Now there are runs on countries
The sickness afflicting the global financial economy has entered a new and worrying phase.
It started last summer with the closing down of big chunks of the wholesale money and securities markets.
Then we saw a succession of crises at individual banks, as institutional providers of funds withdrew their cash from banks they perceived as weak (culminating here in the nationalisations of Northern Rock and Bradford & Bingley, and the rescue takeover of HBOS).
In September the entire banking system was on the brink of total meltdown, because of semi-rational fears that almost no bank was safe from collapse.
And now we're seeing a massive flight of capital out of economies perceived to have been living beyond their means - either because they have a substantial reliance on foreign borrowings, or because they are net importers of good and services, or both.
Commercial lenders to these economies - banks, hedge funds, mutual funds and so on - want their money back now. That's driving down their currencies, pushing up the cost of borrowing for their respective governments and undermining the strength of their respective banking systems.
So they need financial help to tide them over - and with the global economy slowing down, those economies perceived as lacking the resources to cope on their own may need support for months and years.
Queuing up for the intensive care ward are Iceland, Hungary, Pakistan, Ukraine and Belarus, all of which are in discussions about accessing special loans from the International Monetary Fund, the emergency medical service for the global economy.
But there has also been a substantial withdrawal of capital from South Africa, Argentina and - most worrying of all - South Korea.
Let's put this into some kind of context.
The annual economic output of Pakistan, Hungary and Ukraine is something over $100bn each - which is not trivial but does not put them near the top of the rankings in terms of the size of their GDP.
However, the output of Argentina is well over $200bn and that of South Korea is around $900bn. In fact, South Korea is the 13th biggest economy in the world.
If you add together the GDPs of all the economies currently diagnosed with toxic BO by international investors you arrive at a sum that's not far off the economic output of the UK.
And the sums of debt involved are also fairly substantial. Hungary has external debt of more than $100bn, Ukraine has foreign borrowings of $50bn, while Pakistan's dependence on overseas funding is nudging $40bn.
As for South Korea, which hasn't requested formal help from the IMF, its foreign debt is nearer $200bn.
Now you may think this is all about remote countries, with no relevance to you. Well, that would be wrong. We're all connected.
It's been very fashionable for pension funds to invest in developing economies in recent years. If you're saving for a pension, you may own a chunk of South Korea or Argentina.
If you're very unlucky, your pension fund may have belatedly put some of your cash into one of the many hedge funds being royally mullered by the way they borrowed vast sums to invest in some of these emerging economies.
And of course the woes of these economies reduce their ability to purchase from abroad, which acts as a further serious drag on global economic growth.
Also the UK is being buffeted directly by international investors' re-awakened distaste for economies perceived to be too dependent on foreign capital or credit from institutions and companies.
What's happening to South Korea - where its currency, the won, has fallen 29% in the past three months, and shares have fallen well over 20% in a week - is particularly worrying for us.
South Korea is a great manufacturing and exporting nation. Its balance of trade is vastly healthier than the UK's.
But like the UK, South Korea's banks are dependent on wholesale funds that are being withdrawn because of fears that those banks face losses on imprudent deals (not lending to homeowners, as is the case in the UK, but currency hedges with local companies - see my note "Crisis is business as normal").
Of course, our banks - and South Korea's - are being shored up by massive financial support from taxpayers.
But if investors no longer think the UK's banks are at risk of collapse, they then look at our other vulnerabilities - such as public sector borrowing which is rising very sharply because of the costs of the bank rescues, dwindling tax revenues and the need to spend our way through the economic downturn.
They also look at our structural trade deficit and our huge reliance on financial flows generated by a City of London and a financial services industry that's shrinking fast.
As I've pointed out in a tediously repetitive way, the sum of all we've borrowed - the aggregate of corporate, personal and public sector debt - is equivalent to three times our annual economic output.
That's a vast amount of debt to repay - and it's all the harder to do so at a time when our most successful industry, financial services, is in some difficulty and the global economy is slowing down.
If international investors fear our credit isn't what it was and are selling pounds, we should hardly be surprised.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~17~RS~)
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So, we are reaching the devaluation of the currencies stage. Any estimates on when we might get forced into joining the Euro? (Strength in numbers and all that)
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More like "Misery shared is misery halved". It won't actually improve the situation, but (1) it will be a distraction and (2) it will give us someone else to blame when things don't work out.
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Robert what has Peter Mandelson have to say on these matters?
We the public need to know!
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I'd like to see the governments financial behaviour compared to that of the 'worst' indiviudal borrowers.
Bad borrowers borrow massive mulitples of their income; the Government borrows massive multiples of their income (tax raised).
Bad borrowers refuse to cut their spending; the Government refuse to cut their spending.
Bad borrowers anticipate that their houses will rise in value to cover their debt; the government anticipate that they can raise more taxes to cover tax.
Bad borrowers cover up shortfalls by borrowing yet more based on poor estimates of future income so putting off a solution and compounding the eventual problem; the government cover up shortfalls by increasing borrowing based on poor estimates of future income so putting off a solution and compounding the eventual problem.
When property prices fall, bad borrowers are found out; when the economic cycle starts a downward leg the government are found out.
Just as everything is about to go belly up bad borrowers consolidate their loans, get one final big cash loan blow it on indulgences to make themselves appear and feel better and pretend everything will be fine; as before... just like the governent does...
I don't think the government are in any position to lecture anyone, and have no hope of finding a solution untill they admit that they have had it all wrong all along.
The situation can be discussed by the 'little people' - most of whom have probably been far more prudent than the government - but untill the bad borrowers (and government) admit that they have a fundamental problem and get the 'help' that is needed we 'little people' are just whisteling in the wind.
As long as individuals have food, shelter and a bit of entertainment the 'world financial system' can go bust or into melt down, who cares?
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Robert.
OMG.
This really is the END.
The Great Reckoning is here.
There is no hope for Human Kind from the onslaught of the coming financial tsunami.
We’re all going to be living in caves and running round in animal skins.
Our only hope is an interplanetary rescue.
This is the World calling Mars Pluto and Jupiter.
We need you’re help!
I urge you to put out the call before we get some real scare mongering babded about.
Heaven forbid we get a reality check anytime soon.
This is ground control to the Universe HELPPPPPPP
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This is a good article Robert pointing out the fallacy that was de-coupling. Also it shows the US is still dominant, depsite its seeming messy circumstances. The dollar conquers all.
In addition to this though, it is important to think about what happens next in order to make any investment decisions going forward.
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1 spur22
It's not when we are forced into the Euro, it's how long will the Euro hold together with the Mediterranean basket-cases.
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you're da man robert - how do you sleep at night?
where is giddy osborne when you need him
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if this government drops this country into the euro without a refferendum it will proove there intent from the start and have been missleading the good people of this country for there own gains.
the pound is and was a respected currency globaly for this country to give that up in favour of an untested unfriendly currency would be a poor choice and the beguining of the end of this country.
if this global down turn continues there will be no strength in numbers independance may well aid survival.
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Well Robert!
So what's the next step?
Should governemnts now freeze the deposits they have just guaranteed, as in many cases majority shareholders of banks they have just nationalised, or partly nationalised, in order to stem the flight of capital out of our economies perceived to have been living beyond their means?
Thomas M. Disch couldn't have written a more futurist novel!
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Robert
Its why I maintain that we are not just entering recession, but more like a depression on the scale of the late 1929/1930s.
Your own words "As I've pointed out in a tediously repetitive way, the sum of all we've borrowed - the aggregate of corporate, personal and public sector debt - is equivalent to three times our annual economic output."
Liquidity may be returning to the banks sloooowly, but is that the real fix? NO. The reason for our troubles is, exactly as you have stated, from the ground up, we all borrowed too much. International shipping is decline at a rate not seen before, that means no one wants each others products and goods, purely because we cant afford it any more. I'm afraid the light at the end of the tunnel is a train coming the other way.
Unemployment will rise, so will tax. Death rates in poorer countries will rise due starvation and declining health care. Political unrest will come later, but it will happen. We may not have to look very far for that either when the real impact hits the streets. All we are seeing is some bad numbers in the newspapers. When factories start closing and unemployment puts real stain on an overburdened economy, that's when it'll happen big time.
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great blog , thats what we want to hear the truth. so we will be much worse of, not by a little but by a hugh amount. glad i am not one of the mega or super rich. robin hood and his men with soon be on the march.
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Come on, lets stop messing around and extending the pain process, raise the rates, keep the currency strong, bring the house prices into correction quicker..
Besides, I need a strong pound as I need to go on holiday and would like a bigger home..
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Robert's comments show why the government needs to put a big emphasis, backed with the necessary cash, on import reduction/substitution.
In particular it could start with big energy efficiency measures (we are now net importers of the stuff) including more encouragement of energy efficient cars (by more taxation of the inefficient ones if need be). We waste masses of energy unnecessarily.
We also eat more food than we produce. While many of us might benefit from eating less I was thinking we should produce more.
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There seems to be a lot of political skirting around the problem(s) with fingers in ears going 'la la la la'.
There are two problems here:
1) There was no growth in the financial sector over the last decade or so - we have to accept a much smaller market.
There is no magic solution - we just have to let things settle down. However there are those out there who know how to make money out of instability and they will endevour to make things unstable for as long as they can. They are more commonly known here as 'The City'.
Thats the second problem: we've left the dealer in charge of controlling the drugs.
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Two points:
1)
Joining the EUR seems quite plausible now, and it'll seem 'natural' when the exchange rate is GBP-EUR 1:1. This of course will also bring about the required house price correction.
2)
I have been saying for some time that given the UK's overall indebtedness (fuelled by a house price bubble that has been enormously harmful to this country) I would not be surprised by a massive devaluation of GBP. Also, just think about all the young people who have wasted the best part of their lives becoming 'estate agents' when they could have trained in something useful.
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So what if there is a lot of personal debt? I assume this must be repaid eventually. A good investment for the lender I'd say unless someone stupid decides not to demand repayment. Please someone explain this is not the case.
Most personal debt is for house purchases spread over many decades - not a few years.
Another point, it's still cheaper over the life of a typical mortgage to buy than rent.
So really I think most people are prudent with money
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so we have a run on the pound to look forward to- brilliant.
It really is shameful the way this country has been managed over the last 10-15 years. Of course Brown, full of deceit, will blame anyone except himself, but even simple souls such as myself know that while the experts were telling us how brilliant he is his apparent success was based on cheap and easy loans and a consumer boom. Journalists, I'm thinking of Evan Davies the BBC economis editor as was, forever telling us how well things were going and the likes of Osbourne and Cameron, not up to the job, no-one willing or able to bring Brown to book.
what have we to look forward to but years of grief.
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#7
Don't you mean the Adriatic, the economies of the Med are actually stronger in all this that the UK is, both Spain and Italy can hold their own (having both a strong agriculture and industrial base) - I think the real question is, will the Euro block have us and if they do what strings will be attached - Schengen agreement anyone...
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In any case, if GBP goes down the swanee, it simply becomes easier to repay the debt, that's the beauty of the mechanism. In fact, the entire FX market should be in search of exactly that target, as the Chinese so amply demonstrated in getting into the position they managed.
It's time to stop using passive tense. WHO exactly is big enough to take on a national economy and win, even in cartel (which would certainly break US Trust law)? An amorphous "the markets" doesn't cut it, someone's leading them, or at least pointing them in a particular direction, and at that level, you really don't want to be that person, the revenge extracted might be painful.
And those of us who are long in all respects might get miffed at seeing our credit rating smashed because of others' imprudence, I'm already dismissing banks for rudeness.
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#9
Perhaps if Thatcher had held a referendum on the pit, steel and car industry closures etc. all this right wing anti EU bleating would have more weight...
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Does this not help us because the devaluation of other far eastern currencies against the pound will help to reduce our inflation because of cheaper imported goods (despite the pound falling against the dollar and some related oil price inflation), so enabling further interest rate reductions?
In addition will we not be seen as less of a basket case and some of the capital may flow here, so helping the liquidity situation in the UK?
Mind you will HSBC start to rock in the heavy weather?
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Who do governments borrow from? Surely it's ultimately its own people? Do they publish who the lenders are? What sort of contract is made? Where are these answers? Why isn't this made more obvious?
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The run on the pound was highly predictable; which I did to Larry Elliott of the Gunriad.
Basically, making loans is now more risky. Consequently, interests rates are required to go up. Merv King and Gordo are our two king Canutes we await their drowning.
We are all under the misapprehension they know what they're doing. Wrong.
Pain now or pain later? Well we know that Gordo will do anything to remain in power. So pity the poor children
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This really is bigger than 'bird flu' isn't it.
Time to invoke UK Resilience?
Hope someone's working on that..
GC
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RP says, "That's a vast amount of debt to repay - and it's all the harder to do so at a time when our most successful industry, financial services, is in some difficulty and the global economy is slowing down."
Focussing on one line, "our most successful industry" - surely this is incorrect? This is like saying that SUV's (off-roaders) are the American Auto industry's top performers. They are, but only because they are rubbish at making anything else and have been swept out of the market by better imports.
The Banks profits and their employee bonus pools have been paid from inflating asset values not commercial trade. I am upset that we still think they are doing work of any real value - they are not.
They are not a success, they have failed.
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Robert where in real trouble!!!!!
Our so called leaders have lots of brains, but sadly no common sense. they always work on numbers and figures. thing is the numbers are to big for them to work out what is going of.
We need to open our mines and plant more food now, and put millions of our homes back into the social sector.
the green house gases will have to be put on hold for now
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I shall take seriously Mr Peston's views of pending doom when there is a call for a National Government.
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Markets are sensitive to small movements of money, the supply and demand curve is not linear. The flow of money as a spin off of the UK housing market into previously unattractive countires like Albania and Romania and Bulgaria has caused massive community problems in those countries, nationals from those countries tell me that back home unemployment is high, wages are very low, and houses unaffordable, and business pushes through things that the locals do not want. Take the inflow of money to those countries away and the situation collapses back nearer to what it was before. The illusion has been removed that is all. The situation is unhealthy but what was there due to an illusion was also unhealthy. It comes back to sustainable development. Brown has always made a big beef about how much he wants to help the world but it can be argued by helping create a financial shock waves he has in all probability done harm not good, how much will not be know for some time. It is a great deal easier to demolish a structure than to errect it in the first place. It is all about sustainable development and respect for the environment both of which are needed. These have historically been alien concepts in the American Dream which has been marketed worldwide as the solution. Countries that have engaged in the bubble effects willingly or unwillingly are bound to be affected, it is hardly unpredictable. Countries with large natural resources will win in the long term. They are not hard to identify.
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Can we sponsor Osborne to cadge some money for us.
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Now then, now then!
When I borrowed 3-4 times my annual income, it was called a mortgage, and no one was concerned about my ability to pay, or that of millions of others. So with G.B plc.
I get the feeling that if the "markets" can't "fear" this, then they'll look for "that" in the present febrile state of things. It's like trying to put your finger on a blob of mercury. Why don't we all calm down, hacks stop preaching doom and gloom, and think more realistically.
There is no lack of demand for goods and services, only the ephemeral thing called "cash" to pay for them. Peoples hopes and aspirations remain the same and the sun will rise tomorrow!
What WOULD you have done in WW2!!!-now there was a crisis.
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Do you not think that this "global" meltdown in the financial markets was bound to happen, surely if you are at the top of your game the only way is down, you cannot stay at the top for ever, no one thought for a minute about all the normal workers out there that could not get on the housing ladder because of the crippling cost of houses, it is like every thing else, bound to adjust in time, so i dont really see why everyone is so surprised that there is meltdown in the banks.
It was written on the wall, the banks got greedy forced up the house prices and then screamed when the whole thing crashed around them
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I'm wondering how far this wil take us.
Option 1) 'can everyone suddenly start making things and exporting them so we can get some revenue in to the UK?'
Option 2) We kindof shut the borders and start surviving on our own 'two feet' like wartime. Oh, we can depend on our former Commonwealth friends to provide the raw material we don't have (or have lost the means to mine) - shurely??
Option 3) Write off all debts national and international, private and corporate and see what happens
Option 4) play it by ear till it's too late to do anything, fall back on martial law.
In these radical times it woudn't 'arf be nice to hear something majorly radical from Parliament, I mean how many times in a lifetime does a headline grabbing MP get a chance to be visionary and fantastically outspoken at the same time?
Now, where's George Galloway?
GC
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Why does Robert not accept that the UK is far more vulnerable to this than South Korea who at least pay their way by running a surplus? Is that too politically controversial for him? The Pound in our pockets is falling and we are getting poorer. There will come a point when GB will either have to let inflation rip by letting the pound collapse or put up interest rates to protect the currency. Either way projections of a shallow short recession will have to be rewritten. A Labour Govt without a sterling crisis? Impossible.
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So then, what do we have?
1. We have the banks now flush with money.
2. But the banks which still don't want to lend, because they fear that the borrowers may not be able to repay.
3. We have a pound whose value is dropping like a stone.
Ok, so what's the solution?
It is to raise interest rates (to 6% perhaps?).
This will make the banks more willing to lend some of the money that HMG have thrown at them, and will also boost the value of the pound.
Come on, use 'Austrian School' economics now, before it's too late.
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If this true, the situation getting farcical,some spivs are acting in concert to reap many fortunes at ordinary people's andGovernments expense. The right thing to do, and leave them exposed is shut down all financial markets until after November. They'll be caught with their pants down with no way out!
PS:Sovereign Wealth funds, isn't that just being Nationalised by a Foreign power?
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In recent years the pound has been massively overvalued. Exports from the UK are not enough to sustain the level of overvaluation. The UK has had to take on a massive amounts of debt to subsidisise internal spending. We are living beyond our means.
A devaluation is inevitable and is needed to increase manufacturing exports. This is the only way out of the crisis and is similar to what Britain had to do after WWII.
In the long run, a better system is needed for controlling exchange rates, to ensure we remain competitive.
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Great report as usual Robert, but let's bear in mind that Prof Nouriel Roubini has been highlighting this potential nightmare for some weeks (if not months) now.
As usual, our mainstream media is not terribly interested unless/until a potential crisis becomes an in-your-face-crisis. I think it's called "dumbing down".
If we thought the recent "global financial crisis (not)" was hairy, then the forthcoming collapse of countries will shake us like an earthquake. I maintain that our political elite got us into this mess and have not got the faintest idea how to get us out of it.
