Day of reckoning
The sharp and nerve-straining falls in share price on Wall Street last night and in Tokyo today are damaging to the wealth of many, especially those saving for a pension.
But it's as well to remember that they are the symptom of the disease, not the disease itself.
The underlying illness remains in the financial system, as manifested in the record amounts banks were charging each other yesterday for lending to each other for three months.
One serious anxiety concerns the auction today to settle liabilities on insurance - or credit default swaps - on debt of the collapsed investment bank, Lehman Brothers.
As I noted a couple of weeks ago, there are estimates that claims under insurance contracts will total $400bn. Sandy Chen of Panmure was one of the first to highlight the scale of this looming problem.
If demands for payment are as big as $400bn, there will be pain for banks, insurers, hedge funds and other financial institutions.
Here's why.
For every winner in a claim, there is a loser, the underwriter who has to divvy up. And if the underwriter lacks the resources to pay - which may turn out to be the case in this under-regulated market - that creates two losers: viz the bust underwriter and the claimant which doesn't get the money on which it was counting.
And if that claimant had been calculating its own financial strength on the basis that it had insurance against its Lehman debt, well then failure to receive payment could shatter the integrity of its balance sheet. Which in turn would create potential losers among its creditors.
So this day of reckoning on Lehman credit default swaps is momentous - and it could not come at a worse time for fragile bank shares.
The fall in Morgan Stanley's share price yesterday was a remarkable 26%, on the back of various nebulous rumours and as Moody's said it was reviewing Morgan Stanley's credit rating for possible downgrade.
There was also a doubling in the credit-default-swap price for insuring Morgan Stanley's debt: there was contagion from this opaque market to the more transparent stock market.
As soon as regulators have time for breath, they surely must as a matter of urgency bring some light, order and proper regulatory oversight into the credit-default-swaps market
But probably more urgent is for the US Treasury Secretary to decide how and whether he will inject US taxpayers' money into banks to recapitalise and strengthen them, along the lines of what the British Treasury is proposing to do.
But he "only" has $700bn to play with, which no longer looks that enormous in the context of the $400bn claims that may be enforced in just the next, anxiety-inducing few hours.
I'm 
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The Great Depression took place over 3 years, as each layer of leverage was blown away and another group were wiped out. Given the huge pyramid of derivatives and debt build on (over valued) real assets, this deleveraging will be as damaging and prolonged.
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"Fasten your seatbelts, it's going to be a bumpy night." The whole tottering edifice is starting to come apart - the danger is that the sort of situation that now exists between the UK and Iceland - the national repudiation of financial obligations and promises, leading to the seizure of assets - starts to be enacted out on a grander scale. After the Irish promise to guarentee all bank deposits and days before the collapse of the Icelandic economy, I and other posters warned investors to get out immediately. While I have sympathy for those people who did not know their money was being invested in Icelandic banks, I find it harder to sympathise with people who were, in effect, trying to make as much money as they could out of a tax haven. One now wonders which country will be brought to its knees and be unable to pay off its commitments. And even if depositors do get their money back eventually - how many will need access to their funds in the shorter term?
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#2
re JP Morgan & Goldman Sachs
If you are correct then how do they (in effect) bail themselves out, care to explain, something doesn't compute!
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A view from the other side....
The vast vast majority of people in the world consider money to be a representation of the time they spend working. Whether this is correct or not is not the point I would like to bring up - that it is the perception of 9x% of the worlds population is important.
The average world wage is about 2 dollars an hour....approximately.
So when we, these people, see one trillion dollars, that means 500 billion hours of work.
That is 90 days for the entire planet's population per trillion dollars.
Since the working population is probably 50% of the total, then .......
it takes half a year of the whole planet's population working to generate 1 trillion dollors.
From the 99% of the population who think like this to the 1% who don't - have a nice day in the office !
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...sharp and nerve-straining...disease....illness....anxiety....regulators have time for breath...anxiety-inducing...
remove words like these [they only exist in YOUR head] and your copy will become less overblown and more readable.
stop being a drama queen.
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What appears to be an unfolding debacle of the insurance of debt within the financial sector is just one more example of a financial sector that appears to have been running full steam ahead with the buffers clearly on the horizon. Just as within the general insurance sector in the recent past this looming debacle highlights the inherent problems of a system where veryone is not only making exaggerated profits but are doing it because everyone is scared stiff of missing the boat. What these insurers don't seem to have realised is that the insurance in financial sector that is a vertical market place unlike the real world where that market place is horizontal. In the real world the risk of an insured event occuring remains relatively the same no matter how many insured events occur at the same time. Those insured events do not generally cause other insured events to occur. In the financial world the more insured risks materialize the more chance there is that other insured events will take place because the actual insured event occurring automatically raises the risk of the event occuring again. one reason being that the insured events are intrinsically linked. In effect, when insuring the debt of a financial sector you are insuring a deck of cards. Great entertainment until the wind blows.
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Robert
The underlining illness is excessive debt which is unsupportable and will collapse.
As for Gordon's great plan this will not work for a number of reasons;
1 Any bank using the Treasury scheme will be treated as a leper as it will be sending a message that it is not able to cotinue as a going concern. In these panicky times not even Governments will be believed.
2 The ordinary shareholders will be virtually wiped out by this plan so why use it if the bank is doomed anyway?
3 the directors will loose their golden parachutes if they use the Treasury scheme so why use it?
I have said in the past on this blog ,that the end result will be a banking moratorium, which will cover the USA , Canada and most of Europe and many parts of Asia.
A real fire break is needed but it will be impossible to avoid the oncoming depression just is we can stop the arrival of winter.
People across the world have repeated the same mistakes as happened some 80 years ago just as those people failed to learn the mistakes made 60 years before that.
Those who fail to heed the lessons of history are doomed to repeat them.
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Surely it would have been 'prudent' for our government to have waited the extra couple of days before plunging our cash into something that may still implode anyway ?
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I am surprised the Credit Default Swap market, which I understand is worth $50 trillion, has not been discussed more.
This has been a completely unregulated market which presumably did not exist in the same way in 1929.
Banks have been buying CDS's as a form of investment and made big profits in recent years from them. As with anything else they have made huge profits on, you can be sure that they are now faced with huge losses.
I have a nasty feeling that this might be enough to push our high st banks over the edge, in spite of anything Darling and Brown say.
It's obvious that Gordon is loving this crisis. You can just see him swagger and he can barely suppress a grin. He always did want to get control of everyone's money so he can spend it the way he wants. Now he alos has control of the banks. Next step will be to postpone the general election on the grounds of national emergency.
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How about putting a temporary block on the ratings agencies doing their work?
As ultimately illegal and inappropriate as anything else that has passed for government action in the last few weeks, it will prevent surges on stocks that come under the limelight.
Plus, in the current milieu, does any rating really mean much at all?
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Rome is now burning and our political Neros are still fiddling.
Although a somewhat circular argument, what we are now witnessing is the scenario that perhaps our bank economists were predicting at least a year ago. Was this stock market crash forseeable by most? Is this why the credit markets froze over as the bankers themselves froze like deer in headlights?
But beware, the forces that drove markets up in Robert's vortex are just as powerfully pulling the same markets down. A sink hole is opening up that will drag investments and economies far deeper than any realistic "floor".
My local council (Cambridge) has just lost 9 million. It seems pretty real to me. And, on this minor news subject, can anyone tell me how so many public bodies ALL invested in Icelandic banks? How many Treasurers went on jollies to Iceland? Is it the case that a large chunk of the profits/capital have been used by Icelandic bankers to fund the purchase of West Ham???
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#6 - please take a look at the top of this page - IT IS A BLOG.
If the collapse banks (and potentially sovereign nations) is not dramatic enough, then please forgive Robert for the sin of being "too" entertaining...
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#6
To do that would sounds like the (often miss quoted) words of Jim Callaghan in 1978 - Crisis, what crisis...
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Brown and his puppet ministers are to blame for much of this crisis with their spend spend spend regime over 11 years and still they dont "Get it" They have poured more and more of our scarce resources on the fire this week and his latest bully boy tactics with Iceland sum up just how desperate he and his useless Government are. We are in a mess but that is no excuse for bullying others to save your own skin and British people still have a sense of fairness. Sub prime as he likes to blame for the world's ills was created by counties like Britain who allowed the likes of Northern Rock to offer 125% loans against overvalued assets and offered no regulation. Most ordinary people knew we were heading for financial melt down but Mr "We Will Do Whatever", still fed the flames and continues to do so.
A decent man would step down today but his latest move on the assest of Iceland show just the man he is so I fear there is little chance of him going without the push. Shameful and disgraceful from a so called Democratic Country.
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6 - Get a life. Robert Peston is a journalist and does a damn fine job. Most of the people that read this do so out of curiosity and wonderment. Most are not bankers, they are not investors and they are not traders. They are just interested 'jo-scmo's' who have only become interested because people like Robert Peston have made it interesting.
If it wasn't for that, it would just be boring money rubbish of little interest to us and we would just go back to blaming the most identifiable establishment figures - politicians whether it was their fault or not.
Well done Robert lad. Keep it up and thanks for making it easy to understand.
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Wow. Is that almost a 50% loss?
I am *really* glad I got my pension out at the top.
I bet y'all wished you understood what money *really* is now, and why this was inevitable.
Well. You need to watch the "Money as Debt" animated video on Google Video:
http://video.google.com/videoplay?docid=-9050474362583451279
And read: "What Has Government Done to Our Money?"
http://www.mises.org/money.asp
Best of luck, we're all going to need it.
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Does this mean that if the financial system survives today, then banks will relax a bit and start lending? Or are there more 'panic days' in the pipeline?
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...I am surprised the Credit Default Swap market, which I understand is worth $50 trillion, has not been discussed more.
...
its been talked about on Paul Mason's blog for weeks. Long before this one.
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The capitalist system is ANTIQUATED.
We need a new set of rules.
The way that shares are bought and sold.
The way that property is sold and priced.
Hedge funds and investment cos...do we need them, or are they just parasites.
Otherwise it is endless false-booms and crashes.
Change the system.
If you get enough poor people out of this, they may all decide to vote communist.
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Alas ... time to re-think the legacy of Mr Greenspan ... he always resisted the idea of regulating the CDS market and in fact went before Congress to insist that it should not be regulated ... hailed as a hero at the time for saving the financial system and giving us stability ... unfortunately that now appears to be a house built on a bubble.
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Has the news that Citigroup have pulled out of the Wachovia takeover dispute with Wells Fargo gone unnoticed?
This could essentially spell the end for Citigroup.
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The dominoes are falling today.Still the central bankers have not acted correctly by lowering intrest rates, and changing accounting rules for mortgages.Until this is done the banking problem will be at the core of the crisis and will eat at confidence. For the pound par with the dollar is coming same for euro.All in all a good buying event for the very brave.
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Dear Robert
Too true this is a day of reckoning, in more ways than one we are exposed Nationally to three major problems, that have come to light since the Melt down in the markets.
Local Councils and their Exposure to the Icelantic crisis, a double wammy on the general public already reeling from a£700 billion pound injection to the banks, now they may have to find a nother Bilion to bail out Councils and local Authorties.
Finance Offiers may well be Responsible for failures in safe guarding public money in this crisis by leaving money in one basket.
Then there are the police Budgets, this is going far beyond a loan from the Bank of England. Potentially this is a massive council tax rise , to cover the losses made by local authorities.
Then there is the Loss of 100,000 names of British Service personnel, by EDS, this is a security disaster Mod should be charged with Neglegence MOD have lost untold numbers of memory sticks, documents and Lap Top computors in the last two years and it is National disgrace and the Government is to blame, one has to ask ones self is this being done on purpose to expose them to Terrorists??? The Governemnt ARE using The Terroism laws regards freezing of Icelands assets.
It is no wonder Des Browne left the Government this was known about two weeks ago.Britain is a shambles itis falling apart ate the seems, and when an Afgan women and her children get £12000, tax free housing you ask yourself again, "WHAT THE BLOODY HELL IS GOING IN THIS COUNTRY?"
I sincerely hope that this crisis and all that is going on with it, is not a rerun of the 1930s and what that led to.
Some one has to take charge and sort this mess out because that it is what it is an absolute mess.
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Easy solution to all this:
Get off to the Caribbean where all the wealthy hedge fund managers, investment bankers and lawyers are waiting for the stock market to hit absolute rock bottom so that they can start buying companies for almost nothing. And?.
?start raiding their personal deposit accounts which contain billions and start funding the bail out that way. Stop using taxpayers money whilst these characters are STILL rubbing their hands in glee over existing wealth and the wealth they are expecting to make over the next few years.
Alternatively start raiding ordinary people?s bank accounts. After all we can?t be expected to frighten off this seemingly exceptional financial talent.
Can we?
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# 6
I thought it was a rather reserved and measured piece of writing. You should hear the traders ever since the FTSE opened.
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I don't know why anyone thinks the market is unregulated. The problem is that the regulation is unbalanced.
Money has been lent across the globe at knock-down prices. Those debts have been sold and booked as assets on the assumption that they were underwritten or serviceable. Both assumptions have been improperly understood and under-risked and the result is that the market is trying to balance itself.
Since there are more debts than real money to cover them the consequence of that balancing in an unregulated market would be catastrophic for us all.
So Governments across the world are trying to buck the market by underwriting the debts to bolster confidence.
The missing thing is management of the upside to mitigate the risk of intervention being required on the downside.
Personally I feel we already have close to enough regulation - we just don't apply it. In fact we create and employ organisations to hide the fact that we don't apply it. I'll leave you to decide who they might be.
Oh, and don't blame the Government. I don't remember anyone saying they'd only vote for Gordon if he stopped them borrowing 5 times their salary or more to buy an asset worth perhaps two thirds of their outlay.
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Broon and Darling (the comedy duo) have messed up big time. They grossly overspent, under-regulated for 10 years. Vacillated over Northern Rock for SIX MONTHS when action in 3 days would have averted a run on bank. Their rescue plan is too small, too late and tries to prop up a set of terminally ill patients. The plan simply won't work.
What is needed is to either fully nationalise any failing bank or let it go to the wall. The bail-out cash could instead be filtered through to small businesses and individuals via the Building Socities and even possibly the Northern Rock. The only objective in providing liquidity to the big 4 patients is to maintain the status quo, protect a modest number of jobs and massage Brown's ego. unhappily the money lent to banks will NOT be lent to small businesses and private individuals, but in propping up balance sheets and paying off loans and CDS exposure.
The Govt should signal intent by cutting its own spending by 50%. Yes, I am talking about reducing social security, health and education. Get back to basics in Govt like they are doing at the supermarkets. This will give investors confidence that UK PLC is taking dramatic action to get its house in order
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CitiGroup will almost certainly fall and the domino effect will be spectacular to put it mildly.
i'm off to see if i can get a few allotments, might end up living there.
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#3 "And even if depositors do get their money back eventually - how many will need access to their funds in the shorter term?"
This is exactly the problem with many banks today. They are *NOT* bankrupt; they just don't have access to cash in the short term !!
#4 Yours is the simplistic reasoning that the Communist used to justify their "Socialist Peoples' Republics" and which collapsed so spectacularly in the late 80s, starting with the Berlin Wall !!
For labourers and manual, this reasoning may be valid. However, there are those who work with their brains, doctors, lawyers, accountants, etc. They have knowledge and skills that average joe public doesn't and that knowledge has to be paid for somehow !!
Furthermore, if everyone in Britain is paid $2 per hour, the first thing you know will be the unions clamouring for your head !!
Even Cuba, the last stronghold of this concept, has accepted that its doctors must be paid more than its labourers or they will defect to other countries and earn more !! Raul Castro is a pragmatist and realist !!
The question here is not what the average labourer earns but how much is that specialist knowledge worth !! Doctors who claim miracle cures that don't cure should be judged in the same manner as salesmen who claim wonderful products that don't work as claimed or IT consultants that claim miracle systems they can't deliver (heard of EDS, Accenture, etc. and their promises of wonderful government IT systems) or merchant bankers and their miracle products !!
This current problem seemed to be when insurers pay themselves based on income rather than eventual profits when the insurance contract is finished. Their reasoning is that since nobody has defaulted on their credit insurance in the past, there will be no future defaults !! This is not the fault of the insurance industry per se but that of the flawed thinkers. Lloyds of London know better than to think that way because a ship that didn't sink this trip may sink in the next and they will not take profits until the ship has come home (familiar phrase ??) !!
Using the same reasoning, the people who wouldn't go down to the pub and ask the local spiv to insure their Rolls Royce will expect their debts to be properly covered and insured by unregulated insurers simply because either these unregulated insurers charge less "premiums" or Lloyds of London wouldn't touch those debts will a very long barge pole !!
Therefore, I suggest that, in the manner of Lloyds of London, all these insurers, bankers, "whatever" (spivs ??) should be treated like the Names of the Lloyds of London and be made jointly and severally *AND* personally liable for all the losses and that their assets should be seized to pay for those losses !!
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I don't know which is less acceptable, that hedge funds are still allowed to operate, given the chaos they've caused, or that their staff have salted away something like 2 billion for their year-end bonuses. If HMG's prepared to charge another soveriegn state with economic terrorism (a new low in diplomatic faux pas which will be used by our enemies to dismount what's left of our diplomatic credibility inside of the next six months, in passing), then the least they should do is sequester these assets under the same legislation, which appears to be common currency these days in motivating the very thing its supposed to suppress.
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All Gordon had to dom surely, was to shut the stock market (for however long it takes) and put UP interest rates - in that order! And another thing: why is the interbank lending rate so high, and for the three months period? We are told it is matter of "confidence". But if the banks are confident they will get their money back OK, then a sane rate shows confidence. If they are not confident they will get their money back, then they should not lend at all, as no rate of interest would cover it - 6.25% of nothing is nothing ! Or am I just a quaint old-fashioned thing?
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i see Gordon is urging other governments to adopt "his" scheme, well i don't think this rescue has actually worked, or am i being premature?
For weeks now billions have been pumped into the system, where has it gone?
Instead of giving money to the banks, why not become a lender to the very people who need credit, cut out the middleman as they are just taking the money and not passing it on.
All this was started by some whizz kids who decided they could make money out of debt, well we have been doing that for years it is called interest, it was the desire to make even more money that caused this problem, in a word, greed.
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One sometimes wonders what if the regulator had been left alone to just get on with what they were supposed to be doing .....
6 June 2005
FSA under fire after Blair speech
By Gavin Stamp
BBC News business reporter
The FSA is accused of being heavy-handed with its regulation
The troubled Financial Services Authority has come under fresh attack after apparent criticism by Tony Blair.
Unfavourable comments by the Prime Minister have sparked controversy at a time when the regulator is under increasing pressure.
FSA chairman Callum McCarthy has written to Mr Blair asking him to back up claims he made in a recent speech that the actions of the regulator - which oversees mortgage, pension and insurance sales - were seen to be harming well-run businesses.
Mr Blair told the Institute for Public Policy Research - in a speech entitled 'Risk and the State' - that the FSA was "seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone".
'Damaging'
Defending the remarks, Mr Blair's office stressed he was referring to perceptions of the FSA's actions and that his sole aim was to improve regulatory performance.
Downing Street was also at pains to point out that Mr Blair was not out of step with Chancellor Gordon Brown, who was instrumental in creating the FSA after Labour's 1997 election victory and recently described its performance as 'world class'.
"The Financial Services Authority didn't just pop out of the bushes" Ned Cazalet, independent insurance analyst
However, the FSA believes the comments were damaging.
In his letter, Mr McCarthy said they harmed the regulator's ability "to support the principles of better regulation".
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@23, Citigroup may have pulled out, but the damages they're asking for will sink the pair of them and they'll take both out in the aftermath.
