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Armageddon avoided

Robert Peston | 16:42 UK time, Wednesday, 8 October 2008

The symbolism couldn't be worse.

Gordon Brown commits £400bn of taxpayers' money - equivalent to about a third of our entire economic output - to rescuing the banking system.

Traders on the floor of the New York Stock ExchangeAnd central banks from Asia to Europe to North America slash interest rates.

In other words, there's been a co-ordinated global attempt to prop up the financial system and save individual economies from a deep dark recession.

Yet the FTSE 100 plumbs new depths.

What on earth's going on?

Are we all doomed?

Well, the symbolism is a bit misleading, because the FTSE 100 is massively unrepresentative of the British economy.

The main reason it's fallen is because of sharp falls in the prices of giant mining companies that are listed on the London exchange.

So does that mean the FTSE 100 drop doesn't matter?

No, for two reasons.

First, one of the untold horror stories of the credit crunch is that it's wreaking havoc with the investments that underpin the value of millions of people's pensions.

Also, the reason for the fall in those mining companies is that there's been a further sharp drop in the price of commodity and energy prices.

Good news in a way, if it leads to lower household bills.

But the cause of those drops is a slowdown in economic activity throughout the world and the onset of recessions in several developed economies.

So what Gordon Brown and central banks have done today should stave off economic Armageddon - but it's probably too late to save us from months, or even years, of sluggish growth.

Comments

Page 1 of 3

  • Comment number 1.

    Hate to say it Robert but we're all gloomed.

  • Comment number 2.

    Also Robert I think it's in the Guardian online where you're being blamed for everything you might want to take a look.

  • Comment number 3.

    This really should have predicted. In hindsight, a cut a couple of months ago may even have prevented some of the recent disasters (i.e. B+B, Lloyds + HBOS etc.).

  • Comment number 4.

    A superb album by Marvin Gaye.

    If anything even more relevant now that when it was issued 38 years ago.

  • Comment number 5.

    I'll happily settle for sluggish growth, given the alternative.

  • Comment number 6.

    Government and BOE now has started to move in the right direction, rates need to go down further as things stand now 3% will be more realistic.

    What happened happened now we need more cuts to sustain the economy, if BOE has cut rates earlier we will not be in this mess now.

    Hope they announce further 0.5% cut tomorrow.

  • Comment number 7.

    Perhaps the market is at least representative in its mood music. It's like waking up to be told that you'll live, but you've lost both legs in the process. Some adaptation to reality will be required!!

  • Comment number 8.

    It's all about the bankers that have secretly been our government for centuries!.....Stoopid!

    Why else do you think Blair was rewarded with a $5m p/a part time job with JPMorgan, and after only 7 months from resigning from office!

    It's also why it makes no difference which party is in office. They all (I mean both) follow the same secret agenda such as EU expansion, political and economic union, expansion of the single european currency etc, etc.

    Where was our promised referendum on the EU treaty?

    Look what happened after Ireland voted NO (although they were supposed to vote yes by being bribed before hand with massive EU subsudies). The NO vote is now getting side stepped (read steam rollered) by these shysters.

    There is no democracy....its just a sham and a con trick that is being performed by a cabal of 'elite' financial and political megalomaniacs. HENCE THE BAILOUT TODAY. They don't care what happens to equities and the stock markets.....they just want to own all the assets.

  • Comment number 9.

    Is it true that Robert Peston has been reported to the FSA for allegedly breaching rules regarding how market sensitive information should be properly announced to the stock exchange?

    http://3.bp.blogspot.com/_EQc_hLHXONE/SOzOyY5z_4I/AAAAAAAACX8/jkMsI67deN4/s1600-h/complaint.jpg


  • Comment number 10.

    At last! A reference to an issue affecting ordinary folks - pensions.

    Can we hear more about that please Robert.

  • Comment number 11.

    Seven years of sluggish growth ,starting one year ago

    Weve had the seven fat cat years,now we have the seven lean years starting last year


    Biblical cycles overide purely economic ones


    Usa will have to find someone with the wisdom of, a Joseph with a coat of many colors and sold into slavery, to manage events and deal with the pottyfar economic system

  • Comment number 12.

    Yes. But Robert how many days can we go on doing this?

    We do not have an unlimited supply of money.

    What rate is the chacellor borrowing at and what rate is he lending at?

    He has been very cagey about many of these things.

    I think that things are going to get a lot worse before they get better and I wish Darling would keep the public money out of this.

  • Comment number 13.

    There is nothing wrong at all with sluggish growth, as long as it is growth. One shoe that has still to drop is the inevitable imminent bust in the tiger economies, as their exponential growth is about to run out of mileage when they kill their markets, and THAT's going to be painful.

  • Comment number 14.

    Labour and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92

    Labour and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92

    Labour and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92

  • Comment number 15.

    Now isn't the time for the government to even think about sitting back and feeling smug compared with some in Europe and eslewhere.

    Whats was unveiled is the barest minimum and just a first step to what is required. There is still the matter of rebuilding wholesale markets in a manner that is more transparent and sustainable and of course the matter of working through the existing overhang of stuff the media has been labelling toxic (but which isn't all dangerous)

    BW

  • Comment number 16.

    can somebody explain this to me. how can the French claim to be outside of the global turmoil as a result of strict bank lending, but the CAC is tumbling down?

    is this the same language as the head of duetche bank claiming that they were immune from the write downs at the end of last year? surely this is a misleading statement and illegal?

