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Why the record-breaking falls

Robert Peston | 10:57 UK time, Monday, 27 October 2008

Today's fall in stock markets across the world puts us on track to set new records for monthly declines in share prices.

So far this month, share prices in the US and Europe have fallen on average by more than a quarter, those in Asia by a bit more.

Falling sharesUnless there's a sudden bounce, the cumulative monthly falls in October for most major markets will be as big as has been by anyone alive.

In the case of the US, the monthly drop is likely to be the biggest for 70 years. For other markets, where serious measurement of stock-market movements is a younger pursuit, the drops are as bad as any seen since records began some 40 years go.

Why the rout?

Well three things are going on.

First, we're seeing the end of the carry trade, the investment of cheap, low-interest loans raised in yen and dollars for investment in higher yielding financial markets, such as those of the emerging economies, Iceland and - to an extent - the UK.

Investors are liquidating assets everywhere from South Korea, to Argentina, to Hungary, and holding the proceeds in the Japanese and US currencies.

And since so much of the carry trade came out of Japan, the yen has surged to an astonishing extent.

Sterling has been punished, in part because when the carry trade was booming, the UK received a disproportionate amount of this hot money, because our interest rates were always a bit higher than the developed economy norm.

A second phenomenon is the one I described in my note of earlier this morning ("Hungary, Goldman and Regulators"), namely that the conversion of Morgan Stanley and Goldman Sachs into banks is sucking the juice out of hedge funds.

That's forcing those hedge funds to dump assets such as shares, corporate bonds and commodities - which in turn is precipitating further asset sales , as the fall in their prices causes lenders to demand that those who've invested on credit (such as hedge funds) put up more collateral.

Finally, the global economic slowdown has prompted a re-evaluation and re-pricing of risk, in the jargon.

Or, to translate, investors have in the course of 14 months gone from the mad conviction that busts had been abolished to the fear that everything's going bust.

Neither view was rational. But reason doesn't hold much sway at market peaks, when the prevailing emotion is greed, and troughs - when it's sauve qui peut.

Comments

Page 1 of 2

  • Comment number 1.


    The most outrageours thing I have seen is that these people in the banks are still to get bonuses this Christmas.

    Absolutely scandalous. They really are having a laugh at decent, hardworking taxpayers.

  • Comment number 2.

    ''Or, to translate, investors have in the course of 14 months gone from the mad conviction that busts had been abolished to the fear that everything's going bust.

    Neither view was rational.''

    Why is not rational to think everything is going bust?

    Everything is or has isnt that why there is line of business in every country going cap in hand to the governments or the IMF?

  • Comment number 3.

    Robert this isn't end of either. So again: hold onto your hat.

  • Comment number 4.

    Robert,

    The liquidation of funds in the present circumstances is I am afraid to say entirely rational, contrary to your view. It is rational in the same way that savers joined the queue at Northern Rock.

    Funds and investors need to liquidate assets to repay demands for cash repayments by other funds and this multiplies the effect. This run will continue for a while yet and there is nothing short of draconian steps that can stop it.

    It is not the fault of the media (you are not to blame!) It is just an inevitable consequence of the de-leveraging taking place. It will disrupt real markets, nations and trade and there is little that governments can do about it that will have a positive outcome. In fact almost any action by governments will make matters worse overall.

    (However a swift erection of exchange barriers and beggar my neighbour protectionism may help individual countries - I expect the USA to do this this week! - Bush does not care any more!)

  • Comment number 5.

    Well you're right about Sauve qui Peut (Every man for himself).

    I believe the equity markets are about to become something of a sideshow - it's currencies we are on to now.

    The slide in the pound will make it impossible for interest rates to be dropped further in the UK. It's not as though we can really benefit from a weak pound since we don't manufacture hardly anything for export.

    The next phase in the crunch will probably be protectionism and exchange controls. We really have no choice but to try to prevent a massive flight of capital out of the UK. This will scupper international trade.

    The question is - is the UK actually capable of feeding, clothing and housing its population without trade?

  • Comment number 6.

    if stock and share prices continue to fall wouldnt it be prudent for some of these companies buy there own shares back aiming at becoming private companies once more and thus may well be able to fend off the downturn better than getting snapped up by greedy investor that will sell to make a quick profit thus prolonging the problem.
    some of these companies just last year were recording record levels of profit whats happened to it?

  • Comment number 7.