Like I've said before, I'm not a survivalist fruitcake, but it really is time to think long and hard about how prepared your are to weather the perfect storm that is approaching.
Self-reliance will be the 21st Century watchword.
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The 1929 depression was marked by several 'false dawns' as pundits 'discovered' that the market had 'reached a trough' only to find that the crest of the 'upturn' broke and a new trough was encountered...
In 1929 it took a long time (several years?) for the quill pens and native runners to do their stuff. Despite better (?) technology, this 'squeeze' is all about *international* confidence and lending and the willingness of banks to own up to their 'off balance sheet' gambling with the money conned from foreigh governments.
The next step will be the raising of national frontiers to stop flows of money (like we have done with Iceland). Doomed to failure though such attempts will be (that was one lesson from 1929) they will, no doubt, be tried.
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#28
"I shall take seriously Mr Peston's views of pending doom when there is a call for a National Government."
That reminds me of Chamberlain vs. Churchill (and others, such as R.J.Mitchell) in the late 1930s...
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Join the Euro! Great idea. Not. Can you imagine how much bigger the property bubble might have got if we'd been in the Euro and interest rates had been even lower?!
The fundamental weakness of the Euro is that it attempts to control diverse economies with a single interest rate.
One interest rate has arguably been too few to respond to issues within the UK economy as it is. To enter the Euro would be to enter an even less responsive system.
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$1=£1 by end 2009 anyone? By that time, Obama should have taken steps to reduce the public deficit while US imports will fall dramatically while in the UK we take the opposite course putting huge downward pressure on sterling.
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Robert, current crisis hit all the countries whether they are net importers or net exporters. For example, China is a huge exporter, growing fast as economy. However, its stock market has lost more than a half in the last half of year or so. The same is applicable to many countries. World is developing and people live better and better.
Please do not spread panic unnecessarily.
Yes, after years of growth western economies will have 1-2 years of standstill or recession. So what?! Is it now the end of the world?!
In the last month there was the following there was a lot of fears and irrationality. Would media please start to be more responsible and stop creating panic.
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Maybe this is the start of the secret 'new world order' that the Internet conspiracy nuts are always harping on about.
The group of evil financiers who are going to take over the world and have one world bank and one world currency......maybe 'young Peston' is part of this elite group of fiendish villains !
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Surprising Italy isn't in the list of potential failures, after years of cooking the books they're running out of rugs to brush their economic problems under.
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Any update on the situation in Ireland? They're quite a few steps ahead of us...
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I just don't understand why you can't understand why the headline you just made is ENTIRELY logical.
If there is one thing that characterises this sharp recession turning now into a global L shaped depression, is just how this is perfectly but brutally logical.
As in the last depression, flights of government fancy, each claiming to have found the "magic fix", were followed by large falls on the stock market a short time after, only to be followed by more of the same, each time costing the lifetime earnings of the next unborn generation.
Finally the governements then have to give in,- realise they lost control over what they had always claimed was what freedom entailed...."market forces".
I'm afraid, like it or not, governments will now have to live with it.
Market forces will now determine whether a country is solvent or not.
The UK is one that is NOT.
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#31 - well said!
You're right on the money there, cue what I wrote on Declan Curry's blog today..
G
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#34
"A Labour Govt without a sterling crisis? Impossible."
Likewise, a Tory government without 3 recessions within 11 years, all of their own making! The point is, this crisis has not been home grown, as you point out yourself S. Korea is also having problems to, just like many other countries.
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16,
Surely point 2 contradicts point 1?
For the record I think we will join the Euro and that the devaulation in the currecy currently under way has been a plan for some time.
The correction will happen prior to us jopining the euro IMO.
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#36
The mistake is to agree with the assumption that we "need" banks. We don't, we need a means of transferring and retaining money (outside of cash in hand and under the bed, respectively) and of borrowing (within reason).
I thought the banks were only bailed out in order to have them loan again. I don't remember them saying they'd suddenly start being so prudent as they snatched my childrens future hospital / school / etc funds away? They were all sweetness and light BEFORE they got the money!
Its looking more and more like the bail out wasnt to help the wider economy or the "man in the street", but purely to keep these banking behemoths solvent. Why we would want to, now that they appear to still not be lending is beyond me. I'd like my share of the bail out back now please. With interest!
I'll then put it in a nice building society and wait for the inevitable "real crash", where HSBC buys up whats left of the High St and we all get back to normal - Albeit a different normal than before.
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It's odd but I don't remember Robert 'tediously' pointing out the UK's particular vulnerability. I've heard him only once make passing reference.
Would that not support the current D Cameron view that in fact the government does have to take part of the blame for the UK's problems at the moment?
I wonder which of the many spin doctors worked on G Brown's Commons statement yesterday in which he gave us a list of countries which would go into recession and then eventually got to us? Did they think that was clever?
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#40 - no the next step will be to shut down the stockmarkets.
I give it 48hrs
GC
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#36
re higher interest rates
Suely the problem there is, even more people and companies will go bankrupt, the banks will not get their money and there will be even less employment so even more will not be able to repay their loans meaning more bankruptcies, that mean even less employment which means even more loans not being repaid that means even more bankruptcies which means even more.....
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Oh look - someone mentioned drugs!
That's my cue!
OK folks so it's time for a new market and that market is legalised drugs.
Lets raise tax revenue, cut healthcare costs and improve the wellbeing of the global populace by freeing this highly profitable trade from the clutches of criminals.
I'm suggesting that all drugs are made legal and are then regulated and are sold by authorised resellers over the counter, and that a portion of the price is tax.
This will bring this huge black market into the open and under the tax umbrella, while simultaneously reducing crime, reducing prices to consumers, increasing quality, and flushing out all those drug dealers/benefit cheats currently sponging off everyone else.
It will destroy the monopolies in that market and thus increase the efficiency and effectiveness of the economy as a whole.
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#13 FiaScape
Come on, lets stop messing around and extending the pain process, raise the rates, keep the currency strong, bring the house prices into correction quicker..
Except that a strong currency makes imports cheap for us and exports expensive for those we sell to. Result is cash flowing out of the country and an ever worsening balance of payments.
Besides, I need a strong pound as I need to go on holiday and would like a bigger home..
I rest my case.
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I don't suppose it has occurred to Mr Brown that the lack of demand (spending power) might have some correlation with the amount left in people's pockets after they have paid the Income Tax bills, the Council Tax Bills, the Heating bills, the Fuel bills, the Water bills and all the other escalating charges that he personally bumped up, or allowed to happen, during his tenure.
Was there a compelling need to charge people for parking when visiting a hospital, or was there a compelling need to have Home Info Packs, or was there a compelling need to buy into charging more for heating so that people will use less and be colder under New Labour ?
Every tax or increased essential service cost reduces the amount the normal person has to spend
If he is looking at a Keynsian approach, he might also look at the Say's Law approach.
Reduce taxes and essential supply costs ( fuel, heating etc) and stimulate greater descretionary spending.
I could be buying a new TV, a new car, a bit of new double glazing perhaps.
But the amount left in the pocket after these tax levels, has reduced my desire to commit to any new spends.
Brown's taxes has choked the cash spending cycle for Mr and Mrs Average.
And unfortunately at the first sign of downturn, he is reaping what he sowed.
SME's and Retailers can expect more (ie less) of the same.
A tax led recession.
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Robert,
Isn't it more difficult for banks to serve their debt borrowed from international market as the pounds go weaker and weaker?
Is this part of the reason banks hold their money tight and will not drop interest and pass on interest cut to loans?
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I have some other ideas too BTW.
Those would be:
cleantech program - govt provides matching funds for R&D projects
free education for all
tollways / congestion charges
a global carbon trading system / climate change treaty
a few less wars
global resource security / space exploration treaty
competition in the .com namespace
for starters
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Two questions:
(1) is the sum of all corporate, personal and public sector debt = 3 times our annual economic output, or is it 4 times? I may have misheard, but I thought you said it was 4 times on that Panorama program recently.
(2) Where is all the money that is being pulled out of weak countries going? Some countries must presumably be seeing the opposite effect, i,e, their currencies rising in value, if so who are the main beneficiaries?
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Great to see Peston back at doing what he is good at. The big worry for the UK Government is that it is becoming more expensive for it to borrow at a time when it needs to borrow more than ever. The real achilles heel for Gordon Brown is that he deficit spent throughout the boom years, leaving no cushion for the bust - this is what will eventually lead to his demise.
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So, not as bad as we thought!
We are to spend our way through this because financial industry has collapsed and we have no manufacturing base to generate revenue.
We have no manufacturing base because we cannot compete.
We cannot compete because our wages are too high.
Our wages are too high because our living standards are high.
Our living standards are high because we used to be a world leading manufacturer and exporter.
Ergo, no factory, no skilled workers, no exports, no financial industry, no high living standards.
This is going to suck big time
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After reading your report today which is excellent and extremely informative it is more scary that we have a government in power {not control} that has absolutely no record in handling a downturn.
Tight fiscal policy is essential but this is something I'm afraid Gordon Brown is running away from.
Instead the easy answer is to keep borrowing and leave a big mess for someone else to clean up later.
The big problem is as you say how long and how far will investors go to prop up a failing economy?
The money will run out somewhere along the line.
Then what?
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Would it help if I should only drink tapwater?
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57 It won't work. It costs more to sell it thorugh a retailer than it does on the blackmarket. All you'd do is legitimise it, increase demand, and encourage more dealers, who in turn come with gangs and guns.
Go to any pub in the country. There's always a bloke in the corner with a carier bag filled with bootleg fags. But fags can easily be bought in shops but the black market is cheaper.
Same with drugs.
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I'll tell you how bad things are - according to other news on the BBC site, it needs the combined brains of two top men - PM and Guvnor of the BOE to warn about the recession (coming/here)
Reminds me of the old joke 'how many hippies does it take to change a lightbulb?'
They're warning us, they're warning us, one recession for the all of us...
GC
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Yesterday the Fed. Res. effectively lost control of the EFF rate - this is a potentially cataclysmic event for the world's financial system. It is now only a matter of days until draconian measures are taken, or we may even witness the collapse of the financial system. Be prepared.
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The striking feature of the international trade situation is the distinction between the woolly-minded western economies and emerging countries such as China, India, Brazil and Russia.
These countries recognise three things that we've completely forgotten. First, trade should be in balance, and preferably in surplus. Second, manufacturing is vital. Third, the world is competitive.
In the west, we have a woolly-minded belief that globalization must be good irrespective of whether other countries play by our rules. Countries like China and India operate hefty import tariffs to deter imports, and we are idiotic enough to accept this one-sided version of globalization. We should expect these countries to eliminate tariffs and, if they don't, we should introduce our own.
Next likely event: return of protectionism, ending of globalization.
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post 19 is correct 100%
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#Lordjohunt - 11
Time to invest in shotguns an canned food. Those of us that live in cities will have a particularly hard time... basic food stocks will not be able to reach the shelves once the oil runs out, and the food riots will begin.... We've got ourselves to the point (overpopulation, debt obligations, dwindling resources etc. etc.) where the slightest economic twitch will ensure that many millions at the lower end will suffer.
'Short termism, it's long term effects, and why we always slap our heads in realisation in the medium term' should be an economic/psycological case study.
Will we really learn anything from this?
Probably not... right... I'm off to switch all those gadgets I own onto standby and get a froppadoppamochachino, might apply for a credit card, apparently I can get a free pen.
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Its all preparation for cross country runs ,a global paper chase where those collecting the paper can expect to get 7p per kilowatt hour.
Ihave informed my broker to buy shares at 6p per kilowat hour ,as things pick up we shall soon all have more money to burn .
Its the stoopid economy stupid !
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@36
Sorry but dont you see, they had to save the banks because they had no money. if they had of collapsed you would of had world dissorder. better to let everyone down lightly than with a bang. As robert said we now head for a fairer society
some people asked where the money as gone, well the answer is it was never there in the first place.
we greated this money in debt it grow so big that it burst, now we must pay it back
how much worse of? well 77% of wealth is in the western world and 33% in the rest.
has most the debt was greated by the west they have to pay most back about 40%
and 10% for the rest of the countries
so 77% - 40% = 33% this is how much the west will be worth soon
33% -10% =23% this is how much they will worth
so like i say them who have little will have much less. it look very bad for these poeple
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Aren't currency exchange rate movements a zero sum game?
I.E. If a currency declines in value, everyone else appreciates in value, they can't all devalue at the same time.
So yes, bad news for some local economies but not for the global economy, surely at a macro level exchange rate fluctuations are irrlevant (or am I missing something, I'm not an economist?)
Pulling capital out of share markets however is a different deal altogether as it won't necessarily be reinvested in shares in another country.
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'Runs on countries', eh? Come on, Robert, you can stoke the fires of global depression better than that. What about claiming that the 'global economy is in an irrecoverable total meltdown'? True, you won't be able to top it with yet more hyperbole, but it's a good move. Then you can stretch to making some more unsubstantiated predictions without evidence such as 'I suspect that we'll have a coupon currency inside a fortnight and government food shops opening in November'.
I know that these are difficult times, and challenging times, and that a long - but probably not deep - recession is in the offing, but the efforts of the BBC to manipulate not just markets but the perception of whole economies has now become ludicrously extreme.
Can you and your colleagues please stick to recording the facts and not extrapolating from the stories swirling around just those that suggest economic armageddon is just around the corner? The BBC ought to have a policy on speculation in news comment - the policy being 'don't'!
But since we deal in speculation on this board, let me add my own predictions:
- Libor rates will move, slowly, but in demonstrably the right direction by mid-November, and still slowly but positively (but at slightly a faster rate) thereafter
- inflation will continue to fall, and (along with an interest rate cut of a full 75 basis points in November) this will make capital cheaper if not, paradoxically, more plentiful. (Aggregate private sector saving will fall, but that's another story)
- public sector spending will fall in total, but more spending will be switched in year to capital spending. There will be no reckless reflation, not least because we have nothing left in reserve...
- labour markets will become looser, but given the tightness of some labour markets currently that could be a good thing. Watch for first signs of that early next year; it will be the only positive side of rising unemployment.
- currency devaluation in December or January will follow IMF coordinated talks with major economies in danger of further compromising their currencies. I forecast that countries will be invited to accept nominal relative levels and operationalise them simulataneously through announced devaluations. IMF conditions for countries in severe difficulty will include a first round of devaluations in November or December.
Now I could be right or wrong about all of that, but frankly nobody listens to my opinion anyway - and that is what it is, opinion. But they listen to the comment of the BBC and are not exactly being helped to distinguish generalised guesses at the future from sober judgement about what events mean.
I know that you will be tired of reading these sorts of comments, but you need to realise that people care about the quality of the economic journalism provided by our major and best broadcaster, the BBC. Please listen.
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4. At 10:46am on 23 Oct 2008, the-real-truth
"As long as individuals have food,"
Knowingly or not you have just hit the biggest single nail right on the head.
The food growing, processing and transportation system relies as much on credit as any other aspect of the economy. Don't bank on havnig enough food to eat.
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The collapse of the whole world economy stavation of millions, wars over resources, rampant disease.
We have to start thinking about emergency measures. Think about what would happen if the flow of food imports was interruped for day or so, or if Russia decided to ask for lots more money for its gas.
Looking forward to a merry christmas ?
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For the UK, this problem carries its own solution. The balance of payments must by definition balance. Sterling has been driven up by capital inflows in the past few years (making up much of the short term £650bn wholesale funding RP has frequently referred to), making much of our economy outside London uncompetitive, this process is now going into reverse, with the government & BoE replacing the wholesale markets, but at a lower volume. The pound will fall until our current and capital trade flows balance again. We should end up with a better balanced economy as a result but I fear it will be a process of adjustment more painful than most most peoople expect, or can remember
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Robert,
The 1930's showed us what happens. In the 1930's they too were continually surprised by what happened and they too reacted too slowly, although a study of previous slumps in the later part of the nineteenth century history should have alerted them.
What is surprising is that modern day economic managers still fail to understand and react too late and often in the same wrong way. I guess it is to do with the arrogance of power rather than just plain stupidity.
We are entering a (possibly prolonged) period of instability of stocks and currencies. This will put severe stain on the convertibility of currencies as well as trade. This is what happens - it is no ones fault, it is how the (capitalist) system works.
Policy needs to address the support of the poor, and in so far as is possible, to keep the wheels of financial exchange working - but not at the price of maintaining the status-quo. Bankers must be made to, in essence, 'to pay' for the destruction they have caused. It is unlikely that the people will permit everyone except the bankers to suffer - pain must be shared equitably. If this is not done social disruption may well result.
Exchange between currencies may have to be controlled to facilitate trade but to prevent runs on currencies.
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There is a certain irony to all this. Hungarian banks were not exposed significantly to the sub-prime fallout because they were not tempted. As a result there was no particular need to offer deposit guarantees. Of course, when those western banks were confronted with these problems, guarantees were provided with the result that there was a huge exodus of deposits to 'safe havens' further west.
100bn of external debt was sustainable given that Hungary is a net beneficiary of some 26bn annually from the EU providing there were adequate deposits in the banks. If the capital drain ins the direct consequence of policy elsewhere, it is not unreasonable to look to those countries for assistance.
The risk now is that the national economy will appear to be a bad bet when, in fact, there is still growth albeit sluggish. The ECB have recognised the urgency with a bit under 8bn. It is hoped that the IMF are similarly responsible. The situation in Hungary is entirely different from Iceland and that needs to be understood.
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OK, what next?
If you REALLY want to get concerned on a global, ontological, universal timescale, research the Irish Abbot Malachy, who suggested about nine hundred years ago that this is just the run-up to the real Big Bang. The trouble with him is, he's got a great track record for being right. The Mayans agree, their calendar enters a new Aeon in 2012, and their aeons are marked by cataclysm. That's 2 thoroughly independant, supportable, non-interpretative corroborations of something larger yet happening.
Is your definition of reality large enough to cope with some huge questions? Things are starting to roll and will now accelerate in a direction you've got into the habit of dismissing as the working of over-wrought imaginations. I've got a lot more to add, but not before the cynical.
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NEWS FLASH!!!!!
The same advisor, who advised Gordon to sell our Gold Bullion, advised Gordon to borrow all the money to support the banks in sterling with the promise of paying it back in Dollars!!!