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I am far away and a bit removed from all this at the moment, but still have savings in the UK and Ireland. Roberts Blog has been of great use in explaining what is going on to me. And for my five bobs worth (five pennies ain?t worth much these days), I blame house prices in the UK for the bubble. The government knew this was coming ? which is why they put up the amount and duration you could claim mortgage support when unemployed. Now house prices must come down, and personal debt must be lowered. Trust in the economic system (invest in stocks (companies) and cash (the government) not just in bricks and mortar (the value of which is based on someone else?s loan). But that is not going to happen is it? Doom Gloom and Woe for all. The next thing that will happen is rampant inflation, so the value of all those overpriced houses is lost, and cash savings are wiped out. Which means that people will again invest in bricks and mortar??
But keep up the good work Robert, some one needs to shed some light on things, and I do not trust the politicians to do it. I do not think they understand or if they do are too fearful to explain.
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What's the chances the US election will be postponed? Are we slipping with this avanlanche into an altogether more terrifying police state? I don't think many people see the hurricane approaching, they just think it's got a bit windy ...
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I'm 46 years old and on an average salary. My pension has lost a third of its value and my shares are down by about £18,000. Am I suicidal? No actually, I'm virtually unffected. I have no plans to retire soon, and I'm happy to leave my shares untouched for another 20 years. Even if I lose all of them, so what? My wife is still spending money like it's going out of fashion. Grow up folks and stop being so miserable. These stock market traders are behaving like 5 year old kids. I can't believe that our economy is in the hands of such juveniles. I understand why the media have to report the facts, but I firmly believe that the reporting of this crisis is in part causing things to spiral downwards, because the juveniles at the stock market react to the news. The best way we can save the global economy is to have a global news blackout on this story for three months. When we emerge from the blackout, we'll be well on the way to recovery.
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During the Asian financial crisis Malaysia put limits on the flow of funds out of the country. They were severely criticised by the free marketeers - the same ones who have brought on this mess. However what it did succeed in doing was halting the slide in their economy. Perhaps the same thing is required in the UK.
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Scary times and still only just the beginning. Many retailers are heavily borrowed and will start looking like a bad credit risk with sales and the value of other assets falling. With that go failing manufacturing, for similar reasons. 1929 all over again and in spades.
How can we survive, who know and it will be different for every individual. Perhaps we should start looking to trade in skills rather than money, at least swapping an hours labour for a bag of potatoes you know what you are getting.
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Robert,
What dramatic headline will you use for Monday next week?
These "Days of Reckoning" are the new norm.
We have months or in the worst case years of such days to go. We are still at the start of things.
There are probably over 1000 trillion dollars of unsupported financial commitments to be unwound. Only after this has happened can normal service be resumed.
Banks and financial institutions MUST produce accounts - and, I suggest, these should all now be produce as if the organisation is bankrupt. Then we will have a reasonable idea of where we are and how we can build up again.
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Why did the credit rating agencies not know about all these dodgy dealings. Yesterday's problems with local authorities and charities investing in reasonably rated businesses seem to hinge on the credit ratings given by these agencies - did they not know the risks, or are they part of the problem?
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#20
CDS's have been talked about on this blog for the past 12 months.....at least!
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To those attacking #6:
yes this is a blog so #6 is as entitled to their opinion regarding RP's use of emotive language, just as you are.
I'm with #6 on the use of "...armageddon, vortex, day of reckoning, unthinkable, spiral, doomsday...." and all of the other Daily Mail-isms that are put in there. They are not necessary for the reporting of the facts and in my view simply distort them. But fair enough, it's a blog so each to their own. What is irritating, though is the way the BBC then insert parts of RP's blog into their news stories for added credibility.
Anyway, on to the more important stuff:
ING: WHERE'S MY MONEY FROM MY KAUPTHING EDGE ACCOUNT?
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@16
I don't understand why you are angry that the government has seized Icelandic assets. From what I have read, the Icelandic government have been quite open in admitting that they only intend to support Icelandic nationals savings and not UK depositors. Our government have taken action to insure that they may get some compensation for bailing out Iceland who have reneged on their obligation. Good on HMG I say.
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#8 Well said, indeed !!
#11 and followed shortly by Brown's stormtroopers marching down the Mall !! Where have I heard this before, I wonder ?? I believe that was even an Olympics involved in it somewhere, if I remember rightly !!
#23 Nope !! Wells Fargo poisoned the well and Citigroup is letting them drink from that first !! When Wells Fargo goes under, Citigroup will come in and pick over the assets at fire sale prices. The Wells Fargo move was a political maneuver by the Texas Mafia to prevent foreigners (Dubai, Singapore, others) from getting their fingers on US banks !! Meanwhile, Citigroup is still suing them (Wells Fargo and Wachovia) for breach of contract !!
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No.13 - no treasurers went on jollies thats not how it works
What happens is at the start of every day the Treasury accountant works out whether they have to recall monies or have monies to invest and for how long, to balance their accounts for the end of the day. They then work out when they need it for - say for December's payroll date.
They then ring the various brokers they deal with and see whose got the best rates and whether they can deal with them using their S&P and Moody's ratings usually. The broker will say "Glitnir is offering x%" and then the treasurer says "no we already have b£5m with them and thats our limit". so the broker says "Dexia is offering Z% and Landsbanki y%" so the accountant says "okay we will fix it for 3 months with Landsbanki". The dealer then sorts the deal and you arrange to pay Landsbanki for it that day.
The reason the treasurers used them is the rates they were offering coupled with their ratings. Keeping it in their own account would typically net them base rate -1% not enough to meet their obligations and budgets.
What you should be asking is how come they were still dealing with Icelandic banks up to this point when any reasonable Treasurer would have instructed their staff to stay well away months ago.
Mizze
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Dear oh dear oh dear....
Nothing has happened which alters my view that the whole situation is a sham.
When will it finally be understood by those that are SUPPOSED to understand that no amount of money thrown at this will work.
I believe there is a market saying "Don't fight the market..." Well, we the UK taxpayer is and are losing and will continue to lose until the fat cats and dealers are finally called to account.
The system is corrupt by it's nature (the government issuing bonds which will no doubt be bought by the very banks that they are intended to save.). To echo a few previous comments I'm not an "investor" only a taxpayer and it fills me with anger that we are supposed to help those institutions that take every opportunity to fleece us.
Over the past few weeks I have heard numerous commentators bleat on about how "something needs to be done..." and how a bail out is absolutely vital for our survival. Utter tosh. The Day of Reckoning is indeed approaching and the collective "we" will all live to regret the folly of wasting so much money for so very little. The government has effectively allowed itself to be held to ransom by banks and businesses because of it's short term political policies.
Also as a sign of the nonsense being spoken in the media at large I heard a commentator on the radio saying that banks had better start lending again, by that I assume trying to saddle us with more debt, so that people can go out and have a good Christmas. What planet are these people on!?
One final aside, despite any issues about Robert Pestons style it is absolutely correct that this is a blog where at least we can have our say even if it just makes us feel better. A free press (despite some balloons talking about Christmas) and a freedom of expression might be the only thing that keeps us together and gets us through this mess. The price of freedom is eternal vigilance.
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Robert,
Isn't this what we, the taxpayers, are paying for?
Wasn't Darling and Brown's plan was meant to ease the Libor rate and encourage banks to lend to each other again?
Isn't anyone asking why this isn't working and what is happening to our money?
Many on this blog have been aware of the dangerous fallout from Credit Default Swaps about for a while.
http://news.bbc.co.uk/1/hi/programmes/newsnight/7506653.stm
These things are a lot bigger than Lehmans. I have heard estimates from $43bn to over $200bn worldwide.
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Perhaps we should suspend the markets until they sort out where the real money is (or isn't)
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# 14, 15 and 17
Robert Peston isn't doing a good job.
His choice of vocabulary is making things worse - the more people read about crisis, etc, the more they will panic. The BBC should be presenting the news in a reasoned and un-sensationalised manner.
Headlines like "Credit Chrisis: World in Turmoil" lead to a review of the how different countries are reacting to the current situation. So, why couldn't the Beeb have said "Credit Crisis: World's Reaction"?
(yes, even I accept that Credit Crisis is reasonable)
I am afraid that the use of the words highlighted in Post 6 shows Peston's weakness as a journalist and I very much fear that Peston and the BBC has Watergate syndrome - the excitement of a journalist who can actually change the world. However Peston is no Woodstein.
The manner in which the BBC in general (and Peston in particular) is reporting the situation makes it worse. Simple as that.
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Been laid off from work
My rent is due
My kids all need
Brand new shoes
So I went to the bank
To see what they could do
They said son looks like bad luck
Got a-hold on you
Money's too tight to mention
I can't get an unemployment extension
I went to my brother
To see what he could do
He said brother I like to help you
But I'm unable to
So I called on my father father
Oh my father
He said
Money's too tight to mention
Oh money money money money
Money's too tight to mention
I can't qualify for my pension
We're talkin 'bout Reaganomics
Oh Lord down in the Congress
They're passing all kinds of bills
From down on Capitol Hill
(We tried them)
So what on Earth you gonna do
When moneys got a hold on you
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As they used to say in Army war games during the Cold War when all wsa lost and nuclear weapons were fired, it's time to call 'end game' on this one, Robert. Time to look ahead.
Half the planet reads your blog. Indeed I'd go so far as to say it is quite unique and invaluable in terms of the communication line it has built. There is no other voice, though, Lord knows, a British Government blog might attract a few readers.
Thus if you have any ideas for the future, by which I mean the brave new world (of tomorrow, next week) now might be a good time to air them. And those ideas should be divorced from the old way because (as if it were not blindingly obvious) ploughing any more money into the systems is not working and will continue to not-work.
GC
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Comparing this to the great depression is a bit far off. Unlike in the 1930's the US now is not the only country internationally with large coffers. The mid east and china are sitting on large reserves which will no doubt be used in the months to come. Especially China which has built up immense reserves, and its in its own interest to ensure that 'one' of its main customers 'the west' doesn't have a deep recession.
The main thing needed now is international co-operation to get this mess sorted out.
David
http://www.joots.co.uk
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Bank ''Got any money you can give me?''
Jo Public ''Err What for?''
Bank ''Cos i'm crap with money and i'm skint''
Jo Public ''How much do you need?''
Bank ''About £500 Billion''
Jo Public ''Whats in it for me?''
Bank ''If you don't give us the money, we'll destroy your whole life
Jo Public ''If I give you £500 billion you'll have to pay me back £800 billion and I want 20% of your shares''
Bank ''No we can't afford it''
Jo Public ''Anyway, what do you need £500 billion for?''
Bank ''So we can lend it back to you at interest''
Jo Public ''So you want me to give you my money for no return just so you can lend it back to me with interest''
Bank ''Yeah, thats what we've always done''
Jo Public ''Thats a scam and a con, thats totally fraudulent''
Bank ''Yeah we know but what you gonna do about it?''
If you have a loan, an overdraft, a mortgage, a credit card, a store card or any other form of debt then you are a slave. Applies to individual citizens, companies and GOVERNMENTS!
The banks are your rulers and masters, if you're a slave then your masters, (the banks and finance industry) can force you to do anything they want..... and they will.
Money is created by debt and debt=slavery
Politicians, companies and the finance industry will lie and lie, to preserve themselves and their morally bankrupt monetary system which is fundmentally fraudulent.
''There are none so hopelessly enslaved than those that falseley believe they are free'' Johann Wolfgang von Goethe
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#23 and 36
Why do you think Citi pulling out of that deal will spell the end for them? What have I missed? Thx
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This is what Marx wrote about the credit system, all those years ago...
The credit system ?reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issues of shares and share dealings.?
?The credit system...accelerates the material development of the productive forces and the creation of the world market, which it is the historical task of the capitalist mode of production to bring to a certain level of development, as material foundations for the new form of production. At the same time, credit accelerates the violent outbreaks of this contradiction, crises, and with these the elements of dissolution of the old mode of production.
?The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of others? labour, into the purest and most colossal form of gambling and swindling, and restricts ever more the already small number of exploiters of social wealth; on the other hand however it constitutes the form of transition towards a new mode of production.?
Capital Volume III - Chapter 27 The Role of Credit in Capitalist Production
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As an aside from the highly interesting doom and gloom scenarios.
Psychology and neuroscience students please take note.
As a regular reader of Robert's blog since the NR fiasco and I mean regular (more than a year and counting). I have checked and read Robert's postings on an almost daily basis since then but I only discovered 3 days ago that he is Robert Peston and not Robert Preston. Whenever my brain registered Robert Peston it assumed it was a typo. Why is this? The surname Peston will not be accepted by my asscimilating faculties. I am amazed. Does this enhance the cliche that fact is a lot stranger than fiction? I hope someone can enlighten me on this conundrum.
Thanks
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So how much of this supposed 400 billion is actually not going to be paid ? What level of 'default' is assumed to be likely ? Who or what sits at the end of the chain of claims ?Do you in fact have anything useful to tell us or are you just shouting out big scary numbers and waving your arms about ?
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Robert,
These dramatic scaremongering posts are truly disturbing. I have to take issue with your first comment that the sudden drop in the market will especially affect those saving for a pension. This is not true; it will only affect people retiring in these turbulent times. Other pension-savers will benefit from low buy-in prices. These sweeping statements surely need to be curbed to fall in line with financial journalism guidance?
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so the whiz kids from the 'city' only found out about this recently- get a grip
at the current time the stock market is proving to be of no useful purpose whatsoever
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#41
"Perhaps we should start trading skills"
Isn't that what we used to do, before this craze for everyone being a stock broker, we traded skills by their use in actually making things rather than just buying them from the cheapest source. The rather cutting comment about people 'knowing the value of everything but the worth of nothing' has never been more true than now, I just hope that there are enough people left in the UK who know how to set a machine tool etc.
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#32 Rahere
I do agree that the sight of the Icelandic Prime Minister talking in extremely hurt tones about the use of Anti-Terror laws to seize Iceland's assets will have done great harm to Gordon Brown's administration and the UK, in the eyes of the world.
The major asset of UK PLc has been the appearance of a boring democratic stability in a society that in the last century managed to avoid revolutions , this allowed a slightly magestrial approach in which shared assumptions about honour and the "right thing" , legal protection and safeguards coupled with the stable society added up to "A safe place for the world to put their money".
The last two decades of "light touch regulation" has overlayed the sheer money making thrill of the Roaring Twenties to that underlying UK PLC " safe and stable" brand.
The weight of debt has broken the "new and sexy" part of the appeal of UK PLC.
Which is bad enough.... But Gordon Brown, and advisers, with one badly thought through reflexive action have smashed the underlying brand value , one built over a couple of hundred years, that "Your money is safe with us".
Expect a quiet but steady movement of assets from Britain as foreign companies and governments (especially governments of smallers countries) digest the lessons of the Icelandic Prime Minister's outburst
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#43, the credit rating agencies are the biggest part of the problem. Why anybody pays any attention to them any more is beyond me...
Is there some way that we can... how to put this... nationalise Iceland? Their natural resources will come in handy later on...
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I'd just to offer a vote of thanks for the moderators, who are showing a very high degree of integrity and discretion and working very hard indeed. In my view, their protocol is a model of democratic free speech.
It's a real privilege to write on the BBC website especially at this awful time.
Guy Croft
Owner Guy Croft Racing Engines
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One of the serious issues arising from this current situation is the inability to price or assess risk and then price. The market is too volatile for any model to keep up. I have always felt that devices such as VaR are worse than useless in these situations. Since traders and middle office have no other useful tools in the box and not enough guts or experience to countermand the figures these models produce, they will get sucked into illogical trading.
I'll tell you one thing at the end of the year the benchmark used for performance valuations will be ....are we still here!
It feels like we are on a plane going through the worst turbalance ever, and all we can do is hold on tight and hope the pilot keeps the plane together and in the air. Looking out the window doesn't help as all you see are storms but with no idea if the black clouds are 10 miles or 100 miles in diameter.
From a small business perspective I have done what I can do and that is get as much liquidity (cash) together as possible to ensire I have cashflow issue for the next 6 months. Good luck to the rest of you!
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This week was the biggest week, as I said on Monday. it seems we have limped through it so far.
The lehman's issue could be a domino to starta new downward cycle.
Still all to play for this week; and what a week it has been
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As I wrote in a blog about 2 weeks ago, the black hole - which nobody has seen or bothered to worry about - namely, the total value of national and international debt is so great that NOBODY can fix the problem. $700 billion and £400 billion are small change in comarison. When the entire banking system has to be bailed out by the taxpayer, the system is bankrupt.
The party is over!
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#26 Unless those "wealthy hedge fund managers, investment bankers and lawyers" all keep their wealth in gold, their "personal bank accounts" are in the same banks as other peoples' !! Or do you imagine that they have magic boxes stuffed full of 50 quid notes ??
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Your not all quite getting it are you.
Our economies are being crashed, there is nothing mistaken or suprising, this is and has been the plan for years now.
Crash the national economies so you can build a global one. Simple as that.
Sub-prime is not the cause of this it is just one of the many tools used to instigate it. The end of the M3 index is the biggest smoking gun in all of this. It was equivocal to hiding the bills under the mat in the hope they would go away.
By the end of this there will be no dollar, no pound, be no national control over anything.
You only have to read the writings of those who are perpetuating all of this to understand it.
They wanted this depression and they are getting it. Why the bbc are still trying to convince you that we are in a redeemable situationn i do not know.
Peston should be telling everybody straighht what is going on. A big massive theft. The biggest heist in History and we are the victims.
They create a problem then will offer us a solution, a single global financial order, which would of course require a single global political order to oversee it.
We are essentially heading not back to the 20's with this one but back to the 14 centuary.
We should be getting told to get ready to make sure we can feed our families, because the next stage if this is going to be a fight for food.
There is nothing you (we) can do to stop this short of a popular uprising and a storming of parliament. The only way we are going to survive this as free individuals is to accept that we will have to fight for our freedom one more time.
I know this is not going to happen, as folks are still fast asleep, i will get mocked and derided for even saying such a thing and the people of the west will march into economic slavery without ever educating themselves as to why.
In a way we deserve this, its the end of our world as we know it. We can choose to either take control of it ourselves or let the paulsons of this world continue to define it for us.
This is the endgame
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Hey!.....everybody!....chill-out!....its only money!
The sun will still rise tomorrow morning....even if Robert Peston reports that it won't.
We're just entering the 'Age of Aquarius'......Aquarius...... aka the great leveller.
The meek shall inherit the earth.
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35. At 09:00am on 10 Oct 2008, TerryNo2 wrote:
"One sometimes wonders what if the regulator had been left alone to just get on with what they were supposed to be doing ....."
Mr Bliar was pointing out that the FSA was being over zealous with small financial firms such as IFAs and this is still the case today.
The FSA, which is mainly run by ex-bankers has spent/wasted fortunes (hundreds of £millions) building up their 'empire' causing havoc and putting vast amounts of red tape on to the retail businesses for insurance, pensions and investments and the financial advisers' industry.
While at the same time these ex-bankers have turned a blind eye to the banking industry and all of their woes.
The FSA have even been trying to bring in new procedures to allow these same banks to muscle in on the over regulated retail financial sector and allow the banks to sell financial products with less rules or regulation meaning less protection for the consumer.
The FSA has been poorly run allowing the BIG banks to get away with it, while using bully tactics on the small financial adviser firms who do not have the financial muscle, like the banks, to fight back.
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The Americans call Las Vegas 'lost wages' but that place seems like a temple of virtue now compared to the stock markets.
In Las Vegas if you do not gamble yourself you do not lose any money, in the the stock markets if the gamblers lose we all lose our savings..Which is the real city of sin ?
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59 - It is a well known scientic phenona-thingy that your brain doesn't read individual words, it reads clusters and as a result it sometimes mistakes one word for another so long as it makes sense, particularly if it is more familiar with one word than the other.
It's a bit like politicians and bankers - it makes groundles assumptions.
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I may be being stupid here, but if the banks are insured against this caustic debt, then why aren't government supporting the insurers only, instead of offering gigantic amounts of money, to failing institutions, that have now proven that they can't manage them. A centralised bail-out via the global underwriters would surely make more sense.
If the insurers are paying the banks for these bad loans, who then owns the reposessed assets? Are there huge amounts of property now owned by AIG?
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Intersting that the Russians have stepped in to support their own banks
This has has some credibility as everyone at leat knows they have the money to actually deliver.