  • Comment number 17.

    I've been selling crude all day and am smiling. Thank goodness they didn't ban short-selling in commodities huh?

    However, don't expect lower utility bills any time soon. The utilities are making high while the sun shines for them. Lower coal, crude and gas prices are not being reflected in lower wholesale power prices. The spark (from burning gas) and dark spreads (from burning coal) are at record highs i.e. power utility margins are higher than they've ever been. And they have the audacity to raise your bills!

    We need a full scale investigation into this! utility bills should be linked directly to coal, gas and carbon emission prices and not some manipulated power price!

  • Comment number 18.

    Cheerleader Peston!
    How many bank shares do you have?

    Impartiality and all that...

    What are your thoughts on this:
    http://video.google.com/videoplay?docid=-9050474362583451279



  • Comment number 19.

    I'm affraid that was it. The only thing they can do now is to shut down all the stock exchanges for a while. Open it when some sensible set of rules are drawn so that we don't forget the reason of the stock exchange. It's not there so that some people move their computer mouse to move their money from here to there every day to get rich. This is the ugly truth and the longer we avoid confronting it the deeper we will sink.

  • Comment number 20.

    But it does matter, RBS was barely even today after falling 50% this week alone. The effort to shore up the banks is crucial. The whole government is dependent on it from a credibility perspective.

    iceland is bankrupt, pakistan is headed that way. russia is clsoing its markets constantly.

    let's hope calmer heads prevail in the days ahead. but short selling of banks is back on the agenda from tomorrow.

  • Comment number 21.

    As a (horrified) onlooker without specialist knowledge, what astounds me is the toxicity of the mortgage debt that the Americans sold into the system. Thanks to the opaque derivatives (concealing dodgy loans) emanating from the States, the whole western financial system seems to be in very serious trouble. The UK is worst affected in the EU.

    I hope if nothing else, this will shake our politicians out of their silly copying of everything American.

  • Comment number 22.

    Robert,

    Can you clarify if the 'third of our economic output' is just for a year?

    If it is, despite 400 bn being a huge figure - who cares!

    I didn't realise we earnt so much as a country.

    What are we playing at? Don't let the Saudi's buy everything, this should just be the start.

    I suggest UK Gov starts buying into oil and gas futures to protect us from the cartels.

    Why stop at that? We could snap up all the banks, buy all the building societies, start purchasing small un-inhabited islands and even start a real estate business on the moon!

    I feel richer already!

  • Comment number 23.

    Robert. Less words like "plunges", armageddon, please. It (you) are not helping matters.

  • Comment number 24.

    "What's going on?"

    Confused owners of index-trackers asking that question should have checked the price trends of what resource companies are selling.

    The commodity bull run topped months ago, since then commodities have been dropping. This is a normal effect of credit deflation. Other stock markets with heavy exposure have already suffered worse. The FTSE's resource-heavy composition has been the subject of newspaper comment all year, but has been overshadowed by inflation stories told at the peak of the bubble in a classic example of missing the wood for the trees. The only surprise is how long it has taken falling prices to feed through to earnings expectations here. If demand pulls back as sharply as it looks, soon markets will be retesting post tech bubble lows. It is a side effect of our financial problems which cash injections are unlikely to fix.

  • Comment number 25.

    isnt £400 billion as much as the US bailout? given our relative size this surely is Armageddon. and i am not sure this would even solve the problem, the Fed the BOE and the European bank have been pumping massive amount of money into the system to no avail. why would this be any different given there are more "strings" attached? The banks just say no thank you.
    The basic problem is trust, so why dont all governments insist that the banks come clean and publish their balance sheets. The sooner the bullet is bitten the sooner we can get over the problem.
    What does darling think will be the effect of a 0.5% cut in base rate, as the banks gave up on using the base rate a long time ago. What is needed is a massive rate hike to say 10% coupled with a 100% deposit guarantee, and just watch "liquidity" flood into the banks.

  • Comment number 26.

    Frankly, if it wasn't having such a desperate effect on the majority of ordinary people, it would be something to laugh about.

    The entire system is always rigged to make money float to the top of the pyramid. occasionally, the pyramid collapses from the middle down, and some of the middle men loose everything, and the pain permeates to the people at the bottom who have worked hard and done nothing more but buy the hype that the politicians and financiers have been telling us over the last few years, which is to keep on buying, get another credit card, release equity, buy, buy, buy! Well, so many people bought, and kept on buying, one credit card not enough, not to worry, get a second and a third and a fourth, max them out, but fret not, lines of credit will be extended and your limits will be raised. Recoup equity in your home and spend it on a new car or holiday, after all, house prices will keep on going up wont they?

    Usually, the wonderful and canny people in the banks are wise enough to keep on being sensible while the rest of us go mad on cheap credit, but it went on for so long, that most of them believed their own hype and fell for it, to the extent that they too bought into the credit lifestyle, and the neverland make believe of unending credit and growth. They fashioned wonderful financial vehicles and instruments to take real world risks and package them into fanciful products that they convinced themselves and others were worth a fortune, and the big party went on.