We’re all doomed I tell yer. Dooooooomed.
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What can the UK and others do now to decrease reliance on financial services?
The reason why many countries are in this mess is the fallacy that financial services represent a path to endless supernormal profits. This has lead the UK banks and many others to say it is not worth investinging in industry beacuse the rates of return are too low.
The laissez faire approach to regaulation allows those persisting to seek super normal profits to keep moving their capital around. Perhaps its time to restrict it?
Malaysia tried this in 1998 or so and was widely condemned even though the advice came from an ex US Treasury official. It seemed to help their economy but of course they had good fundamentals for manufacturing to be expanded. I think Korea might benefit from the same approach
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This crisis (or is levelling a better term?) is caused by the banks finding ways around regulation and "manufacturing" money through unregulated financial instruments, thereby usurping control of money supply and hence fiscal policy from governments.
What would be the net effect if certain governments stopped trying to (in?)directly support these instruments through propping up banks and either declared these instruments bets and therefore unenforceable, or forced the banks to net their exposures off against each other...naturally letting the hedge funds and other arbitrage specialists sink?
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Stop pointing the finger of blame narrowly (Thatcher, Brown, Peston), this whole situation is a consequence of decisions made on trade liberalisation throughout the world over the last 30 years.
No one has tried to buck the trend and faced up to the rules of the EU, WTO, etc - OK some have more wholeheartedly taken these on board than others (fools).
Those of us who advocated a little more isolation from the rest of the world via energy security (coal - at one time we lead the world in clean coal technology and were self sufficient in energy), food security and some restoration of exchange control were laughed at. You have to live in the globalised market
My only regret is that the ones who will really suffer will be the innocent. See you back in the dark ages.
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#48 Hear Hear
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Robert has not really suggested that the pound will face the same fate as some emerging market currencies, but rather a re balancing is taking place and we should not be surprised considering wholesale funding usage and our defecits. Perhaps what is more interesting is that the US who are in many respects in a similar state to the UK are not experiencing the same. It appears to me that investors in the US are increasingly pulling money out of funds which invested outside the US, causing a rush of money to flow back to the US as funds sell foreign assets to pay back investors. This vast flow of money into the US will stop eventually and we can only hope that it will drop off gradually. Otherwise there will be a panic in the US Dollar as money flows reverse. China could step up to the plate and start buying assets using there surpluses but considering the losses they have made recently I think they may use their money internally especially as exports tank. The elephant in the room in my view is not the collapse of the pound but what happens to the dollar and US treasuries once returning trade flows slow. The last bubble is yet to burst.
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"Besides, I need a strong pound as I need to go on holiday and would like a bigger home..
I rest my case."
Britain used to do irony really, really well. We were world famous for it. Seems a wasted art now.
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Comment 44 : VitaliG
"Yes, after years of growth western economies will have 1-2 years of standstill or recession. So what?! Is it now the end of the world?!"
I think this sentence summarises, in a nutshell, the misunderstanding that must be overcome if we are to rediscover the path of sustained, gradually-increasing prosperity.
What we need to get out of our heads is that the historic levels of reported GDP are real, actual, levels of human production, self-contained in their respective time periods. This is mistaken. It misleads us into believing that we have attained a level of economic development some steps beyond that which we have actually achieved.
I'd suggest that a more appropriate way of looking at the economic performances of the recent past is to view the financial losses, write-downs and re-statements not as contemporary performance, but as corrections to product overstatement in previous years. By doing this we can build a truer picture of where we actually are, in terms of economic development, and we will be able to be more realistic with our expectations for the future.
It surely can't make much sense to regard as a failure anything that doesn't represent an improvement on a level of development/prosperity that we are actually some distance short of ever having achieved. Can it?
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@74
sorry everyone what was i saying about figures and numbers. oops
its 23% the rest of the world
23%- 10% =13% is what the rest will be worth. even worse.
so why is it we are all worse of?
maybe its to do with the growth of the population in the world. even though our wealth as grown the amount of people as grown bigger and qiucker
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HousePricesWillFall wrote:
"Also, just think about all the young people who have wasted the best part of their lives becoming 'estate agents' when they could have trained in something useful."
Ahem. It takes about 2 days to learn to become an estate agent.
And one day of that is learning how to apply hair gel.
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#65
But nor have the Tories, remember that their font bench weren't even in politics during the last down turn either, and lets face it they are still in dream land - when Darling was saying that we are in for a bad time, that the worlds economy was going to see a downturn the likes that have not been seen for 60 years the Tories were still saying that all was sweet and light, that Darling was scare mongering, they were still suggesting that there wasn't any real problems just three weeks ago!
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The FTSE100 down another 100+...
If it - and the DOW Ind - drop another 100 or so - they will both be at 52 week lows...
I stand by my previous posts...
We are heading for...
FTSE100 less than 1000
DOWInd less than 5000
.........
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Robert
Would you like to comment on how gordon browns 'master plan' for the banks is impacting this?
The way I see it, there is no point in a creditor pulling out if there is nothing to be had -- near bankrupt banks are actually quite safe in that position -- pulling the plug would just convert a 'risky debt' into a 'bad debt'.
However lob a few billion into the banks, and their creditors see there is some money to be had - so withdraw it.
FTSE below 4000...
Isn't it lucky that police forces have been miscounting stats... If things get any worse the government will have to leave disk of personal data on a bus somewhere...
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#58
What exports? Aren't you aware that we make very little in this country anymore that anyone outside it wants, whatever the level of the pound.
There are always for and against arguments for a higher or lower value pound, but at the moment I believe the case for a higher-valued pound is uppermost.
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> our most successful industry, financial services, is
> in some difficulty
Does anyone think the financial services industry has been successful? If this is success, how bad would failure be? Most of us can see that the rest of the UK is being dragged down by abysmal losses from London's pariah industry.
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#67
But it could also be argued that the price of Drugs is artificially high due to the illegal nature of the product. Drugs are priced high to compensate for the riskiness of the business to the individuals involved.
Bring them into the mainstream at a reasonable price point and the high level of profits that illegal dealers currently enjoy would be significantly reduced, as they would be unable to maintain high prices and remain competitive, not to mention the basic premise of increased supply reducing price, hence leading to the currently criminalised entrepreneurs would leave the market, or needing to change their current markiting tactics.
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21 Congratulations you got the T word in by post 21 today.
Perhaps if Scargill had held a ballot for his members on whether to strike, as opposed to leading proud people into the abyss then maybe things would have been different. After all the NUM had always had ballots before and during the 8 times they were held during Margaret Thatcher's first term the members declined to strike on each occasion.
Steel - Two plants in Scunthorpe and Port Talbot. Just as in France there are 2 plants in Dunkirk and the South of France. Employment went from 50,000+ to about 19,000 in steel in the UK over the period 88-07. Did production halve in tonnage, or is this mechanisation? You might even notice what happened to tonnage from 97 onwards.
Year Tonnage (millions)
88 18.7
89 18.5
90 17.6
91 16.3
92 16.1
93 16.5
94 17.1
95 17.4
96 17.8
97 18.3
98 17.1
99 16.2
00 15.0
01 13.4
02 11.5
03 13.1
04 13.8
05 13.2
06 13.9
07 14.3
Car industry - News of its death at the hands of Mrs T seems a little premature.
Sunderland Nissan - opened 1986
Burnaston Toyota - opened 1991
BMW Hams Hall - opened 2001
Cowley BMW/Mini - operational
Honda Swindon - operational
Land Rover Solihull - operational
Jaguar Castle Bromwich - operational
Jaguar/Land Rover Halewood - operational
Honda Swindon - operational
Vauxhall Ellesmere Port -operational
Ford Southampton - operational
Ford Dagenham - closed 2000
Jaguar Coventry - closed 2004
Longbridge Rover - closed 2005
Ryton Peugeot - closed 2007
Do you mean that is shame the no one wanted to buy a load of unreliable and undesirable tat.
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Slowly but surely Robert seems to be coming close to explaining the root cause of the UK's problems.
1: We have very few natural resources - previously we used to invade other countries and take the raw materials or proceeds back home. This it seems is now frowned upon even if we could manage it militarily - arms exports being an area we still seem to be quite good at.
2: Money is not a product in itself you cannot base an economy on the sales and purchase of it- the illusion that was the success of financial services has been clearly demonstrated this last year ad ifinitum.
3: Making stuff - food, products, providing a service and knowledge does appear to be a sound basis for an economy and growth - China and India seem to have demonstrated this quite ably.
4: Having a flexible workforce - which most companies translate as making it easy to sack people encourages first cuts to be made in UK manufacturing (such as remains) which over various cycles results in underinvestment, inefficiency and closure - skills required die out and at some point we can;t reinvigorate these basic industries even if we wanted to.
5: A house is not just for Christmas - fueling your economy and basing your judgement of how well off you are on it's value at a given point is a pretty stupid thing to do. Putting £10k kitchen in does not increase it's intrinsic value by £20k - it just has a nicer kitchen.
6: None of the people we pay to monitor and prevent these things is as good as we or they think they are.
7; Act in haste, repent at leisure - time for that old saying to make a comeback.
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#69
What???
EFF is the cost of overnight money loaned between banks to balance reserves. The cost is a result of demand for credit...demand up = cost up and vice versa
FFT is the FEDs target for that cost...cost above target and FED adds liquidity - cost comes back to target and vice versa.
So why the big woryy?
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Esoterica.. be careful what you wish for, it may come true.
I'd been praying the value of the pound would drop down to the 1.65 level so I could start exporting race engine parts to the USA again..
Sorry guys, it's all my fault. Dang, gotta cut them negative vibes..
GC
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RP, do you know what you are talking about?
With the high flow of global money flying to safety, ie into government debt. Any increases in the cost of government debt, that is contrary to equity market movement or more than a technical correction, is mainly due to demand on the debt markets from increased government deficit spending. So why the big noise?
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Trying to think outside the box a little...
We still have lots of coal.
Why not open a few coal mines, create some jobs, export the coal, and use some of proceeds to fund manufacturing start-ups in this country...
Might reduce the cost of importing coal to run power stations too.
As long as we resign ourselves to being an importer of everything, aren't we doomed?
I remember a history lesson at school where they went around the UK and described what each town was famous for making and the list was endless.
What is actually made entirely in the UK by a UK company now?
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And to think that the Govt. has been spending all it's time on trying to push through terrorism legislation, and how to more stringently snoop on everyone, from CCTV to now wanting you to provide a passport to buy a mobile phone, when all along, the real masters of destruction weren't sitting in drafty garages, but in the lofty glass walled board rooms of the financial institutions around the world.
Kind of makes you think doesn't it...
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post 74
77 + 33 = 110 not 100. Do you mean 66 + 33 ?
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#72 itwasntmeyourhouner
Will we really learn anything from this?
You're right, we won't!
Remember Hegel: 'History teaches us that no-one has ever learnt anything from History'.
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This is one of the more interesting boards of late.
Lets be clear on this. The amount that the UK, its people, businesses and governments have borrowed to artificially sustain a living standard that our performance does not justify, is monumentally large.
So big in fact that the chances of it ever being paid back in full are, zero.
The day will come when those with money regard the UK as a bad risk and will not lend. First they will not lend to its banks, later not to its businesses, and eventually not to its government.
Then the merry go round stops and brutally sharply.
Sooner or later this is where it will end, and at that point, just like an individual borrower whose credit lines have all been choked off, a savage drop in living standards has to be accepted.
In fact the best way to deal with this is, to start the adjustment to a lower living standard voluntarily and slowly, i.e cut government spending, cut prices, cut welfare, cut pensions etc. rather than wait for an enraged creditor to do it for us more brutally at a later date
but who has the nerve to start the process ?? and who remembers the IMF bail out of UK PLC ?
The first steps of this irreversible process is well under way - watch out everybody
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You Oxford boys are not helping.
Young Gideon Osborne cozying up to a soon-to-be-bankrupt and now you foretelling le fin de tout.
The tragedy is not the de-leveraging itself, it is the consequences to social policy. Comfy western policies of high public sector (index-linked pension and salary) workforce and lots of anti age/race/sex/illness legislation is now not affordable. The massive expansion in health "professionals" [er not doctors and nurses, but managers] will have to be slashed. sick pay and long term maternity.paternity/work-life balance policies willbe shelved and,ofcourse, index-linlked pensions for the public sector will simply have to go(MPs please note) We CANNOT now affordthese things. All of this will have to take place against a bacrond of massively reduced national taxation income.
Gideon O does not need to kiss and cuddle the Oligarchs, he needs to find a way to govern with no money. He must, Ifear alllow the financial service industry to regrow; re-employ and pay its taxes to keep us going.
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Surely if the government or BOE asked the banks to share the details regarding their poison ODC's, (including corporate), and liabilities and then it was found not to be too severe, there would be a more relaxed atmosphere generally in the financial market place. Why do we have to wait for interims or y/es to see this information?? I suspect it is because of the size of potential bad debt brewing still?? I personally believe the credit reference agencys are to blame for it all anyway.
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My day: I open the BBC website and the home page has all the usual guff about Police, popstars, the latest social issue etc, and outside the traffic past my works roars past, everyone seems to have plenty petrol, couriers who deliver here report no drop in business, suppliers say to me, 'what recession? We're flat out..' and during the morning I see the other side, give some advice to a chap, a Northern Rock mortgage holder, about how to deal with harassment he's getting from another bank (yes, one of the needy ones) who gave him a home-improvement loan..
I read RP's blog, no idea what he's talking about most of the time, but like many feel compelled to remark on something or another..
My Prime Minister and my Parliament seem pretty quiet on the whole thing. All seems rather remote. I used to have a firm so robust and profitable you'd never stop from 8a til 8pm. Now these last weeks I have time to go outside and have a fag.
'With infinite complacency, men went to and fro about the globe, confident of our empire over this world. Yet across the gulf of space, intellects vast and cool and unsympathetic regarded our planet with envious eyes and slowly, and surely, drew their plans against us..'
Maybe not across the gulf of space but across another one..
GC
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Took a long time for the BBC to notice that the value of the pound had gone down, considering it had dropped about 15% against the Euro from the end of 2007 till june 2008. I suspect our great leader didn't mention this hoping the pound would reach parity with the Euro and we would have no option but to join the Euro, thus assuring him of at least consideration for European president after he betrays Britain by accepting their constitution and he is kicked out of government.
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#89 NorrieC
"Besides, I need a strong pound as I need to go on holiday and would like a bigger home..
I rest my case."
Britain used to do irony really, really well. We were world famous for it. Seems a wasted art now.
Didn't seem ironic to me - more misguided.
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Private "we're doomed" Peston strikes again.
Robert, do you have a view as to the extent to which your sensationalist reporting actually contributes to runs on banks and markets?
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Wait a minute wasn't only a few days ago that "some economists" were claiming that more public spending was good for us?
Looking at the artificially low interest rates, the truely appalling public debt, the run-away inflation with the promise of a massive increase in public spending at the same time tax reciepts go down and you wonder why Britain's currency is collapsing? It's old Labour all over again, I guess Brown really did want to get back to his roots!
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#76, 88 - insightful contributions I think
#90 - so the present problem is just a sort of accounting correction, but it feels more painful than that - its a shame that we can not retrospectively correct the winnings of those who benefitted egregiously in the recent past
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#100
It's actually "Marry in haste, repent at leisure", but let's not go there. Things are bad enough without introducing OT topics like Matt Lucas' divorce.
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I don't know what is more entertaining about Peston's posts, his sometimes florid turn-of-phrase, or the end-of-the-world-I told-you-so whackoes and nutjobs that flock onto the comment zone talking about Mayan calendars, ancient Irish monks, stocking up on tinned food and Mad Max films.
Puh-lease.
People are losing their jobs and their homes, and this is horrendous - but it is NOT the end of the world as we know it.
And there will be an economic recovery.
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The rise in the US dollar may seem a bit odd given the state of the American economy. But there are good havens, somewhat so, within the EU, and some good EU banks. This afternoon looking currencies, I like the look of the Canadian dollar. Canadian banks, and the decent Canadian economy, are perhaps best positioned to weather a recession. Not much exposure at all to the mortgage disaster, a currency that is a bargain, and stable financial system, and its a G8 country... Its tough to look beyond the commodities base, but that is misleading too.... their dollar may be bit of a bargain?
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#99
Your point being what, other than to prove my point, Thatcher didn't care, the strike was irrelevant, her decision on what to do with the coal industry had been made in 1974 but she never actually asked the British people if we should all but close down our only source of native energy...
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#105
One has to conclude that the West's reaction to 9/11 was vastly more damaging to the Western World that 9/11 itself was!
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Why should it be that the US Dollar is rising against the GB Pound?
Aren't the economic problems of the US, in terms of deficit etc, vastly greater than those of the UK?
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#99
Further to my last point
You know the worth of everything but the value of nothing, for example, which do you think will be the first car plants to close, those in the UK or those in the countries of the companies that own the UK plants - typical Thatcheright, clueless, shortermism....
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Correction, 99
Cowley: running on tolerance
Landrover Jaguar: for sale, no takers
Ford Southampton: closure announced
That makes rather a hole of your argument, doesn't it?
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Nice try #104, but you will need to get a lot more outside the box than that. Coal imports exceeded total UK production for the first time more than five years ago, and continue to rise exponentially. The UK coal industry currently employs 6000 people at 10 mines to produce less than 20000 tons a year, all these figures in constant decline. 20000 tons fits in one ocean-going collier with an awful lot of room to spare! Coal as anything more than a cottage industry has been dead for an awful long time in this country, and I should know, I was there!
But talking about cottage industries, what about using the increasing number of pensioners to knit millions of stuffed animals for the 2012 Olympics, if there is a 2012! ;o)
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#108 "Lets be clear on this. The amount that the UK, its people, businesses and governments have borrowed to artificially sustain a living standard that our performance does not justify, is monumentally large"
That's way too generalised to make anything clearer. This one needs something absent from Govt policy the whole of my working life - sophistication.
The system made sense to me as a manufacturer and exporter as long as - to quote Brown - there were the famous 'stable macroeconomics'. I and my family lived stably within our means and under a pretty modest borrowing regime and the books balanced every month. Which was until the pound went over 1.70 to the US dollar and then everything did not make sense because I lost most of my epxort market at a time of rising costs. That was Brown's self-confessed field of expertise. Ho hum. Brown, typically, never looked at the micro-economics. I think he just wanted to punch above his weight on the world stage.