In the case of many western governments, the market reaction tells you how convinced everyone is that the money is really there for the scale of suport required.
Going long on the rouble is a good idea, there is a global balance of power shift going on between the 'haves', the 'have nots' and the 'thought we hads'
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Can the BBC find somebody who has a passing acquaintance with the facts.
The list of obligations is well-known and is listed on the ISDA website. The counterparties are known too. Mr Preston urgently needs to learn the difference between face value and the amount at risk. If a zero coupon bond for a billion is not due for another 10 years then it is not work a billion and a billion is not at risk.
Wouldn't it be nice if British licence fee paid for a financially literate business editor?
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#48
Never mind how the system works, the Icelandic problem was known about (it was even written about here if I remember correctly), any LA (etc.) finance director should know were their funds are and keep abreast of the markets etc - that is part of their job description if they are depositing money into the markets - anyone up to speed on Iceland should have been withdrawing their money in the weeks and days before Iceland closed the door. The actions of these LA's etc might not have been illegal, it might have even been Govt. policy, but it's still gross incompetence by the finance directors when dealing with public money. Their only defence is that almost everyone else was as intoxicated by the prospect of making a quick 'buck'...
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19#
"Does this mean that if the financial system survives today, then banks will relax a bit and start lending? Or are there more 'panic days' in the pipeline?"
Lending was the heroine of the banking system. There's no point in giving an addict Heroine when he has started going cold turkey. But the problem is the source of the heroine has gone! There is none to feed him (or the thousands of others in the system)!
There are more panic years in the pipeline not days!
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The underlying disease is still the belief in Bread and Circuses at all costs, and as the summum bonum. The fiddling of books is a symptom.
Thank you.
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A question for the "experts": If everyone is selling shares, who is buying them?
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It has always seemed to me that the US 700 USD bailout was a firebreak and the fire was still burning, what is new. The UK 1/4 Trillion or 1/2 Trillion or 3/4 Trillion, whatever you want to call it, was an attempt to jump further down the slope and create a stop point. It is weakened by other countries failing to take effective large scale action. Perhaps the public who so fiercely opposed intervention are starting to grasp why it is needed, it is not a matter of choice, it is damage limitation. The critics who say it may not work miss the point, it has to be made to work. If intervention is needed and not taken, the longer it is left the greater the level the fear has to be developed to drive intervention forward. The mechanism is simple, fear, no action, more fear, compromised action, more fear, relief and rebound, realisation the intervention will not put things back to where they were, more fear. The bottom is decided by the level of fear not rationale. The real ecomony meanwhile moves along, fear seeps throught to it, big ticket items don't sell, the economy contracts. The public realise uplift is not tomorrow and just battern down the hatches for 3 months, possibly more, some companies cannot survive and just disappear. The regulatory authorities cannot measure the ecomony contraction fast enough to react, the delay in knowing where things are is grounds for argument about which is the threat, inflation or stagnation. There are repeated positive political messages, at first well recieved, then doubted. Conflict with groups or countries starts to divert attention. This has already started, effectively fiscal war has been declared on Iceland by the UK. Groups and communites look to see who is the best positioned, who will survive the best, and survival becomes based on somebody elses failure. It is very dangerous. Unpopular governments gain popularity when the country is seem as being under attack and that encourages combative policy. It would be very nice to think that a mild recession with a rebound in the middle of 2009 could occur but it is doubtful any viable model exists to predict it with any certainty, we have not been here before. It is a matter of hope. There is no reason why the sort of banking collapse we are seeing should not occur in Main Street, it is the same mechanism, a withdrawl of operating funds. It does not matter how sound the business appears, if the cash tap is turned off the business is gone very quickly. The stabising of the ecomony to encourage investment is critical.
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Brown told us he had fixed the cycle of boom and bust. He is responsible and only his removal is going to start to fix the confidence problem. GET OUT NOW BROWN.
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#61: You're not the only one, BBC deputy director general Mark Byford had the same problem.
http://www.guardian.co.uk/media/mediamonkeyblog/2008/jul/08/heypesto
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61 - That statement is only true provided the stockmarket increases in value faster than inflation.
Just supposing that the stockmarket has been overvalued for the last decade or so because prices have been linked to assumed profits as opposed to reality, and in fact it will continue to fall for the next 3 years till it reaches it's 'true' value of around 2500. Then flat lines for a decade like the Nikkei did.
Not such a good investment to get involved with a stock related pension then is it.
Could always try housing hahahahahahah
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Surely Credit Default Swaps is a fire that will quickly burn itself out!
E.g. Lehman go bust, the people who sold the CDSes on Lehman also go bust because they cannot pay, whoever took out a CDS on those companies also goes bust, etc. It just triggers a domino effect that wipes out the whole unregulated CDS market.
Good riddance to it too. The whole premise was silly. E.g. you buy a high risk bond and then a CDS to make it a low risk investment - why not just buy a low risk investment in the first place and keep things simple!?
In any case the CDS market was nothing more than gambling as many people were using it to place bets rather then mitigate risks on bonds they actually held.
The net losses will not be in the trillions as some say because quite frankly that money never even existed. It is like this: if I put one pound on a six horse accumulator bet at the bookies, then I can get odds exceeding 1000000:1. Therefore, if the bookies goes bust before I collect my winnings then I could say I have lost a million pounds - in reality, I have just lost my original one pound bet because I never had the million pounds. I might be upset, but I am not ruined and life goes on!
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Hey #45 ME TOO ...
ING: WHERE'S MY MONEY FROM MY KAUPTHING EDGE ACCOUNT?
I initiated a transfer at the start of the week and no sign of it yet!!
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@57
Part of the reason is that whoever gets Wachovia will fall into the "too big to fail" category.
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#40 - Great Idea!
Then all countries do the same thing and the world stops! Everyman for himself! Back to the 1930's!
Not the best plan listed here!!
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I'm not sure that this is such a big deal. Underwriters and claimants will have known for some time now that this is coming. If there are large enough concentrations of liquidity or credit risk in a single institution to topple it, they should have already alerted the Bank of England to this fact, and appropriate temporary assistance provided. No doubt some of the actions already taken have been done so in anticipation of this event.
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My guess is the markets are this jittery because they are now focused on what will happen more widely. The failure in the Banking system has been accounted for per se. With money this tight and demand slackening many highly leveraged businesses will be in very hot water. The markets are obviously expecting repercussions across the business world. What they are telling us, unlike the calming words of the IMF, is that a deep recession is more or less inevitable and growth is a long way off. My guess is that we are now in for a long-haul bear market of ten years of more - and the markets know it.
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Robert,
Could you make your headlines a bit more graphical and lurid please, to capture the current mood of things.
Vorex was quite good, as was Armageddon.
But we haven't seen Maelstrom around for a while, nor Tsunami come to think of it, but perhaps that one has been a bit overused in the past so it has no impact.
How about
'Credit and Time runs Backwards.
World to end Tomorrow as Brown gives 400 billion back to Taxpayers and Bankers vote for Big Bonuses once again'
But then again, if Time is running backwards then the world should really be ending Yesterday.
Alternatively, what do you think of
'IMF have convened a special meeting with Stephen Hawkings to send a message into Space to ask if anyone out there has a few zillion quid they won't need until the next Millenium'
Anyway, has anyone seen Keynes recently, because Endogenous Neo-Classical Growth Theory is on the Scrap Heap of not very good long term ideas.
It only leads to eventual Bust.
cheers
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#55 "international cooperation" has just become moot because Bully Brown used anti-terror laws to seize Icelandic assets instead of negotiating for a guarantee of British deposits !! Such heavy handed tactics will not win friends and influence people. And to crown it all, he is asking other countries to follow his tactics - i.e. seize the assets of any country that even look sideways at you !! Diplomacy ?? What diplomacy ??
No one will trust the British again just as no one trusts the Americans any more when they used anti-terror laws on any one whose face they didn't like !! Guantanamo Bay still operates despite its illegality by International Human Rights Laws !!
The big guns (or more accurately, the big cash mountains) are all in the Middle and Far East and all else is posturing by pocket dictators from banana republics !!
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Is there a problem with the ICICI Bank, have just been timed out of their website?
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I agree with post 30. Going to the allotment is a good idea! Because isn't there something bigger happening here? Won't this all lead to a complete reassessment of how we live, what is important to us etc? Have we been living beyond our means for so many years when the rest of the world is struggling with poverty that the chickens have finally come home to roost and some sort of just judgement is being exacted on us?
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#52
Do you honestly think that Mr Peston has such power over the markets - if so - lets all get him to say "Crisis over, buy, buy, buy" tomorrow morning, if you are correct the markets will have an all time high...
Of course you know that won't work as the markets don't get their info from the BBC, they get it via their Blomberg terminals etc. and that Blomberg are sounding just as dire about the situation as Mr Peston and the BBC is.
I really do wish that all they anti Peston bankers and speculators would just cool it, the only people they are discrediting are themselves - assuming that it's possible to be any more discredited than they are already.
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#59 Your syndrome is related to that of a scientist who was working on poisons and when he went to hail a cab he yelled,"Toxic ! Toxic !" !! The mind does play strange tricks sometimes !!
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This comment has been referred to the moderators. Explain.
Brown and his puppet ministers are to blame for much of this crisis with their spend spend spend regime over 11 years
----------------
What utter poppycock.
We've been setting up this debacle since at least 1979 if not earlier.
You could just as correctly blame Major, Thatcher - or even Callaghan, Wilson or Heath!
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I'm waiting for the Sun headline that reads:
"IT'S WAR"
Gc
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Many are wondering why gold hasn't soared on the back of all the doom and gloom. It will but you need to understand the USD funding issues at play here. It goes a little deeper than what Robert has been explaining.
See http://tradeforce.blogspot.com/ to understand why gold will soar fairly soon. It might also help put some perspective on why this is all happening now.
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'The evil is perhaps gone too far to be remedied (1798!), but I feel little doubt in my own mind that if the poor laws had never existed, though there might have been a few more instances of very severe distress, yet that the aggregate mass of happiness among the people would have been much greater than it is at present.'
Thomas Malthus, An Essay on the Principle of Population.
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#39
I'm a little younger than you but I am very surprised by your attitude.
In my life time I have seen the various scams by the financial institutions of which the housing bubble is one. Remember Endowment Mortgages ? Pension miss selling ? Dot Com boom ?
To say the stock markets are run by juviniles and hence the root cause is over simplistic. The fact is that stock markets realise that there are people like yourself who will put up with things no matter what.
If you are so lax with your cash is there no wonder people are lining up in the stock market to take it away from you ?
News is not the cause of the fall. The fact is that a lot of assets have been over inflated by speculators - specifically Housing, Oil, Gas, Steel, Coal, Copper to name a few.
What we are seeing now is the realisation that what was an easy money gain is actually a huge loss. Speculation has met reality with a bump.
No amount of news of the lack of it is going to change facts.
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The FTSE 100 and other leading indices are bound to fall as the brunt of the financial crisis with wild swings in the cost of money, commodities and currencies will hit the likes of banks, insurance companies, mining and oil- the bulk of the indices. Another benefit of this carnage could be that leading indices become dominated by real businesses. I think there is still some way to drop and any sensible player will factor that into their thinking. I also think they should have factored in that Lehman debts might be lost altogether. What they perhaps have not factored in is the disgraceful behaviour of Iceland. If countries start walking away from international obligations- all bets are off so I guess what we need to start worrying about is the level of the pound- not really sure why it is dropping against the dollar- yes against the yen and the euro but the US is in it deeper than anyone!! At 1.70 begins to look a bit silly as surely people want to offload dollars even more than sterling.
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#29
Cutting public expenditure in a time of recession? How do you think cutting back spending by £250billion is going to help?
Even less businesses getting already scarces contracts would mean more people claiming unemployment benefit, not to mention the hundreds of thousands of public sector workers you would have to make redundant. Frankly it's a recipe to take us back to the dark ages.
I'm also highly critical of the New Labour/Brown/Blair leadership but this childish sniping, use of silly pseudonyms and name calling is not conducive to good political debate.
If you have an opinion, why not use your actual name?
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When economic historians look back at this mess, one conclusion will stand out about the causes and the follow up: the IMF and World Bank have done TOO LITTLE, TOO LATE! Not only did they not foresee the mess, though a number of financial experts I talk to have been warning of the dangers for almost two years, once the storm broke and the problems became clear they have responded woefully and indadequately. These two critical institutions, which are entrusted with repsonsibility for maintaining the health of the global financial system, need to be brought to account as soon as possible, for all our sakes. The very purpose of Bretton Woods has been undermined by them for ideologocial rather than sound economic reasons, putting us all back to square one.
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#64, yeah because people who work in sweatshops in Asia are doing so much better than British people at the moment! Hands up everyone who'd like to swap places with a Chinese worker making Nike shoes? Only takes around 10 years worth of salary to buy a computer there.
Sad to see the state of the British education system when it produces people like you - and that at last IS something you can blame on the Tories( with the help of the geniuses who came up with comprehensives... )
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The banks are busted. The levels of debt, when fully revealed, will probably be expressed in astronomical type figures. Governments are promising money, that they will probably have to borrow, in what appears to be a developing busted flush - more of the same, more of the same until there is no more of the same. The markets intuitively know this and react accordingly.
I wonder if we are looking at the end of money as we know and understand it? You know the stuff that has no smell and the stuff one cannot eat.
Are we on the edge of a precipice or is this all a stark and unwanted opportunity to learn to fly?
Interesting times, communism fell into disuse and disrepute, what now capitalism?
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#66, nobody pays attention to them. The serve a regulatory role because what they mark as good "credit risk" is what usually goes for "good risk" in the fixed income market. A great bit of regulation from a long gone era like one of those bylaws from the 12th century about driving sheep through the City of London except not as funny.
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only people with little knowledge will be fooled or 'entertained' by the overblown language.
how does the If poem go?
or as Life of Brian states 'he's not the messiah he's a very naughty boy'.
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Mr Peston, Moderator.
First, good work on commenting and reporting. In crisis transparent information is privy. Good Job and ignore the FSA.
I do not wish my comment posted.
I sold up and left the UK last year in July - instinct rather than reason. However inability to unravel pensions and endowments means that I will, within 18 months, feel the pain personally.
May I offer my feelings as a joe bloggs. Here is a long line of dominos. 1. Investment banks, 2. High St. Banks, 3 insurance comapnies, 4. endowment companies, 5. Pension funds.
The first domino is still to hit the ground and the second is still falling.
Nobody knows the depth of the financial loss 'black hole' thus GB & AD are wrong to commit the same cash levels as the USA. Why, it signals we have a bigger problem, investment will flee from UK plc.
The iceland PB has highlighted to all joe bloggses how they can personally and without any warning be hit. Confidence drop everywhere in UK.
Asia and India have fast info networks, comment here is rapidly analysed and divulged, they have more human resource to do this job and are more dependant on foreign investment, their markets are more responsive to news and analysis and realism. Hence the fast falls after the brown comment and rate cut.
And now here is why I do not wish this comment posted..
I have indicated n other BBC comments that GB should give the 400bn to smaller banks and let the larger go. This was wrong.
We are headed into depression. really.
What the 400bn needs now is a government agency (unfortunately) to use this money to fund businesses direct.
We need to retreat now, dig deep trenches and keep whats left of 'manufacturing' (i mean general business by this term) going through loans at preferential rates.
Please please please please please, tell your contacts.. dont throw tax money into the debt pit of the current banking regime. This has only just started.
Use the money to keep UK business afloat and bottom feed off the biggest losers - who we wont know for months yet... Build Britain, dont squander it.
Sorry, but from outside, this seems clear to me....
Please Mr Peston/Moderator dont post this - just think on it, we are in recession and headed to depression. Money into the current financial institutions is lost. And GB will be lost.
Uk may no longer be my home but it doesnt mean I dont care or have no influence.
best regards
Rod McLeod
[Personal details removed by Moderator]
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Some interesting links presented on here:-
may I recommend this - it seems to me to provide a balanced history of why we are
at the point we are today without the rhetoric and tub thumping I've seen elsewhere on the web ( not here .. this is definitely a very open and useful blog for all who are concerned )
http://www.wsws.org/articles/2008/feb2008/nbe2-f01.shtml
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"If you can keep your head...."
It may be bad, even disasterous, but for heavens sake guys, keep a lid on it!
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Well, I hope the rumour mongers and shortsellers are happy.
Making or worsening a crisis of confidence has paid off for them big time.
Hopefully some of those who jumped on the bandwagon have lost out.
I wonder how many shortsellers had their cash with Icesave ?
Now that would be poetic justice!
Of course, it does not help out the small investors and the pension plan holders who have lost a great deal during this crisis.
Action should have been taken to restore order to the markets (limit shortselling and stock lending) a year ago.
Northern Rocks lesson wasn't learnt.
The Gov't allowed other Banks to fail, when they could have shored them up, and now confidence is at zero.
The Ratings agencies, who were relied on to value these toxic bonds, are still spouting off, when perhaps they should have shut up shop and quietly retired.
Afterall they have failed everyone who trusted them.
So here we are, the Gov't should just get on with auctioning off funds to the Banks at the Bank of Englands base rate, temporarily.
Of course, the post war western economies have been designed to run with a twelve to twenty two percent expansion of the broad money supply each year.
Attempting to restrain inflation to below five percent is bound to cause problems.
The only way to have zero Inflation is to turn the clocks right back to the Victorian era, including dispensing with the welfare state, no mortgages at all (ie everyone rents except the wealthy) and a far lower standard of living for the majority of the population.
Thats my twopence for today!
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Is it only me who is worried about some of the very dodgy business models we have out there? They have bought into very high leverage which seemed mad even in times of high growth. How are they going to survive a downturn? Most private equity deals - and private equity now accounts for between a quarter and a third of all business, depending on who you believe - have taken on very high leverage, of ten times or more. Plus, to make the model work, they demand returns of 20 percent or more. This will be impossible in the present environment. If someone can tell me where this leaves us, I'd love to know?
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#6. I couldn't agree with you more. I am very fed up with the melodramatic reporting on BBC.
This is not to say that times aren't tough out there - and there's a possibly tougher time yet to come before we get out of it. But, really, if confidence is what is needed to see us through it - play your part RP. Not to gloss over the facts - but certainly not to over dramatize them.
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UTTER NONSENSE!!!!!!!!!!!
YAWN, THIS AGENDA IS SO BORING, I CAN NOT WAIT FOR THE MEDIA TO SAY WORDS TO THE EFFECT ...
"WE HAVE A NEW PLAN, FIRST ITS THE AMERICAN UNION....CANADA USA AND MEXICO ARE TO JOIN IN A UNION WITH A NEW CURRENCY.....
METTINGS HAVE TAKEN PLACE BETWEEN ALL POLITICAL PARTIES AND CENTRAL BANKS TO BRING THIS TOGETHER...FOLLOWED BY A UNION IN THE FAR EAST AND YES ANOTHER CURRENCY, WE HOPE THIS FIXES THE PROBLEM"
WE ARE LIVING THOUGH A MANUFACTURED DRAMA WHERE ALL THE ACTORS HAVE A ROLE TO PLAY...
THIS WHOLE AGENDA WAS WRITTEN ABOUT BY THE PROPAGANGIST H G WELLS IN THE BOOK "THE OPEN CONSPIRACY" ITS ONLY 129 PAGES, MAY I SUGGEST EVERYBODY READS IT, FIND OUT WHO IS BEHIND THIS NONSENSE.
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#65: e2toe4
Can I just say that if there were such a thing as "UK plc" then we, the shareholders/taxpayers, could call an Extraordinary General Meeting and fire the board of directors/MPs.
Furthermore, the bail-outs would have to be done via a Rights Issue that would require a vote from the shareholders/taxpayers.
The UK does not look much like a plc to me! "UK Serfdom" would seem more accurate ;-)
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80 -Boilerplated
Er - exactly - did you read the second part of my post?
Mizze
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Buffet said years ago the derivitive market was a nightmare but they laughed at him.
It has got worse simply because the multiples on each $1 or £1 went to demented levels.