    Then of course, as will all parties, the drink run outs, the food is eaten or discarded in congealed lumps on scattered plates dawn breaks and realisation sets in that it is time to go home, and that not so nice feeling that you did something you really ought not to have begins to nag at you, so you think to try and slip out unnoticed to leave the clearing up to someone else, and realise in horror that the party was in your own house, and its been well and truly wrecked.

    Like all clean ups after a hell of a long and enjoyable party, it isn't the pile of rubbish that instantly is visible that is the problem during the clean up, its the red wine on the new carpet, the vomit in the sofa, the broken toilet and the wet mattress. Just when you think you got it all sorted, you find something else to horrify you, and this financial crisis is no different. From the initial mortgage backed securities and the credit crunch, we have many more bad news stories to come, the whole $6trillion mound of festering Credit Defaults are sitting in the spare bedroom, a waft of putrid smell occasionally assailing our nostrils, as we scrub at the stains on the rub, but we put off going into the spare bedroom as we hope nobody actually went in there.

    It is going to get a LOT worse before there is a hint of it getting better, but one thing we could do if we wanted to make sure that future generations do not have to go through similar is to ensure that we change the face of our financial systems once and for all.

  • Comment number 27.

    Whats the big deal? I've just got my annual inflation linked pay rise, my mortgage is going down, petrol is going down - surely all good news for most people?

  • Comment number 28.

    Robert,

    Please please can we have some objectivity in your reporting.

    Neither you nor I nor Alistair Darling have seen anything like this before. You don't know whether 0.5% rate cuts now and the £400bn package is enough to avert a full scale depression any more than I do or the man on the Clapham omnibus.

    Will you please separate opinion from fact in your reports, otherwise personal sector spending will collapse. People do listen to the BBC, you know...

  • Comment number 29.

    thus this government and others master plan has come into being, they know they are due to be unemployed soon and to damage there oposition they have destroyed the ecconomy of the planet. sounds far fetched but looking at the facts it seems plausable.
    its all our own fault and sadly we will have to suffer this collective planned incompitents.

  • Comment number 30.

    To answer your question:
    "Are we all doomed?" we need to review the long wave theory of Professor Kondratieff. He looked at economic performance from the early 19th century.
    He proposed that economies go through cycles of around 70 years.

    The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter).

    Since, the last Kontratieff cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression.

    I hope he's wrong!

  • Comment number 31.

    #21: There is quite a parallel between that and the funding of the wars...

  • Comment number 32.

    Robert, thanks for the reassuring words, we need them. Though I have to say the most flabbergasting news unfolding at present has got to be the great 'compensation' scandal coming out before the US Congress House Oversight and Government Reform Committee, with Chairman Waxman asking ex-Lehman CFO Richard Fuld whether it was fair to say he had received $480m (£276.2m) in pay and bonuses since 2000.

    Fuld has replied that the correct amount was more like $300m (£172.6m) adding, "we had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders."

    Employees? Does he seriously mean the admin and the poor old clerks in the Lehman back office were in their 'compensation' plan? Don't make me laugh.

  • Comment number 33.

    "We are not out of the woods yet," said Joshua Raymond, market strategist City Index.

    "We will have to see whether this has any long lasting effect on confidence."

    Whose confidence exactly??? - why is this guy (in a position of apparently deciding strategy) waiting for others - is it a case of eveyone waiting for someone to be brave enough? Paid for what exactly?

  • Comment number 34.

    I think the answer is that absolutely noone can possibly have any real overview of the situation. The government, the BoE and the FSA are essentially guessing and then putting huge amounts of taxpayer money behind their guesses. I'm not saying they are wrong to do it, but that's in essence what they are doing.

  • Comment number 35.

    I'm with #28

    for too long now the BBC - funded by us no less! has been offering its opinion as if it were indeed fact - I don't want to hear the soap opera of BBC news - I want to hear objective reporting of the facts - it seems more air time is given over to BBC correspondents' need for TV and radio exposure than to a critical evaluation and presentation of the facts.

    It needs to stop!!!!

  • Comment number 36.

    So, replacing 400 billion of roulette money with 400 billion of real money when the economy is going down. Let's assume half of it would default, half can be withdrawn by the BoE in three months' time, so 200 billion unwarranted increase in money supply. What inflation rate does it likely to suggest?

  • Comment number 37.

    #35 - top right of the page.

    "I'm Robert Peston, the BBC's business editor. This blog is my regular take on the business stories and issues that matter."

    This is a blog!

  • Comment number 38.

    Your speculation has caused billions to be wiped off shares and I am pleased that you are now facing an FSA enquiry.

    Your actions have been utterly irresponsible and acting as you have, as a conduit for government whispers has created a crisis out of a problem.

    I, and thousands of others, hope they throw the book at you and your employer.

  • Comment number 39.

    I'm struggling with something and I hope one of you trader fellows can help. Apparently the FTSE is down so much driven by big falls in mining/mineral stocks ... that being driven by gloomy thoughts about global economic slowdown etc. What I'm struggling with is why this blinding flash of insight occured today - hasn't it been obvious for months? Thanks in advance for any clarification.

  • Comment number 40.