GC
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At least we can have a chuckle about those people who were predicting that the IMF was going out of business.
I shall especially enjoy watching left-leaning autocrats who have had nothing good to say about the IMF for the last decade returning, cap in hand, asking for loans.
There's always a silver lining.
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104
Open a few coal mines?
Once again, a hidden passive hiding an inconvenient truth. The populations of mining areas had their balls broken down the mines, worse when the mines closed, do you really think they'll help open them again that easily, particularly since said mines have been left without care and maintenance of any sort for the last 40 years and are ready to collapse at the first footfall?
The only way you might persuade them is to expand the Tower principal, but then again, Tower took all the miners still wnting to work, you just couldn't do it without reintroducing conscription and confiscation of the local housing. And the death rate will be horrendous.
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#108
"and who remembers the IMF bail out of UK PLC ?"
Yes I do, that was a time when the UK actually made things that it could trade with, that is why the IMF was able to give us a loan, now what the hell would we secure such a loan against come any global economy melt-down - a few skyscrapers in the east end of London a container port or two and lots of warehouse space...
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Only one problem with your theory, Robert, the so called 'run on the pound' is actually a strengthening of the dollar. Yes, USD:GBP has fallen quite dramatically in the last couple of days, but EUR:GBP has fallen by much less, and today is still well over 1.25 which is well off the lows of the last couple of months. So it is not true to imply it is just the pound that is weakening. Let's have things reported fairly and accurately please.
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Why single out the UK. which has the lowest PSBR to GDP of any member of the G7 at between 40% and 50%. What about Japan where the figure is 195% or the US where the figure is 61% and rising fast. You seem to have joined the knock the UK at any price brigade.
I cannot see any good reason why sterling should be under attack.
The reason the dollar is strong (as opposed to the pound being weak) is the unwinding of carry trades and asset investment using borroed dollars.
The US is in a big mess and the dollar will fall again
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I wish the sh*t storm would hurry up and commence.
It's all this waiting I can't stand.
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108 well said and yes I do remember the IMF bailouts.
Who can tell us the numbers now? UK reserves? Total required from IMF for the other countries RP mentions? And who would fund the IMF this time? China?
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Some confused history on here.
Blair was determined to join the euro, it's only because of Brown (who was desperate to avoid it) that we aren't in it now.
I'm not making any judgement call on that - I'm not sure if we'd better or worse of in it (I suspect if we are going to join it would have been better early than now but that's a mute point) but those posting that this is all some Brown plot to achieve 1:1 parity with the Euro and join it (at a massive cost in living standards to all in the country) are surely as delusional as those who harp on about full reserve banking being the answer to all our problems.
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77. NorrieC wrote:
Don't bank on havnig enough food to eat.
Oh don't worry there's always plenty of food to eat!
Why if things get really desperate I will travel into the city and either eat myself a banker or a politician. Whichever is tastiest.
It would be a pleasant reversal.
I'm torn between Gordon Brown or Mervyn King. Well fed the pair of them.
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something that most people still overlook (and is not priced into markets yet): a lot of these countries having been enjoying their own credit bubbles with their own build up of dodgy lending, in parallel to the bad debt problems in the us and uk. top of the list is china. when falling exports and outflows of hot money cause a sharp slowdown in these economies, their own bad debts will start to surface. things are going to get a lot uglier in the next few weeks..
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#114
...and Bloomberg terminals don't?....
The one thing that is not in short supply is nutty fruit-cake that is for sure, perhaps you should buy shares in the nutty fruit-cake company - Oh sorry, you already have!
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We have clearly ‘missed a unique chance to sustain humanity in this century by not changing our basic economic structures and allowing the present financial market system to prevail.
When one considers what the future holds, a world population of between 9.5 and 10.5 billion by 2050 (possibly even up to 12 billion), ever-dwindling natural resources to support human life and the dire effects of climate change through carbon and pollution emission, is it not clear that we have to change our economics to ‘Ethical and ‘Sustainable economics? For if we carry on with the present capitalist economic system, where the very few become rich beyond their wildest dreams and the majority are kept in relative poverty through the crumbs that drop from the rich mans table, our young and future generations to come will eventually have to endure immeasurably suffering. Indeed, governments are still presently blinded by current economic dogma and minority vested interests that do not look after the well-being of all people.
Therefore we have to change to new economic systems that are sustainable and where the needs of the vast majority of the people are addressed. In this respect it is a little know fact but it only takes a reduction of no more than a 15% drop in global oil supply to bring eventually the whole of the global economy to its knees.
We have therefore to supplant the present capitalist systems and economics with ‘sustainable systems and ‘need economics before it is far too late to change. That does not mean that we do away with 'markets', as 'markets' are the only way in which trade occurs. It is how we operate those markets is the problem for sustainability and public need.
But unfortunately to allow this to happen, governments should have started the critical need to change to these ‘ethical economic structures at the start of the credit crunch and should not have supported the banking system as they have. In this respect we would have had a decade of comparative hardship but where we would have eventually attained a new way forward for humankind based upon sustainability and necessary human need economics. Now, having rescued the banks and other large corporate entities we are still on the same road to our ultimate destruction as a species. For nothing has and will really change, as the same system will in principal be with us, ‘capitalism in another disguise. Unfortunately governments are in the main dictated too by big business and where whose only aim is profit, no matter how they achieve it. Considering this the world will continue in decline in human development terms and where at the end of this road awaits a nightmarish vision for humankind. Therefore wouldn’t it have been better to change now, go through 10-years of pain whilst we forge new equitable economic systems and then have a lasting environment for all generations to come. But no, governments and big business will not allow this to happen and accept the inevitable dire problems that they will cause through still adopting the basic premise of the capitalist system – profits, greed and self-interest to the detriment of all humankind. That is why governments now spend around £1 trillion on armaments and defence alone every year as they know that the capitalist system will eventually lead to global wars and aggression, as nations eventually fight for ever depleting natural resources under the dictates of the ‘capitalist market forces and economic principals - the law of the fittest and strongest and who will win through. But this time there will be NO winners it has to be said. We have now therefore lost a major chance in providing humankind with the means to a sustainable future in this century and where our political leaders should reassess their economic strategy, for what they do now will affect the very survival of the human experience itself.
But having said all the above there are many skeptics who by their very complacency do no service to humanity or even their families and children if they have any. For it will not be them or I who will suffer the symptoms of dire complacency in no more than 50-years time, but our younger generation now. Therefore they go along in their own denial thinking, but they do not see what that will bring them.
The main thing is that we have to change, as if not, what I foresee from just a common sense perspective will happen. The denialists even believe that when natural non-recoverable resources to sustain life become extinct that there will be no major global wars and basically live in a Utopian world.
For too many people are not realistic even when the writing is clearly on the wall. They seem to put their heads in the sand and just hope for the best and that we shall never experience the nightmare scenario that is clearly on the horizon for humankind in this century.
Dr David Hill
World Innovation Foundation Charity (WIFC)
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I just watched Baron Mandelson on this site, asked about his meeting with 'the banks' (no names no pack drill) re the forum the govt is setting up 'in the next few weeks'..
Oh my word. Painful, absolutely painful to watch. A slight unmeritable man, meet to be sent on errands, struggling visibly to give an impression of great importance, bearing, and authority.
I'm all for constructive discussion and if certain banks are represented and they 'get with the programme' - well great. But 'making more money available to small business' is a tiny part of the problem. The Baron gave the strong impression that this 'quick fix' will do the job and we should then all get back to work and stop complaining and smile more.
Who's running this country? If that is the brightest and best this government can produce at a time like this I say bring on the chaos and an end to whole lot of them.
GC
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@ 101
http://ftalphaville.ft.com/blog/2008/10/23/17369/losing-control/
and
http://market-ticker.org/archives/623-The-Stark-Choice-Now-Facing-America.html
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Robert
With repect to you son you may have a lot of facts and figures but you and your media friends are causing a lot of concern. Please ease off and look at the positives, if people are investing long term what fantastic opportunities there are out there.
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"As I have pointed out in a tediously repetitive way, the sum of all we've borrowed - the aggregate of corporate, personal and public sector debt - is equivalent to three times our annual economic output."
Robert, how come nobody on the Government side has been listening to you?
The PM for one has been in complete denial that we have been borrowing too much. Careful you don't promote too far what the Conservatives have been saying or you will be disinherited.
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it all sounds like the end of the world as we know it, but in truth we will get over it, i believe that people are better informed these days, or misinformed however and whomever you wish to listen to, the media is powerful and multifaceted with great influence, we all know the economy can not just grow, there has to be collapse, its just in this small 100 mile an hour country things happen fast, boom, bust, stagnate, green shoots of recovery, boom again, every 15 to 20 years, and why does it happen so regular? why do we never learn? well we do, but think about it, the last time it all went wrong 15 20 years ago a lot of the people affected now were only 10 15 years old, who care or knows what goes on at that age, now they are 30 35, i bet they are the ones with the 300 grand mortgages, massive credit card debts, and cars on finance, we are sheep like consumers, it is what drives economies, it will never change, this will be talked about as the worst ever recession, but when the dust settles, and the next generation of eager drones start to want things, it will start again.
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#100--this is worth reading by everyone, worthy of republication--hint, hint, Mr. Peston.
I hope Mr. Peston actually reads the comments, because I hope he hears from this reader that his comments have been almost invariable on the mark.
The dry black humor assists us all in digesting the bad news.
Two 'global' lessons to be learned:
1. Just because someone has 'MBA' or 'JD' behind his name does not mean he's not an idiot! The MBA's and lawyers created a lot of this mess, and we went along for the ride.
2. Here in the US, things are not going too well. However, they are going less badly than many other places. This is in great part due to the political stability that flows from the US Constitution, that much-maligned document. It has made America possible.
When you go to bed at night, everyone, say a prayer for us, and for our ability to operate by that document.
And, next time you want to sling mud and worse our way, remember that we are the only ballast left keeping this ship upright.
A little less vitriol would be appreciated, even when you disagree with us.
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@119
Its no surprise at all when you think about it. this started in the usa and in 6 to 9 months when house prices level out, they will be the first to start building there economy. while the rest of us will be still in deep recession. where at least 12 months behind them.
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You are turning into Frankie Howard.
"Woe is me. My woe has never been woe-ier".
Lighten up. Enjoy your life and stop trying to turn us all into manic-depressives.
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Just keeping abreast of who's doing what, from the British National Party website:
"The City of London must rediscover its roots as the servant, not the master, of manufacturing industry, which should be the prime source of wealth creation in any modern economy."
Well said.
GC
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What is not mentioned is the huge amount of investments from illegal drugs and crime and the way in which those investments can be used to manipulate markets and take control of important long term asset investments.
There are so many chefs in this financial crisis and the ingredients are being messed around with to manipulate a better tasting outcome for those prepared to gamble.
The roulete wheel is spinning and as with the whole functionality of Capitalism there will be many more losers than winners when the wheel of fortune stops.
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"The sickness afflicting the global financial economy has entered a new and worrying phase."
Whilst i do not agree with those who blame Peston for making the situation worse with irresponsible reporting, his somewhat melodramatic style at times can undermine whatever point he is trying to get across. As for capital flight from Ukraine, Belorus, South Korea etc, one of the good things to come out of the current crisis will be the realisation on the part of investors that investing into third world unstable economies is little more than a punt. Like a personal investor, institutions should put nothing into these places that they cannot cheerfully wave good bye to,
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When GB plc is referred to is that Gordon Brown plc? There just might be a difference?
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"The sickness afflicting the global financial economy has entered a new a worrying phase".
Or has it?
Is this not more remiscent of an old fashioned "third world" debt crisis of the 1970's?
Then, following a massive post war spike in the price of oil these surpluses were re-cycled to third world commodity producing countries.
Subsequent increases in interest rates made these debts unpayable. And were written down and written off in London Club and Paris Club IMF sponsored meetings
An eclectic clutch of countries are lumped together each with their own unique and entirely different challenges, making it impossible to make an informed judgement.
What problems do Iceland, Hungary, Pakistan, Ukraine, Belarus, South Africa, Argentina, and South Korea possibly share in common?
Other than the hubris western investors.
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122 - two of the reasons the dollar is so resiliant when taken in context off the US economy and then compared to sterling/UK or eur/EU, are:
Most Important - Most of the worlds oil can only be bought in dollars so everycountry needs them. We even have to buy North Sea oil in dollars. Should OPEC ever de-couple the dollar from oil America would collapse by 5pm that day.
Second important - The Dollar is one of 3(?) recognised reserve currencies.
As a result, no matter how knackered the US is, the demand for dollars is always there.
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Anarchy has started to break out in India. Pakistan is watching closely
South Korea is looking perilous with North Korea looking on
Russia is looking at former suburbs in serious trouble like a wolf licking its lips
I suggest we enjoy the rest of our lives, kiss your children because before the last domino falls a country or two somewhere is going to press its button in a bid for survival
And there is absolutely nothing we can do about it
I just hope we get to Christmas so I can watch the Eastenders Xmas special
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Ok, this blog is a touch irresponsible in places.
Not far short of the UK GDP mentioned as if we should be imminently worried. In full context what your saying is if the UK was in as much debt as the combined totals of those countries worst affected we might have a problem.
Well hold the front page!
Oh wait, never mind, there is no story here.
Other non stories:
Politicians don't always tell the truth.
England are not playing a football match this weekend.
Peter Kay has more talent than the majority of X Factor contestants when he is just taking the mick.
I am not in debt, but if I were it may cause me a problem.
Please Rob, stop putting out all this "information". Based on the frequency you update your blogs I am sceptical about the physical possibilty to check all of it in that time frame.
Whats needed here by the public is cold hard fact. No gloss, no spin and certainly no scare mongering. Plenty of people will be reading your blog over the next few monthes, given whats going on in the economy. You don't need to "Sex it up".
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"The sickness afflicting the global financial economy has entered a new a worrying phase".
Or has it?
Is this not more remiscent of an old fashioned "third world" debt crisis of the 1970's?
Then, following a massive post-war spike in the price of oil these surpluses were re-cycled to third world commodity producing countries.
Subsequent increases in interest rates made these debts unpayable. And were written down and written off in London Club and Paris Club IMF sponsored meetings
An eclectic clutch of countries are lumped together each with their own unique and entirely different challenges, making it impossible to give an informed judgement.
What problems do Iceland, Hungary, Pakistan, Ukraine, Belarus, South Africa, Argentina, and South Korea possibly share in common?
Other than the hubris of western investors.
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Cycles come around all the time. Boom and bust has happened many times. We smart people been waiting for this one to happen because it always does. We also haven't had a bad winter or a large war for ages. Both are overdue, so is a large natural disaster in a "Western" country, eg, a killer earthquake in say, California. Isn't life grand. Enjoy.
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118. At 3:37pm on 23 Oct 2008, gooner_no1 wrote:
I don't know what is more entertaining about Peston's posts, his sometimes florid turn-of-phrase, or the end-of-the-world-I told-you-so whackoes and nutjobs that flock onto the comment zone talking about Mayan calendars, ancient Irish monks, stocking up on tinned food and Mad Max films.
Puh-lease.
People are losing their jobs and their homes, and this is horrendous - but it is NOT the end of the world as we know it.
And there will be an economic recovery.
The mayan calendar/Irish monks maybe a tad OTT,but then so is a quadrillion dollar derivative-product uncertainty at the heart of the financial system.
Tinned food is a wise investment regardless of economic conditions.I for one,would hate to be one of the panicked masses storming the supermarkets because I never gave a thought to financial collapse/natural disaster/disease pandemic.
It`s as if you don`t believe a modern,technologically advanced country can overnight be turned into a beggar nation(with the delightful IMF shaping future economic policy).
If you`ve got a spare hour,I would recommend watching this film about the Argentinian collapse,and the reasons behind it.
The parallels with our own nation`s political/financial/media elite`s behaviour in these decades past,are blindingly obvious.
http://www.brasschecktv.com/page/445.html
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spot on 132, it's all going south which ever way you look at it...
Apparently we are waiting for the banks to return to 'normal lending'. Would that be 2006, 1996, 1986 or 1976? I know which it isn't: 2006!
1. Institutional providers of funds aren't going to forget their exposure quickly
2. Having put up Billions, sorry Hundreds of Billions, to bail out the banks, the Government must surely put some legislation in place to prevent this happening again - I hope to god it's not going to be settled with a nod, a wink and a handshake at Spearmint Rhino. As a tax payer I DO NOT want to be funding this again!
3. Am I hearings right, the Gov is talking to banks in the hope they will lend us more to spend our way our of what borrowing more got us into?????
3. Maybe from all this Banks will now realise that a return to considering the customers who deposit money, believing it to be safe, aren't panicking if they find out some spotty faced oink has been putting oll on red only to see the wheel stop on black!
I am the only one that will be glad to see the back of 'cheap money'?
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Being serious for a nano second
Have you had a look at the companies that make weapons?
Halliburton up nearly 6% for example: watch over the coming weeks where that stock goes along with all the others - where there is crisis there is always somewhere the rich put their money
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#144
re the USA
"And, next time you want to sling mud and worse our way, remember that we are the only ballast left keeping this ship upright.
A little less vitriol would be appreciated, even when you disagree with us."
All very true but that ballast has shifted and is in danger of capsizing the ship, what is more some people have been complaining for years that the said ballast had been loaded badly and that sometime it would shift, so what did the captain and first officer say to that - 'That's Socialism, don't you dare tell me how to load my ship, you red commy'...
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Boilerplated 129
the IMF does not make secured loans you get the money if you agree a workout plan. Interesting to guess what the IMF would demand. Control of public borrowing, control on bank's leverage, what else I wonder.
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wow - well done the moderators!
GC
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"Robert's comments show why the government needs to put a big emphasis, backed with the necessary cash, on import reduction/substitution."
Er, have you ever learned what was one of the main features of the 1930's depression? It was the contraction of international trade with tariffs being raised left right and centre. Seems like you want to repeat the medicine - didn't work then and it won't work now
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Robert,
The current economic situation is going to keep entering a new and worrying phase every few days for the time being. This will go on until the global economy lands at the bottom of the deep, dark pit with a sickening crunch.