Of course Insurers will not have the cash to settle it goes without saying, so shareholders will hgaev to take the strain.
Much as people love to emotionalise about recession there, this all has teh making of the bottom of the market.
No there wont be a huge bounce but we will see well run companies get premium ratings and eth dross stay where they are.
That show it always should have been but we all now what commision incentives makes people say!!
All I want to add is that the very idea banks should pay any bonus given they are running cap in hand to governments is an outrage. If theur staff were earning sweet nothing paying a bonus woudl have some credibility but they are paying twice main street salary levels so stop the bonuses it is obscene to anything else.
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I have read some of the comments about Marx and debt=slavery. The response to Marx was in part to put in regulation- if one person gives credit another has debt- you cannot trade internationally unless someone gives you credit. The issue is not one of principle but one of excess. Our problem is that as humans we like to go over the top- otherwise why do people get smashed on a Friday night and why are there so many fat people in the world. The principles are not perfect but we need a system of credit- we need to remember that credit evolved to allow people whose harvest had failed to buy food and survive on credit until they could recover. We need a way of being able to spread the gifts of the world around to enrich us all and to keep us from reverting to barbarity- as when our harvest failed we declared war on our neighbour- killed them and ate their food. We are not perfect and have developed systems that have actually done not too bad for mankind but they have gone too far and we have known this for sometime but have not been forced to change- I am reminded that people never give up a privilege voluntarily. Democracy and markets have served us better than any other system thus far simply because we can innovate, trade and adapt to crises quicker than other systems and we do need speed fom time to time. There are better ways those taught us by Jesus and Mohammed but when religious people get into power they seem to get corrupted even more quickly than bankers by greed - just look at the history of Europe and some of the behaviour of clerics in Irana and Saudi. Let us not believe the basic system is the problem- it is getting it to work by ensuring some of the crazy stuff does not happen again- starting with the US consuming so much- capitalism does not work if one country consumes so much of the world's resources - especially when it is consuming so much more than it produces.
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#35 and others.
It's not interference with the FSA which is the problem. It's their inaction in the face of obvious evidence.
Like when I contacted them about the inability of a well-known High St Bank to calculate my outstanding mortgage correctly. A problem which was also ignored by the Bank's Customer Services dept and the internal audit committee, neither of whom could bring themselves even to respond to my letters.
"It's all difficult maths stuff - don't you worry your pretty little head about it - best leave it to the experts" is the message they give out.
Who on earth are these people?
By the way who amongst is confident his mortgage is correctly calculated. Have you asked to see the calcs?
I would if I were you.
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#72
re the forthcoming recession or even depression
The one thing for sure that will be in plentiful supply though will be nutty fruit-cakes...
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Have I got this right? Today there is a fix on the $400bn of CDs previously held by Lehmans. These CDs are insured. If they are now found to be worth 50% of what they "ought" to be worth the Insurers face a margin call of $200bn which they might not have and go bust. But there must have been earlier "fixes" in which margin calls had been made. Does anyone have any idea what the potential exposure is today? This is a complex and opaque market but I would ask Robert for some more facts before scaring us all to death.
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There are three crises going on at the moment, and the financial crisis is the easy one to fix.
The other two crises are climate change and energy depletion. Mother nature makes up the laws that govern those crises, whereas humans make up the laws that govern the financial crisis.
We cannot ask the Sun to give us more solar energy per year, nor get fossil fuels to form by next year. We cannot ask the atmosphere if it will kindly ignore CO2 there and not warm the planet. But we can change the rules that govern how money is created and moved around.
The rules that govern money embody our values. At present the rules are set up so that the rich grow richer with ease and the poor have to work hard just to stay afloat.
I think that money should be a means to ensuring fairness in a society. That the work I do is reciprocated by others.
Money needs to be designed to fulfil the following objectives:
1. The peaceful survival of humans on the planet
2. The basics of life for all that we (mostly) enjoy in the developed world: food, health, education, care in old age
If we are to solve the crises of climate change and energy depletion, there is a great deal of work to be done, for example:
* Homes must be insulated
* New energy schemes, such as combined heat and power plants must be constructed
* Railways must be constructed and run
* Probably more people will have to work on the land as the availability of oil-dependent fertilisers decreases
There are going to be a lot of people out of work soon. The Government must employ people on the necessary work for the survival of our civilisation.
As the New Economics Foundation has said, we need a [Unsuitable/Broken URL removed by Moderator]green new deal
Some commentators have called the three
[Unsuitable/Broken URL removed by Moderator] and there are more articles on it here
For many years I distanced myself from socialism, partly because of the risk of being called naive by the free marketeers who actually understood economics. It turns out they didn't. If what I -- and the NEF -- are advocating is socialism, I am prepared to wear the badge with pride. If you don't like the word "socialism", think of it as "survival".
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Will someone ask these banking frauds to admit to the fact that they themselves are utterly bankrupt.
This is the "lack of confidence" - the knowledge that even these silly billions being bandied about will not fill the vaults and get the system working again.
This trance of money is only a stop-gap till the bankers come back to Brown/poulson et al in a couple of weeks time for more stating that they've now discovered a "slight" shortfall in their previous calculations.
Then what? More bailouts? More promised money?
This will only stop when you stop the rot.
Peston - stop your flannelling and get serious. Stop fawning round these shysyters and get them to answer honestly for once in thier venal lives.
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Maybe we need a global toxic bank, into which all the bad debts and duff assetts can be dumped, exchange for an IMF special facililty. This would take over the underwriting from the insurers. It would have to be very large, arranged very fast, and channelled through national central banks. Tough, but it can be done, if necessary retropectively (ie the central banks take over the debt first and then draw on the facility).
The IMF would be left with some pretty poor stuff, but most of this will come good in time.
I do not think that national solutions are enough for what is clearly a global problem -unless governments are going to start introducing exchange controls (and they would have to be drastic).
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All this stuff about ratings being justified as the basis of putting money in locations which turn out to be dodgey.
The speed limit for driving a car away from the motorway and outside speed zones is 60 mph. However when you drive along an unrestricted country lane at 60 mph you are likely to get in trouble. Just because something is legally possible does not mean it is risk free.
With the bank ratings it is simple, a rating is based on history not the future and if you make a decision just on ratings you are a fool. If a higher rate of return is offered for the same deal then implicit in that is the probability of a higher risk, particularly if it means effectively moving your asset out of the country to a different market.
It is easy to have sympathy with an individual. However - It is about time some of these large investors accepted responsibility for their decisions instead of demanding a risk free world but expecting the benefit of taking a risk. With the Local Government bodies involved the public will pick up the bill whatever happens, either through reduced local services, higher local council bills or via the central tax burden if the government bails the Local Authority out. As usual the person making the wrong decision simply wants to say the problem is not here, it is there. It is about time the public said it did not find it acceptable.
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I am not a financial expert, I'm an I.T. Consultant. I know very little about the money markets. But what I do know about the money markets I have learnt from Robert's blog. He takes the time to write things in plain English for the layman (and I am one, in this context) and I think his blog is the best on the beeb.
So, those people who think he's a drama queen (e.g. #6) should really take a look around them. Some of the world's biggest banks have folded, Landesbannki is folding and has debts bigger than the entire Iceland economy, the stock market has lost a huge percentage of its value. Drama queen? I think not. In the current climate it would be feasible to make practically any prediction about any bank, with a strong chance of it happening.
Robert, keep up this excellent blog. You have a clear, consise style of writing, and you're clearly explaining this global situation to non-financial experts like me.
Jim
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Time to invest in Farmland.
People will always need food.
Mind you, under rationing, you might well find your crop being seized for the greater good.
An allotment is also good.
Time and money spent outdoors, as well as being healthy, will bring its own dividends in vegetables.
And no overpaid politician or financier or hedgie can swindle you out of your vegetables.
It is also quite possible to keep Chickens.
All you need is to set up an appropriate run in your back garden, and you can have fresh eggs nearly every day.
There you are, real investments for your money.
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It's not today, it's Monday, again.
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#88
The trouble is when that 'million' has been placed on the books in one shape or other and it then gets used....
Whilst you might never have actually had the million, your wife has spent it on the assumption that you did!
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94 Thats a bit optimistic !
I now know no one prepared to invest in Shares!
I feel quiet lonely.
I think it is due to the fact that people no longer trust the public school directors and politicians.
It is also the fact that a Director can say their Bank is safe and three days later it is Nationalised.
Poor old Bradford and Bingley, missing you already !
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The UK Govt acted quickly to protect individual savers in the Icelandic Banks. If I understand it correctly, wholesale depositors are still exposed. This includes Local Authorities, Charities BUT also anyone who has money deposited via a nominee.
Nominee holdings include fund managers and pension funds. So, many of us are at risk of losing money.
I have 1/3 of my life savings with a fund manager deposited with Kaupthing Singer and Friedlander - a UK Bank. Surely this should be protected in the same was as individual savers ?
Can anyone tell me the position !?
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#95
Try AOL headline news:
"Bloodbath"
GC
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The entire financial system is a pyramid scheme and it is collapsing before our eyes.
If you wait for the CDS auctions for Lehmans/GM you will see further fireworks. The entire system is unravelling.. This is in many ways worse than the Great Depression in that it is a failure of all the fiat currencies and debt based money systems across the world.
Please watch/read:
http://www.silverbearcafe.com/private/moneyasdebt.html
http://www.rense.com/general83/bado.htm
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I know Robert Peston wants to be at the cutting edge of reporting on this crisis but he and others need to draw breath. It is simply not possible for there to be valid default claims of $400bn arising from Lehman alone. It should also be borne in mind that stupid behavior such as that seen on Wall Street in the last hour of trading yesterday and in Europe this morning will add to problems in the real economy. City people are simple widening the list of those who will rightly be blamed when this crisis is over.
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HELLO EVERYBODY.
WEVE MOVED OVER 276MILLION STERLING TO IRISH BANKING SYSTEM.
UNTIL BROWN & DARLING GUARANTEE UK DEPOSITS PROPERLY THE MONEY WILL STAY IN IRISH SYSTEM.
NO CONFIDENCE NO CONFIDENCE NO CONFIDENCE THERES NO MORE TO SAY.
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Hello? Hello?
as we are at the stage of Governmental intervention anyway, force the banks in the UK and internationally to lend a % of their capital to each other on interbank market - level the playing field and unfreeze the flow of money and do it now then we may just think that the government actually has a plan rather than merely reacting to events!!!
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I am no fan of Gordon Brown - but all the posts criticising the seizure of Icelandic assets are curious in the extreme.
Iceland had:
(1) encouraged all Icelandic companies to repatriate any overseas assets and
(2) it had reneged on its international obligations to pay compensation to UK depositors.
It was therefore apparent that the Icelandic policy was to protect its own citizens (illegally) at the expense of UK depositors. It was more than likely that a failure to secure the UK assets would just increase the losses to UK depositors - and if anti-terror legislation was the most effective way to do this - then so be it. The UK was being subjected to financial terrorism by the Icelandic banks!
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you can call it greed, I bought three grand worth RBS and Hbos shares yesterday, thought this is real deal. anyone can give me some insights - like what could happen if the both banks get bust or nationalised - does it mean I will lose all my money? sorry for sounding me so naive.
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#72, why do you regard "a global order" as a necessarily bad thing? (Not that it seems likely)
Done right, it could be a golden age for Man.
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By the way, as an ex-banker, happy to help fix it, but on a paid consultancy basis.....well the government is giving money away in other areas that have even less chance of success!!!
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I am AMAZED that we have not yet had an emergency interest rate cut today, the state of the markets is worse than it was when soros shorted the £ when we withdrew from the ERM.
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There has been much discussion of excessive compensation in boardrooms, and its link to risk management. How about approaching the argument from the other direction and making company directors become partners in firms. A new legal framework would be required to integrate this into the concept of a PLC, but having a liability for company debt would certainly make directors think twice about potentially 'dodgy' investments. We certainly need some way to get rid of this 'heads we win, tails you lose' culture.
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I likened old Bob Peston to a sensationalist tabloid journalist and mentioned the license fee.
comment moderated and removed.
That is all
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#66 Yes !! It's called Conquest !! The Americans tried this in Iraq and they are seriously regretting it !!
With UK troops still stuck in Iraq and Afghanistan and crying out for more and the Gurkha troops feeling uneasy about not being allowed to live in Britain afterwards, how do you suggest we conquer them ?? Perhaps we could transport our dole scroungers there to undermine their economy even more !!
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#6 - thats right, this is all a conspiracy started and driven by Robert P. and the BBC.
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What happened to the blog on Capitulation?
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Simplified History Lesson that became the money=debt system:
In the olde days we traded using gold coins. The banks had big vaults full of gold and when you took your gold coins to the bank you got a receit for the gold worth the amount deposited. We then started to trade with just the receits (money notes) as these were lighter to carry around. However, the amount of money circulating = the amount of gold in the banks. (A fair trading system)
Soon large banks (central Banks) held the gold and the small banks just dealt with the money (receits). Central banks would then start to print more money (receits) than there was gold. This escalated such that the money in circulation is worth more than the amount of gold in the central banks. (money therefore has a portion of credit (debt) associated to it). When a government borrows money to bail out banks they borrow money from the treasury reserve which is our tax money which has already debt associated with it. The banks then use the borrowed money to either loose it on the stock exchange or give to us to pay our debts. What a great money system we are in :-( Time for change!
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#72
Hahaha - that's cheered me up.
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Based on Richard's article, and other analysis, here are some pictures of the situation we face. http://southbeach-examples.blogspot.com/2008/10/day-of-reckoning-on-credit-default.html
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Governements borrowing money to lend to banks so they can lend it to each other so they can lend it to us so we can afford to pay the interest on the money the governments have borrowed in our name...
Are you laughing or crying? Why did anyone ever think that sounded like a sensible thing to do?
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Does anyone have any Optimistic views, on the current "financial crisis".
All the doom and gloom, is not conducive to a recovery. A recovery, which I believe will happen, remains an outlook. timescale? who knows?
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hurray! Welcome back Robert-missed you!
Re my posts yesterday-can we have our money back please? Maybe by joke aboutgovernment funds being in Iceland is true....hence the mayhem and legals threatened? Frankly, in all this mess, I wouldn't be surprised!
Hey everyone, we all knew this was going to happen-how daft does GB look now-writing to everyone suggesting they follow his model-even the IMF says individual solutions are not the answer.
Sorry financial institutions-you can't have the money. The rhetoric and stress of the last 3 weeks has been a ridiculous waste of time as us ordinary folk knew it would be!
As ye reap, so shall ye sow.
We've just gone over the top of the roller coaster, and now we're racing to the bottom-it's one he'll of a ride! Yeeha!
We now just have to hold on tight until the ride stops-the more GB and co try and stop the ride, the more it just delays the inevitable!
Noone has any idea what will be left when the dust settles-the poster yesterday who said the markets will be closed after the Washington meeting today may well be right.
Do that, have a bank holiday (the computers will still keep working) and take a breather-knee jerk reactions aren't helping-batten down the hatches-and look after the common man. Financial crisis is dreadful, but we will survive if good sense prevails.
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# 105 Post
How about "HSBC ATE MY HAMPSTER"!
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#110
This is the internet, were anyone can be anyone, who is to say you are using your real name in any case - are you going to post your address and NI number?! Please don't, what ever you do, the question was rhetorical .
My point is, user names don't really matter, in fact I suspect most never notice them until someone points them out.
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I can't understand why this is being dragged out so much. Every financial institution has far more debt than it could ever handle so let them all collapse and burn instead of pumping in more monopoly money into the system. the debt numbers are just getting bigger and don't mean anything any more. We have all suffered in the utterly irresponsible age of buy now, pay never.
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Robert,
I'm surprised that there has been no mention at all of those few Banks (eg Co-Operative Bank) and Building Societies (eg Nationwide) who have, through proper consistent risk management - the sort that we would expect from a financial institution - avoided these problems.
They should be congratulated. Loudly. But instead, they are hit twice - aside from NOT getting generous buckets of government cash sloshed in their direction; firstly, by exercising proper caution with OUR money, they have experienced slow steady growth rather than massive expansion over recent years, and secondly, they will provide a disproportionate part of the insurance fund. Why disproportionate? Because the contributions of this fund SHOULD really be based upon the risk management of an institution but they are not. Maybe it is time for such venerable and clearly trustworthy institutions to be granted some form of "no claims bonus" for their long term excellent risk management?
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The real danger I'm worried about is the growth of populism in the US and here. The threat of protectionism is rearing it's ugly head and if it does we are all doomed to relive the tragic thirties. Both the US and EU must have written in their statue books a strong commitment to free trade to each other and a denouncement of autarky; and a potential committment to a Keynesian 'mixed' banking economy if required.
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#104 The key thing is it didn't happen on their watch.
Brown was Chancellor since 1997. He had the opportunity to adjust and change things. He chose to ignore what was going on.
Brown has failed this country terribly. It's just he and his supporters will not admit it
it.
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Autumn leaves
are falling
So are the Stock Markets.
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#31 - ishkander
How wrong can you be?
Firstly your claim that banks are not bankrupt, they simply don't have enough short term cash.
So with their assets depreciating and the only wealth they hold is NOT THEIRS - it's the depositors - so what exactly does a bank have?
The answer is nothing, just a lot of promises to pay back money it never had in the first place.
Your argument about Cuban Doctors etc. only exists because there are capitalist coutries offering higher wages. If these did not exist (i.e. Cuba was the only country in the world) - then this would not be the case.
In the current times this is even more of a joke as the increased wages offered by the west - DON'T ACTUALLY EXIST! - They are totally reliant on the debt of others.
Now people have stopped paying their debts (through foreclosure etc.) there will not be a temptation for long. Especially when the NHS start closing hospitals because the Government has just thrown the funding at the banks black hole.
The only value ever created is when a worker PRODUCES SOMETHING. The rest is all play money - fake - unreal - a big con.
You may feel that there should be a difference in wages between a doctor and a dustman, but again this is probably because you wasted your time at university getting a degree which has taught you nothing.
Consider the following - A doctor can only treat illness once it has been contracted. A dustman prevents the contraction of the illness by removing waste which harbours disease. So tell me - who is worth more?
When you start to compare some of the big earners in society - it's even more obvious.
I work in a bank - I produce NOTHING - at the end of the day if I wasn't here, it wouldn't make a difference. This also goes for all my colleagues at work. However we all know if the farmers all went on strike we would all feel it immediately.
The problem is the people who control the money supply are also dictating what each person's value is - and it is completely WRONG.
I cannot eat money, I cannot live in a house of money, I cannot redecorate with money - it is completely useless - and in about 12 months time you are going to find out exactly how useless.
Usuray is harshly rebuked by ALL religions - and yet somehow we live in a society that functions on this premise. Doesn't that make you wonder?
Finally, please don't try to confuse yourself by understanding the Soviet Union and the 'communists' - the USSR was never more than a revelutionary degenerative workers state - it never reached Communism because your (and my) slave masters could never let that happen.
If you were a Capitalist master - would you allow the world to throw off the shackles and run free? I think not - it's logical.
If the world had turned Communist then we wouldn't be facing the problems we are now. The only value would be what was produced, and not this fantasy world we live in where value is placed on the movement of money.
I suspect you actually believe you can better yourself in this system - well I have news for you - YOU NEVER WILL. The designers of the system cannot be caught.
You are a donkey chasing a carrot on a string.
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I wonder if it would be possible to ring-fence that part of our banking system that is actually needed by enforcing an immediate de-merger of each of the banks. Make each bank float off the branches, deposit base and bits that do loans to small and medium-sized businesses into a new separate bank (similar to how those bits of Bradford and Bingley were sold off to Santander). Then these new banks could continue operating as normal, untainted by the dodgy derivatives, CDSs etc.
Meanwhile what's left of the original banks (the investment banking parts etc) are left to cope as best they can, and if they go bust then so what.
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boiler plate,
That will be the mocking then, No mention of the M3 i see. Best not argue the facts if you dont understand them eh.
You do your thing and i will do mine, your welcome to trust those who gambled away your savings with your future and you are welcome to mock me for thinking we shouldn't.