    Should have put interest rates up (means bugger all to the mortgage rates for most anyway) and attracted some investment in sterling.

    Labour should not only be voted out after 11 years of mess (PFI is going to bite some sorry government in the backside in a few years time too), but they should be made extinct.

    They have no place in the future of this country - they're wrecking it day by day.

  • Comment number 41.

    Forgive my ignorance but can someone explain how we can get back to growth without one of the following?

    1. Using more natural resources - which we will run out of in the not too distant future.
    2. Using existing resources more efficiently, not easy when costs in this country are comparitively high and investment is low.
    3. Consuming ever more from other countries, giving big balance of payments defecit.
    4. Finding a way to use smoke and mirrors to do the financial equivilent of pyrimid selling.

    With my limited grasp of economics surely there has to come a point when the economy cannot grow anymore? If so what then as everything appears to be built on contiual growth. Do we need a new non growth model?

  • Comment number 42.

    Armageddon avoided...for now

    This is a crisis with no ending

  • Comment number 43.

    The last few weeks are enormous, historically.(and the next few). 1929 in slow motion.
    Capitalism will never be the same again.
    Perhaps the Chinese model (communist government with a capitalist sector) will come to prevail in many countries.
    It certainly seems to work.
    A massive lesson to learn by sad-looking Western governments...
    "Dont let the financial sharks rob you".

  • Comment number 44.

    @ silverfoxuk

    #9
    "Is it true that Robert Peston has been reported to the FSA for allegedly breaching rules regarding how market sensitive information should be properly announced to the stock exchange?"

    No, it is not, and if you bothered reading the letter it says this:

    "I therefore request that you launch an immediate inquiry into the SOURCE of the leaked information as received by the BBC and others in this case" That clearly states Mr Howard wants the moles gonads nailed to a plank not Roberts Pestons.

    Robert Peston is NOT responsible for the stock market tumbling. It's the irresponsible banking and investment executives that are to blame and they are now reaping what they sowed. So will you and everyone else who has or is thinking of doing so, do the rest of us all a favour and stop bleating about the BBC sending the FTSE into decline - please. It's just so dull.

    BTW, I don't work for the BBC...

  • Comment number 45.

    Today's shenanigans bring clarity to a situation that we all should have known about for some time. We now have an enormous civil service. All bankers and their hangers on now owe their jobs to the rest of us that are in productive employment.
    They join the teachers, council workers, nurses, politicians, local government quango members etc. Not forgetting the armed services.
    The difference of course is that the above list has a useful purpose.
    The bankers do not.
    Let me explain.
    Automation has made great inroads into all aspects of modern life. Machining stations take the place of teams of men working lathes etc. The software used to design and specify and describe components takes the place of whole drawing offices. All this has happened in the years when service industries including banking have expanded.
    Have bankers grasped automation? Well there are now ATMs and bankers can keep tabs on money as it courses around the world. Also “What, If” scenarios can be played out on computers in order to maximise profits. But has the actual banking process been automated, computerised? Nope. We still have loads of bankers earning loads of money needed to service the real economy. The bankers of course reckon that they are the real economy. Not so, as the recent events have shown.
    The real economy could easily be serviced by computers programmed up to get money to companies that need it. Those companies would still compete against each other. There would still be innovation. All without thousands of bankers.
    Those innovators that got lured into the banking system could have been real industrialists, who knows what clever gizmos and processes we could have had by now if their efforts had been channelled into real work?

    I hate to say it, but wee Harold was right to have introduced Selective Employment Tax.

    We could have had continuous white hot technological development.

    Instead we got a bloated banker class.

  • Comment number 46.

    Good on Gordon and Alastair- it might not work but I think they have just about gone as far as they could. A larger rate cut that was not co-ordinated would have been pointless and may not have been passed on. We are certainly not out of it- lots of job losses to come and we are all poorer- but I think now we may not go into a nosedive into an empty pool.
    On the Icelandic bank- hear that some LAs had £10m's at stake- what on earth were they putting that much into a poorly rated bank- their risk management and policies should make them spread their risk and stick to major UK banks especially after Northern Rock- I am sure theye were despearte to get extra income to maintain services but now they are stuffed. The contageon of acting stupidly seems to have spread.
    Of course the FTSE will go down- there are lower profits and dividends for a few years especially in key sectors- lowering rates will help but I repeat- we are all poorer so next HMG must target help to the poor to ensure there is a safety net. I think an increase in higher rate to 50% is called for.

  • Comment number 47.

    Armageddon avoided, and the FTSE drops another 5%.

    If this is avoidance I'd love to see what a head-on collision looks like.

  • Comment number 48.

    Armageddon fall out...city boys are off-loading their Ferraris and Porches. Don't think there will be many takers guys...it's the association...know what I mean?

  • Comment number 49.

    There's far too much negativity around. Nobody's died. And most people are a little better off overall.

    Most people have received another welcome reduction in their mortgage rates. Mine will be down by over £300 pcm since the crisis began last year. My deposit rate is now actually higher than my borrowing rate.

    I suspect that's about the same for most people.

    True, the nominal value of my pension fund is down quite a bit. But as I don't need to sell, that doesn't affect me yet.

    I note that oil and commodity prices are falling everywhere, and it's not long before those big cuts will be reflected in lower retail prices.

