see of Nouriel Roubini's interviews on youtube on the US financial meltdown, the more it looks as though he was right all along and all the so-called experts were pathetically wrong ! Perhaps it just goes to show that most experts were just following the herd rather than true independent thinkers.
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There is a Bradford and Bingley Action Group forming at
http://bradfordandbingley.weebly.com
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143: "the House of Representative, mainly the Republicans, have voted down the Bail Out preposal. What happens next? Does anyone have a clue?"
Nope .. but the market took it badly .. the Dow is currently down 600 points
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Post 48 says in the last paragraph......
Instead we should see this as an opportunity to rethink our values. Sound finance, very constrained borrowing, encouragement of saving, greater emphasis on non-material values, importance of manufacturing industry, trying to break away from material greed if we can. Reduce bureaucracy, encourage constructive (rather than speculative) enterprise. This is a wake up call - do we respond, or lapse into the blame culture?
I agree with all of that but I do think we can attach a good deal of blame to Crash Gordon for the unpreparedness of the UK to weather this storm. He was the key architect of a Government and private debt bubble that certainly did not exist in May 1997 which was when this country's affairs were last based on sound money. He HAS to take some of the blame surely?
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Needs the be renamed: "the day the bill didn't arrive"!
I am sure someone else already pointed out that irony, but I couldn't resist!
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I am reminded of a saying of a former President of America: 'You ain't seen nothing yet!' Nadir? Not close, I fear.
What a topsy-turvy world we live in! Public services, such as transport, energy, communications and water (rivers and rain etc.!) have to be privatised and sold reluctantly around the world [Who currently owns the Thames? Does anyone know?] while the thrifty and prudent working class must buy bad debt; of all the things I would have liked to buy with my pension [Ferrari, golf holidays and concerts], that never occurred to me - but Bird and Fortune predicted it precisely in a sketch two or three years ago.
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Testing
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Beware of Cabin Fever breaking out, it can be quite contagious so I'm told...
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What is plan B?
come on bloggers everywhere - everyone speculate...
Our combined view of Plan B is probably quite a good one after all
Wall Street meltdown. National guard on the street. US military recalled from Afghanistan and Iraq to bolster the national guard. State of emergency.
Same here tomorrow morning. Banks going down like ninepins. Queues around the blocks at every bank. Mervyn King and Alistair Darling completely discombobulated. Gordon Brown nowhere to be seen.
It's been a decade in the making but it's finally here.
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I keep getting blocked for reasons beyond comprehension. Can't be bothered repeating what I tried to post. Suffice to say I think we are now in very serious trouble, and do not be surprised to see bank shares fall close to zero tomorrow.
Watch for RBS in particular. It hasn't bought anything in the latest shakeout, whilst Lloyds has bought HBOS, Santander has bought A and L, and B and B, and Barclays has bought Lehman. RBS is too weak to buy anything, and is the next lame animal to be put out of its misery.
Here in Ireland, the big 4 financial firms' shares fell 18-over 40% today. We've already been softened up to expect them to be taken into State ownership. Expect that to happen sometime this week.
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The points of #121 and #123 about non-execs specifically created simply to help the small investors is just about the best suggestion I have seen for a long while.
I think most small investors just haven't a clue when it comes to corporate governance or just reading the stuff companies send out (It may sound harsh but that's what listening to most small investors leads me to believe).
If the "aggregated small investors" non-exec had existed in some Banks and other large companies I think that moderating voice , that small investors almost always represent, would be better heard---to the benefit of not just the shareholders, but as events are presently showing, everyone else as well.
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Oh dear, things are getting serious. Time for some big changes, though I haven't much confidence they will happen.
1. Stop consumer spending from collapsing. This potentially means big tax cuts for low to medium incomes (5-6% off the basic rate?) funded by increased borrowing and increased tax on high incomes (60% on 100,000+? Increases in capital gains tax?).
2. Ring-fence lending to those parts of the economy not already infected by the mortgage crisis. Legislate for every bank to hive off that part of its business that is involved in mortgages, CDOs etc into a separate entity, so that the basic functions of current accounts, overdraft, loans to businesses etc can continue/resume. Let the bad mortgage related parts of each bank fail or be nationalised as and when necessary.
3. Accept that the pensions industry is a disaster. We need to move to a more European system with higher State pension and less reliance on private pensions. This can be paid for by removing all the tax exemptions on private pensions (which are highly regressive anyway)
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Why are we suprised by all this? We know that banks cannot master technology. We waited years for business managers to get email addresses but they now never reply to them. We transfer funds to pay suppliers etc electronically but when we want to invest in a bank savings offer they ask for a cheque. They don't know how to answer a phone of look afer a customer.
So why are we suprised when they find their employees have been bundling bad debt with good ones and selling them on? These guys sit in their 19th Century panelled boardrooms without a clue as to how the 21st ccentury operates so their employees can pull the wool over management eyes all too easily.
We need a similar investigation here to the FBI in the US, with bankers being led away in handcuffs like the Bear Sterns bosses were when eveidence of fraud is found.