Time will show who was right, I just wish i could see you when it does. I am more than happy to be wrong, infact i want to be wrong, how ready are you for me to be right.
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#112
Nice ignorant rant.
Best you go back you counting the pennies that you no doubt make from importing from (and thus exploiting those who work in) those sweat-shops.
If you really think that their products are better then you really don't know your *rse from your elbow, people like you buy because it's cheap and you know that 'average Joe' is to ignorant to understand that worth is better than value.
Anyway, if this recession / depression really does kick in the UK isn't going to be able to afford to import, we ain't going to have the currency reserves to do so, that was my point - we'll have to learn to live on our own resources for a few years. Anyway, I bet you don't even know a cross-slide from a feed-screw, so much for your level of education...
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The Equity markets are hoorid. But they are the effect and not the cause.
Summon the 20 top bankers, both private and state; stick them in a locked room with no food or water inside. tell them they can come out when they start lending to each other. Then the equity markets and pensions will rebound.
They will say "Hey, if I am trading 2wth 20 guys in a room and I know 2 have terminal diseases, but don't know whom, who, if I trade with them I die, then I don't trade at all". tell them, if you don't trade, we all die.
Read Rousseau.
or Ricardo
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#74
I think that's largely true.
I was against the construction of a super regulator, preferring the specialist regulators it replaced.
On the other hand, it doesn't help if politicians kick your legs away when you're trying to score a goal.
I'm not so sure that the FSA is stuffed with bankers, by the way. I think they tend to be accountants or compliance people who worked in banks. To put compliance people and bankers in the same basket "does not a happy mix make".
To most bankers, compliance is an irritation.
Having said all that, at some higher echelons you need senior people who are fully conversant with banking as a trade/profession rather than a process that gets monitored.
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Ref 88 Simonmw3
There's a lot of sense in that.
Most of the perceived loss of wealth is notional and never existed beyond paper promises. Some real wealth has been extracted as "bonuses" and has already been re-invested or is available for future investment.
Intervention by governments should now focus on protection of the real, productive and service economy by easing cash flow problems caused by a frozen banking system. Major capital projects such as nuclear power plants and alternative energy sources will be required as Keynesian investment projects to keep down unemployment and the consequent reduction of consumer demand. Its time for taxing the super rich of some of their gains from the past decade and investing in future wealth creation.
The banks and insurance Co.s should meanwhile be separating their conventional service and safe assett activities from their derivative trading arms. The latter must be left to fight alone in internecine warfare. Any left standing can resume as heavily regulated functionaries
The rest of us should stop panicing. Our parents/grandparents endured not only the depression but two world wars that killed millions of people and destroyed the real assets of centuries of wealth creation.
Our real assets and skills still exist. Protect them and keep them working and this crisis will soon pass.
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#120
"The only way to have zero Inflation is to turn the clocks right back to the Victorian era, including dispensing with the welfare state, no mortgages at all (ie everyone rents except the wealthy)..."
But they didn't even rent in many cases, they had tied-cottages which was even worse - loose your job and you lost your home, what with the vagrants or poor laws etc it wasn't long before either prison or the workhouse beckoned.
...and people wonder why the likes of Marx came to the conclusions he did!
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This comment was removed because the moderators found it broke the House Rules.
For those who think the cds mess is new news, robert did a very good programme about this '50 trillion pound gorilla in the room' in june.
in general, if you want to know what's going to happen next watch this blog. If he's a drama queen it's only because we're in the middle of a bizarre pantomime!!
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#80 Well said. This is the time of the incompetent pointing fingers at everyone but themselves !! If they check their financial needs everyday and check the places to deposit or withdraw the differences, then they *SHOULD* have also checked the health of those places at the same time !!
That they didn't speaks volumes for their competence or the lack thereof !!
#107 Malthus also postulated that we'll all starve to death before the end of the 20th century, or at least fight for food. Therefore, you sir, are a ghost posting on a ghostly blog !!
#122 It leaves Man U in deep doodoo because its US owners borrowed heavily to buy it; quite unlike Chelsea whose owner could shrug off the loss of a billion because there's plenty more where that came from !!
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* RP?s blog has been and IS essential reading and despite a florid turn of phrase (NOT a drama queen btw!) he has made sense of a complicated mess.
Indeed I think he is pulling his punches, being painfully aware of things to come but not wanting to spook us or the markets with his (very) accurate predictions.
Do not attack the messenger just because you hate the reality of what is in front of you!
* So public sector FD?s have been signing off on millions in Icelandic bank investments despite:
a) Reading in the trade press for over a year that the Icelandic banks were ?questionable? to say the least
b) Cause to doubt the judgement of ratings agencies (sub prime and the AAA ratings debacle had been kicking round for OVER a year)
c) Best practice being shown by other local authorities not touching Icelandic banks ?with a bargepole? (Well done Brighton and Hove!!) Assume FD's talk with each other?
d) Due diligence being done on the Icelandic banks (one would hope!) and being sure about their lender of last resort in case of financial collapse. This was done? Right?
So corporate jollies are apparently out of the question ( see previous comment) so just what DID induce so many public sector FD?s to place AND keep OUR money in Iceland when they had points a, b, c and d staring them in the face??
* Ref. US election being postponed and Brown shirts marching down Whitehall.
Calm the HECK down people!!!
Quick reminder that despite fighting a war across the whole planet, the people of the United States of America exercised their democratic franchise on November 7th 1944 (as laid down by the Constitution).
Indeed the Constitution itself was forged out of the need to overcome the economic DEPRESSION, threat of contagion and possibility of widespread default on loans that came out of the war of Independence.
Some of us learn from history!
Some of us do not learn from history too.
Which MAY mean, wide scale unemployment, massive inflation and world war within the next 5 ? 10 years.
Sorry to doom monger on that one.
PS Now all interested parties can find out ?where our servicemen and women live?? (see lost hard drive story)
Good to know that the same level of public sector 'competency' that can keep secrets and invest in Iceland will be focussed (laser like) onto saving our financial system (HELP!!!!)
Mike (Worthing)
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THE MARKET IS CRASHING AGAIN. BROWN MUST GO NOW! VOTE OF CONFIDENCE PLEASE.
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Re. Iceland.......it looks like a new COD war is developing.
COD=Cash On Delivery
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#26 -
"#26 Unless those "wealthy hedge fund managers, investment bankers and lawyers" all keep their wealth in gold, their "personal bank accounts" are in the same banks as other peoples' !! Or do you imagine that they have magic boxes stuffed full of 50 quid notes ??"
Gosh, gold would do.
Is there anything else I have not thought of?
How about land that they own in the Uk, we could turn private estates into working farms.
Sort of 'making and growing' things. What a quaint idea that is.
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so the decline is deepening whilst all efforts are falling short and there is nothing more those in power can do, well throwing money at the problem seems to have fueled it on rather than dampening it down, so try removing money from it the exact opposit of what has been tried.
if just as a thought the government nationalised all the banks and fired the market traders thus halting any dealing in stocks and shares from uk we would no longer have to worry about the global market falling like a lead ballon and they could shore up our stocks etc technicaly freezing them.
sounds extreem but in critical cases where all hope is lost you have to do whats needed to save the patient.
or do we just sit back and moan as our current dictatorship continues to despoil this once great country.
action is needed now not after some government quango has spent a fortune thinking about it.
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149 FutureFinancier:
Absolutely. Your analysis is absolutely correct. It's a point I made repeatedly here yesterday. I'm not a Brown admirer either - very far from it - but he and Darling did the right thing about Iceland.
Meanwhile, I'm deeply shocked by the Local Authority exposure.
The risky nature of the Icelandic shambles has been known for months.
On 16th March 2008, the Daily Mail highlighted this, and said that Icelandic banks "are now seen as the most unsafe in the developed world".
The idiot treasurers of those authorities involved should be fired forthwith, and their index-linked pensions cancelled.
What they have done is even worse than the bankers, if you think about it. All they are supposed to do is conserve taxpayers' money, not gamble with it; they are not in the private sector, with the justification of a risk/profit profile. They are just idiots.
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Before I retired I worked in project management.
I find it totally amazing that this whole financial debacle seems to be progressing on a day to day basis.
Does no-one look forward at all or have any knowledge of what is likely to emerge as a consequential effect.
Let no-one throw a stone at the builders of the Olympic Park. They can just point at this economy destroying fiasco as an example.
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@136 glanafon, not even a Treasurer has time to follow everything, particularly in this period of being up to one's arse in alligators. The role of the Rating Agencies is to examine in depth not only what issuers have done, but what they are going to do, and how the market will affect them. They have the staff and time - and charge issuers for them! - to keep on top of their subjects, so it's incomprehensible how they got themselves into this mess - in theory.
In practice, it's beginning to look as if they were either playing a hand, or were incompetent. Either way, they are discredited, but like many another in this game, that doesn't necessarily put them out to grass, sadly.
The problem's moved on yet another step today, and a serious step with it - it's starting to look as though we're on the edge of popular meltdown, and once THAT happens, we're into 1929 in a big way. We won't need to worry about inflation, because we've got a worldwide Zimbabwean situation coming into view.
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No 55.
The Chinese are not sitting on their reserves, they are quite busy in trading.
However, they also know that their order books are more like order pages nowadays.
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Post 136. Hear hear. An excellent piece of common sense.
It is about time people realised that you don't get something for nothing and that higher retunrs generally mean high risks.
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This is pathetic and it has to stop now! City traders have got to wake up and realise that their pathetic button pressing games are helping no-one.
Action must be taken by central governments to supervise these stripey shirted idiots who believe that the numbers on their screens are nothing more than a suduku puzzle. The numbers mean something to ordinary working people.
Common sense must return and the "only in it for me and to hell with the rest" attitude must be eradicated once and for all, otherwise the UK and the wider economies of the world will face more than just economic collapse - armed conflict might be the only solution.
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# 58
Very good quotations. Of course, it also shows that the problem is systemic, it is not new and not made by a few bankers. They only played the role given them by the capitalist system, while it does not abolish personal responsibility.
The financialisation put the impending recession off for well over a decade. Now the recession found its way through the veil of financialisation and shows its not very nice face. And in the process it destroys the illusion created by financialisation.
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#151 That's what Hitler thought too !! Only he thought that *HE* will lead that Global Order !! The rest, as they say, is history !!
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What a load of nonsense
Anybody would think that there was a credit crisis or financial meltdown !
Get a grip everybody !
Its only a virtual reality game of youve been framed for a laugh
Its just a reality cheque for £0
It takes one back to ones childhood
On the good ship ALL CO. "pop"
On the good ship lollipop.
Its a sweet tarp to a cAAAndy shop
Where bon-bonus lay
On the sunny beach of Papermint Bay.
Lehmanade stands everywhere.
Crackerjack bonds fill the AAAir.
And there you are
Happy landing on a chocolate bAAAr.
See the sugaaar bowl do the footsie roll
With the big baaad devils wall st caaake.
If you eat too much ooh ooh
You'll awake with a tummy aaache.
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#138
re Farming
To right, and much the same comments were being made by farmers 6 to 12 months ago when oil hit it's high and everyone started to think 'crash', farmers were saying that as long as they invested in some form of bio-diesel technology they would always be sitting on the high ground!
PS, to all you City bankers, Farmers are those people who get in your way when you take your Porches out for a run in the country, Farmers are also those who put the mean in your McDonald's too.... Sorry, that was a bit below the belt, but still true for many though!
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#160 It capitulated !!
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The government inject £50 billion into the markets for the banks to lend to each other. The have not done this so the government should withdraw the funds, let the banks fall, and use the £500 billion to lend to homeowners and businesses themselves.
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Not heard much of Tony Blair lately!
I wonder what he's doing now?
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These CDSs are really like ealy life assurance, betting on whether uncle Monty would die before Friday.Why are they not void as wagering contracts?
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#171 That's because "dog bites man" is not news but "man bites dog" *IS* !! Hence there is hardly any mention of all the good ones but the bad ones are trotted out again and again !!
At least they are also not punished a third time like Lloyds TSB by being forced to swallow HBOS with all sorts of political strings attached !!
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I find it interesting that the BBC, a news organisation with massive resources and a mandate to provide the British public with first class investigative journalism, has written about CDS only once before this occassion. It appears that only on the eve of a happening do you feel bound to inform Joe public on the casinoesque practices of our banking institutions. Shame on you BBC. Orwell is turning in his grave.
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And what, pray, were the auditors of the financial institutions thinking about signing off accounts where the assets shown on their balance sheets have been shown/proved to be grossly overstated ?
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#146
Good for you, just prey that Ireland don't follow Iceland, whilst your money is technically safe (you will get it back) you might have to wait a few years - or even decades) before you see it again...
Oh, and there is really no need to SHOUT.
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Does anyone else believe that ICELAND may just be trying to break the EVIL chain of debt.
If it is......then this is the real reason why GORDY is so angry with them..........as they may just bring the whole 'house of cards' down.
GO BRAVE ICELAND!......GO DO IT!
Don't be bullied.
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It is lunchtime the FTSE 100 is hovering around 4000 (7 percent down ish) waiting for the US exchanges to open to find out where it should go. I think we obsess too much about these things!
Real life goes on - Charities and Local Authorities have a least a billion pounds at risk, but yet again our government is using inappropriate legislation (The Terrorism Act) to negotiate with Iceland. It really goes to show that Politicians and Civil Servants cannot be trusted to use legislation for the purpose it was enacted and this is very very worrying (but not a surprise!)
There are two things to think about: first, how to stop the imprudent borrowing happening again and second, how to rescue the economically vital financial structures.
Presently we all want to make an example of those responsible, but we should, I think, consider more deeply the nature of the responsibility rather than simply lashing out.
'Days of Reckoning' will come and go and we will enjoy them or not as the case may be, but what we really need is a stable and well constructed internationally agreed set of regulation going forward.
Anybody any thoughts on how to get from where we are today to the desirable future condition? A well set out set of steps would be comforting.
(I'm off to eat a light lunch!)
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The complete and utter irresponsibility of these financial institutions is laid bear.
Plan B is for HMG to fund businesses and retail customers as directly as feasible.
The banks can go to the wall.
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#175
Consider the following - A doctor can only treat illness once it has been contracted. A dustman prevents the contraction of the illness by removing waste which harbours disease. So tell me - who is worth more?
The doctor is mate.
Because anyone can be a bin man. And it takes years of study and sacrifice to become a doctor.
Best of luck with your career.
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This comment has been referred to the moderators. Explain.
Why are some traders still selling shares? When I read that this is explainable because they are now concluding that there is going to be a world-wide recession I am amazed. I would have supposed that most people (with an IQ much above that of a hamster) had concluded that there was going to be such a recession two months or more ago. What is the point of selling after the markets have declined so much? Isn't it a bit late - unless you only bought in very recently?
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So much for solidity! We appear to living in a house of cards on crocodile infested quicksand.
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I'm certainly not an economist and I struggle to understand some of the finer points of what's going on here, but I think I have an idea why we're all in such trouble.
If you add up all the money that banks everywhere have lent, to each other, to businesses, to individuals etc, you will get a huge amount of money. Let's call it x.
If you add up all the money that actually exists in a meaningful sense everywhere in the world, you will also get a huge amount of money. Let's call it y.
In a rational world, y > x. We are now having problems because in fact x >> y, so there is no way that all the debts can ever be repaid.
Is that more or less right?
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#206......we could probably watch Orwell turning in his grave....because there are probably several CCTV cameras spying on it!
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I saw on a sandwich board today that Gordon Brown was declaring war on the City.
I think this is a fair and just response as the City has just done more harm in just two weeks to the people of this country than the Taliban have managed in years of conflict.
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Robert Peston should show a little more descretion.At a time of such panic and insecurity, his continual briefings and "leaks" have cost the country £500 billion pounds and a melt down of £10 billion on monday.
Is there no editorial control at the BBC?
I refer to Michael Portillo"s comments regarding the secret meeting between the banks and the Chancellor. this infomation should not have been revealed....the markets have always operated with a level of secrecy in order to avoid such rumour and speculation.....all trust and discretion seem to have gone,
Mr Peston also boasted that he "exclusively" broke the Northern Rock story...I hope he felt very proud when he saw the queues of pensioners and desperately worried people in the streets.
He is irresponsible, self-promoting...I hope he is not rewarded with any journalistic awards.
His tabloid style jounalism has already cost us over half a trillion pounds!!! Well done!
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173 johnnie london
I agree, I am fed up of hearing from Brown, the Brown Ring and all the little Brownies that really it all entirely due to something elsewhere or bizarrely, it is down to Thatcher. As I have said before, why not try blaming the Knights Templar in the 12th Century for being the first to charge interest in order to provide funds for the Crusades. Amazing how funding war can coincide with economic problems. Oh and anybody questioning the Brown delirium must be right wing, don't forget that.
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Regarding "symptom of the disease, not the disease itself".
What actually we seem to be experienceng is a situation that is analagous to cancer, that spreads.
Because the global economy is in turmoil, I've battened down the hatches and am trying to conserve what resources I've got for the longer term, spending as little as possible.
I'm unemployed at the moment, which also doesn't help matters. Because I don't need a car for work, the car is laid up at the moment. So I'm not paying Road Tax, Insurance Premiums (+ Insurance Premium Tax) and I'm not buying fuel (and paying the double-whammy tax of VAT and fuel-duty). The car also hasn't been for an MOT, because it doesn't need one if its laid up, which means the motor trade has not benefitted from its annual opportunity to rip me off, at the behest of the Government...
And I'm also tending to take the view at home, that if it aint broke, don't fix it. So I'm not spending cash at the DIY superstore and elsewhere. I'm just buying food, paying the basic bills and I'm trying to minimize them all as much as I can.
So the sickness in the banking system has spread, exactly like cancer. And because I've had to make all these cutbacks, you could say I'm "not feeling well" about the economy. Just like depression, its a viscious downward spiral that's difficult to escape from.
What we're experiencing is the death of Capitalism. Communism went west (literally) 20 years ago. It seems it is our turn now. Perhaps it is now time to buy a tin-hat and a copy of the Koran...?
Anyway, it just goes to show how important it is to have a healthy banking system, stable and well-regulated, run by responsible people rather than rogues...
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re the posts on the FSA, the current head of the FSA was previously head of the CBI. Here he is talking in his earlier capacity :
" The CBI is to oppose any further significant changes in the rules on top pay and corporate governance after a members' revolt against demands put on them by recent new measures.
The CBI's director-general warned that industry was feeling "corporate governance fatigue" and wanted to digest the changes of the last few years. "
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There seems to be the assumption that we are facing something along the lines of the 1929 crash and the depression that followed. However in 1929 few members of the public had bank accounts or mortgages and credit cards did not exist. Today at least one of these financial instruments is used by almost all of the population.
While the 1929 market crash put the brakes on the real economy today's banking crisis is akin to putting a broom handle in its front wheel - and is why the crisis is moving into the real economy so quickly. The current crisis could ultimately prove far more catastophic than the great depression if everyone is forced to revert to the cash only economy that existed in our grandparents or great grandparents time.
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Anyone complaining about RP's use of dramatic language clearly fails to appreciate the fact we are in a real mess here and if anything its rather understated. After all the whole growth thing has been built on credit and there has not been a period where the world stopped, took a breath and allowed itself to catch up. Look at house prices to earning ratios as a very simple example. I would discuss this growth in house prices and people would say even longer mortgages would be allowed or interest only would be more widely used. The simple fact is that both models work providing the structure is there to bridge the long term gap on capital being repaid. It was not, the loans were seen as assets and the deals to buy the assets were seen as bonus's and bang! The situation we are in will now allow the world to catch up, infact it will force the world to catch up! RP keep it up, the blogs are accessible, entertaining and to the point.
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#177
Nice suggestion. I wrote along similar lines 2 weeks ago, but the BBC moderators declined to publish my comments. Times they are a changin'.
We NEED a banking system to handle our wages, make payments, and keep our modest savings safe.