I factored in a downturn some five years ago and have been amazed at the resilience of the boom. Yet I knew that as long as the boom continued the worse the crunch will be when it came.
Now even though I have been a member of the Eeyore Tendency I never thought it would get as bad as this. I stupidly thought that `They' wouldn't allow it. So much for `Them'.
I am now watching `Them' run about like rabbits in a traffic jam trying to do something, or is it anything, to reverse what is a truly horrible process. They have done the obvious, bless them, but they seem to think that will be enough to reverse the inexorable process that is in play. It won't: all we can hope for is that as much hangs together as possible.
When the run on Northern Rock started last summer I thought recession by autumn 2008 and a hard landing for the UK economy by spring 2009. I see no reason to change that view. I do admit to getting a bit frightened at times and I have no debts.
The reckoning will be interesting, the attribution of blame will destroy reputations and the rebuilding that will follow will make others. We just have to accept the need to change.
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@121
i think many would not be in disagreement that the worlds population as grown somewhat in the last few decades. and in past times wars have kept the population down. now if you are in agreement which i would expect most of you to be. Then it was only amount of time before this happened, make no mistake but our wealth as grown but not nearly as fast as the population of the world. and one as to ask if we knew this then surely so did our goverments.
so what do you to stop?
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to PetersKitchen - for your information, Haliburton does not make weapons - it is an oilfields services company
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The economic tsunami Alan Greenspan talked about in his Congressional testimony today seems to be the most successful export America has produced in a long time. As a means to bankrupt the entire world simultaneously it is unparalleled. He said he and other regulators were surprised by it, it caught them completely off guard. Now that sounds surprising. After all, he was one of its chief architects. We have a saying, be careful what you wish for, you never know when your wish might come true. Greenspan had plenty of company, plenty of blame to go around. President Clinton, Paulson, Bernanke, Franks, Dodd, and much of Congress in both parties over the last ten or fifteen years or so. They systematically dismantled the bulwark of regulations designed to protect banks and other lending institutions Congress put in place after the great depression to prevent another one. Instead of extending regulations to new institutions which functioned as banks and new financial instruments designed to avert being regulated, these people did just the oppposite. While the commodity was housing instead of stocks this time around, it is the same event, history repeating itself. Greenspan thought he was smarter than those in the 1930s who lived through the depression and were determined another one should never happened. Instead he outsmarted himself. It's the law of unintended consequences. The markets were regulating themselves or trying to...by going bankrupt. And they would have if the governments hadn't intervened with an heroic effort. The real problem is the social consequences of these bankrupcies, not the bankrupcies themselves. This is why the American public is so angry about the bail out. By our sense of justice, those who created this mess should suffer for their recklessness. The problem is, everyone else will suffer along with them.
What will happen? A huge amount of debt has been created which cannot be paid back. The assets these debts bought now have no market, they are all but worthless for the time being. The good news is that one day in the future, the houses that were bought will be worth something unlike the stock certificates which were bought on easy credit in the last great depression. The US government has resisted doing the one thing it will have to do to end the depression, print vast sums of new money devaluing all fixed debt which will be written down. This is good news for borrowers, bad news for lenders. They will be paid back with far cheaper dollars than they loaned. And this of course serves them right, in fact they are lucky to be paid back at all. Too bad the US taxpayer is now among the owners of this debt. But the banks will suffer. Before this happens, the entire world will be bankrupt. Hard hit will be China with its cheap junk export economy and Europe with its high wage, high tax, uncompetitive welfare state. Europeans had better get used to the idea of living far worse than they do now, their nirvana paid for by future debt is over, the bills have come due.
The reasons the US dollar is going up for now are several. One is a flight to perceived safety. If the US does not survive, nobody else will either. When the dust settles and a cup of coffee at Starbucks costs $15 or $20 and the average wage earner will make around $100,000 to $200,000 a year in the US, the economy will return to normal but prices will simply be at a much higher level. And once again, the US will be the unquestioned and unchallenged economic superpower of the world. Total victory in an economic war the world was not even aware was being fought.
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"The sickness afflicting the global financial economy has entered a new and worrying phase. ...now we're seeing a massive flight of capital out of economies perceived to have been living beyond their means..."
To neutralise the customary yells of "too much information", capital flight actually began weeks ago and was widely reported in the news media. I even commented on it two weeks ago, naming some of the countries named above from news reported by other outlets, and again yesterday. Anyone taking a glance at bond yields, CDS and forex can see it.
Onto the substance.
The reason you see capital flight is governments are guaranteeing one asset class after another, achieving nothing more than chasing the insolvency fear caused by lack of transparency into new asset classes, which in turn also have to be guaranteed to stave off a market crash for another week. As this process of guaranteeing everything runs its course, governments are coming to resemble the over-levered monoline insurers of old, with obligations and loss exposure that exceed taxing power. As a nasty side effect, sound and sometimes essential borrowers lacking sovereign backing are frozen out of the credit markets as lack of a backstop means competitive disadvantage.
Investors are quite reasonably selling up and retrieving their capital. Selling overseas assets, government bonds and currency, and bringing their money home, is no different to the man in the street selling his shares in any insurance company once he loses faith in their viability as a going concern.
In this context, Britain's problem is not only its public and private debt, but its guarantees of failing institutions that are better wound down. This crucial element has been left out of the analysis above, leaving it incomplete and unsatisfactory. Foreign investors know that we do not have the money to repay those losses. Claiming otherwise does not play on psychology to instill confidence, it gives people a sound business reason to sell.
As a country we need to be clear that we will insure only those risks on which we could comfortably expect to pay out, and only enter into contracts on which we could comfortable expect to perform. We should all know by now what happens to companies that sell insurance policies for which they are not capitalised and play games with their balance sheet. Countries are no different.
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Rarely have I seen such well thought out comments, so well articulated as Number 4 - above.
Well done number 4!
Other contributors have added much - whether one agrees or not.
My point is simple; why is it that a period of slow growth, no growth or negative growth is considered anything more than part of the economic cycle?
No matter how many times he said it, Mr Brown did not abolish boom and bust. Perhaps those younger than me genuinely thought that he had, and budgeted accordingly.
The situation we find ourselves in was caused (in the UK, at least) by vote hungry politicians running laissez-faire economic policy, greedy (or worse) banks and a public who really did suspend their belief system, and buy into the cheap money "pay later" for ever crap.
The biggest problem is if too many people loose their jobs and create a self fullfilling prophecy.
So what if I can't buy a new jumper, or jeans or whatever. Wear the old stuff, as I have in similar periods during the last 40 or more years.
As for the stock market, I advise all to read the new Warren Buffett book, and consider his comments: "in the short run the market is a voting machine. In the long run it's a weighing machine.
Just another opinion!
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Robert you say "And now we're seeing a massive flight of capital out of economies perceived to have been living beyond their means"
Well lets look at the American National debt....
oh ten trillion
http://www.brillig.com/debt_clock/
Do we assume the end is nigh?
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@ #138 davidstuarthill
I agree, and appreciate your effort to describe the real problem.
Day after day, most comments on this blog either try to assign blame, or recommend ways to tinker with and "correct" the present world financial system. At least these are more or less harmless; the actions of politicians and financiers do the real harm.
With a few exceptions, most people, including RP, are stuck thinking "inside the box." They well serve the interests of the few who really benefit (materially, at least) from the present system. Those who try to think outside the box are dismissed as "whackos," "fruitcakes," "anti-fractionalreservists" and so on.
It's a shame so much intelligence is wasted, when it could be applied to finding a real solution. But until people are willing to challenge their own, deeply held beliefs about
the system, nothing will change. Or, rather, things will change, but not for the better.
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I sincerely doubt that the sterling is going to be adversely affected,it happens to be one of the stronger stabilising forces in this entire crisis,i,m inclined to believe that if the panic can be quelled,things will be back to sane again,this is what i have always said and still reiterate on my blog [much ado]http://www.yomi11.com/blog,htm
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124
Not really, what it proves is that car factories have closed under a Labour government, whilst some new ones opened under the Conservatives.
Jaguar up for sale? I think you will find Ford put it up for sale and Tata purchased it along with Land Rover as they intend to continue to share components. If you know more please tell.
Ford is I believe planning to continue making the Transit panel van at the Southampton plant until 2011. After that it wants to use the site to only make a specialist version of the model called "a chassis cab vehicle".
Cowley production reduced but what western car plant is not reducing production.
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#161
I think you missed my point, a country needs to have a means to repay the loan - at the moment the UK doesn't as it's top heavy in the finance sector unlike many of our near and far neighbours.
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Robert -
you better watch out or you won't get ANY invitations to xmas dinners this year!
some good news soon pleeeeeease !!
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All these bits of paper - they are all promises or IOU's. As with people, if countries don't live up to their promises then next time around their promises are taken with increasing doses of salt. Internally that translates into currency inflation, externally into currency devaluation. In extreme cases like Zimbabwe, the promises end up worth less than the paper they are written on.
Not much mention has been made in these blogs about the part played by demographics, but maybe it should be. It was remarked a long time ago that when the baby boomers retired (those now in their 50's) there would be 2 workers trying to support 5 retirees and it just wasn't going to add up. Well knowingly, or unknowingly, the financial industry sold the baby boomers the illusion of a prosperous retirement with a myriad of paper investment schemes and the real estate industry an illusion based on ever increasing house prices. Well none of these addressed the real problem and of course now the mirage of a sweet post work oasis which was proffered is evaporating before our eyes. The Japanese actually hit this before us as their demographics were even more out of kilter and with no social security, their population invested even more heavily for retirement than their western counterparts. This will undoubtedly be an L shaped recession like theirs with the baby boomers working well into their seventies cursing the fact that they did not spend all that money wasted on pension investments on having a hell of a good time while they were young enough to enjoy it,
Yours Aye,
Graucho
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The present Government looks increasingly like the Board of Directors of a failing company desperately trying to maintain the confidence of customers and suppliers.
At some point in the decline of such a company, the Board of Directors have to recognise the inevitable outcome and change their actions to protect the ceditors of the business, or risk prosecution for wrongful trading.
This Government is unlikely to make such a change. Sadly, they cannot be prosecuted for wrongful trading. The only thing we can hope for is that we, the shareholders, will vote them off the Board at the next AGM !
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#140 - dear Grave Sniffer. Thanks for the links. However, those charts are part of the illusion that money = wealth and money is real. You need to have bought into that illusion to feel that the world will end in the next 7 to 14 days.
Real money is Power and Power is wealth. USA stands on the tip of the piramid. Under them are countries which pass up 'wealth' while recieving 'wealth' from those beneath them. We all eat because many millions are starving. They cannot get out from under because we use our power to keep them there. We stop other contries building arms by using the lables of terror or unstable regime or anti democracy.
The trick the top boys need to carry out next is the illusion of a correction to start the cycle over and not lose our high standards of lliving. All goverments know that the 2nd world superpower is its people. They are still worried about us, hence the pretence of elections.
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Thirty/forty years ago the British economy could have been described as a pyramid with 80% manufacturing/extraction industry supporting 20% service industry.
That pyramid has now been inverted as a consequence of many factors but particularly successive British governments and EU/EEC policy.
That's why I think we're so weak economically.
Regeneration of wealth creating industries is not just desirable but essential. The allusions in comments preceding to the miners' strike of 84/85 and the demise of coal, steel, shipbuilding and manufacturing industries are getting to the heart of the problem.
What Scargill said then and since has been proven correct.
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For anyone with any ideas on how to fix our broken/sorry financial system.....there's an interesting challenge from Newsnight's Paul Mason on his Idle Scrawl blog.
http://www.bbc.co.uk/blogs/newsnight/paulmason/
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120
I thought people had their say through the ballot box. In fact people were so unhappy with it that they elected her again in 87 and Major in 92. I guess you can't get over this.
What is more the Labour party has betrayed its core voters by doing nothing to reverse any of this, instead they let in economic migrants from the EU accession countries, whilst other countries such as France and Germany delay the barriers as long as possible.
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on 23 Oct 2008, DMJeffery wrote:
to PetersKitchen - for your information, Haliburton does not make weapons - it is an oilfields services company
OK another one that just looks at the basics of a company and makes a comment
FYI Haliburton's subsidiary, Brown and Root, are the forerunners of the future of armies and welfare as well as building war ships amongst other 'weapons'
Have a look and weep
Type Corporate Warrior into your browser and read
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#169
"No matter how many times he said it, Mr Brown did not abolish boom and bust."
But was that comment of Brown ever meant to mean that bust was now an impossibility, it's obvious that no country can insulate themselves from the world beyond their boarders - even the USSR couldn't do that in the late 1980s and China is finding the same out now (about the only country that has managed that is N. Korea), IMO the comment was more about the sort term boom and then correcting bust that was common during the 1980s and early '90s when the UK had three recessions within 11 or so years.
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166 wrote
''to Peters Kitchen - for your information, Haliburton does not make weapons - it is an oilfields services company''
OK another one that just looks at the basics of a company and makes a comment
FYI Haliburton's subsidiary, Brown and Root, are the forerunners of the future of armies and welfare as well as building war ships amongst other 'weapons'
Have a look and weep
http://www.pwsinger.com/books_corporate.html
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'when our most successful industry, financial services, is in some difficulty...'
I dont think so! Not some difficulty but grave difficulty. Throw out capitalistic monetary systems. What a failure that Hungary/Ukraine/Pakistan have to see their precious resources wasted on a debt economy. The poor have not benefitted, disproving the economics behind comparative advantage. World economists - throw away your books and look out of your ivory towers. Your theories dont work.
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#173
Many car factories shut during the Thatcher era, more than ever opened, and what has opened (or now remain) are not UK owned and that is were the problem is being stored up, do you honestly think that Renault would close the Nissan factory after one of their French car factories, or that BMW would close the Mini factory after one of their German plants - if, what is it like living on Mars?!
The worlds Govts. might well talk about keeping trade routes open but non are talking about not using protectionism to protect their own manufacturing base - the two are not the same thing.
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Today (1830 BST) shows not only a downward trend in the markets, but also a downward trend in key commodities including gold.
This would indicate investors are moving to cash, and cash is usually deposited in banks.
If this continues, will bank liquidity improve?
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The UK is doing the equivalent of a run on Iceland. By using its dominant position in the world wide money markets, it has managed to virtually stop all transactions between Iceland and the rest of the world.
The objective is to squeese money out the Icelandic government. Rightly or wrongly.
Does this not put into doubt the suitability of London as a world finance capital. Is London a safe place to do banking? Should banks prepare a move? Maybe to Frankfurt? That would be the reverse of what the myopic measures of the governement are trying to achieve
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Just one small thing Mr. Peston... If there is any lesson from this crash (and yes, let's be honest and start calling this by it's real name), it is that financial services are hardly an industry, except by analogy. Industries produce goods. Financial services just deal, and apparently, have recently only produced virtual money for speculation: no goods, no food for tables, no education, no basic needs, nothing but electrons flying around the world representing nervous greed.
If financial services are indeed the UK's "most successful industry" hard times are indeed ahead for the UK and the World. Sad thing is, _again_, most of humanity, who has nothing to do with speculation, will have to pay _again_ for it all.
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"Robert's comments show why the government needs to put a big emphasis, backed with the necessary cash, on import reduction/substitution."
Dear oh dear. With the crisis, all the silly old ideas are coming out of the woodwork. Just because the current system has been shown to have serious flaws doesn't give people a licence to resurrect all the failed economic policies from the past, dust them off and present them as solutions.
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Over a week ago I posted to another of Robert Peston's articles and my message is *still* appearing with the following status:
"200. At 00:32am on 15 Oct 2008, papanca
This comment has been referred to the moderators. Explain."
After a few days I sent an email to the BBC asking what this meant.
Yesterday, I received an email acknowledging my message and saying:
"I've since forwarded your correspondence to the people responsible for the website. Whilst I can not guarantee a response from them directly due to the amount of correspondence received on a daily basis, I can guarantee that the issue has been made available to them."
My previous post to today's article (#171) has the status:
"This comment is awaiting moderation. Explain."
But many subsequent comments have been posted.
Can anyone please tell me (or point me to where I can find out) what this status means?
How is "awaiting moderation" different from "referred to moderators"? The explanation you get by clicking "Explain" doesn't help!
Sorry to go "off-topic", but I can't seem to get posted "on-topic".
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The only problem is that the interest rates go in the wrong direction. The rate cuts may help Mr Brown to win the next elections. It will however not help to turn this mess of an economy around. All it does is messing around with the overdue and inevitable correction. It scares away the capital and punishes the prudent.
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If you're waiting for the "Black Swan" event - the final, awful thing that couldn't possibly happen, but that will drive away every last scrap of optimism and cause a final, precipitous stock market meltdown - it probably won't be anything as preditable as the default of a nation such as South Korea or Argentina.
It's more likely to be something like a major terrorist attack in the USA or the totally unexpected and shocking defeat of Barack Obama in the Presidential election, an event that would end political hope and might lead to civil disturbance on the streets of America.
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Brown and Root, are the forerunners of the future of armies and welfare as well as building war ships amongst other 'weapons'
Whoops a ironic slip
welfare should have been warfare
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post 152, aint lying!
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It isn't the Bank of England that is at fault, although a rates rise might have slowed things down a bit, but Gordon Brown. Mr Brown has been highly successful in using the global word to cover up his ten year spending spree. What did this achieve? Little or no Gas storage facilities, No replacement energy generators, hospital and post office closures together with specialist wards such as Maternity. Our infra structure has been left to rot whilst private utilities make hay.
Yes, Labour always screw up the economy a la Healy, but to be handing out taxpayers money to all these Utilities, Rail companies, Consultants (who always foul up) Capita etc. We are talking billions here and no-one is asking the question. Why did you do it? I am sure Korea, Argentina and all are important but if our house was in order with all debts "on balance sheet" we would be affected but able to help instead of being a major patient.
Perhaps Brown's worst crime is the destruction of our pensions which were in excellent health in 1997. He's ok though because we will have to pay his unfunded pension along with his extra 200,000 civil servants.
Thatcher was right when she demanded good housekeeping as a priority. It is simple really but Gordon likes things complicated as do the city spivs. Result? No-one has a clue where the money is or even if there is any left. Is there a good person out there who can help because Brown will only dig a bigger hole(debt).