What are we supposed to call hiding bad debts inside bundles of good debts with intention to deceive for pecuniary gain - if not fraud?
Robert, I'm afraid you took too much from your informants in the city at face value and in doing so you contributed to the storm of fear that has created todays situation. Economic fundamentals were sound until the bankers shafted us all - as they continue to do
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# 145 "cash rationing at banks is only days away"
Totally agree. Happened in Argentina in their bank crash in 2002. Locals could only take USD50/month out of their accounts. Armed police outside every branch. I was on holiday there at the time.
I think there was a retailer further up this blog saying he'd had a great August. I suggest you don't bank your cash, as you won't see it again, except in small drips, for years. That, again, was the Argentina experience. We were offered a further 20% discount for cash on already depressed prices, versus credit card payment, as the retailers then had cash on hand as opposed to cash in a bank accountthey could not access.
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In a storm, most people join the others in a shelter. But the entrepeneur is out buying cheap sunbeds. For he knows the sun will shine again, and he wants to be first on the beach with the best deal.
from the www.checkmatemortgages.co.uk (not yet regulated) website ...
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Plan B options
1. Sell part of Alaska back to Russians to raise capital? (sic)
2. Pass a law to identify and punish all Wall St types (at middle rank and above) who have made excessive capital gains over the last 10 years. (based on a benchmark of reasonable reward). The punishment being a fine in each case equivalent to the excess monies made over par.
This would appease the US taxpayers who feel they are bailing out the excesses of Wall st.
3. Make banks publish their current financial standing in detail including all significant assets and liabilities and when loans etc fall due for refinancing etc.
4. US Govt to make an offer to buy any property up for foreclosure from banks at say 75%? of CURRENT market value. This means they make a loss on each such mortgage (but get guaranteed swift payment), but it should be containable as only a modest proportion of a bank's mortgage book will actually default. This is cheaper.
5. As an alternative to 4) why don't the banks' rent out foreclosed properties for goddamsakes?
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Are the banks just holding us all to ransom? Why not say "no rescue" and leave the banks to come to terms with the situation and find their way to setting a LIBOR? They are not going to sit there for ever and do nothing. Perhaps it is all a big game of chicken!
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To be fair none of this is as bad as Argentina's 2001 economic collapse which got barely a wimper out of the western media. But it has meant that people were forced to go through rubbish on the streets (and its still happening today).
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Robert,
Please explain why the markets are not suspended to stop this madhouse, and the Central Banks temporarily put in charge of all interbank lending, and all finance companies required to declare their known bad assets immediately to the Central Banks, so that a rational sorting out of the markets can take place? I don't understand finance, but I can recognise foolish sheep in a panic.
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Citibank will not pull out of the Wachovia deal, they have been angling for something like it for months. It gives them a retail banking chain to rival the other major US players (and on the cheap too).
To continue my more optimistic note of earlier, like B+B, Wachovia in the US was the last big bank that was perceived to have real problems. There is now a glimmer of a possibility that the markets will get over their hyperventilation attack and realise that what's left now is not in such a bad state after all (relatively speaking). I've no doubt that some kind of aid package will be passed in the US this week (the politicians can't be seen to do nothing in election season), it won't be as extensive as the one that fell, but it should calm a few more nerves.
I find it unlikely there will be a cash shortage. We are not heading for the next great depression. As much as I hate to agree with them, GB and AD are right in one respect: the underlying fundamentals of our economy are ok. Manufacturing is not collapsing; retail is actually growing; contrary to the belief of many posters here there have been no large scale redundancies or repossessions.
That's not to say that everything's rosy: the government have still massively overspent and they need to claw the money back from somewhere. No prizes for guessing where that will come from.
A much needed correction is the feeling of many (even a CNN finance journo said it). Companies who fraudulently pumped up profits have died and those that didn't have become stronger. The housing market is correcting in much the same way, though there is a lot of pain to come for those who bought at the top.
Disclaimer: I'm no more than an informed observer (which makes me at least as qualified as most economic "experts", many of whom neither observe nor are informed).
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#112
So, your argument appears to be that it's OK to quote out of context if that supports your personal view of the person being (mis)quoted. This seems somewhat self-serving to me.
"It is not unreasonable to see her philosophy as the cause of our present ills."
Really? So the policies of the UK government in the intervening, let's see, 18 years didn't contribute at all eh? Or, erm, those governments have all been slaves to Thatcherism have they? Pshaw.
And how many mines do you have in Hendon then? We had quite a few up here in County Durham - that doesn't get in the way of my view of Lady Thatcher's net positive contribution to our history.
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[Unsuitable/Broken URL removed by Moderator] will be opening for business next week.
No cheques, debit/credit cards or paypal
In fact no bank notes either
Only gold krugerands, class A drugs, or petrol will be traded.
Welcome to the new world!!
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#154
...whilst David Cameron says he can sort it all out by freezing UK Council Tax for two years!
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What will happen next?
I quote part of AnddrewH's post 10: "People do not sell on the basis of fear of owning the asset. People sell out of fear of needing cash instead of the asset at a time when the price is even less favourable. This is nowhere near the nadir of this particular recession. This is the brink. From here-on in, it is a desparate race for the bottom, until prices are actually low enough for people to be able to risk their own money".