The word financial markets need us, because over many years they have managed to convince us that we can part with our savings, sometimes for many years at a time and they will do a good job looking after it. Then they forget it is our money at all and start playing with it because they earn lots of money and are convinced they are doing a good job by nothing other than betting on the movement of things like stock and commodity prices.
My solution : LEGISLATE THAT ALL EMPLOYEES WORKING IN THE FINANCE INDUSTRY ARE BANNED FROM HAVING PRIVATE INVESTMENTS. Why, because at present they have a conflict of interest that perpetuates rising prices. That is the energy of Robert's vortex that is fast collapsing.
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#28
Hmmmm did we vote for Mr Brown at the last election.....NO!!!
We voted for someone else, the person at the helm of the sinking ship SS UK plc was unelected and if you talk to a lot of people today is largely unpopular and unwanted....
Time to hand over to someone who is voted for by the masses Mr Brown.......GET OUT
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The problem is we have minnows for politicians, who have gone into a blind panic, and the financial instututions in the City and Wall St are manned by people who are gung-ho risk-takers when things are going well but are cowards who run to the hills as soon as things get difficult. Anyone selling shares today must be losing their shirt; they should hang onto them for a year or two.
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I?m no Brown fan but get this!
Where would Britain be today if we HAD managed our finances prudently? I mean that every country in the world has the same problems, we would have been caught up in this anyway. You know the old saying don?t you? ?Its better to be wrong with the crowd as right on your own?.
Perhaps GB actually did the right thing?
In any case regardless of your (or my) opinions of the man, I am sure that Osborne and Cameron would not have done any better! I remember life under the Tories and what they did to our country, the were a disgrace to the human race IMHO
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#173
But this whole fiscal system was put in place by Thatcher, the problem is that Thatchers supporters can't accept that she is the cause of this, yes Major, Blair and Brown have made mistakes - no one is saying they haven't - the main mistake was not dumping Thatcherism when the world / country could have had a relatively painless readjustment. Major should have dumped Thatcherism way back in the early 1990s, probably after the ERM fiasco.
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Its good to know we still have our gold and dollar reserves !!
Oh sorry I forgot...Gordon sold most of the gold off at a 75% discount some time ago.
As for the dollar !!
Well, we still have the good old welfare state dont we ??
We used to ??????
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Want to prevent this from happening again?
The answer is simple,
No matter who you are or for what purpose - NEVER take a loann from a bank ever again. If everyone did this, the banking indutry would disappear.
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#175 To answer your points, firstly the Big Four banks have quite a lot of assets that have not depreciated !! Even if you are a crook and default from your loan with them, they can legally chase you through the courts ad recover that from YOUR other assets !! They also possess a great many buildings and other assets that are worth something !!
However, because what they now own is tied up in illiquid (solid, long term) assets like loans, they need more liquidity (cash) to carry on trading and lending to those who need it. If they don't, thousands of small and medium companies will go belly up simply they cannot pay their next week's wages !!
Secondly, if Cuba was the only country in the world, your argument is totally moot !! ANd the countries that the Cubans defect to are not always in the West. Many of them are Latin American countries !!
Thirdly, your comparison is also flawed. A doctor can remove his own rubbish but a dustman *cannot* diagnose and cure diseases !! Or do you go to your dustman who practices as the local witch doctor/shaman for your cures ??
Fourth, as for you producing nothing, are you saying that we should return to the barter economy ?? I'll let you have a bit of meat if you make me three more flint spearheads !! Perhaps you should take up flint knapping instead of working in a bank !!
You cannot eat money but you can eat the food that that money buys. You cannot live in a house of money but you can live in a house of bricks and mortar bought with that money. Next....
Finally, if the USSR was not a "true" Communist state, pray tell us more about what "true" Communism is and how that can be achieved !! And which animal will be more equal than others ?? And which temple does the faithful pray in ??
And finally, if you say the "designers" of the current flawed system cannot be caught, then surely your "true" Communism also cannot possibly exist because the "designers" are omnipotent and will do all they can to stop it !!
You have just defeated your own arguments !!
Of course, there will always those who blame the Devil for all the ills of this imperfect world, be they self-inflicted or not !!
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If the Govt and the Establishment was concerned about Joe Public's job they would ensure Small and Medium Enterprises (SMEs) survied. SME's are the backbone of most EU economies prviding apprx 70% of GDP and Jobs. Typically they emply less than 20 people and require bank support for working capital, unlike bigger companies who have stack markey /shaeholder sfuns to use and abuse.
The Govt should give a PAYE and NI holday to all SME's to ensure outgoing cash flow is minimised.
It should aslo reduce Public sector heating/electricty consumption by 30%, has anyone been in a public sector building where sleeveles dresses werent possile because of the thermosatat? Get a cardigan and save the planet!
Long term it should exempt SMEs form H & S , Equal Opportunity and a raft of other expensive regulation avoided (legally or illegally) by most of our compertitors abroad.
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Just wait for the American markets - think the world has created a huge downward spiral on the markets and it will be difficult to stop.
Even if they do stop, I am sure it will just be a temporary thing
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How much further do the Market Caps of the banks and financial institutions have to fall, so they drop out of FTSE 100. Just a thought on "market perception".
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I don't fully understand this financial crisis. I understand a) lots of people borrowed money they hadn't got b) financial institutions lent them the money which they hadn't got either c) now governments are having to make up the deficits.
But what I don't understand is this: according to Wikipedia for the US "The median income per household member was $26,036 in 2006". Now the debt clock (which ran out of digits the other day) says each citizen's share of the US debt is $33,621. (Be more by the time you read this.)
So therefore the US debt is now greater than the GDP. I thought that a basic rule of capitalism was that a country couldn't "borrow" more than it's GDP. Yet the US, UK and all the rest are continuing to magic up hundreds of billions of dollars, almost on an hourly basis, but from where? Has money suddenly become an infinite commodity?
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Hope I'm not repeating anyone but wouldn't this be an ideal opportunity to get shot of the 2012 Olympics.
Perhaps the Greeks could have it in perpituity if all the IOC member nations offered some annual monetary support
We all need to think how to save a few bob now !!
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# 129
If you had read Marx, you wouldn't have said that it came from him, when it didn't.
The good bearded author only said that the credit system fully develops with capitalism. It helps the system to overdrive the limit of profits (the basis of the current crisis is the collapsing rate of return). However, it is not a tool in the infinite, but limited in itself.
The credit system also creates a very special social layer in the society, he added, and the behaviour of this layer mimes the behaviour of the rotten old aristocracy.
He also pointed out that the credit system is too complex for politicians to understand (or they resort to superstitions, just as today), thus they use experts, who happened to be from the credit system (Locke made a fortune from the completely wrong answer to a particular question about reminting the pound).
So, if you have capitalism, you have cyclical recessions and as the credit system linked to it organically, you have rides and runs.
Regulations, as they cannot be systemic, work only in "peace times", but are powerless, when the normal routines are upset.
In principle, the vested interests need to be broken, but the rescue plans do just the opposite, as much as they work. They are making the bed for the next crisis.
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Financial services has produced the greatest satire in the historyof bankind.
Add Gordon gekho[Kingdomino] and the Browk nights in shining ARMour telling the lemmings of the world to follow him and it becomes sidesplitting .
Please, can we have some more
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The Banks are being assisted by the Government hence the tax payer therefore main street but the Banks are still not lending to main street, should it have been a condition that our government said we (the taxpayer) will help you the banks as long as you help the taxpayer to get loans and mortgages. This would generate income and protect job losses
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#29 You say "The Govt should signal intent by cutting its own spending by 50%. Yes, I am talking about reducing social security, health and education. Get back to basics in Govt like they are doing at the supermarkets."
So why not scrap all the expensive boys toys first, like trident, warships, tanks and planes? Pull back the troops from foreign climes - defence should start and end at the UK coastline. Then turn the arms industry into producing useful tools that people in this country need, instead of selling arms to foreign governments to use against their own people.
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Look on the bright side the tree huggers will be happy...
The global collapse of the markets and reduction in energy consumption as a result of a recession/depression will probably go a long way to reduce the carbon emissions for 2020.
Every cloud has a silver lining. LOL
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Re CitiGroup, it is interesting that Tata have bought Citi's Indian back-office operations for $505m in cash (the operation has revenues of $270m and Citi is including a 9.5yr, $2.5bn contract with the deal).
As to the Wells / Wachovia situation, I don't really see the supposed apocalyptic downside for Citi of the deal not going through - certainly not enough for Citi to fold. Sure, Citi's share price might be hammered as a result, but that in itself isn't going to kill them, unless (a) it massively overshoots downwards, and (b) Citi has deals in place with penalties / margin provisions based upon its share price.
Or have I missed something?
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#177
"Best not talk about things you don't understand"
If only the bankers had taken notice of that, you can't gable with fantasy money as one day you will need real money to pay your debts.
How is more the fool, someone like you, up to the hilt in debt (be that anything from dealing room floor debt to your personal credit card), or me, no debt, no mortgage, no credit card (debt), no overdraft debt, car paid for, a trade that will still be needed (even if we have a Pol pot type regime!), OK I only have a modest life-style, but I'm content all the same - but hang on I lied, I'm not debt-free as people like you have just put me and everyone else in this country in to a share of the trillion - and counting - debt for these bankers bad debt deals.
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Look at these figures:
http://www.federalreserve.gov/releases/h3/Current/
Now you know the banking system is insolvent. Banks can't lend, because they do not have anything to lend.
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How does the behavior of the bankers in the generation of hype, speculation, rumor and fear in the drive for self progression differ from your content & style of reporting on this whole sorry episode in our financial history?
How much of the blame are you prepared to take? Or do you honestly believe you are not having an effect, merely reporting the results of other actions?
I would dearly love to know - As I know what effect I think you are having on my business and financial security.
It would be really interesting to hear what effect you think, if any, you feel you might be personally having.
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175. , TawkinSenz:
Spot on.
I just agreed with a banker, and normally I curse the ground they walk on.
Strange times.
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When we get a chance to look back at the recent events and start to point the finger, someone should take the "Basel" committee to task.
This is the banking world's 'super' regulator which sits above the EU, FSA and SEC.
In Jan 2001 they announced changes to the capital rules for banks. They said that....
...the new framework intends to improve safety and soundness in the financial system by placing more emphasis on banks? own internal control and management, the supervisory review process, and market discipline.
They also said that...
....the new framework intends to provide approaches which are both more comprehensive and more sensitive to risks than the 1988 Accord, while maintaining the overall level of regulatory capital. Capital requirements that are more in line with underlying risks will allow banks to
manage their businesses more efficiently.
How wrong they were !!!
Their 2001 plan was eventually accepted by the EU and embodied through the EU Capital Requirements Directive. Has been implemented in the UK financial sector over the last copule of years by the FSA.
I haven't heard much mention of Basle on the BBC or elsewhere in the media, in all the discussion about the crisis, but at some point someone should ask was it wise to allow the banks so much control in deciding how much capital they should maintain.
Perhaps if they have maintained more, reliable capital, they would not had concerns about lending to each other and the whole crisis could have been avoided.
Keep smiling...hopefully in 3 years time this will look like an ideal buying opportunity...at least that's what my broker tells me.
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Has everyone in the World forgotten the old adage:
If it seems too good to be true, it probably isn't.
Icelandic Savings Rates; inflated paper valuation house prices; six times salary self-cert mortgages; endless 0% credit card balance transfers - and then get debt consolidation experts to IVA you.
Easy to borrow, so much harder to pay it back.
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Has it occured to anyone that the powers-that-be WANT global economic chaos?
This would give them the excuse to impose a fully regulated and completely intra-dependent system. The system would be as free as TPTB allowed it to be, and would, in effect, be inaccessible to the 'ordinary' citizen.
Is it not possible that the present 'crisis' was deliberately orchestrated?
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#219
The blame for this mess lies squarely in the finance industry. Their grotesque greed got us here and craven fear of losing their place on the gravy train is why the market remains so fragile.
Don't shoot the messenger: It's the bankers, stoopid!
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I invested £7,000 last year and £7,200 this year in a stocks and shares ISA. Two weeks ago I lost £3,500 which was invested in Bradford & Bingley. Last week I was watching its value through the cracks in my fingers. This week I dare not look at all. I have no other savings. None. I do find it irritating that a Cash mini ISA is covered by the FSA guarantee but a stocks and shares ISA is not. Both are government incentivised schemes to encourage people to save and invest in shares.
I wish people wouldn't assume all shareholders are tremendously wealthy. They are not.
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221 TGRWorzel
Sounds sensible to me. Think it is more like leprosy than cancer. The body still is alive but it has bits falling off all the time and nobody wants to go near it. AAA ratings becoming Red X's, cry of bring out your dead bankers. The Ice melting in Iceland. Thing is with all this insanity that those with dough will sit on it soon, zippy mattresses and money belts are the sector with a growth forecast, I've got a sewing machine so I'm thinking. Could be - Merry Xmas here's a roast turnip. Henry hated them, turnips I mean, thats why he kighted a lion of beef, Sirlion. Now what waist size would be popular, King Henry or Kate Moss, perhaps a codpiece for money would go down well in Iceland.
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My comment at 133 is in moderation -- I don't think I said anything insensitive or off-topic, or perhaps it was the attempt to put in links that failed. Anyway, what I said can be summed up pretty well by the New Economics Foundation:
http://www.neweconomics.org/gen/
In short, we have to deal with the "triple crunch" of climate change, energy depletion and the financial crisis. Maybe this financial crisis, painful though it will be, is actually an opportunity to deal with the other two crises.
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Has anyone checked the price of turnips?
Maybe that's where all the money went.. The great turnip bubble of the early 21st century..
Bank Manager: So what would you do if I lent you ten thousand pounds?
Joe Bloggs: I'd get a little turnip of my own.
Bank Manager: So what would you do if I lent you a million pounds?
Joe Bloggs: Oh, that's different. I'd get a great big turnip in the country.
[some years later, when Joe can't meet his payments]
Bank Manager: Joe, how did you manage to find a turnip that cost £400 000?
Joe Bloggs: Well, I had to haggle.
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Surely we are heading for a time that it would be cheaper for the government to nationalise all UK banks and for us to trust our debts and savings with the nation.
That way, if people default on their mortgages, the house becomes the property of the country and they continue to live there but pay rent, as they would in a housing association or local authority house.
This would alleviate homelessness caused by repossession and keep the assets in the nation.
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219 - Do you really believe that experienced City traders do their trading based on the writings of Robert Peston?
If so, they desrve whats happening.
The Stock Market IS NOT collapsing, it is re-adjusting to it's true value. Like wise with houses.
People go on and on about credit, credit cards, lines of credit, credit crunch etc etc.
There is NO SUCH THING as credit - it is debt. All credit is debt. The minute you understand and accept that then you will understand what is going on.
There is no credit crunch - it's a debt crunch.
There are no such things as CDO/CDS - they are DDO/DDS and highly educated and experienced morons have been gambling on them and are now finding out that credit isn't credit at all, it's debt.
That's why we are in this mess.
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236 - The CDO/CDS market is bigger than the world's GDP. And a huge chunk of it is worthless.
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#228
"I remember life under the Tories and what they did to our country, the were a disgrace to the human race IMHO"
I really, really, really think you haven't thought this through. The Tories came in to a total inefficient, strike ridden country and changed it. Yes there was a LOT of unemployment but they turned it around.
Because we are back to the same situation AGAIN thanks to Labour - spend, spend, spend, spin, spin, spin.
The next government is going to have to cut everything radically. Even if this ISN'T a tory government say "Hello" to the 1980's again.
"Perhaps GB actually did the right thing?"
Getting the public to spend 300% more on the same houses the previous generation lived in isn't "the right thing".
Spending 300% more on houses when you have inefficient power stations, utilities and infrastructure (Telecoms, Roads and Rail) - is suicidal.
Just think that money could actually have been paying for itself by reducing our cost of living. Future generations will curse GB.
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#192
re project managing and this crisis
The problem is, this is a problem made out of human nature, not scientific or other measurable item - someone could go to bed thinking "buy, buy, buy" but wake-up thinking "sell, sell, sell"... Much of the problem is day-by-day.
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I suspect this crisis will not go away unless investors have a clear view of how the financial system will work in the future. Confidence is gone and all the bail-outs and support is the equivalent of band-aids on a serious wound.
I suggest a radical solution. Nationalise all banks so only They can adopt fractional reserve banking. Abolish all a taxes and let Government spending be financed out of banking profits. All banks must publish their asset based weekly. Have a supranational body that is independent supervise the global financial system.
The Nationalised banks will have an objective to stabilise the finances within the country and work with other national banks and the supranational body to stabilise money supply. We could allow trading on financial assets but make it quite clear that companies doing so are not backed by banks. Credeit guarantee insurances must be backed by the amount insured deposited in the nationalised bank. .
Charities and Public Authorities may only deposit their spare cash with the nationalised bank.
How about that for starters?
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Here's an idea for you to consider..
A significant volume of the shares that are currently bought and sold are actually under control of computer systems. These systems are programmed to make decisions based on a set of very complex variables.
So, why not turn off all the stock market systems?
Benefits:
1) How good is the programming of these systems. Have the developers a cogent set of rules to allow 'rational ' decisions to be determined by the systems?
2) It would slow things down.
3) Traders/buyers/sellers would REALLY have to talk to each other.
Just an idea.....
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It appears the banks are looking everywhere BUT the governmant for help in recapitalizing to avoid "the strings". Barclays have just secured 25billion from the Chinese apparently
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Re 233
Perhaps a better solution would be a willingness to accept outstanding invoices from SME's to big companies as collatoral against money owed to the UK government. The UK government has much more leverage for getting the invoices paid that the SMEs.
At the moment bank money is not making it to the big companies from the banks and the big companies are not paying the small companies. Intervention is needed at every point in the system in order to start it moving again.
Otherwise ...
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Perhaps by this evening, Robert will be explaining the "circuit breaker" with regard to the Dow Jones.
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While this is a global crisis we have to accept that the root of the problem is in the US - more accurately the two remaining investment banks who have bet big and lost big in the derivitives market.
In order for this to all shake out these banks need to fail/be taken over and the resulting fallout dealt with.
Only then can the credit-default-swaps, money markets and stock markets begin to reassess and recover.
I only wish this was allowed to happen before billions of pounds/dollars was wasted in government bail outs and central bank loans. These attempts to circumvent the wholesale money markets are akin to trying to protect an injured antelope from a hungry lion with nothing but a stick - it may delay the inevitable but ultimately you will only anger the beast more.
Saying that the initial advocate of these bailouts was the ex-boss of one of these investment banks!?
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#203
"What's Blair doing now?"
I assume you mean Tony and not Sir Ian, if so, he is teaching at Stamford Uni' USA (IIRC), as well as trying to the middle east countries to talk to each other.
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#221
Perhaps it is now time to buy a tin-hat and a copy of the Koran...?
How about a copy of the Bible? A house that's built on greed will never stand...
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I'm no academic, but have been following the newstream with interest. There's some stuff I'm sure I've missed, or would like to know.
Much has been said about the asian and western markets. What's happening in the OPEC economies? Russia? China?
Shares are presumably still being bought at tumbling prices, who's buying them?
Obviously shares are being sold across the board - who's doing most of the selling? Is it simply more of everyone who usually sells, or is the mix different? Are individuals with small private portfolios selling up or are they holding tight while large corporations trade through the crisis?
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Would prayer help?
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"You know what the trouble is, Brucey? We used to make shit in this country, build shit. Now we just put our hand in the next guy's pocket. "
I think that says it all. Union boss Frank Sobotka in David Simons peerless series "The Wire".
Everything has become virtual. Banks are so out of control the can't even put a value on their exposures. This is the service economy - it has little intrinsic value or assets.
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The economists are not doing any better!
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Excellent!
When you said "So this day of reckoning on Lehman credit default swaps is momentous - and it could not come at a worse time for fragile bank shares." was really useful.
I assumed CDS were still some way down the road. Of course not because of the default.
Suddenly I understand but wonder why this wasn't highlighted more generally as it explains an awful lot.
Thank you.
I also agree strongly when you say:
"As soon as regulators have time for breath, they surely must as a matter of urgency bring some light, order and proper regulatory oversight into the credit-default-swaps market".