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Robert
Having read a number of your articles I can only conclude that you carry a scythe, wear a black cloak, and have the middle initial "I".
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So when exactly do all the Thatcherites and free-market, deregulation right-wingers stand up and apologise for the plight they put this country in by their childish adherence to the dogma that manufacturing wasn't important and could safely be allowed to wither; that investing in public services wasn't important, so Labour has had to try to catch up on 20 years of under-investment just to get our services close to those of a developed country; that financial services needed 'light touch' regulation and a 'bonfire of regulations'; and that that same financial services sector would drive our economy for ever more? Have these people (and there are millions of you, you know who you are!) know no shame?
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Moderators, please allow this link.
The start of hyper inflation?
http://news.sky.com/skynews/Home/UK-News/Mass-Civil-Servant-Strike-Walkout-To-Be-Followed-By-Three-Months-Of-Industrial-Action/Article/200810415127408?lpos=UK_News_Carousel_Region_0&lid=ARTICLE_15127408_Mass_Civil_Servant_Strike%3A_Walkout_To_Be_Followed_By_Three_Months_Of_Industrial_Action
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126
sorry 126 I was, of course being very general, which makes it all the more painful for those individuals who have behaved with a semblance of finacial prudence.
BUT - the stable macroeconomic conditions you refer to do not include living in an economy which relies on ever more debt to and rising asset prices to create an illusion of wealth.
Sustained growth and rising living standards can happily live alongside macroeconimc chaos, just not for ever.
Now the time is up
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#181
So we do, so just as Thatcher decided that she would close much of the UK's industry so that she could push her fiscal policy (instead of backing it like most other countries did at that time) should Brown decide that he wishes the country to join the Euro so that he can push his fiscal policy that will be that - or are you one of those people who only believe in the electoral ballot box when you are getting your way...
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I'm amazed, Robert, at not seeing any reference by you (at least not that I've seen in entries read) to the fact that savings - value retained from production - is what makes lending via real, or good, credit possible. An individual who has not spent all his income on consumables or asset purchases but has saved some for a "rainy day" and retirement is able to loan some to another person whom he is convinced is a good risk for returning that money with interest for its usage. Banks in the past served as a middleman for such selling of credit - BUT the fractional reserve system and central banks turned this good practice of loaning money into a giant ponzi scheme years ago feeding booms and busts. The practice of pumping (printing) currency by the central banks into the banking system does NOT increase credit, which can come only from saved value. Such increased numbers of dollars, pounds, euros, yen, etc. does nothing but decrease their value, thereby inflating the cost of everything purchased with them by all but the very first who get a hold of that new outpouring of currency (the earliest borrowers).
The fact that so few writers in the field of economics - as well as economists themselves - will acknowledge the distortion of credit once obtained by individuals and companies via the productive use of savings into the world-wide boom/bust ponzi scheme it has become in the past (decade at least) is a disgrace to the claim by them of informing the public. It is far more like aiding and abetting the continued distortion of government interference in the marketplace that has grown tremendously in the US since the time of Abraham Lincoln and has always existed to a large extent in other parts of the world. But since your column, Robert, is under the banner of the BBC, maybe this is a major reason.... though I do hope that this will change before the situation worsens, which it most definitely can.
**Kitty Antonik Wakfer
Casa Grande AZ USA
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theres an easy way to solve this world crisis but its extreem a decent world war, or the human form of culling the population.
i know its a silly idea but each time there has been a war there has been investment in rebuilding and some countries improoved greatly.
i am not advocating a world war i realy wouldnt want one but the way these governments are acting we may well suffer worse than any war.
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Hi Robert,
I have to admit to reading your blog every now and again. Of course I take a view on what's essentially above me.
However, in the grim hope you do requests, could you tell me what you feel you would do for the UK in the current crisis, if you were in charge of the BoE and held the Government purse and why you would take such steps.
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100 wrote:
"2: Money is not a product in itself you cannot base an economy on the sales and purchase of it- the illusion that was the success of financial services has been clearly demonstrated this last year ad ifinitum.
3: Making stuff - food, products, providing a service and knowledge does appear to be a sound basis for an economy and growth - China and India seem to have demonstrated this quite ably."
All so true. The problem being if the UK is turned from a "paper" based economy into an economy that actually MANUFACTURES things to keep the current level of desired wealth, the carbon footprint will explode.
What to the greenies make of this?
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i have been banging on for weeks that the answer is to raise not lower interest rates. I am surely not alone in thinking that it would solve the banking problem, encourage savers, strengthen the pound, and change houses into places to live not "investments"
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I was talking to someone at work today and happened to mention that this credit crunch stuff was quite worrying.
The reply was "what's that all about I never watch the news or read the papers".
I'm quite envious, in this case knowledge is fear (and a bedroom full of rice).
Things are getting so serious that we need all the politicians to get together and agree on an emergency plan. They have to get out there admit they have messed it up and sell austerity measures.
We can't keep expecting to reflate the bubble without serious consequences.
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#190
"Serious flaws", me thinks you under state the problem somewhat, whilst it's true that the mixed economy had/has faults the current fiscal model has become about as successful as Communism did in the east of Europe - an outright basket-case failure, only eclipsed (so far) by the 1929 Wall Street crash, it makes Jim Callaghan's "1976 IMF Loan Crisis" look like a village tea party by comparison!
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Maybe I am just stupid but if the problem is over extended lending/borrowing why are we giving the banks more money to lend out ? Especially as the world is now going into recession and more businesses/people will go bust.In my opinion we in Britain should have set up a state bank like happened in Sweden because the banks will use our money to rebuild their balance sheets and it is us who will be paying the higher interest rates .
Another fundamental problem is house prices and no-one can change that , only time , and why will mortgate lenders listen to the government about repossessions?
As you say Robert it just gets worse and worse.Capitalism on the slide?
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#196
Nice rant, pity you mixed your 'metaphors', much of what you complained about was caused by the policies of Thatcher and her 'house-keeping'.
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#199
re story on the cited URL
Interesting spin put on the story by the Murdoch press...
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#134
Sorry but I couldn't hear your mute point.
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This all makes the Spurs situation seem a little irrelevant, doesn't it?
Anything good on the Telly tonight?
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#187: "This would indicate investors are moving to cash, and cash is usually deposited in banks. If this continues, will bank liquidity improve?"
Investors are using the cash to cover losses and pay off debts. The banks might not see much of it.
And the real problem is solvency. Liquidity is actually worsening because it is leaving the market and freezing within the banking system. Trust is the antifreeze.
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206,
Another thatcherite ideal, thats the ticket.
Raise Interest rates when everyone else in the world is lowering them, why do you think they are doing that? or do you know something everyone else doesn't know?
Let's say your right, would a stronger pound help us or hinder us?
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I should have added on post 215 that the interest rates will stay low long enough for inflation to kick right in, only then will the rates go up. To do so now is utter madness and asking for a depression!
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#206
The problem is that higher interest rates also makes existing or future loans more expensive, not good for a country whose industry is going to have to re-invest in much of what was thrown out with the bath water in the 1980s...
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#203
"I don't really want a world war"
Good, as after the next world war there probably won be a world left, well not one that any radiation susceptible living creature will be able to live on...
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#74
I see you have difficulty with hard sums.
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Peston,
Will you never admit that the state we are in is down to your beloved Brown?
What is your response to the vast number of complaints regarding your biased coverage of the Osborne non story?
Can you please, at all times, remember you work for an organisation that is supposed to be impartial not the broadcasting arm of the Labour party. And your salary is paid for by taxpayers that belong to all political parties and none.
Regards
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Sure things are bad but for me the biggest issue here is that no one is paying attention to stop the rot, when the rot sets in (via redundancies and foreclosures) I think that MP's in general will be in a scramle not for their jobs but their lives.
Some folk, just have not grasped the enormity of the present situation!
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#125
Can you say 2*12 any more. I thought the government had trademarked it?
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#108 Eurohaus states the problem nicely...
...but in reality the solution is already very much in play - the value of the pound in our pocket will be reduced at a faster than usual rate. Already there has already been a swingeing decrease in the value of our houses and shares. Taxes and general living costs will increase. Unemployment will have the effect of reducing average income.
There will be no choice about it - we will have to produce more and consume less. Why should other economies continue to fund our bloated lifestyle? Well, as Robert infers, very shortly they will not.
The comment from all sides of the political spectrum about 'spending our way out of trouble' is worrying. We have been 'spending our way in to trouble' for decades. It has got to change, and it will cost many of our luxuries, and with a bit of luck, not too much more.
I have criticised inept boards of banks. The monumental ineptitude of government and regulators puts that in the shade. The absence of an opposition of substance [ the sooner Osborne goes the better] in matters economic allows the basic dishonesty of the Prime Minister in these matters to go on without effective challenge.
Not a brilliant prospect is it !
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203 said
'theres an easy way to solve this world crisis but its extreem a decent world war, or the human form of culling the population.
i know its a silly idea but each time there has been a war there has been investment in rebuilding and some countries improoved greatly.
i am not advocating a world war i realy wouldnt want one but the way these governments are acting we may well suffer worse than any war.'
An Easy way? You must be a pensioner as you won't have to fight it, still anything to prop up the pension fund of a thatcherite! (Hey, Brown & Blair are also thaterites btw)
Instead of talking wars why not vote / demonstrate against the clowns you voted into office!
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Hold On
If lending is restricted to ZERO
And Interest Rates are ZERO %
then
The world will get back to Pre Banking and Lending times when no body owed any body anything.
We've now acheived a high standard of living. "we keep what we have!"
So no more need to borrow anymore.
Let all just live happily ever after.
That'll work?
The same intelect has been applied to the economy over the last 10 year of GBrowns's management has it not?
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One comment said that britain lacks natural resources...
Built on coal, surrounded by fish...
The sooner we banish the european stock-destoying fleets, the higher the chance that we will can have a sustainable fishing policy.
And now the coal bearing areas have been freed from union control at some point it will be economic to use them. The main barrier will be the stupid environmental argument -- even completely de-populating the UK would not make a noticable difference to global greenhouse gas emissions - messing up UK business and overall economy for envionmental considerations is a very expensive indulgence that we can not afford.
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Peston, here's a story for you. It involves Business (Banks) and politics (Gordon Brown - we know you have an interest in politics!). It is also about judgement - another topical subject.
The New York Times is reporting that the Former Chairman of the Federal Reserve, Greenspan has admitted to the House Committee on Oversight and Government Reform that he made errors in judgement.
“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,”
He was pressed on this by the chair of the committee, Mr Waxman.
“In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.
“Absolutely, precisely,” Mr. Greenspan replied.
So Greenspan admits to his error of judgement.
As you know judgement has been in the news a lot over recent days...
Now to consider Gordon Browns judgement.
In 2005, when Gordon Brown was Chancellor, the Treasury issued a press release number 50/05 titled "Chancellor launches Better Regulation Plan".
http://www.hm-treasury.gov.uk/press_50_05.htm
In it the Chancellor states...
" In the old regulatory model – which started in Victorian times – the implicit regulatory principle has been 100 per cent inspection of premises, procedures and practices irrespective of known risks or past results. The theory has been to inspect everyone continuously, demand information wholesale, and require forms to be filled in at all times, the only barrier to the blanket approach a lack of resources.
The new model we propose is quite different. In a risk based approach there is no inspection without justification, no form filling without justification, and no information requirements without justification. Not just a light touch but a limited touch. Instead of routine regulation attempting to cover all, we adopt a risk based approach which targets only the necessary few.
A risk based approach helps move us a million miles away from the old assumption - the assumption since the first legislation of Victorian times - that business, unregulated, will invariably act irresponsibly. The better view is that businesses want to act responsibly. Reputation with customers and investors is more important to behaviour than regulation, and transparency - backed up by the light touch - can be more effective than the heavy hand. "
This is almost identical to the view that Greenspan had, and has now admitted was a misjudgement.
The 2005 press release goes on to say " We will look to apply on a wider basis the principle of risk based regulation to financial services legislation and the work of the FSA. The FSA, which we set up in 1997 as a world leading example of how to regulate financial services, was itself a merger of nine regulators into one.
It has already done valuable work on adopting a risk based approach and I welcome the thinking it is doing about how it can further reduce the burden of financial regulation."
So there is a direct link between the light touch regulation, promoted by Brown as the better way forward, and regulation by the FSA that has now failed.
Will you be pursuing this lack of judgement by the then Chancellor, now Prime Minister, that has contributed to the hundred of billion pound bail out of the banks with as much vigour as you have shown in the pursuit of the lack of judgement shown by the Shadow Chancellor relating to a £50,000 donation that was not received?
I look forward to seeing you on BBC news being interviewed on this in the leading item!
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#210 and substantially all other posts by the same author.
You appear to have a fixation with Thatcher - she has been out of power for some 18 years, how can she possibly be responsible for this mess?
OK so she put the core framework in place but she was not, and is not, omniscient - all who have followed her could have changed tack - but they did not.
This lot have lied to you - they pretend all kind of things but at their essence they have been enthusiastically carrying on precisely the same core policies.
The only difference being that Thatcher was broadly honest - she told you she was going to screw you, she tended not to hide behind an impeneterable maze of deceit, and a bizarre complex of smoke and mirrors.
What´s all the stuff you heard from Brown about prudence whilst contemporaneously building up some massive off balance sheet PFI liability which has paid handsome fees to an army of accountants, bankers and assorted advisors.
Where has my pension gone? Probably exploded somewhere in Afghanistan or Iraq.
Why do they make babies have passports?
How many people live in the UK? What is the rate of inflation? What are the crime levels? What is the level of Government debt? What is the rate of hospital infections? What is the unemployment level? What are the literacy and numeracy levels? - No-one knows because these ju-ju men have got to the statistics and voodooed them all up. Basically thanks to this lot no-one knows anything, because their only achievement is obsufication on a massive scale.
Why are they saying they want to build nuclear power stations - but not actually building them? Why are they closing post offices? Why have they introduced 3,500 NEW criminal offences? Why are they investing in a DNA database?
Why are they participating in wars all around the world and then treating ordinary soldiers like so much crap? Why have they allowed anybody from anywhere with money to come to the UK and buy anything they want from utility companies through to football clubs?
Why did they lovingly foster the asset price bubble? Why do they not have the first clue as to how to deal with this crisis?
This lot are indefensible, not least because their only principal is expediency - and they even dissemble about that.
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I have read some of the other comments and get the feeling that most people think RP is "the man". Personally I think he has a lot to answer for. There are several levels of problem here. He may have got a handle on the bigger picture but when it comes to the man in the street he seems to enjoy finding something else to worry them about.
Today he managed to panic everyone about their pension again by pouring scorn on perfectly sensible decisions (or as sensible as anyr if done properly) by some pension funds to invest in emerging markets. The average person belives everything he tells them because he is on the BBC news and he is not balanced. Even when anything good happens he manages to find the gloomy side that affects the little man.
I heard him on Radio 4 the other wek delighted with himself that he had a "scoop". I suppose that all the time he is finding scoops and spreading his doom and gloom he is keeping himself very busy and gainfully employed thank you very much.
Try some balance RP. And if you are going to continue to keep busy with this crisis take on the responsibility which you should have as a reporter for the BBC and find some balance. If out of every bad thing you can find a worse thing try something good as well. Belive it or not there are some positive things out there but does that make headlines?
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Oh Boy don't you just enjoy stirring up speculation against sterling. You have accurately reported that a number of smaller economies have had to resort to support from the IMF, but it is unhelpful to add to this that if the output of all these countries is added together then the total reached is close to the output of the UK. People and investors outside the UK see the BBC as the legitimate voice of the UK government, whether or not this is in fact true. Your comments are likely to undermine any faith overseas investors may have in this country's economy and contribute to the devaluation of the pound. Thanks a lot, just what we all need, but never mind it makes a good story!
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er...the ECONOMIC... er.. situuuuation... has ....er.....(pause) become... err.... very hard to er.... explain....er .... that it is all the er.... fault of someone...er..else....er.... i HAVE ...er.. to say that.....er...GORDON...er..brown...has er.... spent alllllll our (huge pause) money...and....er. I am not going to say much about ...er... this.
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"Now there are runs on countries"
The country with the biggest run on it - far, far outweighing all the countries mentioned is Russia.
The consequences of this run are utterly devastating for it and is reminiscent of the 1998 government debt default and subsequent 40% devaluation of the rouble.
Russian oligarchs are being wiped out in the markets. Their wealth being based solely on their shareholder value.
The consequences for the Russian economy are dire.
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#205
What to the greenies make of this?
I think many results of this would be applauded by the greenies.
for example:
Less food/product miles = less transport carbon. Do we really need beef from Argentina and lamb from New Zealand? We aren't even self sufficient in milk.
Fewer flights - after all if the product is made here the retails execs won't need to fly to China to seal the deals.
Green Energy - if we invest in it centrally (though we may already be too late admittedly) to be world class we might export the technology.
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Remember people:
Banks are DELEVERAGING.
This means they are calling in debts and selling assets that they don't need. Basically banks are over exteneded.
So yes we are seeing funds from all over the world going back to those that borrowed them and then they are repaying their debts to the banks.
It's painful because there is sooo much money that has been lent out. Eventually this will ease the banks situation - maybe.
If the banks don't get back what they are owed then they loose their capitlisation and hence we are back to recapitalising the banks.
In the side lines we have the rich awaiting their moment to jump back in and buy at a cheap price. When they sell again they won't pay tax because they live in tax havens.
We can't do anything about this process at the moment but hope that it doesn't damage our daily lives too much.
But the MOST important point we ALL must take very seriously is to ensure our votes are placed with those who WILL ensure this NEVER happens again.
So far I don't think any of the political parties are looking out for the general public's interests - if they were we would be okay now. They would have picked up the problem years ago - it was there on the bank of englands reports in 2003 that UK banks were taking wholesale loans.
The sad fact is that those who got us here are still doing what they have always done. Writing on this blog isnt going to change anything.
The seed change has to come from us the public. Changing our behaviour MIGHT give us a chance of some different choices.
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We've borrowed three times our annual economic output. But how much have we lent?
Every debt is both a liability (for one person) and an asset (for another), so borrowing is not inherently a problem for the economy.
If there is a problem with debt, it is the damage it does to economic incentives if default becomes an expectation. Is this (so far) a significant issue with UK domestic debt?