It is going to a very bumpy ride.
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Hard to rebuild a house of cards in a hurricane.
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Re 143
If you believe there has to be a US deal, which I do as the only way of limiting damage economic, then I am afraid the terror has to start. The only way the politicans will be back at the table is driven by their voters.
Largely driven, better not suggets manipulation, by the posture of politicians and the media who have continually reported this as a 'bail out' rather than a two-way transfer many of the US public see this as a gift to the banks. Similar opinion is UK.
The upshot can only be more self harm by the system. More banks will fold. the impact on markets will be substantial. The great danger is that the damage spreads faster than the terror to the public. The flow is similar to a hydraulic system in banking, so it can be rapid, problems in EU today (is anybody modelling this a fluid system with shock waves out there, looks interesting). Have no doubt the terror will get to the public. However some damage will be irresversible. The end of the trading quarter was clearly the target. Target missed. Bloodbath. Very Roman. How much blood to satisfy the crowd. A very rapid collapse in the property market and job prospects is probably needed to concentrate the public mind. My bet is Wall St trading suspended sometime soon but who knows its a new terrain of stupidity.
I imagine some pressure will be brought to bear on the few politicians who need to change their vote, a revote will occur on a slightly modified package so there is a pretence of a new deal. Very dangerous game. The whole process of terror is it has to be gained by damage. If the control loop on terror has a quicker response than the growth in public terror then damage overshoot happens by definition. Congress is punching itself in the face at present. Eventually the pain will filter thru.
Pax Romana is some way away. I have no doubt the fear mechanism is in control.
I think the BnB deal is the least of the problems. If the Banks have to pay most of the bill where do you think the money will come from. Your just being steered by the government wanting you to think its got nothing to do with you as customer rather than taxpayer, or is that just my way of thinking.
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@165: I really hope you're right re fundamentals, but I think you're probably very wrong.
Unfortunately even many of the biggest manufacturing companies rely on short term bank funding to finance day to day operations. Also many of the largest manufacturing outfits (GM, Ford, GE) have become little more than financing organisations with a funny little factory or two attached.
Lack of short term funds to these companies is what worries me, if this occurs, job losses will start to soar, I am expecting GM to approach the US govt at some point in the next month for emergency loans.
Banks could be just the start.
Incidentally I don't look forward to this, I own a small company which is very reliant on consumer confidence, if it goes pear-shaped we will all be losers in the short and medium term.
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#13 - suggests that next on the list is Dexia
One has to laugh at their slogan....
"Dexia - short term has no future"
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Completely off topic, but I love this quote from a Wall St trader:
"This is global contagion. It's no longer just the United States"
Helloo?? Rest of the world calling... We've been at this for some time now...
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@71
"We have a public sector which is so big that we cannot afford it any longer. Time to change direction."
This is EXACTLY the opposite of the problem that is occuring at the moment. The public sector has nothing to do with this in the slightest! The problem is the private sector, and the false economy that we've built on false housing prices, and the greed to get a piece of the housing pie.
Because of this, the banks panicked. Everyone will suffer now because of the greed of the rich, not of those who are paid on average less than £17,000 a year and can't even afford homes.
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#166
On "Margaret Thatcher Milk Snatcher"
Next you will be telling us that your beloved Thatcher did not take the free milk from primary school kids.
Stop rewriting history and accept that the ills we are presently suffering stem from her philosophy of light or self regulation. I will not even go near the poll tax! The woman was an unmitigated disaster not only for the UK, but because of the pernicious influence on Reganomics, for the World.
I hope the fog clears soon and you can see her for what she was.
There are more important things going on today but it always pays to remember who started the ball rolling - she did - with her advisers. The whole business of relaxation of regulation which directly led to the disasters we see unfolding before us was Mrs Margaret Thatcher's idea. And of course the Tory party who only apparently picker her as their leader by accident. - but the Tory party did nothing to stop her - Cameron is Thatcher in trousers. He was after all an adviser to the Chancellor during the last Tory government I believe.
Cameron's advisers and financial supporters include the very same hedge fund managers according to the papers. It also can not longer be the case the The Church of England can be describes as the Tory Party at Prayer as the very same short sellers were described by both of England's archbishops as "Bank Robbers"
The country wing of the Tories has lost out to the libertarian city slickers wing in a big way - time they reasserted their position. The liberal wing (dating from Joseph Chamberlain's - of Birmingham) defection from the liberals to the Tories have a lot to answer for. Even today the shadow chancellor was singing his praises - The Tories just don't get it - their economic policy caused the bubble that has now burst.
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Its very interesting isnt it. If the politicans have to be driven to the deal by the public feeling fear, what is the first thing that happens - Up pop some politicians saying everything is okay guys I'm sure it will be sorted. I hope they have got it right.
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164:
Great point, great question. I hope you get an answer!
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# 171
I don't agree about the fear factor.
Ok investors have a lot to worry about, but depositors have little or nothing.