    However, many people on low incomes do need the help our government has already promised.

    All in all, the gloom is overdone for most people. We shouldn't create unnecessary anxieties.

  • Comment number 50.

    If the conditions for receiving the government / taxpayers support (the system) were to include a set premium (3%) on the inter bank lending rate between those in the system over the Bank of England base rate changes in the interest rate would directly flow into the credit market. Those outside the system would not be able to benefit from this finance.

  • Comment number 51.

    If taxpayer's are to contribute £1,610 odd (of our own money) to purchase preference shares of ailing banks, is there any chance of knowing what conditions are going to beput in place to ensure that our money is not flushed doen the loo?
    It amazes me that a financial rescue plan of such magnitude can be put in place so quickly, who draws up these plans and potential conditions up on behalf of the public?
    Will I get a tax rebate when the 'investment' comes good?

    We all knew something like this was coming, we just didn't know 'when' or 'how bad' . So, to be frank the 'bankers' that have caused this trouble are nothing short of fraudsters and should be punished as criminals; I would like to se the government punishing failed banking executives with jail sentences going forward, will this happen? Thought not.
    BTW, don't blame America, we could have put measures, checks and balances in place to protect our economy from the worst of this, if labour are to ever do carry out a decent 'old labour' style policy, this could be it!

  • Comment number 52.

    The current situation is serious enough without our leading public-service broadcaster creating confusion - Robert, your enthusiasm is clear, but you must distinguish between reporting and analysing. There are many, many views out there, and many experienced hands who can explain what is going on - we really need more than subjective guesswork and hysterical innuendo to inform the British public.

    I don't think we are yet in a position to make any further predictions about the rate and depth of slowdown that is now unfolding - but if the BBC continues to talk it down, we will surely sink deeper than otherwise.

  • Comment number 53.

    WHERE HAS THE MONEY GONE???

    Why is no-one asking where this £B400 and $B700 has actually gone? For there to be a need for this much cash, it must have GONE from somewhere. Who has it? Where did it go?

    The banks have "squandered" their capital on these wonderfully obtuse "packaged finance deals" with "toxic debt". That money has been given/taken by someone from the banks. It has not just dematerialised. Where is it?

    I wonder...Is it us? Do we have all of this money in the form of personal debt, so that when there is a run on a bank, they actually have no cash to give us back?

    It all seems very murky to me. Why is noone asking more awkward questions???

    And also, how come the banks are now taking £B400 of OUR money, and are going to loan it BACK TO US at a very nice interest rate over the next few years thank you very much, making BILLIONS more for themselves.

    Huh?

  • Comment number 54.

    Yes - Armagedon avoided for the present.

    Nobody forced banks here to buy these financial instruments from the USA, some of which appear to have been very bad investments.

    Politicans such as Gordon Brown seemed to think, until very recently, that UK property prices increasing by an average 18% pa over the last ten years was a good thing, when the norm is just over 3% pa.

    This 'relaxed' attitude by Government to rampant property inflation has had serious consequences.

    It will all take time and some pain to unwind.

  • Comment number 55.

    Yes Robert, Pension Funds

    I am with Equitable Life (No need to laugh all of you, its a final salary one and have been told it's still good).

    But no body there replies to e-mails. Talk about customer service, it's a joke.

    I suppose enquiring customers and just a nuisance to british financial institutions these days. All they want is our money so they can invest it recklessly.

  • Comment number 56.

    Robert, you have already mentioned pension funds - perhaps you could expand on the effects of the current crisis on:
    a) pension funds and payments to pensioners. Are these funds safe?
    b) the credit card debt mountain that we have accumulated in the UK. Will there be massive hikes in charges and a further downturn in consumer spending as people try to pay off credit card debts, mortgage repayments and cover the costs of the increasing energy and food prices?
    We should be told!


  • Comment number 57.

    Businesses look to effect takeovers when there are perfect fits.
    Do you think Scotland and Iceland should unite and rationalize their fishing and banks.
    It would solve some problems for the government and Gordon Brown could go North to do what it takes.

  • Comment number 58.

    #23, 28, 35

    I totally agree with these posts. Peston needs to tone down the use of its extreme vocabulary and be more objective.

  • Comment number 59.

    #36: Oh, don't worry about inflation. The Bank of England are on top of that with their tough interest rate policy.

    Oh, wait a minute...

    I suppose the one consolation is that I should be able to pay off my mortgage with the change in my back pocket in a few years' time.

    Seriously, is rampant inflation really a bad thing?

  • Comment number 60.

    Dear Mr Peston,

    I heard you speaking on the 6pm BBC news (8/10) and making reference to the decline in price of commodities and oil and attributing this to anticipated fall in demand. This is clearly a factor but isnt it also relevant that the hedge funds no longer have access to easy credit and are increasingly out of the market. It is very disappointing that commentators fail to tell viewers about the impact of speculators on the markets which affect their lives. Using descriptions such as 'investors' (not the same thing at all) or generic terms such as markets is inadequate.

    A key concern re: the govt's attempts to reinflate the credit market is that this doesnt enable financial terrorists to resume their activities but goes to truly productive parts of the economy and ordinary decent people.

    Regards,

    Mike Pummell

  • Comment number 61.