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220
..and perhaps you could get your fact correct rather than making fails accusations because you don't want to hear the true facts. What you fail to understand is that Mr Peston doesn't actually publish his blog, his up-stream line editor and line-manager accepts or rejects Mr Peston's copy, so if he was trying to put out a story that he should not (due to either a D notice, legal issues or simply it's not in his remit) his copy would not get published. perhaps if you found the slightest clue as to how journalism works you would not be so quite to prove that you are a nutty fruit-cake addict!
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#221
Oh I think they have, hence all the talk about bringing forward public works that have already been planed. The thing is, there is no point starting those schemes until the recession/unemployment kicks in.
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Isn't it time we knew who was making money out of the public ? Credit Default Swaps have been used to make gambles on financial positions - now the public is having to make good those bets.
Lehman had debts of 613 billions dollars - Who lent this money ? Who has paid out via CDS's ? If 400 billion dollars of CDS's cancels down to 8 billion dollars, due to two way trades !? then how much commission was paid on the 400 billion ? Nice little earner for some ? If 8 billion dollars was the only cover for 400 billion dollars then the CDS system is completely pointless other than manufacturing commission.
From Bloomberg:
AIG Taps $90.3 Billion, Exceeding Original U.S. Loan
"Oct. 23 (Bloomberg) -- American International Group Inc. has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount that exceeds the size of the original loan meant to save the insurer.
AIG may need more than the $122.8 billion now available to the New York-based insurer, Chief Executive Officer Edward Liddy said yesterday. The company, which agreed Sept. 16 to turn over majority control to the U.S. in exchange for an $85 billion loan, got access to an additional $37.8 billion this month. AIG's latest debt was revealed today by the New York Federal Reserve, and is up from $82.9 billion a week ago."
``This emphasizes the uncertainty for anyone trying to put a number'' on AIG's cash needs, said Bill Bergman, an analyst at Morningstar Inc. in Chicago. The financial-products unit responsible for most of the firm's losses ``is a big black hole.''
Liddy said in the interview that he thinks AIG ``should be OK,'' that he still hopes to stay within the $122.8 billion ceiling and that Treasury efforts to spur lending ``seem to be working.'' A spokesman for the New York Fed declined to comment. Brookly McLaughlin, spokeswoman for the Treasury, didn't immediately return a call seeking comment.
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The Hegemon have enslaved us in their debt as they prospered and now, as it collapses upon them they will surely have their rallying cry.
Woodrow Wilson, September 11, 1919, St. Louis stated
"Is there any man, is there any woman, let me say any child here that does not know that the seed of war in the modern world is industrial and commercial rivalry?"
I say: is there any man, is there any woman that does not understand what the Hegemon will do to ensure industrial and commercial rivalry exists to the point of starting wars in order to extend further their existence for if your money making commodities are shot, use your human pawns to reap a harvest.
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Well i have searched the posts and i am appallled at the lack of knowledge of most posters on financial matters
A The current crash id the result of the nature of the money system - not its abuse!
B The current crash had to happen (as did its predecessors)
C If the nature of the Financial system is not fundamentally changed it will happen again and at fairly regular intervals.
If you doubt any of the above then google "Money as debt" then come back and criticize me all you want - I am in good company!
if this post is censored out by moderators then it confirms what a journo told me thirty years ago after a two hour lunch together. "If I managed to publish what we have discussed - i would lose my job"
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This is the most annoying presenter on BBC R4. His deliberately dumbed-down and 'bouncy' delivery is, to me, unlistenable.
I turn off the radio every time this bumptious prat starts to speak.
Can someone with a little more gravitas replace him please?
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It's truth your opinion about Argentina. I hope Argentine government understands this too.
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ignorance of key facts is a pre cursor to serfdom
1. The Banks are ruptured
2. Nations are ruptured
3. ""rich'''' Governments are guaranteeing cash 'made of air'
4 3rd world governments are ''stealing assets''
5 Their People are rebelling
6 (emergency)Meetings are convened
7 No overall leadership prevails
8 Anarchy or war
Well, the French decided that their elite were too elitist. The Russians decided likewise
Britain tried as well beforehand
alas, a man with a coin is stronger than a man with a match because the fire can be started, but the coin will supply arms and therefore the food to supply the surrogate army
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#230 "Oh Boy don't you just enjoy stirring up speculation against sterling. ... it is unhelpful to add to this that if the output of all these countries is added together then the total reached is close to the output of the UK."
It is very naive to think that big investors/speculators haven't worked this out for themselves. Since the end of World War II, if not before, Britain has run down its productive economy in favour of banking and financial services. Without these, essentially parasitic, industries we could not feed or clothe our population. Wasn't it Mr Osborne's, Mr Rothschild's and Mr Mandelbon's friend Mr Deripaska wh described Britain as a "post industrial society"?
Thank you Robert for rubbing our noses in unpleasant reality. Too many people, from the Northern Rock crisis onward, have been wanting to shoot the messenger. The truth is out there - burying our collective heads in the sand will not make it go away. We need a constructive economic and political debate about how Britain is to earn its living in the next century.
By the way, on yesterday's controversy - Everyone is entitled to a rush of blood to the head, but I do think for once that you got it wrong. You should have been more generous to Nick Robinson and let him handle the whole story. I'm afraid that your references to Mr Rothschild looked a weeny bit like name dropping. Never mind - let the one without fault cast the first stone. In general, keep up the good work! :-)
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Unfortunately Argentina is far from big economies, but, the reliance on this is big through the markets. Argentine government is not understanding that this crisis won't be affecting the country and minimizing the connection between a local economy and this global upheaval.
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"And now we're seeing a massive flight of capital out of economies perceived to have been living beyond their means - either because they have a substantial reliance on foreign borrowings, or because they are net importers of good and services, or both."
This is a perfect description of the United States of America.
The big difference here is that capital and currency flight is being delayed as the Asian creditors cannot afford to dump it's holdings without serious pain to themselves.
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237. At 11:03pm on 23 Oct 2008, Boilerplated wrote:
#221
Oh I think they have, hence all the talk about bringing forward public works that have already been planed. The thing is, there is no point starting those schemes until the recession/unemployment kicks in.
oh please!
Do you really think bring forward public works means mending your local NHS trust or your kids primary school?
It has already been stated that they are bringing forward TRIDENT, AIRCRAFT CARRIERS and taking the order of EUROFIGHTERS that 8 months ago thay were trying to sell to Saudi Arabia!
WHEN A GOVERNMENT SPENDS MONEY ON 'PUBLIC WORKS" in a time of crisis please look at what the 'money' (or loan) is being spent on and not what the government led media is telling you it is being spent on
The Banks are not lending the money they have been handed out because it has been "spent already" on what you call public spending, the Banks are implicit in their dealings
I will bore you all until you see the light and put your shoes on
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In these times, stability is needed. I consider steps such as the pegging of currencies and regulations on outflows of funds as viable avenues.
Borrowing from the IMF is a big mistake.
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This flight of capital may be beginning with the likes of Pakistan and Hungary, but we can be fairly sure it will be the pound before very long that goes into free fall, esp if interest rate reductions go ahead as predicted
I guess by mid 2009, esp if events in the USA on Nov 4th go a particular way, the pound sterling will be worth about 80 cents.
I guess it will help the UK government meet its green poverty plans if nothing else.
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just been looking up websites and blogs , under America foreclosures you really do start to get a real picture of what is happening there. 3000, houses in san fran only that have been fore closed. set to double over the next few months. people being thrown out of there homes, thats after they have lived there with no gas electric or water, soon as they fall behind by 3 months on there mortgage they cut them off. it took 200 years to build the America dream , and now in just 2 years its falling to bits. they say on one blog that the usa is 45 trillion USD in debt.
the bbc are only showing clipits of whats really going of there.
maybe there to scared to show the truth?
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"As I've pointed out in a tediously repetitive way, the sum of all we've borrowed - the aggregate of corporate, personal and public sector debt - is equivalent to three times our annual economic output."
House buyers were borrowing up to five times their annual earnings. Isn't up to three and a half times your salary a responsible level of borrowing? Debt is not bad. Bad debt is bad. Get the rules on lending right and the rest will come right too.
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Your blog has asserted that South Korea?s banks are dependent on wholesale funds. For your information, this is untrue as Korean banks are reliant on retail funds.
On the contrary to your expressed views on the Korean economy, although it has been affected by the global economic crisis, the stability and the soundness of Korea is much underestimated.
To point out a number of facts, the average loan/deposit ratio maintained by Korea stands at approximately 100% which is better than many of its peers.
Also, the current situation of Korean banks are in no way similar to that of the UK. The UK has witnessed the nationalization of a number of private banks, which has not occurred, nor plans to be initiated in Korea.
The Korean government has recently announced market stabilization measures to be implemented to increase foreign currency liquidity into the Korean market as well as the guarantee of foreign bank loans, to stabilize confidence of Korean banks as a preemptive measure.
Intervention of the government has not been the result of finding a resolution to a problem that the banks are currently facing, but more so in an attempt to lessen the discrimination of Korean banks within the global financial markets as other countries have already intervened and have provided assistance to their banks. This way the Korean banks will not stand at a disadvantage due to the lack of support from their government.
As you are well aware, now is the time for government intervention using its budgets to tackle the global crisis head-on if the course of the financial crisis is to be diverted. It is a known fact that Korea holds the top spot in terms of fiscal soundness within the OECD countries.
Overall, the picture presented by your blog underestimates the current financial position of Korea and has not portrayed the stability of the Korean economy.
From S.korea
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Have read most comments above and people show an appalling lack of understanding of the financial world.
To top it off we now have Allan Greenspan (God bless him- nobody else will) confessing he got it wrong! and he is "shocked" The man must be either a economic fool or a blatant liar, as any one who knows how the statutory reserve system works could see this coming. They just did not know when. I am telling all my friends who did not listen " told you so"
Just google "Money as debt" and you will understand this crises is a grab for "assets" (not money which is patently worthless - just a lot of computer bits in data bases or printed paper) but real assets, homes, farms, ships, factories etc.) to reset the system.
And those who are cashed up will purchase at firesale prices
MIchael
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It's not only the pound that is going with the imminent entry into the Eurozone for the UK. The Hungarian Forint has gone too whereby they'll be forced into the Eurozone.
AND....America will no longer exist in it's own right, it will dump the Dollar, form the North American Union with Canada and Mexico to form ONE country and the new currency of the Amero will be introduced.
Colin powel recently said that the next president, he reffered to Obama, would face a major crisis around the 21st or 22nd of January 2009. This is the dates where America is supposed to pay it's annual national debt payment to foreign creditors.
It can't afford it! It is virtually bankrupt now.
Seems the Bilderberg Group's plans are all falling into place. Man the barricades folks, it's going to be a very bumpy ride. I for one would not like to be living in America when the people behind the scenes pull the plug completely and martial law is finally introduced and a fascist state emerges. That's what these people want.
All these so called "Global Financial Reforms" are just a smokescreen to facilitate corporate fascism in America and to spread this around the globe.
When are people going to wake up, draw a line in the sand and say ENOUGH IS ENOUGH!
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When are people going to realise that this has nothing to do with some poor folks not paying mortgages? If that was the case they would have all had to have defaulted at the same time. That just doesn't happen!
Do some research folks!
THE BILDERBERG GROUP
This has been done deliberately!
I'm getting so fed up hearing about the "poor" banks. The people at the top have caused this to happen so that they can copnsolidate wealth and power amongst a relativelt small group of elites around the world to dominate world finance and power.
PLEASE.....WAKE UP AND GET INFORMED!
Stop listening to mainstream media hype, the mainstream media is owned by the same people causing all this.
You are only being told what the want you to hear.
Try listening to some alternative media sources, there are plenty out there.
Don't be fooled again!
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Robert Peston really must do something about his delivery.
Who can pay any attention to what he has to say with that bizarre, jerky, inappropriately swooping, dropping and rising, bad rollercoaster way with words?
It's spectacularly awful.
I watched Sophie Raworth asking him questions the other day and I could tell she thought he was a weird dude.
It should tell him something that Rory Bremner has taken to doing impersonations of him.
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Looks like Labour have told the BBC to tone down their front page and replace
The Financial Crisis
with
The Downturn
The downturn? I suggest the BBC tell Mandy to poke it and use the language fit for purpose or im going to an unshackled news website in future
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I see my comment on Robert Peston's weird way with words has been referred to the Moderator.
Encouraging proof, I think, that Robert Peston reads our comments.....
(:-)
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PESTON and ROBINSON IN DOUBLE ACT
I am reliably informed that the BBC has formed a new department, the Department of Light and Dark Entertainment, to leverage the talents of its "Celebrity Commentators."
Its first production will feature that well known duo, Nick "The Cheeky Chappie" Robinson and Bob "Doctor Doom" Peston, with Peston being the "straight man".
In the 30 minutes show, Robinson and Peston will each cover both politics and business following the success of the trial run over the "Osbourne Affair."
Using their now normal strategies of setting the agenda rather than just reporting on the news, the dynamic duo will tell us what is going to happen in the next seven days based on private conversations with unnamed individuals at the top of both politics and business.
Another feature, borrowed from "Who Wants to be a Millionaire", will allow Nick and Robert to "Phone Friend." I understand that in the first show Nick phones Pete "Prince of Darkness" Mandelson and Bob phones Nat "Super Hedger"Rothschild for "on the air" denials of anything they may be being accused of.
Future celebrities with their own programmes may include John "Rotweiller" Humphrys, Sarah "Always the wrong question" Montague, Andrew "Ears" Marr, and Evan "Metalman" Davis, but not necessarily in that order.
I can't wait - can you?
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#257
I've been trying to get people to stop listening to the mainstream media for a long time!
It's not only censorship, it's disinformation that has people fooled into thinking things are as they seem.
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#228
"OK so she put the core framework in place"
Exactly! If a building collapses due to an error in it design would you blame the bricklayer, electrician, plumber or the architect? Yeah sure the bricklayer, electrician, plumber etc. might lie to the HSE enquiry but the facts would still show that the basic design was flawed.
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#229
Head, meet Sand. Oh, you already have...
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Historically the solution to growing population and lack of resources was a war. We have moved on from that.
I begin to suspect that the inevitable solution to massive debt is the one that Germany adopted to pay their compensation after they lost the war (because their compensation was stupidly quoted in Marks rather than Dollars).
I am not sure whether massive inflation will work this time (although Government is doing everything in its power to ensure that inflation does not rise accidentally) because I do not understand what happens when the whole world is in debt or suffering inflation.
This is a question I asked thirty years ago (remember the inflation i the 1970s) and never found anyone who understood it:
What happens if every country has inflation of 10%? Does it mean anything (apart from savers losing out and borrowers celebrating)?
I can understand if one country has inflation and their exchange rate falls...
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#235
re bank assets and liabilities
But an asset made from lending money (Loan debt) is only an asset if and when the debt is fully paid back - one way or the other, until then it's a liability - this is the problem, far to much debt has turned into a liability for both lender and borrower.
As they say, if you owe a bank 1,000 pounds it's your problem, if you owe a bank 1,000,000 it's their problem...
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It is good to read some numbers following our holiday gossip in Corfu.
Could do with:
1) If we have borrowed and spent 3 years of GDP which looks bad! Just how bad is bad? I assume it excludes mortgages? I owe nothing but I do end up commenting here.
2) Lehmans CDS auction! We need an update. This http://www.rgemonitor.com/financemarkets-monitor/254133/post_mortem__lehman_cds_settlement_360bn_or_6bn#readcomments points to $5.6bn being settled of the visible £70bn amongst the majors. Looks to be another $330bn to be settled between private parties. Is this supposed to be finishing today?
Any insights welcome.
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#250
thank you for telling us the ghastly reality of the foreclosure/repossession scene in the USA.
I expect the UK to follow that particularly savage and uncivilised 'model' - by sheer default.
I have been consistenly campaigning against this for some time by email and letter. To no avail as far as I know. This is a war of decency against the worst consequnces of usury and I am particularly surprised the Church of England is silent on it as a socio-economic and ethical issue. I might add that in the matter of fair lending the West has much to learn from the Islamic banking system.
My plea letters to the Archbishop of Canterbury and the Bishop of Lincoln (the Diocese where my business is located) remain yet unanswered.
GC
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And by the look of sterling this morning after the GDP number the next run will be on the UK.
This country is in serious difficulty, the magnitude of which the BBC continues to fail to understand.
We are seriously indebted to the rest of the world who have been financing our spendaholic ways for the past eleven years and the BBC has absolutely nothing to say about it.
Get your act together.
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Ref 193
Perhaps the shock will be sooner than later
Check out Hal Turner
http://video.google.com/videoplay?docid=1954933468700958565&hl=es
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#247
"Do you really think bring forward public works means mending your local NHS trust or your kids primary school?"
Well, call the minister a liar then, as that is what the Govt. has indeed said it would do as well as other public works if needs be - and this work does not include MOD spending - indeed their spending plans are likely to go for review, along with other Govt. none core departments.
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#257 PetersKitchen
Re. BBC replaces THE FINANCIAL CRISIS with THE DOWTURN
Seems as though another of guycroft's predictions is coming true!.....
3. The media will quietly let the 'recession' story die, recessions are not dramatic news like share collapses, de facto 'it's here' so 'no point going on about it'.
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#196 earllavender
It isn't the Bank of England that is at fault, although a rates rise might have slowed things down a bit, but Gordon Brown.
<Large snip>
Is there a good person out there who can help because Brown will only dig a bigger hole(debt).
Spot on - couldn't have put it better myself.
#210 Boilerplated
... much of what you complained about was caused by the policies of Thatcher and her 'house-keeping'.
Ahh the traditional left-wing rallying call. I expect she'll get the blame for the mega-recession in 2085 (or whenever) as well
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#258
Or proof that you don't understand how moderation works...
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Cheer up everyone we will soon pay the 8 trillion pounds that we have amounted in debt
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#260
Hmm, sorry but what truth is that, facts about the economy or the fact that your shop is stacked to the rafters with extra rich nutty fruit-cake?
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Mr Preston of course is well informed from his Labour friends, this we know. When I see an article from Mr Preston admitting that his friends have spent beyond their means our public money in the good times and did exactly the opposite of what Mr Brown was telling us about boom (built on rising housing prices) and bust, then I may change my mind about him.