But as I am a pleb does that include derivatives generally?
If I understand it CDS are derivatives and there are zillions of dollars of derivatives in the pipeline?
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Maybe a rhyme will help ease the pain....
Ashes to ashes, dust to dust
our tinpot economy's just gone bust.
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#255 We've seen the Icelandic bubble; is it related to the swede bubble you mention?
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The only things currently in shorter supply than an inter bank loan are common sense , responsilibilty, accountability, competence and vision.
Would you give an alcoholic a crate of whiskey bought with someone else's money
(and not insist they enroll at AA or get treatment, and not supervise their drinklng) ?
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#219
re Peston and BBC bashing
Perhaps you could send the same complaint to Blomberg, CNN, CNBC etc. etc. Even Sky News, so I assume FoxNews/Business, are rather gloomy about this crisis too - normally the bastien of support for the capitalist system...
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I accept that the BBC has to report bad news, in relation to the economy and current crisis. However, when the fundamental issue is one of confidence, the tone of media has a direct impact on the behaviour of the markets. If you accept this premise, there is an obligation to make that reporting accurate but dispassionate. In my view, the BBC, who must lead the way, has demonstrably failed in this regard. Recent examples: reporting, with dramatic emphasis, house price falls of 13% in the last year without balancing that fact with the 20% annual growth in prices that took place in recent years. The very large downward facing arrows as the backdrop to the 10 o-clock news. The infantile heckling of the Chancellor by John Humphreys on the recent Today program.
A more responsible attitude, reflecting the cause and effect of media reporting, is required from the BBC and others.
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#248 good point
Whilst basel II is certainly not the cause of the problem and the lack of capitalisation the banks are experiencing. It certainly goes to prove that at the time this regulation came in, no one (not even Vince Cable) was thinking that the current situation would arrise. Otherwise all the other regulators and politicians would have objected to the Basel II regulation.
Am I right?
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#129 - emgebees
I got about 5 sentences in and I spotted a big mis-understanding of credit and
The use of credit to survive a failed harvest is a great example.
Lets take 2 farmers, A and B. A's harvest fails and takes credit from a bank to purchase surpluss harvest from B.
First of all, why does B have a surplus harvest? Unless of course he is producing more than he needs, in order to sell it on. If B is in fact a production owner (the capitalist) then this surplus has only come from the 'underpaying' of his labourers for their work.
Then we have A who has a disasterous 4 seasons - with no harvest. He borrows and borrows to keep his family alive. When he eventually reaches season 5 - he has a good harvest. However he must
a) Sell a portion to start paying back the credit he had for season 1 (which by simple maths must be a whole harvest's worth)
b) Pay back the bank the interest charged on the credit he has borrowed over the last 4 seasons.
c) Feed his family.
As you can see, farmer A will never get even again. His life is destined for eternal debt unless he is able to produce more than he needs - and find someone to sell it to.
Unfortunately, this is goverened by market forces, the more he produces in excess, the less it is worth.
This is basically how our monetary system works. You cannot catch up once you are behind - unless (in the farmers case) - you are very lucky and you have a grat harvest while everyone else's is destroyed.
Only then could you sell enough at the right price to start paying back the credit.
....oh and the banker is currently taking a nice fat feed for doing absolutely nothing.
I agree that excess exasperates the problem, but do you think farmer A is being excessive?
Communism would have both farmers contributing their harvest to the state. Both families would be provided for no matter what the harvest was like. Farmer A may provide more some years, and farmer B may be the bigger provider in other years.
The reason capitalists cannot understand this is because their natural view on the world is green eyed - and they (as farmer B) would be crying that farmer A wasn't providing enough food.
They are too stupid to understand that one day farmer A will be the main provider and he will thankful for that. Hence the reason for credit - jealousy and greed.
As for barbarianism - well when I run out of sugar I don't go and invade my neighbors house and kick his family into the street. I merely ask to borrow a cup of sugar - which he is happy to provide.
Once again, the use of force to obtain goods is a capitalist / feudal philosophy - once again driven by greed and jealousy.
...and that's just about where the world is.
I'm not even religious (I don't believe in God) - but all these religions are correct. I see religion as a handbook on life for the stupid. Unfortunately some people are too stupid even for that.
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#236 - couple of points. The median income is irrelevant for extrapolating GDP, you'd need the mean (average) to do that and it's much higher than the median because it's skewed upwards by the wealthy.
Also there's not really a fundamental reason that 'borrowing' can't be more than GDP, it's just be a very bad idea. And yes I guess money is roughly an infinite commodity as it doesn't physically exist, just 'creating' more of it though leads to inflation.
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#226
You are wrong, we did not elect someone [else] to be PM as we don't elect the PM, we elect our MP - that is all. The PM is chosen by the party that has the majority vote (the largest number of MP's), normally this is done before the election but there is noting to say that - as some have speculated about Cameron - the leader of a part has to be the PM once elected to power.
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It seems very simple to me yes the government should inject money to protect peoples money but if these companies go under then tough if you mis-manage things eventually the chickens come home to roost
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Day of Reckoning?
It may well be, because if the DJIA should somehow tank by another 500 points today, we will indeed be staring into the abyss! It will set us straight on a collision course with ....
"BLACK TUESDAY" - OCTOBER 29, 1929
On that day, the panic on the NYSE trading floor changed to absolute pandemonium. According to one observer-:
"They hollered and screamed, they clawed at one another's collars. It was like a bunch of crazy men. Every once in a while, when Radio or Steel or Auburn would take another tumble, you'd see some poor devil collapse and fall to the floor."
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Here is what is happening: Over the last 20 years, it has become harder and harder to make money. Transparency of prices, goods, markets, etc, means that every company, of whatever kind is working on wafer thin margins. They have to pull out every trick in the book to make profits. Thus, you get the rise of all kinds of strange business models. In the finance world, being a virtual world, the business models are even more esoteric, more esoteric than anyone outside can imagine. Thus, in all kinds of companies, not just finance companies, the value of things has become connected to esoteric business models and artificial values. The credit crunch/sub-prime has exposed this, but it is deeper than just sub-prime of course. It's the reality of transparency due to global networks, global media, the Internet and globalization. What will happen next is either that the same connected world will be used to good, to create a collective act of common sense, or, human nature will take over and destroy the system. It is also just possible that the sheer diversity of activity on this planet will be enough to avert disaster. No one knows. No one can know. But one thing is for sure ... this is not a small adjustment. This is going to be a fundamental reworking of what it means to live and work on planet earth. We now need the next industrial revolution beyond the information age. The information age, tied to the finance system, has failed us.
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This week there has been unprecedented cooperation by central bank and governments to alleviate the liquidity constraints. however while the rest of the central banks did their bit it has become quite obvious that our own Central bank/government was just paying lip service how else can they explain dropping rates 50 basis points to a target rate of 4.5% while allowing a wholly taxpayer funded organisation to maintain a standard variable rate of 7.49%. This is absolutely disgusting and another example of the sheer buffoonery of our current administration.
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the day of reckoning should be for the london stock exchange - they blatantly do not have a scooby.
sit wetting themselves to see what the dow does - american bank stocks go up and whey hey so do uk
why bother my kid at 3 could hit the necessary buttons
in fact we could all just toss a coin and heads we hit a green button and tails a red - don't think it would make any difference to the added value these muppets bring
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@ Tawkin Senz
#175
Best post I have read on these blogs in ages. Thanks.
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#257 RedLenin
CDO is a collateralized debt obligation not a credit debt obligation. But I take your point.
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when fundamentals are ignored and panic selling takes over, you can be sure we are near the bottom!
be brave there are some great bargains out there, dont leave them all for the foreigners to snap up....
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#275 nedafo - it must be.. although the Iceland one is more of a blubber bubble
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Six years ago, at the age of 32 I was diagnosed with an aggressive form of cancer. Following diagnosis, I was fortunate enough to have my mortgage paid off by my critical illness insurance pay out.
Now, in these days, this is the one and only time I have ever felt 'lucky' to be in the position I am in. I don't envy my peers with sky-high mortgages and insurance premiums which are crippling them.
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Re 219. When I read comments like yours I really do wonder how guys like you reach your conclusions.
Robert Peston is just one person who works as a journalist. Like all people sometimes he´s right, sometimes he´s wrong, sometimes he says or does stupid things and sometimes he doesn´t.
He is manifestly neither omnipotent nor omniscient - i.e. he is not God.
According to you he is single handedly responsible for the loss of half a trillion pounds.
Ranged against him are the central banks of the entire developed world and all find themselves impotent against the power of one journalist.
Do you have any idea how insane your argument is?
Are you aware that this kind of stuff is a necessary first step for all kinds of loonies looking for cheap and populist answers to the ills of the world. It is the propogators of such intellectual garbage that have paved the way for some of the most evil and destructive regimes known to man.
Your ideas are not only stupid they are dangerous, perhaps more than you know.
For goodness sake get a grip, and just think about the inanity of your core proposition. Ask yourself how many people in Japan are ever likely to even heard of Robert Peston, and then explain to yourself why the Nikkei has lost 10% of its value on two occasions just this week.
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#259
re Thatcher and the damage she inflicted
Sorry but you really do spout some utter rubbish, did you actually live (as an adult) through the 1980s or are you just regurgitating the spiel from Conservative central office?...
She could have sorted out the problems, not closed down 9/10th of the countries (potential) wealth earning capacity. The new finance sector could have run along side, both could have feed of each other, just like they do in just about every other industrialised country. Funny how both France and Germany still have a strong industrial base, and strong finance sector and a generally strong GDP and both had (and still have) strong unions.
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A lot of this problem seems to be caused by speculators investing in the stock market using other people's money. The prices of shares at the moment, based on what comapnies are actually earning and paying out as a dividend, are still too high.
If you had, say, £1,000 to invest, and National Savings and Investments offer you 4% p.a. then, presumably, the only reason to invest in a company that last paid a dividend equivalent to, say, a 0.3% return on capital invested is speculation. Investing in the hope that the shares will rise at a faster rate than the interest forgone, by not putting the money into a secure investment, is gambling and stupid.
I would say the best return on investment at the moment is to retire your own, personal debt, starting with the credit cards. 15-19%, tax free.
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I recall a comment Robert made a few days ago - a call for a different kind of market. Maybe he hit the nail on the head. The fundamental problem is whether matters of such great importance to the world can be left to these kinds of markets and the vagaries of their traders. It is fascinating that on the up even a Labour Government hails the 'market' as the way to go. But on the down we seem reluctant to blame the market mechanism. Although I know enough not to suggest State Planning or Central Control, the open market is not the form for handling matters of such import. These things can't be left to some acne ridden suit, wet behind the ears, bucking for his first 100,000 bonus check .... making instant decisions. We need periods of sober reflection by staid old bankers before they decide to make a decision! Nobody under the age of sixty should be allowed near a trading floor ......
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Two posts in this thread stand out in my mind:
#56 ZephrinVirqie
"The banks are your rulers and masters, if you're a slave then your masters, (the banks and finance industry) can force you to do anything they want..... and they will.
Money is created by debt and debt=slavery
Politicians, companies and the finance industry will lie and lie, to preserve themselves and their morally bankrupt monetary system which is fundmentally fraudulent."
#72 Hank_Reardon
"Our economies are being crashed, there is nothing mistaken or suprising, this is and has been the plan for years now.
Crash the national economies so you can build a global one. Simple as that.
... By the end of this there will be no dollar, no pound, be no national control over anything.
You only have to read the writings of those who are perpetuating all of this to understand it.
They wanted this depression and they are getting it. Why the bbc are still trying to convince you that we are in a redeemable situationn i do not know."
[end quotes]
Anyone who doubts the above points are a possibility should watch the videos "The Money Masters" at
http://video.google.com/videoplay?docid=-515319560256183936
and the five-part series "Money as Debt" beginning with:
http://www.youtube.com/watch?v=ThXpjmfyiMQ
After seeing the history of fractional reserve banking, particularly as it unfolded in the world's "leading economy," I don't believe it's all a conspiracy theory invented by "nutty fruitcakes."
Of course it's also possible that while those who seek to manage the world's economy for their private profit may have attempted to engineer the present crisis, things may have gotten out of their control. Nonetheless, I think their goal will remain a global financial system that they do in fact control.
Rather than endlessly debate our theories of how a fundamentally flawed (and fraudulent) financial system can be repaired by implementing this or that policy (all of which ultimately tax us one way or another), why don't we debate the need for a massive shift in what we value (wasteful material consumption) and how an alternative monetary system could support a sustainable way of life for us all?
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When a country is developing it first experiences massive amounts of growth and then levels out once it is highly developed. The perfect example of growth for a highly developed is France at what is considered to be a stagnant 1% a year. If a place like the UK which is a highly developed country which has levelled out, how can they expect to have created more growth in some imaginery fields when their is clearly no more growth to be developed on?The whole artificial growth was something that was invented to please shareholders, when everybody was well aware that a country can only develop at a certain speed after a while...
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Easy way to restore confidence to the stock market: ban all short-selling with immediate effect. No new short positions, and make shorts close any open positions. It would result in a few days of chaos as hedge funds and a few banks who had backed them went bust, and then sanity and order (and most important of all, confidence!) would be restored. At the moment shorts are taking advantage of panic to drive down stocks, and because short positions are distorting true values, nobody has a clue what anything is actually worth. Ban short-selling and let the shorting scum go bust. After all, when else in life can you sell what you don't actually own?
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212 - oh dear....another educated person trying to justify their existence.
'anyone can be a binman'
Rubbish - literally.
Most educated men are weak and wouldn't have the strength to lift a bin. Most educated men couldn't deal with the monotonus work that a binman has to do without being distracted. Most educated men have difficulty looking when crossing the road!
Intelligence is not defined by how many books you have read, but how quickly you can think your way out of a situation.
A binman faces danger in his line of work - a doctor does not.
As for my career? Well I made it to the top of my field and I left school at 16. All my peers are university graduates and none of them realise I haven't even got an A-level to my name. Such is the arrogance of the intelligenta that they believe they have defined intelligence - but sadly no.
We're back to how you value 'things' - and in this society we have already valued Bankers above Doctors, dentists, nurses, teachers, policemen, lifeguards, politicians.....in fact above everyone. Are you telling me that their contribution to society is worth more - (ha ha ha my sides split with laughter)
Now tell me that a Doctor is still worth more than a binman when the black death returns because of the mountains of rubbish. A doctor can only treat the symptoms and not the cause (as I don't believe this is actually a disease you can innoculate against).
Over the next few years your perception of value on people will change. You will be thankful for the postman who brings you your giro, you will be thankful for the charities who will keep your family alive, you will be thankful for the policemen who keeps the robbers from your door and you will wonder how you were able to get it so wrong before.
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# 218 - the funniest thing I have ever read on Peston's blog.
Embarrassing as I laughed out loud at work.
Who's going to put a price on humour?
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why not just solve the global problen once and for all and exterminate the human infestation on the planet.
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# 295
Good point about retiring debt but your point regarding Price earnings and Dividends only holds up if the company historical capacity to earn is maintained going forward (we are starting to find out that in a lot of cases historical earnings have been based on booking profits and instead of booking losses wrapping them in derivative products and marking them to model) and I suggest alot of companies may stop paying dividends in this environment.
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#299
We have had a ban on shorting pretty much most financial stock in this country for a couple of weeks now and it has not done any good. banks stocks are still dropping. if you take out short sellers all that happens is volume dries up and market makers have to lower the price to attract buyers for long sellers.
Even the Americans have started to understand that short selling is at least providing vloume hence the reason why they have allowed this rule to lapse and short selling to continue.
The problem we have is tahat for over 20 years now we have had governments trying to control markets (1987 The Greenspan PUT) To stop the market from dropping and finding it's correct level various Governments have added liquidity to the system to facilitate excessive buying and speeding up a recovery this works as a short term resolution but requires more liquidity each time until eventually it becomes impossible to service the kind of liquidity required to boost the market.
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#143 - Guy
AOL ' Bloodbath' header not too bad, but I think Robert's 'Vortex' trumps that one.
Seeing as these headlines will probably be studied in about 50 years time when all this is looked back on, I think it is incumbent on todays writers to think about the future students and juice it all up a bit.
Personally I would go for something such as
'Grim Reaper Scythes down Shares'
'Molten Miasma Melts Markets'
'Dastardly Directors Defenestrated'
'No solution forseen as Darling keeps falling asleep whenever he punches the number of zeros in a Trillion, into his Calculator'
regards
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#232 - welcome to your first communist lesson. I can see from your animals equal comments that your previous education was Orwellian.
Firstly the value of banking assets. These assets are only worth what people are prepared to pay for them. If no-one is prepared to pay more that 50p for a 2 bed semi in purfleet - then what does a bank have then? The valuations are all based on sentiment - the true value of your property is the REBUILD COST - check out your building insurance and you will see how little it's worth.
What do you think will happen when the banks try to get rid of all these reposessions - a complete collapse of the market making every property only worth it's bricks and mortar value - and possibly not even that.
You seem to think that loan defaults only happen to crooks - strange point of view there?
I'll tell all those families who are facing eviction that they are clearly crooks and deserver it - nice.
My point about Cuba (and other non-capitalist economies) is that the other capitalists cannot allow them to exist. It undermines their progress is enslaving their own subjects in the world of credit and cannot be allowed.
My point about Doctors may have been blaseh, but as I have said in a post just before - this society put the value of Bankers above everyone in society - including Doctors - now please someone come and argue that in light of events that was correct.
We don't need to return to the barter economy - we just need to stop banks creating money out of thin air and then charging interest on the loan of that money. Haven't you watched the video (money is debt) yet? Everyone else on this blog has by now!
You can only buy food with money whilst money is an accepted form of payment. Try coming back from Europe with holiday Euro's and get a loaf of bread in your corner shop. If I no longer believe in the value of money - then I won't sell you a loaf of bread - look at Zimbabwe if you want proof of that. I realise your life (and mine) has never seen anything but money as the form of payment - but maybe we both need to think about a future without it.
True Communism is about community (it's a hint in the name). It's a very long story and you need to get on Wikipedia and start reading - like I did - in order to fully understand it. What you are often given as examples Communism is simply a pre-communist stage (degenrative workers state) which unfortunately was destroyed by the enemies of Communism - possibly because if it had of been achieved then Capiltalism would have died back in 1917.
Communism cannot be forced - that was the big mistake of the past. It needed the failure of capitalism to come about - and unfortunately this could not be forced either. However as it turns out - Karl Marx was 100% correct - Capitalism is unsustainable, as is being proven as we speak - even if it survives this time it will burn itself out eventually.
Historical communism is where it's at - look it up and you will see it's how the human race survived naturally - without interference and without slavery.
Finally - maybe you're right with your last point - well at least until the last 6 months!
The greatest thing about power and corruption is that they always manage to screw it up in the end.
Look at the end of the british empire in India (Ghandi) - the power of the masses kicked out the powerful few. The people just don't realise how much power they have.
If you want it on your terms - remember the horse in Animal Farm? Well without him no-one could function - he represented the workers. The beauty of this situation is that the Bourgoisie eventually believe they are so powerful they can live without the Proletariat - but they can't - and one day the workers will realise this - perhaps when they are hungry and sick of being used as they have been.
...and there is no devil - only man and the devilish things man does.
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247 - maroon3.
Why thank you.
I live in a dilemna - and sometimes I would rather live in ignorance.
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#300: Ah, that explains a lot. My local bin men must all be highly educated. That will be why they so frequently forget to collect my rubbish.
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270.
I'm an athiest - and even I'm considering praying!
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If this was the day of reckoning, why did the BBC site show at one stage that Barclays shares had gone up by 103%? Are peoples' nerves not jangling enough without BBC adding to it. Serious decisions can be made based on the information BBC provides. Perhaps putting more people on the job of correcting figures rather than political correctness would be more appropriate.
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#252
Sorry to hear you bought ISA's based on the stock market.
I wish you the best however, this product is an accident waiting to happen.