As regards jobs ? Well if banks seek to close business down in an effort to gain their own reincarnation - I doubt it will work.
Retailers will leave enmasse, either via the government or by themselves away from the toxic management - and good ridance quite frankly.
As regards paying for the problem via bank charges > profits > insurance scheme. You might be right here, however I think both share holders and retailers will be seeking firm control on banks from now on.
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I am about to start a new job with one of the 'big 4'.......
it's not HSBC
Am I mad?
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#176
LoL.
And what of Gordon Brown's tenure in No. 11 Downing Street. I seem to recall significant lauding of his achievements through the late 1990s into the early noughties. Not too much mention of the Thatcherist bubble expanding to bursting point while he looked sadly on.
I don't know about you, but I lived through Mr Callaghan's period in office, and very entertaining it was too.
BTW - I think your line about my "beloved Thatcher" is presumptious. It says rather more about you than it does about me. I will repeat - I think she had a net positive contribution to our history. I have the same view of Attlee, Jenkins, and (dare I say it) Blair. I don't hold any of them 'beloved'.
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I'm heartened to see so many enlightened posters who recognise the Fractional Reserve Banking system as the root problem in this banker-made crisis. For those who have not heard of the term before please watch this series of short videos on youtube:
http://www.youtube.com/watch?v=vVkFb26u9g8
http://www.youtube.com/watch?v=sanOXoWl0kc
http://www.youtube.com/watch?v=_yvRZoM-2r8
http://www.youtube.com/watch?v=WKeMrPgDPBU
http://www.youtube.com/watch?v=JF5YZPk3NUc
It is an excellent beginners guide to the causes of this problem. Once you get your head around the fact that money is created out of thin air and that banks are lending something that they don't have then the fraud perpetrated on the populace begins to make sense. I urge you all to take 20 minutes out of your day to watch these short but informative videos.
It is pointless asking Mr Peston what is wrong and what is going to happen next. He is either clueless or complicit in this fraud because he point blankly refuses to discuss the subject. He fails dismally in his charge of Public Service Broadcaster and should be sacked forthwith.
#137 Isi-92
"Don't wait for laws to make fractional reserve banking illegal. The customers will come naturally to a more sustainable model, and fractional reserve banking will die a quiet, lonely death."
Unfortunately I don't think it will be that easy. The banksters have engineered many collapses in the past because that is how they accrue assets and power. If the economy of the world bobbed along at a consistent rate permanently the banksters would not be able to fleece us so readily. If you look back in history the money changers have not given up without a fight when the powers of the day disband the Fractional Reserve Banking system. They usually end up losing their life or at the very least the banksters trick the replacement power into allowing the FRB system to return.
The banksters won't go down without a fight and they fight pretty dirty. However, that is no reason not to try. We must rid ourselves of the permanent debt that the banksters hold over us. If we get rid of the FRB and debt-based money we also get rid of the growth paradigm. Its the growth paradigm (inherent in the debt-based monetary system) which is overpopulating and therefore destroying the planet.
Let the system crash and use the failure to instigate the move away from Fractional Reserve Banking.
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175:
Oh come on.
I accept that the private sector has caused this. The private sector is in big trouble as a result. No disagreement there.
But who do you think pays for the public sector? The private sector pays for it. Would it survive if it was just the public sector, paying for itself by taxing itself? Bit of a zero-sum game, isn't it?
The private sector - like the UK as a whole - is going to be poorer after this. A lot poorer. Its ability to pay for the public sector will be corrrespondingly reduced. We need to spread the cutbacks across both public and private sectors. If we don't, the system implodes.
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#176
Credit where credit is due. You missed this bit out.
In hindsight Thatcher's 1986 Big Bang was a misnomer. It was little more than the starting signal which over years of non regulation has led to today's Bigger Bang.
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#172
You can see the fundamentals on the ONS website. Retail is trending up, manfacturing is on a slow decline (as it has been for 20 years). I'm afraid I know little about the US economy but I would think that the US government would be more than happy to grant those loans right now (it would be political suicide to let any of those companies fail, they have many, many voting pension holders to support).
I can see a few more smaller banks going under and maybe even a few large non-finance companies being burnt, but most companies aren't considered national assets and don't have the luxury of large loans to keep them afloat. They will have budgeted for this year back in April (or whenever their financial year started) and the better run ones will have paid for it already. As long as liquidity can return to the system by spring, I suspect most companies will be fine. (If not, all bets are off.)
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You know that rational thinking has gone south when someone, during the debate today in the US HoR, implies that he would prefer the USA to go down a road ending in possible bankruptcy (or at least deep depression) rather than endure a policy that is ever so slightly socialist in it's thinking. ..and then, after with the country starts creeping toward the cliff-edge, the legislators decide to pack up shop for two day.
It's a funny old world...
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#180
No. I'd imagine you'll be paid quite well.
If they're still taking people on, they can't be that badly off...
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#166
re Thatcher and school milk
To be fare, actually she was just the messenger in that instance, and she was still a very minor player in the Govt. and Cabinet. Ted Heath didn't even want her in his cabinet but was advised that he really needed to have a woman if he wasn't going to look 'Old School Tory'. The decision was made above her head, she just got the flak.