In the meanwhile will Mr Preston not admit that Labour lowered unemployment by putting more jobs in the public sector. That before we even started heading into recession it was clear that the coffers were not there to adequately fund a recession because of the Labour party's spend, spend spend
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#255, Bilderberg Group
That which I have read since first hearing of them is either pretty factual and not in any way explosive or Erik Von Daniken stuff. I'm not likely to be swayed either way.
If I had to take bets on the global crisis having been perhaps planned and even orchestrated (so to speak) my money would have been on Communist China. If they did not do such a dreadful thing then by the means I cite below they have certainly come out of it on top which more-or-less amounts to the same thing. And since the Govt there has such a grip on power and no-one outside of China really speaks their language the chances of us ever knowing would be pretty slim.
For over a decade they have been capitalising, modernising and equipping their country on a vast scale via sale of cheap junk to the rest of the world. They have relentlessly encouraged foreign investment and turned a blind eye to copying and counterfeiting and filled Western universities and research facilities and most advanced companies with their own PhD level people. They have relentlessly stockpiled strategic raw materials and despite being rich in minerals themselves, bought them from wherever they can get it and will even start importing uranium from Australia soon. The high cost of steel in Europe is largely attributable to the shortage created by China's demand.
Yet at the same time they have developed the most advanced stuff available to their military, that we never see, except when something like one of their 30 160ft Song class diesel electric attack submarine appears from 'nowhere' right in the middle of a US Navy Battle fleet.
GC
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Moderators, is this any better, although not quite as entertaining?
PESTON and ROBINSON IN DOUBLE ACT
I am reliably informed that the BBC has formed a new department, the Department of Light and Dark Entertainment, to leverage the talents of its "Celebrity Commentators."
Its first production will feature that well known duo, Nick "The Cheeky Chappie" Robinson and Bob "Doctor Doom" Peston.
In the 30 minutes show, Robinson and Peston will each cover BOTH politics and business following the success of the trial run over the "Osbourne Affair."
Using their new strategy of setting the agenda rather than just reporting on the news, the dynamic duo will tell us what is going to happen in the next seven days based on private conversations with unatributed individuals at the top of both politics and business.
Another feature, borrowed from "Who Wants to be a Millionaire", will allow Nick and Robert to "Phone Friend." I understand that in the first show Nick phones Pete "Prince of Darkness" Mandelson and Bob phones Nat "Super Hedger"Rothschild.
.
I can't wait - can you?
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#267
Make that the past 20 odd years...
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#271
To right, if Thatcherism is still the fiscal policy, that is the point, if the HSBC tower collapsed due to faulty foundations in a 100 years will it be the fault of the painters in 2090 or the those who laid the foundations in the 1980s?...
The facts are, we are reaping the harvest sown in the 1980s by thatcher and Reagan, history proves that fact and the right can bleat all they like but it will not change the facts.
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(formerly ''mindthegjc'')
It's a bit bemusing when I see countries pegging their currencies with each other. Surely this is a bit arbitrary(and dangerous). What's the difference between a currency pegged at $1.50 or $1.49 ??????
GB has an opportunity to go for it.
I know it's not the usual machocistic way, but PEG THE INTEREST RATE to ECB levels and let the pound float with the Euro, say,from 01/01/09 to 31/12/09.
For the conversion,use a weighted average.(Could it be a one pound/ one Euro ratio??)
Surely this will give a more meaningful indication for a pound/euro exchange.
If,when, both parties, Westminister and Brussels, are happy, put the question of joining the Euro, tagged onto the next general election.
OK, so there is much talk about slashing the interest rate, maybe 2%, but this will slaughter the pound and make foreign currency quoted goods much dearer. No good for inflation.
I mean,since Mandy is back you might as well give him a job to do.... So come on GB .
Chop !! Chop!!
[All together now :
''One finger,one thumb, one pound, one euro, keep moving...'']
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Oh sorry!! I've just started reading some of the comments. E.g. #16. 1/1Pound/Euro.
Funny. Nobody seemed to be talking about this(UK joining the euro) just a few days ago.
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You regard the fall of 29% in the South Korean Won as a matter for serious comment, but you don't seem to have pointed out - at least clearly - the fall of 23% in the value of sterling over the same period. You refer only obliquely to the threat of capital flight from the UK which is happening right now under your nose.
It's a little bit like listening to Gordon Brown at PMQ reel off a list of country names before quietly tacking the UK on to the end as a "country facing recession"
The fall in the pound this week is substantially worse than any since 1982 and beyond, including the famous black Monday of 1992 - a benchmark repeatedly referred to by your friends in New Labour.
The five worst falls are recorded here:
http://cassiuswrites.blogspot.com/2008/10/sterling-crash-now-worse-than-black.html
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Re my post at #266
I have just received the cordial email from the Bishop of Lincoln to say that the Church Of England has in fact been campaigning on the same issues that I have repeatedly remarked upon here, at local level and in the House of Lords too. Well done them and quite right too.
Apparently (re: why is the Church silent?) they have a real problem getting media coverage.
BBC, you hearing this? Get on with it.
GC
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Do people really belive that Gordon Brown coming out with the statement that Britain was in a recession was going to do anything other than cause further panic in the stock markets?
This is deliberate!!!!!!
When will people wake up!
I really am sick of heads buried in copious quantities of sand, who constantly rely on the BBC, CNN etc for their factual news reporting when it is anything but.
It takes very little effort to find, reputable and accurate alternative news sources on the net.
When will people get their heads out of the sand and peek over the parapet?
Are they scared of the truth?
They would be if only they went looking for it.
Maybe that's why they don't!
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#279 Boilerplated
To right, if Thatcherism is still the fiscal policy, that is the point, if the HSBC tower collapsed due to faulty foundations in a 100 years will it be the fault of the painters in 2090 or the those who laid the foundations in the 1980s?...
To pursue the analogy rather further than it deserves, would it not be the fault of the owner, who in 2000, suspecting that there might be something amiss with the foundations failed to do anything about it.
You can't have it both ways. Either Brown thought Thatcher was right and was happy to continue with the policies she initiated, or he failed to change what he thought was a bad set of fiscal policies.
Which is it to be then - Happy or incompetent?
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#285
...and what would the rights reaction to that have been - "Oh look Labour going back to it's roots"...
Sorry but you can't win on this, history proves who designed the fiscal system (Friedman) and who implemented it (Thatcher and Reagan) QED.
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"In Moscow, share trading was suspended until 28 October after both main stock markets plunged more than 10% in morning trading
In Romania, the Bucharest stock exchange was temporarily suspended after some shares plunged almost 15%"
Jetzt geht's los
GC
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#286 Boilerplated
Sorry but you can't win on this, history proves who designed the fiscal system (Friedman) and who implemented it (Thatcher and Reagan) QED.
So, was Brown happy with the fiscal system? If not why didn't he change it. Surely you're not claiming that someone with his towering intellect could be unhappy with the system but be incapable of coming up with something better.
Perhaps he was just incompetent.
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#288
Try reading the comment you were replying to...
Perhaps Blair and Brown were just trapped in a fiscal system they inherited and the fact that the electorate were largely brainwashed into thinking that there was no other way - it's funny how even Bush and Cameron is now extolling the virtues of the Keynesian model (by calling for intervention) rather than the Friedman/Thatcher 'free market forces'...
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A simpler analogy concerning the role of Thatcher might be:
Thatcher invented the fast car, Brown did away with speed limits.
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#290
No, I think you'll find that Thatcher invented a car without brakes, any speed limits are irrelevant as common sense should have sufficed - the problem was made worse by the driver being blind to the inevitable bend in an otherwise straight road...
Much of the current economic problems are caused by dealings away from any of the (once) regulated markets, indeed the dealings were invented to get around any regulations in force.
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here we go again an appalling ignorance of history
Boilerplated wrote
"The facts are, we are reaping the harvest sown in the 1980s by thatcher and Reagan, history proves that fact and the right can bleat all they like but it will not change the facts."
The facts are in fact:-
This is where it began, for UK.
The Cromwell rebellion and the Bank of England 1640 -1694
app. 750,000 pounds in deposits and a 1.2 million pound load to the government (as well as a note issue) - 8% per year interest and a 4,000 pound yearly service charge - this is "fractional reserve" or "statutory reserve" which ever you prefer.
I call it fraud! the books "multiply" .75 m to 1.2 m the missing .45 million in FACT IS MISSING! some day the piper will have to pay and it will not be the banking system because the taxpayer will bail it out. and what with? its all ready taxed and hard earned wages.
In every depression we reap the reward of this unbalanced system of debt/credit creation
for USA The Federal Reserve (privately owned and run - never audited) since 1913, is a copy of the UK model. Interesting how many times the US economy has fallen over since 1913? and now, at least twice since that year, it has taken the rest of the world with it down the tube of financial ruin.
Do some digging maybe you might just be "shocked"
Michael
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"Doom and Gloom!"
Not for Mr Peston - Ever heard of PPR or 'Pestons Pay Rise'.
Any chance of spreading your new found wealth with us poor small shareholders who obviously didn't and don't have a clue!
What price for RP Plc shares?
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#291
I think boilerplate very accurately sums up Labour's approach to regulation.
Speed limits are irrelevant as common sense should suffice.
Lets hope Geoff Hoon isn't reading this !
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Why do we need to employ economists, professors and business experts etc in governments, huge corporations, banks and other businesses to tell them how to run things? All we need is to ask Robert Peston. After all, wasn't it this prophet of doom & gloom who predicated all this and has been one step ahead of the rest of the world? And it is he who has all the solutions.
Good on you Mr Peston. You have really found some very gullible editors in BBC News. They believe every word you say. What was the saying? "In the land of the blind, the one-eyed man ...".
Ferri
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Why do we need to employ economists, professors and business experts in governments, huge corporations, banks and other businesses to tell them how to run things? All we need is to ask Robert Peston. After all, wasn't it this prophet of doom and gloom who predicated all this and has been one step ahead of the rest of the world? And it is he who has all the solutions.
Good on you Mr Peston. You have really found some very gullible editors in BBC News. They believe every word you say. What was the saying? "In the land of the blind, the one-eyed man ...".
Ferri Jahed
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#284: "I really am sick of heads buried in copious quantities of sand, who constantly rely on the BBC, CNN etc for their factual news reporting when it is anything but.
It takes very little effort to find, reputable and accurate alternative news sources on the net."
Might I suggest the Financial Times, Wall Street Journal, Bloomberg, and for the entertainment value, CNBC. There are also some excellent news aggregators in the blogosphere. The BBC offers only soundbite coverage.
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#292
Re Oliver Cromwell
In other words, "I've lost the argument so I'm going to be silly"...
More nutty fruit-cake Sir or do you want to carry on sticking your head in the sand-pit?
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#294
...and what political party wanted even more deregulation, and they were calling for more deregulation as a means to cure the current ills of the financial sector only a month ago - yes the Tories...
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#265: "Lehmans CDS auction! We need an update."
Look up how much AIG is asking for.
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Yes but the re-payment 'schedule' is exponential; i.e. if the markets resume their true value and production continues and is paid for adequately (somewhere near the true / accurate value if the companies) then the value of bonds etc goes up and the debt comes down far more quickly than putting over the explanation of; "gosh it will take a while to pay off 500billion pounds at £50.00 nicker a month - which is all Britain can afford...because - all together now, the BBC phrase of the week - : "WE'RE IN A RECECESION"
...and they keep saying it as if it affects them; but not one...not one person in the corporation will be. Their money is guarrenteed by law and the menances of recoverey.
Go on, report the news normally - not with your 6th form student agiprop mindset on, you 30 year old radicals from Morehampstead. We've had enough of it after 20 years or so. We know you dont like tories or any monetary policy. We get it. OK! give all the money to the welfare state and bleeeeed the rest of the population. We know. Got it. Clear. D'ya think you're correct and hip now??
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#289 Boilerplated
Try reading the comment you were replying to...
Perhaps Blair and Brown were just trapped in a fiscal system they inherited and the fact that the electorate were largely brainwashed into thinking that there was no other way
I'm afraid that argument doesn't wash. Blair and Brown were in charge. They could do what they liked including changing the fiscal system if they wanted. It's not called "being in power" for nothing you know.
BTW, resorting to insults is usually a good indication that you're clean out of usable arguments.
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#302
I think you mean is, it doesn't wash with you as a believer in the Goddess Thatcher, unfortunately for you facts are facts, especially historic facts - the self same phrase (about Labour returning to their natural roots) has been trotted out by the Tories when ever Labour have favoured union/workers rights over those of the CBI/employers.
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#303 Boilerplated
the self same phrase (about Labour returning to their natural roots) has been trotted out by the Tories when ever Labour have favoured union/workers rights over those of the CBI/employers.
You make it sound as though being accused of returning to your roots is somehow embarrassing for you and the other NuLabor apologists.
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#304 you point being being what exactly, other than proving my point...
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# 224 clowns i voted in i say rather poor choice there then if they are my fault i give you permission to take them down any way you wish, the sooner the better.
i must state i wouldnt give neu labour or labour a vote let alone the tories i will remain independent or vote monster raving looney.
party politics is killing this nation and it follows that fools will follow there parties.
nuke the lot.
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Runs on countries sounds like what happens when certain countries cannot pay for their Chinese take aways and dont wish to wash the dishes after licking them clean
Sweet for some , sour for the Others
Toxic waste exchanged for led and melamine poisoning
The industrious Chinese seem to have been paying us to consume[manage ha ha ] their earnings ,no wonder the banks gave out 120%loony loans ,folly seemed to be the a la carte menu of the day .
There is a woman shortage in China ,why can we not simply devide what we owe them by the number of spare woemen we have available for immediate export ,we can classiffy them as mostly triple AAA with the odd civil union thrown in
AAA's they say ,never give a sucker an even break
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The public will not spend while there is a severe risk to their homes.
It amazes me that the governement gives money to banks to reposees homes instead of giving the money to the people to pay to the banks and keep their homes.
Once the risk of reposession is removed people will feel more confident about spending themselves and it would not be expensive. If everyone made redundant through no fault of their own had a charge put on their property and the government paid the interest reposession would not be a threat.
Many of the people reposessed wind up in public funded rented accomodation and that money is never repaid so this would be a better system and would encourage spending and recover some of the benefits paid eventually through the charge on the property.
It would be the same as legal aid and that works so this should too. Public money should be used to keep the public in ther own homes, not to subsidence the new wave of proerty speculators who are snapping up reposessions at a fraction of their true value.
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So we're in debt to 3x gdp - that's an average. Seems ok to me. My mortgage is at a higher ratio and I can afford it.
Just remember, people take on debt for a purpose. We are all born into this system where you have to pay large sums of money up-front for a roof over your head and other essential items.
Provided we can continue to do meaningful work we can individually pay off of debts throughout our lives. Most people do.
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This spending of the tax payers money puts me in mind of what happend in Germany through the 1930's
As that was never resolved by the then powers, I have to wonder will we get our funds back?
Any thoughts.
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Yes but ... . Robert, as I understood matters, an EU Commissioner (who cares which one, they are essentially unelected overpaid and useless)insisted that UK Taxpayers Preference Shares (it ain't Government money, it's ours - mainly English taxpayers, re-distributed without our explicit consent by a Scot with a most dubious democratic right) precluded payment of dividends to other shareholders. Thus does the EU finally destroy funded pension schemes, key recipients of dividends! Great if your pension is a compulsory tax on all tax payers (e.g. Peter P o D Mandelson, and indeed both GB and AD). The unelected rule again! Down with the EU's unelected 'crats
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Saw your "report" last night on the BBC News last night on Barclays "turning up their noses" in favour for foriegn investment over UK government money last night - are you SERIOUS?!?
That (at least) one of our financial institutions has chosen not to dpend upon goverment dole-outs, is suerley something to be commended, rather rthan sneered at?
Sure, the money might be more "expensive", however have you pauesd to think that Barclays managment just might think this a price worth paying to preserve their independence, and just maybe see that as a source of real competitive advantage?
Do you not consider at all that kind of thinking just might be a the root of Barclays quite spectacular success in posting profits at this time, when all around seems to be in crisis?
Nah - much easier to sneer at them for "turning thier noses" up at the prospect of part-nationalisation (Now who was telling us what a disaster that was for us all just a short time ago? Surely not the same BBC biz-ed who claimed Barclays had asked for goverment hand outs, when in fact they hadn't - is this a poorly attempted payback for that faux-pas, I wonder?).
BBC?!? You'd be better off at a red-top! And take Wossy with you, please. Your mate Brand at least had the decency to realise when he was being a plank.
Seems to me that idiocy is a readily available currency these days at "Auntie" (or should that read "anti"). How comforting.
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Barclays
Great they are saving taxpayers £6,000,000,000 - that's six billion pounds! Instead of having a go at Barclays for perhaps not doing a great deal for the shareholders, one should think a bit more about the man in the street who would otherwide have to cough up.
Well done Barclays!
PS Look at it another way. The saving will keep the Beeb going for another year.
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While this is all very enlightening, I'm wondering more about the practical implications.
'Iceland, Hungary, Pakistan, Ukraine and Belarus' - are these the destinations we should be looking at for a good friend's upcoming stag do? Will we get more 'bang for our buck'? Would it be cheaper to buy the national banks and stay over in their vaults rather than a hotel room? Or if we stay in the banks, will they attempt to collateralise us and sell us on dumb UK investors?
It's questions like these that I think we need to start addressing as we move from theory to practice.
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You are right; we cant think about UK as an isolated country, too many things are interwoven in the world economy. It is actually frightening that our regulation system allowed pension and hedge funds to invest anywhere in the world. Of course, most investors want maximum return on their investments, but when things do go wrong, we realise that it was not without a risk and blame fund managers. Indeed, the whole world has been affected by this crisis. However, if other countries have other industries to rely on while financial sector is in trouble, UK doesnt have much to rely on. Financial sector has been a backbone of the UK economy and we have to take care of it, we cant just sit and hope that our financial services will make it somehow. Banks have taken a lot of blame, but we have to remember that it is the place where our money are made, as UK has attracted investors from around the world and we need them to keep our system going. Government cant just comment that mortgage lending has declined substantially and buy to let mortgage providers have ceased to exist, they have to do something about it, they need to implement programmes, loans, grants to get lending back on track.
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