With all stocks the key is to get out of the market before or just as the market is declining. With these ISA's you cannot, therefore you will now have to wait 6-7 years or more for the value to return to current levels. This is the main reason why pensions are so bad as well.
When I saw them the one way deal of converting cash ISA's to Stock ISA's said it all to me (You cannot convert Stock to Cash ISA). Someone somewhere is setting people up to lose their money on the stock market.
Sorry you have been caught out, either stick it out or try complaining to the FSA if you think you have been missold.
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Those who believe a cause will succeed are often proved right. Those who believe a cause will fail are also often proved right. It is about belief.
Those who continue to talk up fears will encourage the belief in the claimed truth of those fears, which in turn will exaggerate the outcome. Times such as these we find ourselves currently experiencing, call for cool heads not panic reaction. Commentators should also bear this in mind as their commentary can have an inflammatory effect with unpleasant consequences for us all.
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#294
Well yeah,, we could but at the time we had a miners trade union leader who wanted to defeat the government and create a communist state - not my words his. I didn't even realise this at the time but I thanked the gods Mrs Thatcher won out.
So yes we could have both parties working together. But instead we had two egotistical politcially diverse maniacs and the miners/police were in the middle.
I worked through those times doing shift work.
I remember exactly what happened. I don't forgive the power blackouts and neither the fact the miners couldn't and wouldn't face up to the fact the public had enough of them.
To take the argument another way. If miners had accepted that cuts were required then perhaps most of the mines wouldn't have been shut down ?
I also note that in the time that the conservatives have been out of power we haven't had stunts pulled by councils and trade unions trying to pull the government down. Funny isn't it how Labour could not abide the fact the public didn't want or like them to the extent they caused disruption ?
Nothing would make me happier to see a great manufacturing base in the UK. However, throughout the last 10 years under Labour we continue to see decline. Therefore something is wrong at the core of this country.
Unions, Banks, Stock Market, Labour, Conservatives and the EU will not bring back manufacturing because they cannot see past the quick fast buck.
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'122?' I think all that leverage leaves us with many High Street names going into administration in January when the tills are fullest for the banks to snatch back.
'181' You make very good sense on all points.
It is said that the UK share of the CDS's is second only to the US at about 40%. Seems decidedly dodgy to me.
And just wait while January when the shop tills, and bank accounts, are (hopefully) full and the banks pull the plug. All those High Street names 'invested'in by the Hedge Funds are doomed.
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#216
I'm not an economist either but I have a different worry...
I always understood that bog standard banks had to keep a liquidity ratio between deposits and lendings so that, at any one time, there should be no problem getting cash out of the bank. This should avoid a sudden run on a given bank and was regulated giving everyone great confidence...
If, however, banks are also acting as unregulated insurers (credit default swaps etc) and have taken a highly exaggerated view of the value of their collateral, and then these policies start getting claimed against, then for the first time I can see that we might all be turning up at our cashpoint one day soon to find nothing there.
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@ OldHabits
#310
If you make any serious financial decisions based on what market information you read on a BBC website then you deserve everything you get - and then some...
Stop being such a drama queen!
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#16
Grumpybob, you have every reason to be grumpy as you have so eloquently explained in your post. Well done.
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imho, there are about twenty people on this blog who should be running this country (and possible the world).
When do you ever hear such common sense, logic (and wit) from our rulers ?
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The day of reckoning indeed.
Which is the most powerful motivator- the doom or sensationalism of dramatic news bulletins every 15 mins, all day, or the stock market crashing - with someone's large cash box filling up in the future, again, or football superkids saying 'we hope to get a result'?
For every scoop there is a drop the dead donkey.
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Robert,
You said "There was also a doubling in the credit-default-swap price for insuring Morgan Stanley's debt:".
Unless I am gravely mistaken, this is fundamentally untrue.
I understood the CDS spreads to have "slightly increased after Thursday's trading (when MS' price reduced 26%) , i.e. a 5% increase perhaps, rather than what you suggest as being an increase of 100%.
There are a lot of people who believe everything you say or put into print on your blog, regardless of the caveats you have in place to protect yourself.
Do you think it is right to post this kind of wording which is potentially so very damaging and feeds into the bigger, negative thinking, self-fullfilling "doom-and-gloom"prophecy that is taking place at present?
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Probably 1000 trillion dollars of debt to be unwound.
Thank you John from Hendon. At least one person has attempted to put a figure on it.
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Re 313: Your post appears to be suggestive of some kind of normal thought process that has been corrupted by the "Newthink" of the Murdoch media empire.
Presumably the miners strike you refer to is the 1984/5 strike. You may well thank "the gods that Mrs. Thatcher won out" but you fail to explain why.
You say you remember what happened and imply that there were power blackouts - although as a matter of record there were none of any significance (those that occurred were transitory and a consequence of frequency control issues and not as a consequence of any supply failures).
You go on to suggest that if miners "had accepted the cuts that were required then perhaps most of the mines wouldn´t have been shut down."
You don´t mention what cuts were required or required by whom.
I assume that by implication you refer to the required closure of the Cortonwood pit - which was required on the grounds that it was "uneconomic" - with such term being defined by the Thatcherite methodology.
Ultimately the miners lost the strike and Thatcherite economics won the day. The consequence of which was the closure of substantially all deep mined coal pits. In other words by force of power the miners were required to accept the "cuts that were required" - and those cuts were the total destruction of the UK coal industry.
You are correct in your summation that "something is wrong at the core of this country" - not least the extent to which the collective memory of modern history is twisted beyond any credible recognition of facts.
Do yourself a favour: Read all that Arthur Scargill said throughout the period of the strike and try to identify anything that he said that was either not true or was a broadly inaccurate prediction of the future.
Please also review all that the full forces of the dominant power structure said and try to identify things that they said that either were true or a broadly accurate prediction of the future.
Here´s a clue - look up anything that was said by Thatcher, Ridley or MacGregor that said "see things our way and we guarantee to recreate the conditions of the 1930´s"
On a more nugatory level why should the fact that you were working shifts be of either interest or relevance to anyone or anything?
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#52
This situation cannot be made 'worse' by words. It should be obvious to everybody by now that we are all stuffed -particularlly since HMG are doing the reverse of what should be done.
Get rid of the fat cats, bankers and lawyers, raise interest rates and stop giving the banks any more of our money, suspend the market and change the banking system before re-opening it.
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#73
I am all for the meek inheriting the earth.
However I doubt the weak will. How are they going to forage for food, water and shelter in a few weeks time ?
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# 59
Robert Preston was of course Long John Silver (in Hollywood) . Spooky ?
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We seem to have let a mere banking system destroy us (courtesy of the establishment).
They just couldn't wait for over-population, natural catastrophy , plague or WMD to do it.
Isn't it a shame that the majority who seek and acquire power seem to care so little about the weak and powerless ?
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#83
A question for the "experts": If everyone is selling shares, who is buying them?
Good question. I am not an expert or trader but I am seriously considering having a punt on Monday in bargain basement.
The people willing to buy are obviously not as desperate as those trying to sell hence the drop in price.
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I am sick of hearing about confidence.
There is nothing to be confident about.
I am sorry but that is all there is to it.
It reminds me of those infuriating people who always look on the bright side,
the 'positive thinkers',
the cheerful smiling brigade (probably busy thinking about their fat cat salaries) with no dress sense
(who coincidently seem to monopolize the tv weather reports and tv, pinky and perky, so called 'news' programmes),
those Charlies who wear rose tinted spectacles and who always get caught in a shower without their umbrella.
'Be prepared', Enoch and Bayden both knew what they were talking about.
Mr Scout - from the land where refugees are put in hotels and given houses and benefits that hard working native citizens can only dream about.
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Loved #95; I laughed till I cried, or was it the other way round? But we don't have to go into outer space for the answer, only to Switzerland. No, no , no, not the Swiss banks, but underground to that great institution unCERtaiN and its 27km ring of steel called the Had-some Collider-scope, otherwise known as Gollum's Ring, which should be in Mount Doom.
It's easy: you take all the world's money and all the world's debt and you fire them round in opposite directions at nearly the speed of enlightenment, then flick a switch and smash them into each other.
This produces two financial products: 1) The elusive Bigg-Bogey particle that explains the meaning of Life, the Universe and everything, and why other things appear to matter, when nothing does really; and a Black Hole that swallows up everything financial and leaves us all owning nothing but the skin we stand up in.
How super-cool is that?
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Thank goodness other people are thinking i similar ways to myself, herewith an old post submitted to the corect government departments previously.
Copy of a letter sent openly in many directions.
The Answers To Many Problems Are Often To Be Found in The Past.
Looking out from the windows, back and front of my house, I can clearly see the beautiful English countryside as it was before E.E. regulations and the binding chains of unnecessary political interference made small scale farming as a means of raising a family an impossible task. Yet thousands of square miles of useful green fields are empty of live stock and are fast reverting back to useless moorland, while the small farms that provided a reasonable living for successive families for hundreds of years are now being converted into builder?s yards or places to store vehicles and materials for the building industry.
On recent frost, and light snowfalls, it was easy to see just how far up the hills successful cultivation had reached during the 1939 to 1945 war, when even wheat was grown for the war effort, and potatoes and greens flourished. The barren looking Lancashire Hills are quite capable of producing vast quantities of food, especially free range eggs, lamb, beef, pork, chickens, rabbits and hares. Also Pheasants, Partridges ducks, geese and goats, herds of deer and horses, thus not only helping our own economy, but with the use of the successful drying processes essential in wartime, we should also be exporting food to help to feed the starving children of the world.
We should remember that it was these small scale farmers who launched the Industrial Revolution in the first place, the Rochdale Coop in particular. There is scope to turn back the clock and do it again, beginning with the ancient idea of a house a barn and a few acres of land adjoining the moorland roads, these would sell for good prices as fast as they could be built, and would reduce the imminent need to take green belt land for house building purposes.
It is true that those who routinely object to any measures of progress will do so, and will say as usual that the idea does not conform to a moorland landscape, but those foolish persons of little knowledge do not understand that this is how it was done previously.
In fact it was wrongly stated by one politician that trees do not conform to the moorland landscape, without realizing that he was actually talking about a part of the former Forest of Rossendale where ancient Birch Trees can still be found in the peat bogs. Nor is it even realized that we are missing the best opportunities within living memory; because the one good thing about the Climate Change is that the lush grass crop is better than it has ever been and it is growing all the time even in Winter, thus good quality lambs can now be produced without buying a lot of extra feed. The only way to achieve this in the past was to finish them in a warmer climate, but now the temperature has already leveled out to such a degree that it is now possible to complete the process entirely on the hills of Lancashire
Not many countries would deliberately waste the assets that we possess, such as the good rich soil tended and nourished for hundreds of years, or the huge stocks of energy rich peat that were actually producing oil more than a hundred years ago.
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Japan and many other once bankrupt countries balanced their economies and rose to where they are today by using firm tactics, such as not letting assets leave the country, producing as much as possible and buying very little from outsiders, until their problems were solved.
We are doing the opposite, and treating the symptoms instead of the disease, am I right or is that too simple?
Cheers H.
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This is part one only of a fully intregated, alternative Transport System to Road Tolls, that was forwarded for consideration by our government in 2003, with an offer of government money available for such projects.
This project was intended to place no extra burden on motorists or taxpayers and to be eventually self sufficient.
A New Transport System.
Phase (1)
The Transfer of Intercity Commuters To A Rail Link.
From The Motorways, To The Bury/Manchester Tram System.
The area of the Motorway from Birch Services to Prestwich, and the main roads in and out of the City of Manchester have many features that lend themselves specifically to an efficient, long term, new traffic policy. The newly up dated, efficient rail link from Bury to Manchester Victoria Station endorses the idea of such a policy, and forms a strong basis on which to build a sound traffic system.
The motorways M60. M66 and the M62 all converge at Prestwich, and they carry the main traffic stream into and out of the City. The railway runs close to all of this very heavy traffic flow, and I would suggest that it could very easily be adjusted to take practically all of the commuters into the city by train.
The vast areas of land surrounding the motorways contribute very little to the general economy and it supports very little farm stock. By making massive car parks adjoining the railway, this virtually unused land would become very profitable indeed. The security of the stored vehicles should be fairly good, because the car-park exits would only lead back onto the motorway, and those exits could be controlled with an efficient camera system connected to those already in operation on the motorway, and those already in the nearby police station at Birch Services. In addition I would recommend the fitting of a modern electric fence with attached detectors, on any vulnerable sides of the park not immediately adjacent to the motorway.
I would suggest that the idea of a tram, spur line into the car park should be considered, with a halt for passengers to board the trains. Unknown of course today, but in the days of our properly run railways there would always be a spare train available, or coaches ready to attach to any trains likely to be overcrowded. A properly designed spur line and a halt with two platforms would enable such efficient practices to be reintroduced. Besides city commuters using the car parks and trains to travel into the city, all rail travellers would have immediate access to the mainline stations and airports as well. With an express train service, Leeds-Manchester-Liverpool there would be a choice of three airports available, the cost of building more runways would be reduced, further destruction of the countryside could be controlled, and extra pollution from overhead flying would not be inflicted upon the towns and cities below.
Modern expensive innovations seem to have a very short, extremely limited life, but this proposed traffic system would have a long lasting life, comparable to that of the Railways and the Motorways themselves. The project is ideally suited to Private Investment, and should attract considerable interest in every way; including extra votes in future elections. The long established Railway Companies practice of building top quality housing, adjacent to the site for the occupation of key personnel has many advantages, and should also be revived. Expert opinion is required to take this idea forward and I would suggest that consideration be given to contacting Consultant Rail Engineer James Harries, he was a Senior Rail Engineer in charge of constructing the new rail system from Bury a few years ago.
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I agree with #137 and any others like-minded - carry on Robert because I am getting an education from you, I know absolutely nothing of the financial world and you are certainly enlighteneing me. I was discussing the crisis earlier with a friend and even I used the term 'tsumani' as a description of what might happen - its all good and sensibly thought through. I only wish I had found your blogs sooner!
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The news over the past few days concerning the collapse of Icelandic banking, has been devastating to many british institutions (political, public service and charities). One needs to ask three questions of these organisations.
1. Why do they need to invest in overseas banks?
What is wrong with supporting british based industries and businesses.
2. Why have these organisations got so much money to squirrel away into bank accounts?
They should be using it to supply services not to make more money. After all they keep telling us that they have to raise the amount of money we give them as they don't have enough to maintain the services.
3. How much of our money have they got that is not being put to active use?
If they have spread out their "savings" as they have been advised and their at risk savings are as high as they say there must be a fortune stored elsewhere, surely the "rate" payers deserve a payment holiday not another demand for more money.
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Robert, according to Wikipedia there were many "Financial Experts" who attended the
Bilderberg Group meeting 2008 (June 5-8) at the Westfields Marriott in Chantilly, Virginia, United States:
Including
? Keith B. Alexander (2008), current Director, National Security Agency
? Roger Altman (2008), former United States Deputy Secretary of the Treasury
? Harold Ford, Jr. (2008), current Chairman, Democratic Leadership Council, former US Congressman, Vice Chairman, Merrill Lynch & Co., Inc.
? Robert Gates (2008), current United States Secretary of Defense
? Richard Holbrooke (1995 - 1999, 2004 - 2006, 2008), former U.S. Ambassador to the United Nations
? Vernon Jordan (1979-1985, 1987, 1989, 1990, 1991, 2005, 2006, 2008)
? Henry Kissinger (1957, 1964, 1966, 1971, 1973, 1974, 1977-2003, 2004,[6] 2005-2008), Secretary of State, 1973 ? 1977
? Henry M. Paulson, Jr. (2008), current United States Secretary of the Treasury
The list goes on so is better if you check yourself...
Anyway because the Bilderberg Group holds "Private Meetings" many theorists conclude they have a hidden agenda.
It can be seen from this list that there were alot more "Financial Experts" at this meeting than previous years. May we all ask what did they already know about the problems with the banks then. Is it a coincidence that after this meeting a global financial crisis has occurred or has this crisis been cleverly planned? Let's ask the Bilderberg Group attendees to comment and produce the minutes of their meetings! They owe us this "Right" in the name of "freedom of information" act during these difficult times. Lets clear the air so we can be sure there is no financial "New World Order" agenda!!
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I can't wait for the film.....
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#316
Must be nice to be able to bathe in self- conceit Thanks for nothing. Don't come back stay abroad. We can do without you!!
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#309, #207
I'm sure you're aware of the saying.. there are no atheists in a plane in severe turbulence
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#329 HCP
Thanks for your comment and I must say that I admired your 'Debt Reduction Particle Collider' whereby all debt is vaporised into a black hole which will then grow and grow until it forms the basis for the next Big Bang.
As life reforms, Bankers will be assigned as the first organisms with an intelligence somewhat akin to a JellyFish with an under developed brain.
(C'est la meme chose, etc)
However, are we sure that Darling has not already tried the Debt Particle Reducer ? And it was him that actually bust the bleedin' thing ?
I heard he was trying to fix it, only when he had cycled halfway round the Cern circuit, he had a flat tyre and is now awaiting the Government assigned Pucture Outsource Consultants to arrive.
cheers
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After reading Robert Preston?s article on the credit default swaps auction which took place last Friday, I decided to do some digging. The credit default market is a staggering $62 trillion, and is bleeding like a stuck pig, within the next 20 days an auction will take place in the US to settle the value of the credit default swaps outstanding on Fannie Mae and Freddie Mac which are estimated to be in the hundreds of billions of dollars in settlement terms and could well be in excess of the $700 billion already pledged by Bush and Co in Washington. These settlements were triggered by the US government takeover of Fannie Mae and Freddy Mac. What concerns me most is how much exposure the UK and European banks, hedge funds and insurance companies have to the credit derivatives market, particularly now that our banking system is about to be effectively nationalised. Will this nationalisation also trigger credit defaults for the banks in question? We are in currently a recession which is deepening by the day; stock markets, the housing markets and commercial building and property markets are in free fall around the globe. Bankruptcies and contract defaults are an hourly occurrence; the ability of insurers to pay on these contracts is virtually nonexistent, do we then nationalise the insurance company?s? Where does it stop? Just call me a pessimistic optimist, but I have a nasty feeling that we are up the preverbal creek, in a barbed wire canoe without a paddle! The banking end of the credit crunch is a marshmallow compared to what is about to come.
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The whole worlds economy just broke down, this is all because of not taking enought thoughtful pre-cautionary measures. The stock exchange markets have been internally demolished, the internal affairs are rarely exposed to citizens. I work at an agency of Stock exchange, I know how much the situation has worsen.
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I wonder why my comment #121 is referred to the moderator. All I was asking was when does RP ever have time to sleep! Seems pretty innocent to me and certainly not abusive...:)
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Loggy1948 (#342), I sympathise as I had the same problem, for the first time on Peston's blog, last Monday. From what I can tell just one complaint is enough to make a contribution invisible to all. I assumed for ever. But the moderators do seem to get around to such matters eventually. At least, I was very surprised today to see that my first contribution to "What the Germans did" has eventually been restored (you can see it by clicking on my name and scrolling down beyond my gentle complaint at the time!)
It's no doubt far too late for my comments ever to be read by the two contributors to whose earlier posts I was responding. Or anyone else, come to that!
My contribution was clearly longer and more controversial than yours. There again, many far more controversial ones, with less references to external sources to back them up, are never challenged here at all.
Having said all that, I consider this a truly great blog at a momentous time. It's strange that it has such grave weaknesses as a system yet still functions pretty well.
And yes, like you I hope Robert gets some sleep so that everything we think we're learning here is as punchy yet judiciously phrased as possible!
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http://newsbiscuit.com/article/bags-under-browns-eyes-sink-to-new-low-383
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Robert, why no coverage of the Bankrupt Banks in the Isle of Man such as Singer & Friedlander and presumably other small banks in off-shore jurisdictions.
Have you been told not to spook the fragile market? Some guys have apparently lost millions and will only see £50K returned if they are lucky and the insolvency practitioners dont drain all the remaiing cash in generating their fees first!
Visiting the website - shows you what happens for real when things go bad!
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