Heck, I've just defended Maggie Thatcher!
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Re 172
Really we are talking about the impact of recession dramatically speeded up by the catalyst of the US souring. Recessions are lopsided in their impact so some sectors, demographics etc etc will be hit hard by this and some will see little impact, or perhaps that should be little immediate impact.
The trend in the retail sector has been convergence in product lines so there are increasely similar product lines now carried by businessess which started by being quite disimilar. There has been a drive to cut margins. This actually leaves the retail sector more not less vulnerable to downturn. There is clearly surplus retail capacity about and something has to give.
If the consumer goes in the nuclear bunker then some businesses will go in a matter of months. They cannot resturcture quickly enough. The likely survivors are a few big boys as usual and small highly flexible businesses with low overheads and very flexible product lines. Ethics are likely to be an important marketing tool. There are always people with money. Things in the village seem quite normal, charity coffee mornings and such, nobody thrown themselves off the bridge yet.
Anything bubble driven is vulnerable as the bubble is gone but the consumer debt remains. Could be about some time. Dont know. By the way the UK government has a track record of having absolutely no idea what is going on on the street in these sort of circumstances. Perhaps it would be unfair to say that it is only when VAT income drops that the surveys start. Of course thing could have improved.
Has to impact on Asia shipping to EU, dropping volumes and transport costs could push prices up so homegrown stuff more atractive. Happening in parts of the US already.
Oh by the way the Mayan calander predicted the end of the world as we know it around about now. Interesting isnt it.
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Various posters have suggested panic scenarios, National Guard on the streets, equivalent in the UK, and so on.
Over-alarmist, maybe, but the basic point is a good one. Control mechanisms may be needed if the public either (a) panic, or (b) get very angry that they've been sold a pup.
But then I start putting two things together:
1. Governments, ours in particular, have been putting control mechanisms in place, gradually, for years. Surveillance. Erosion of civil rights (rightly fought by David Davis). 42 days. Plans for ID cards. Elderly gent complains at Labour conference and gets arrested as a terrorist. Lady stands in Downing Street and starts reading out a list of British casualties in Iraq, and also gets arrested. Control mechanisms, it seems.
2. Clever people, like those in Whitehall, could have seen this crisis coming for years. (read Michael Ruppert on this).
So - control mechanisms, and likely knowledge of inevitable economic crisis and predictable public backlash.
Coincidence? Or cause and effect? Could be.
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187
Cheers!
I'll go to bed now and sleep contently...
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Re 183
Some do think that a public sector and the rest of us in a circle servicing one another is the solution. Wealth generation difficult with that solution.
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@185 (and can anyone tell me where hash is on a mac keyboard?)...
>You can see the fundamentals on the ONS >website. Retail is trending up
But margins are generally razor thin in retail at present, which means little scope for weathering a prolonged downturn (especially if consumer spending is severely down over the xmas period and banks won't make short term loans for additional xmas stock -which happened to many small companies last year and the crunch is likely to be far worse this xmas)
>but I would think that the US government >would be more than happy to grant those >loans right now (it would be political suicide
I would hope, but as we have seen politicians often act far too late and then in bizarre ways!
>As long as liquidity can return to the system >by spring, I suspect most companies will be >fine. (If not, all bets are off.)
Total agreement with you there, would you care to hazard a guess at the odds of liquidity back by spring? I reckon no better than 100/1 best, short of widespread nationalization of banking.
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Crikey, Hector Sants of the SFA looked rattled this evening. Sweating, stuttering...anyone would think HE was responsible, for the UK part of the crisis anyway.
Sorry, what's that, he IS ...?? And God help all who sail...
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#188
re my post @ 188, that should have refered to post #176 - sorry.
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164: I do not think that this is about panic or irrational behaviour. It is (as R.P.'s headline suggests) about a bill that needs to be paid before any more booze is served to some of the most heavily drinking regular customers. For a long time the barkeeper thought he would profit from serving round after round. But he has just discovered the gentlemen left their wallet at home.
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#92 -
Perhaps you should have waited a few hours before your prediction!! Xmas is a long, dark time away!
Have you heard of CDS's and derivatives??
I think your August sales are people having a 'last blast' and maxxing out their credit cards before they file for IVAs and bankruptcy - it's a well known trend!
See you at the bottom!
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Somehow, I think that this deal in the US
Congress will get back on track, and be passed
sometime in the next week.
But, like an illegitimate child, no one wants
to be associated with it, unless everybody is.
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192: glanafon
Good point. You do lots of posts. Very good and readable ones, I find.
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197:
Superb post. Spot on.
Retail figures - when compared with markets, economics, house prices, etc - suggest an 'end of the world' spending binge.
You explain this very well.
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#198
By next week it might be to late, with the Dow closing 778 points down anything could happen over night in the far East and Europe/London later before wall Street has a chance to reconsider - never mind Wash DC.
Re your second point, that doesn't compute, they could have voted unanimously today for the bill but they didn't, what makes you think they will be any more likely to do so later, especially when there are people of the mind set I pointed at in my message @ 186.