    Its not just the bankers who are to blame for the current crisis. There were plenty of memebers of the public willing to borrow way beyond their means, aided and abbetted by the present "prudent" prime minister, to fuel the wonky wheels of a false economy,
    Now so many fools have saddled themselves with the most exceptional debts that all those crows are coming home to roost.
    Sorry but we need to bear the pain and suffer the consequences for many years to come. Its going to be grim, and not just up North !
    This will not go away with yet more borrowing from Gordon and his pals

  • Comment number 62.

    What are all these personal attacks on RP and the BBC coming from... All very strange.
    If RP has all this power then he can make it all better...
    A good hack he is... Omnipresent being he aint.
    All these other reports on RP smack of sour grapes from other lesser hacks (of which there are too many). He is doing his job. I don't like what he has to say. But on the whole he is getting it right and giving Darling something to think about.
    Image the situation if there wasn't any reporting on this situation of this level. Just straight reporting of "Facts" from whom ? Press releases for the Executive and BoE. Facts from the Banks ?? Where are all these hard facts to be had. This situation is not only about facts.
    It is also about confidence, attitude, morals, philosophy and politics. Areas of life/business where hard facts are even harder to find...
    We need to know not only the "Facts" (what ever they may be) but how these "Facts" are being arrived at and the effect that they may/may not have.
    If one don't like what RP is saying then hey, don't read it... But these personal attacks on a reporter just for what he is saying is getting a bit scary and I feel missing the point.

  • Comment number 63.

    With the bail out surely there is now no need for the HBOS/Lloyds merger. Can anyone explain why this would not be the case? If I was an HBOS shareholder I certainly wouldn't be voting in favour of the merger if I knew that my bank wouldn't be allowed to fail and sooner or later would be out the other side. for this merger

  • Comment number 64.

    RP - I am your biggest fan..

    But again this afternoon you were saying the taxpayer could potentially "earn" from this 50bn investment in the banks.

    It is surely technically impossible for the taxpayer to earn out of this..!

    The banks EARNINGS can only come from loans sold to TAXPAYERS and the profit is the interest the bank charges on those loans...

    ...but if WE are both the customer and the owner of the bank, we cannot logically earn anything.

    ..We are lending and borrowing from ourselves at the same time - charging and paying ourselves..

    The only difference in the amounts ..is a LOSS equal to the bank's administration fee..

    ???

  • Comment number 65.

    1 I have been boring my wife since early 2004 when I told her that our economy was like a Catherine wheel that was going to come off. The only question was when.
    It has been a standing joke that as each months figures were released I told her it was getting faster.

    2 I have watched with astonishment at the way Icelandic banks have built their sandcastle and nothing in the world would have persuaded me to invest in them.

    3 I think the current problem is much severer than we think and we have to wake up to the fact that our living standards are simply way beyond what this country can support.
    There is only so long we can have such a balance of payments deficit. There comes a time when the Far East can no longer see benefit in recycling their money into the UK as we have not enough to offer them.
    It only needed a glitch of confidence and their banks no longer want to lend to us.
    As I see it we are in for a really long haul - at best marking time for a decade so that we can catch up withourselves after almost ten years of gluttony.

    I am no economist so I am probably talking out of the back of my head

  • Comment number 66.

    Mr Peston: I'm not too bothered about the substance or lack of it in your reports as I assume City types do not rely entirely upon you before making their decisions - but I am getting increasingly irritated by your use of the phrase 'I have learned...'. This implies some effort other than just 'being there'. Please can you alter your introductoions to 'I have been told'. This, I think, may be more accurate and would certainly be more palatable. Thanks.

  • Comment number 67.

    i see that HSBC and Abbey have both declined Mr Darling's offer. Who else?

  • Comment number 68.

    All Brown has done is create inflation. He's just printed 400billion. He's clueless. These banks are gonna fail anyway.

  • Comment number 69.

    Many thanks for your balanced reporting of the current crisis. Many other journalists are failing in this respect and their near hysteria fuels already raging fires. We saw examples of this during foot and mouth, in the aftermath of the disappearance of poor Madaleine McCann and now here. Such newsprint (and airtime) might sell a few redtops but at what cost to the nation?
    Please continue not to be first but to be accurate and balanced.

  • Comment number 70.

    Is Mr Peston going to do the honorable thing and resign. Or offer to pay some of his salary to make up for the additional deficit he has caused?

  • Comment number 71.

    Well which ever way you look at it we have certainly gone from "Boom to Bust" under friend Gordan who spent so long telling us that it would never happen under his watch. Silly me, of cause it is not his fault it is everyone else that has dragged us into it. So now it is going to could well cost every adult in this country £2000 to pay for it all and even then it might not work !

    Well lets be clear about one thing, before taxes rise and services are cut we need to get our priorities right ...
    The Olympics can go for a start, it is not being financially well managed, is already over budget, and I am damned if I am paying for the Olympics Committee to live in our best hotels during a time of austerity.

    Anyone agree with me?

  • Comment number 72.

    Right, I'm getting tired of all this theater and show. As I said before, politicians need to work hard to surgically separate this malicious debt bubble from our economies and lay it to rest in the toxic waste bin, seal it and never open it again. But this stupid symbolic global slashing of the interest rates, probably aimed at voters in certain countries, is a sign that politicians fail to understand what their job is.