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The brown stuff is now hitting the fan....duck if you can.
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By the way, if the US does not agree the bailout, will it be as bad as we all think. In our time of need, has anyone bothered to ask those in cash (in EMEA land) what they are going to do to help.
New world order beckons. I'm off for a curry and won ton soup!
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I've suggested it has something to do with fear and stupidity and some disagree, I'm not really bothered either way I have already done what I can to protect myself and my family from this sort of nonsense, some time ago. After Lamont throwing my money into the fan at the start of the nineties I was never going to leave myself in a vulnerable position again if I could avoid it. I expect more fear tomorrow but we'll see.
I think Nancy Pelosi played it the way she did to damage Bush, probably overplayed it, tried to be too clever. Most of the time they know the voting beforehand. Some time ago I suggested the loop with the politicans was not to want to be tainted by it and they would not want to be seen as bailing out the bankers and the last act would be trying to pose as saviours. They are very predictable lot. .
NB Re comment about deposits in the bank. The last thing Brown wants is a run on a bank at the moment. A lot of small investors hold shares or know their pensions are in shares or their wealth is tied up in their house. I dont think many are as robust as you. You don't think you are ordinary do you surely. :)
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Robert a key question: does the government have the funds and the ability to nationalise the whole banking system if needs be? How close are we to seeing a run on all banks, and then a run on food, and then general anarchy?
Should the government perhaps consider stepping in and taking over the whole lot before it is too late?
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#157 random_thought:
3. Accept that the pensions industry is a disaster. We need to move to a more European system with higher State pension and less reliance on private pensions. This can be paid for by removing all the tax exemptions on private pensions (which are highly regressive anyway)
Oh dear, I can't believe I'm hearing this. Gordon Brown's attacks on pension funds in no small part has triggered the UK side of this crisis. The mechanism of compounding meant that the reckless taxing of funds had an enormously detrimental effect on their performance.
They were forced to chase higher-yielding - and hence riskier - investments in order to maintain returns for their members. Thus we see a boom in appetite for the (current) instruments of our financial gloom.
Prior to GB's smash-and-grab raid, all was going well with the pension funds, without significant risk to members or the wider economy. For those who choose to ignore this, this tax "raid" was to pay for the legions of self-perpetuating civil servants.
On that note, when are we going to reform the Civil Service, and permit Governments to sweep them away every few years?
#176 John_from_Hendon:
Next you will be telling us that your beloved Thatcher did not take the free milk from primary school kids.
Who cares? Free milk was introduced to help during a period of poor national diet and austerity. The circumstances which necessitated its introduction vanished many, many years before Thatcher came to power. It was an anachronism.
Stop rewriting history and accept that the ills we are presently suffering stem from her philosophy of light or self regulation. I will not even go near the poll tax! The woman was an unmitigated disaster not only for the UK, but because of the pernicious influence on Reganomics, for the World.
Well, I'm going to put my head above the parapet and say that the Poll Tax was a much better bet than Rates or Council Tax. It was only, in my opinion, a problem because large numbers of people were used to the idea that they didn't have to pay their way in socieety. Its very unpopularity was the mechanism by which it would keep up the pressure on local authorities to deliver value for money.
Its lasting legacy is that tenants now pay Council Tax, whereas previously tenants were not usually responsible for Rates, and so that local accountability still exists.
Frankly both should have been scrapped in favour of a single, national income tax, or perhaps local income tax. But in essence the Poll Tax was a reasonable idea which foundered on the rocks of a public who did not want to pay their own way.
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Re 171 and 189
Very astute observations. Saw some talking head who said the next move was for some US banks to cut credit for credit cards. Basic idea being to scare and harass the population into lifting their pressure to a deal.
As I understand things the "deal" is now over a 100 pages long and will obviously be modified a bit before it comes back. Seems like a fair bet that most politicos haven´t read it and if it passes they will then say that it is being misinterpreted, misapplied etc etc. and even post pass a lot of effort will go into watering it down or changing it in some way - thus creating ongoing uncertainty.
It´s not really subject to economic logic as some of the US population are quite rational but true believers and they would rather go down with the ship than see any part of it painted red.
Some more of them just don´t care about economic damage as they already don´t have a job, don´t own a house, don´t have savings, and don´t have a pension. - Why should they care?
A few of them actively want meltdown because they believe that it heralds the second coming or something similar, and they definitely don´t want to be doing the devils work.
The patient may be beyond help before the medicine is administered. The patient is clearly infectious and the only time will tell as to the true level of contagion.
Even if it sails through on Thursday it still remains possible that we may all be reminded that not every illness can be cured.
For those who believe in the Mayan prophecies I think they need to find a way to struggle on until December 2012.
Happy days
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The media et al seems to blaming the bankers, governments and regulators etc and sure, they shoulder a great deal of the blame but I feel the Credit Agencies have managed to duck under the radar.
It's been said that these agencies rated a great deal of the toxic CDO's at the centre of the problem as AAA rated. I'm not sure if there was any intent to decieve but they obviously didn't do what they were paid to do.