  • Comment number 73.

    #39: As far as I can tell, the mining stocks have indeed been plunging for a while now. It's just that we didn't notice because the freefall in the banking stocks was even more spectacular.

  • Comment number 74.

    Well this really takes the p**s, here we have banks who for years have been hitting us with extortionist bank charges and merciless foreclosures now being given our tax revenue so that they can borrow it back to us and we will have to pay interest for borrowing our own moneys. YOU COULDNT MAKE IT UP!!!!!!!

  • Comment number 75.

    Low Interest rates are not the answer! Interest rates have been 2% in USA for a year, has it helped? NO! We will not spend our way out of this recession and banks will never again lend at the low rates of the last 5-6 years!!

    If you (and it seems many of you are!) are hoping that a cut will drop mortgage rates before all the low fixed term mortgages expire and stop defaults, repossessions and plummeting house prices - think again! A gargantuan world wide credit bubble has burst and the avalanche of fallout is only just gathering speed.

    The nationalised banks will own 40-50% of nationalised housing in a years time!!

    Unless of course.....we just 'talk ourselves out of the recession' that we have been 'talking ourselves into' for the last year???!!!

    Any of those comments still being posted? I think not! CDS and derivatives have nothing to do with what we talk about here and they have foiled bubble....BIG TIME!

  • Comment number 76.

    #49

    No real grasp of the principles here! Falling commodity prices and lower interest rates is leading toward seizing up of world trade, world deflation and then a world depression!

    I hope you aren't retiring anytime in the next ten years, perhaps you will be a bit more appreciative of the 'problem' then Jack!

  • Comment number 77.

    Sounds to me like we've thrown ourselves on the sword.

    £500bn is a LOT of money to be gambling in a casino where the odds are fixed.

    Who are we going to go cap in hand to this time? No wonder nobody wants to talk to China about human rights!

    Cheers, Gordon.

  • Comment number 78.

    As Robert points out I think the next problem is everyone other than the banks. We've been so focused on banking over the last year that FTSE and Bank have become synonymous.

    I see the banks stabilising and rising to more reasonable levels over the next few months, however the FTSE will probably remain flat as the rest of the companies take a hit from the recession.

    We've been so focused on banking and housing since July that everyone has forgotten about employment and inflation. While not as serious as the crunch things still aren't going to look pretty.

  • Comment number 79.

    Just one more thing: Given the state of things and given that all this is nothing else but a correction of a debt bubble: How on earth can they cut interest rates in an apparent attempt to blow some more hot air into the bubble. That is totally irresponsible and like pouring petrol on the fire.

  • Comment number 80.

    HELLO EVERYBODY

    SO HERE WE ARE AGAIN ANOTHER DAY NO GUARANTEE ON BANK DEPOSITS SO ALL OUR CASH WILL STAY IN IRISH BANKING SYSTEM.
    ITS THE ONLY WAY I CAN BE SURE WE CAN PAY OUR STAFF AND SUPPLIERS INCLUDING DARE I SAY IT THE PAYE THE VAT AND THE TAX.

  • Comment number 81.

    comment 18

    The fractional reserve, yes, I'm sure Peston knows about that and modern money mechanics.

    The monetary system is in a tailspin and the amount of exposure to derivative debt is an unknown and bares no relation to the actual net worth of planet Earth.

    Now here's the bad news the Banking system has sold the planet many times over, debt is out there in the derivative-o-sphere and the only currency that is holding it's own is gold.




  • Comment number 82.

    I see that Lehman Brothers employees are staging a protest outside their head office... See the picture here.... http://tradeforce.blogspot.com/

  • Comment number 83.

    It is totally unacceptable that County Councils put UK taxpayers money overseas, in locations like Iceland. All it shows is that they have no concept of risk, you do not get something for nothing.

  • Comment number 84.

    #39: There are many reasons resource and industrial companies are suddenly doing badly, but I can give you three.

    First, because share ISAs and mutual funds (such as in pension funds) buy an index. The investment contains shares (and sometimes bonds) in proportion to the index (FTSE100 for example). Unless the owner of the investment transfers his money elsewhere, he stays invested and continues to accumulate. The FTSE dropping 1000 points in a month and 600 points in a week has finally got people's attention enough for them to dig out that number and make that phone call.

    Second, because the "decoupling" theory that even professionals came to believe is being discredited before our eyes. The theory went that the developing world had come of age, no longer needed the West, had ample income exporting basic resources and their construction booms would continue immune from our problems. In fact the developing world is not self-financing and in some ways is more vulnerable. Progress on the surface is an illusion fueled by a commodity bubble to which it has heavy undiversified exposure. A lot of its income has been our excess debt (we could afford to pay more for the same thing), and with that gone so is the commodity gravy train. The intermediary companies suffer accordingly.

    Third, it has been a very profitable sector and with reality dawning, people are taking profits.

    That bubble will not be reinflated by the taxpayer giving money to banks, only if people then borrow and spend. So stock markets will fall regardless.

  • Comment number 85.

    Can someone explain how a bank like ING can take over the commitment of individuals deposits of another bank without the cash to payout. Has the government provided a guarantee.