They should be forced to re-score every single debt vehicle they rated. At least then the banks and regulators would know who's holding the bad debt?
It's all too late to shut the stable door as the horse, cow, duck, pig and chickens have all bolted down to their local bank to withdraw their cash.
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#157
...and don't forget the scandal miss selling of pensions that in the early 1990s - an Equatable Life anyone?...
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The major problem is liquidity in the markets? Why not let the BOE act as a clearing house to dish out guaranteed loans on a daily, three monthly basis, etc to free up the credit flows?
Why not create our own toxic bank where banks donate their toxic assets and over a period of time get returns, as and hopefully they regain worth. Banks which getting into troubled are being bailed out now, so why not support them in the short to medium term with money and recoup the cost from the toxic loans or take-overs or the insurance scheme.
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Amongst all the other big numbers today I learned that around 9,000 houses per day are being "repossessed" in USA.
About a year ago when all the concerns about subprime, NINJA mortgages and liar loans first started I suggested stability might be cheaply bought by subsidising most of these people to stay in their homes and continue paying off their loans.
Do the sums today:
9,000 per day is 3million per year.
I guess $500 per month might subsidise most of their loans sufficiently to continue repayments. That's a grand total of $20bn per annum.
A lot of socialist subsidy but peanuts by comparison with the capitalist subsidies proposed at the top end of the pile.
Take away the fear of the defaults in the minority of loans and the great weight of normal paid-up loans and mortgages will be sufficient to restore confidence and for normal banking rules to be re-asserted.
For example I gather Bank/building society defaults are running at around 1.5% but Bradford and Bingley has failed because it had the huge default rate of 2.5%. In other words 97.5% of its mortgages were being paid on time every month. So why not just help out the few bad payers instead of destroying not only that bank but undermining confidence in all the others?
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Further viewing for those who want to know where all the banking wealth goes:
http://video.google.com/videoplay?docid=-515319560256183936
We can come out of this with a new banking system that bans both fractional reserve lending and usury, or when the money supply contracts the middle classes will be wiped out.
Gaetano Salvemini stated 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social"
"Fascism should more properly be called corporatism because it is the merger of state and corporate power." - Benito Mussolini.
With the above historic quotes and our CCTV, ID Cards.........
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Sentiment had been so hyped regarding this bail-out plan that it's no wonder that markets are crashing. Fundamentally, what has changed between yesterday and today? Value is a fleeting concept and is simply a number. All that matters is what that number will be in the future and this decides our response.
Short term fluctuations aside, ultimately, how does the US, UK etc. pay for all this?
1. They end up printing money which leads to massive inflation.
2. Inflation means the value of your house 'rises' so that at some point it becomes 'worth' what banks thought they were lending against.
The difference between what they lent you (in real terms) and the inflated value of your house in a few years time is what the banks are losing now.
It's all a zero sum game. As long as you own (and can continue paying for) stuff like bricks, food and water you will be OK. But it's going to be ugly in the meantime.
Good luck and remember this.... The Mayans predicted the end of this age (baktun) would be in 2012. And precession of the equinoxes means that:
4000 BC - Sun in Taurus - Bull worship
2000 BC - Sun in Aries - Old Testament Lamb of God
0 AD - Sun in Pisces - New Testament fishes of men
2000 AD - Sun in Aquarius - the great leveller
When one age gives over to the next we tend to see great conflict as the excesses of the previous age are brutally thrust against the new enlightened.
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THE WASHINGTON HILLBILLIES
I wanna tell ya?ll a story ?bout a man named Dodd
refied his house but it seemed kinda odd
saved eighty grand but he said he didn`t know
law makers get a break cause they`re friends of Angelo...
Mozillo that is , CountryWide, Bad loans
Well the first thing ya know Angelo?s in some trouble
he say`s HEY DODD NOW THEY SAY I CAUSED A BUBBLE!
Dodd say`s fine I`ll just sponsor us a bill
tell em that they need it and I`ll sell it on the Hill..
Well the moral of the story that you all should know
better vote em all out if they`re friends of Angelo
or one day soon we`ll be shootin at our food
Bernankes got us lookin at two hundred dollar crude
Oil that is , black gold , OPEC tea
And now it`s time to say goodbye to you and all your kin
and Dodd would like to thank you all for kindly chippin in
you`re all invited back again to this localitee
to pay another trillion for their bogus LTV..
Loan to value
Kick your shoes off
Ya`ll come back now, you hear..
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As most are listed entities, how could it happen in this manner?
Is there a lesson to be learn from here? Are we holding the Board responsible for these collapses which we are hearing DAILY?
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Robert, you should rename the title of this
blog thread to "The Day the Earth Stood Still."
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Shouldn't general share prices be falling more than are at this point - since the 80s share prices have been boosted because lots of firms have been able to borrow to takeover other companies by paying a premium, often funded heavily by lending. Hence the fall from historic dividend returns going from around 3-6% down to 1.5-2% (or less at times), as that became less important and takeovers became much more common and important in a share prices. Clearly not many companies are going to be bought out at a premium at this point, only in a firesale as they collapse for some reason (which is one reason for the prices to drop); but more than that, the chance of borrowing money to do it is fairly laughable in the current market, even if someone did see a cheap company they want to takeover.
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This is going to make the great depression look mediocre. I hope everyone likes the taste of dog meat, cooked in 44ga drum. Yea Haww!!!
Everyone can stay the hell away from MY bridge.
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What a silly to suggest that the taxpayer should bail out the greedy bankers of Wall Street! No wonder people objected. What is needed is not a bail out but a funding exercise. The taxpayer should buy the real estate and lease it back over 50 years to Wall Street. Mortgagors become tenants, still with right to buy, mortgagees become landlords with right to sell to other landlords or to tenants. No foreclosures, no bankruptcies, the banks have new money to lend, the taxpayer has return for his money and the would be homeowner has a home to live in. QED
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This alert from Le Metropole Cafe says a lot:
GOLDMAN SACHS GOES NET LONG GOLD ON TOCOM
In the September 29 session on the TOCOM Goldman Sachs
COVERED 13 short contracts and bought 495 long contracts
to bring their long position to 2,525 contracts AND AS
A RESULT MAKING THEM NET LONG 28 CONTRACTS!!! The largest
net short position they held was 52,000 contracts in
March of 2006.
Below it is shown graphically. The declining net short
position has been going on for 30 months and I have
predicted for some time that GS would eventually be
net long just before the gold price explodes. Well here
we are! John Reade of UBS poked fun at me for this
analysis saying that GATA doesn't know what an arbitrage position is. Well, Mr. Reade I do know, and this sure
as hell isn't one! This chart documents perfectly the
demise of the gold Cartel. It should be noted that in
July Goldman Sachs advised its clients to sell gold as
they said gold was going to $740/oz. Their price prediction turned out to be accurate, however, they did not sell
gold from their own account during that time; they
covered their shorts with the aid of charitable donations
from the clients who followed their advice!
(CHART WILL BE IN MIDAS COMMENTARY TOMORROW)
Here is the estimated liquidated value of the GS
TOCOM gold position. I no longer have to extrapolate
this as their net short position has now been eliminated.
GS has lost approximately 185 MM$ on their TOCOM
position since I started tracking the data in January
2006. One has to wonder why a company as smart as GS
would tolerate being in an increasingly losing position
for so long. I think we know the answer. The suppression
of the gold price facilitated orders of magnitude
larger profits to be made in other markets.
Now that Goldman Sachs has finally come on to the GATA
side of the market we can expect a gold price explosion.
For a long time many in our camp wondered if the Cartel
was so smart they could continue their manipulation for
ever. We have seen in the last few weeks that some of
the key players have stepped on their own land mines.
The laws of economics can be frustrated but not repealed.
Cheers
Adrian
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'Show me the money!' One of the biggest reasons there has been this credit crunch has been completely overlooked in this debate. Huge amounts of cash are stashed away in tax havens. This colossal injustice is something the tax justice network has been campaigning against for years, but governments have turned a collective deaf ear, largely because the people with the biggest stash get heard in the corridors of power. As President Bush once memorably said, 'The rich don't pay taxes'. No wonder our economies are in crisis. The terrible thing is, those who are arguably most responsible for this situation are those who are most able to protect themselves, while the poorest are the first to suffer.
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WHEN THE BANKS WON T TRUST EACH OTHER ? NEITHER SHOULD THE TAXPAYER AND HOMEOWNERS TRUST THE GREEDY BANKERS.
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As the credit crunch continues to unfold and as the list of casualty's (bank's and busnesses) grows ever longer then I am becoming more and more convinced that the situation was deliberately engineered by the financial markets big power brokers. I strongly suspect that these ruthless banker's are only doing what they have always done when they have lost control over the money markets. They set out to restore order by destroying anyone or anything that threatens their position or supremacy.
I genuinely believe that the sub prime mortgage problem, in America, was just the excuse that that they (banker's) needed to firstly unsettle the markets and then panic them into behaving irrationally. This was a necessary pre requisite to shaking up the money markets so they could regain control. Until these ruthless people achieve their objective the markets will remain frozen and the carnage will continue regardless of any attempts, by other people, to get things moving. This is naked capitalism in its most basic form.
Unfortunately since the UK markets were deregulated and became more global using electronic dealings methods then unravelling what has/is going on, in order to gain control, might take longer this time round.
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#221, money always has a home, although people
with homes don't always have money.
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#14
It would be perfectly possible for LTSB to pull out. The biggest ramifications would be sunk deal costs and political dis-favour (given the match-maker). Also, LTSB shareholders could not agree this one. At the minute, they are paying 180 a share for something currently worth 147 a share. And they would be increasing their share of the B and B bail-out costs.
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I am no expert but it does seem to me that Bush's plan was put together very quickly and an attempt was made to stampede Congress into passing it. On the principle that anything that quickly tacked together must have problems alone it is unsurprising that the bill did not pass.
On a more UK note I remember going to see a Mortgage broker a few years ago and the list of failing banks in the UK reads now like the list of banks most eager to lend that he gave me then....
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