  • Comment number 86.

    Over the last year, we have heard so many times that 'this is the bottom'.

    First we had the nationalisation of Northern Rock. Then all those banks rights issues, Bear Stearns buy-out, AIG bail-out then Bradford and Bingley etc.

    After all of these things have got better for about a week, then some new piece of new has come out and we are back on the death spiral again.

    I do not know how the treasury can raise the money required through issuing gilts. The banks have no money to buy them and if I was a foreign institution I would steer well clear. After all, how can we hope to even service the debt while tax revenues continue to drop.

  • Comment number 87.

    Robert, did you know that the Bilderberg Group met in 2008 (June 5-8) at the Westfields Marriott in Chantilly, Virginia, United States? If you check the guest list it is surprising how many Financial Executives attended this year! hmmm it is no wonder that conspiracy theorists conclude that the Global crisis is actually pre planned so that a Globalised Financial banking system is put in place? Conclusion: as a result of this mess with the eventual demise of the dollar the American people will be offered the Amero currency to save the economy. One more step to a Global currency!

  • Comment number 88.

    "53. At 6:22pm on 08 Oct 2008, jakeeyre wrote:


    It all seems very murky to me. Why is noone asking more awkward questions???"

    It all makes perfect sense if you make the assumption that it is in fact the banks (not governments) which are in charge of the world... Hence "masters of the universe".

    Here's a quote by a former director of the Bank of England:

    "Banking was conceived in iniquity and born in sin. Bankers own the Earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again…

    Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit." - Josiah Stamp (Director of the Bank of England, 1928-194)

    "The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." The Rothschild brothers of London writing to associates in New York, 1863.

  • Comment number 89.

    50 billion pounds.....450 billion pounds?....The government does not have that amount of money. It is just a number....like a bank transfer....no money gets transferred just the number. They know it, we know it so stop the nonsense and correct the problem. If someone is bleeding you dont give them a blood transfusion unless you first stop the bleeding. So.... stop the trading now....correct the financial rules then allow trading to commence. Stop the bleed of money then transfuse the money supply with new money to allow the patient to recover. Next patient please :-)

  • Comment number 90.

    #41 I am with you. We cannot keep expanding.

    The natural resources are running out.

    Apparently Fractional Reserve Banking relies on continuing expansion to work. Plainly it is not working.

    What will replace it?

    In all the dscussions about growth problems, not a word has been said about birth control.

    Everyone seems surprised by these events but Mr Reece-Mogg predicted it last year, as did Mr Alan Edwards,IOM, who commented on HBOS Auditors in August 2007 and Mr Warren Buffett spoke about this problem 2 years ago.

    Mark to Market will have to go, too.

  • Comment number 91.

    Robert Peston tells us that economic armageddon has been avoided.

    Rejoice at that news,
    as Margaret Thatcher famously said.

    Robert Peston should be appointed either:

    1) A member of the Bank of England's monetary policy committee immediately, charged with setting appropriate monetary policy and rates of interest to suit our current needs, or

    2) A deputy governor of the Bank of England in charge of economic stability.

    Of the two the latter role would be more appropriate. Robert Peston's talents are wasted as an economic commentator.







  • Comment number 92.

    For many years government has been weary of the money men and Financial institutions. It is time the government took back power on behalf of the people. Atleast we elect them and throw them out when need be.

    Energy sector is next. Imagine when a nuclear reactor goes wrong and this private companies won't clean up or evacuate people. Government will be back.

    It was quite armageddon!

  • Comment number 93.

    #14

    re Bankers in 1997 and Bankers in 2008

    Bankers and the FTSE....2nd May 1997 it was 4455.60 ------Today 4344.92


    Now stop blaming the blameless, start blaming those who traded and speculated with the money and broke the bank...

  • Comment number 94.

    I'm buying my bread early so that I can avoid the line.

  • Comment number 95.

    #23

    The truth hurts I assume?...

  • Comment number 96.

    I do wonder if pension funds have actually been part of the problem. Rather than investing in the future, they seem to have spent a lot of time lending money via the money markets to the banks, who have then lent it back to the ordinary individuals who were saving in those pension funds in the first place, getting them into debt. It all seems very circular and bizarre.

    Does this all date back the Robert Maxwell case? Before that I seem to remember company pension funds were often invested back into the company.

    It made sense at the time to get pension funds to diversify, but the side-effect seems to have been to add a great deal to the asset/debt bubble the repercusions of which we're now suffering.

  • Comment number 97.

    Mr Peston, I too am getting increasingly irritated by your overexcitable almost gleeful manner of delivery over the past few days... Yes some in the banking world have acted imprudently but what about everyone else in the country who have enjoyed the bull run in spending and lending over the past 10 years. Its payback time.

  • Comment number 98.

    I see Peston has been named in Michael Howard's letter to the FSA about market-sensitive information being leaked. Good.

  • Comment number 99.

    Robert on a slightly more positive note.

    It looks like finally we're on the right path with a united cut in interest rates.

    How about future mortgage loans fixed to a multiple of average past Tax bills to limit lending and increase Tax revenue.

    We’re going to need the extra taxes to pay for all this.

  • Comment number 100.

    Not reporting Howard's complaint about you yet?

 

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