    Re-pricing of risk? - Much worse than '29, we really are in uncharted waters here. In effect all currencies being faith backed are doomed, simply because all faith has gone. The only way forward is a jacking up of rates to 10% to attract the average Joe to put his worthless money back into the banks which will stabilise the economy and give us a floor.

  • Comment number 8.

    Isn't it funny that the country where these problems started - the US with sub-prime scams, Lehman Bros going bust, lame-duck President who is in part responsible - is where the money is headed now! It seems that people are still buying into the American dream.

    But it all goes to show that markets are fundamentally unstable. This is fine for those buying and selling on an hourly basis because they make a living on second derivatives but for Joe Public and the Pension Funds who have been persuaded that the stock market is a good way to invest, it is a painful lesson. We have been hoodwinked in the past to expect them to carry on going up but that sort of exponential growth is not sustainable.

    Apart from gold and supposedly stable economies as safe havens, expect a return of the housing market as soon as the bottom is sensed by canny investors with the cash and by the general public when banks get to lending again.

  • Comment number 9.

    Yep, the unwinding of the carry trade is probably the final piece of the crash of '08. All those grannies in Japan prepared to chase 5% yields in money market accounts have been introduced to currency risk,

    Lots of lumpy sleeping mats in Tokyo from sleeping on gold bars for the next couple of years.

  • Comment number 10.

    "..They really are having a laugh at decent, hardworking taxpayers."

    Yeah right, those same fine, upstanding taxpayers were more than happy to take the money banks were throwing at them during the credit glut.

    Really, the problem is the same wish-thinking mentality that makes people believe that God will sort out all their problems for them. Sorry I've slipped off topic...

  • Comment number 11.

    Reminds me of that famous football commentating phrase, "They think it's all over ....". The difference is that nobody can yet say "... it is now".

    Indeed, like I've posted elsewhere ... this 'convergence of catastrophes' has one helluva long way to go yet. Indeed, the current set of inter-related crises will soon connect with the even bigger looming problem of the end of cheap energy.

    Now, that's another challenge our glorious political leaders have yet to realise is a disaster waiting to happen.

  • Comment number 12.

    If your business is based on a risk portfolio then as that risk increases (or more importantly is perceived to be more risky) it is entirely rationa to limit your exposure and transfer assets to a less risky type in order to maintain your overall level of risk.
    But then as everyone else is being rational (!) then the whole thing will just feed on itself and the more risky assets will be sold off.
    Seems to me that those people with nerve will make money in the longer term as they choose their moment to enter the market to by up more risky assets at knock down prices ..

  • Comment number 13.

    So another nail in Gordon Browns prudence coffin. By allowing interest rates to remain so high, at a time of unremitting debt increases to fool himself that it was actual growth. We now have yet another wave of fiscal problems hitting the UK because of his growth sham creating a market where we took on a "disproportionate" amount of carry trade. Why not make this statement Robert? Maybe a little too critical of Brown for the BBC liking?

  • Comment number 14.

    When will it be possible to buy shares in Robert Peston?

  • Comment number 15.

    Ref 1

    I totally agree with your points.

    Pensions are being hammered by the day.

    My wife received a yearly pension statement on saturday stating that it has lost in excess of 40% during the past year.
    It will result in more people being reliant on means tested benefits in the future despite having saved for old age.

    These crooks need to be taken to task - now

    We need to see blood on the floor

  • Comment number 16.

    America is bust. The US consumer can no longer afford to prop up the spending bubble and the banks are in no mood to continue the lending spree to finance it either. As credit cards get called in either average Joe goes bust or local US banks continue to go bust. The US current account deficit is virtually unpayable. The US Treasury is on its way to Chapter 11.

    Soon they will start printing dollars like there's no tomorrow. This will cause a collapse in the dollar which will help to pay off their current account deficit as China and other dollar longs start to dump it.

    The greatest carry trade in the world will soon emerge i.e. borrow in the US at close to zero percent and invest it anywhere in the world where rates are above zero.

    You really want to live in a country now that is self-sustainable in terms of resources and food e.g. Australia, South Africa, New Zealand etc.

  • Comment number 17.

    You state RP that investors are liquidating assets.

    You got proof?

    Who are these investors then? Thousands of them? Hundreds? Ten? What?

    Where are they putting their money and why?

    GC

  • Comment number 18.

    @ hutonthehill @ 12.44 pm

    when they have their IPO i am going to short them. i think he has peaked.

  • Comment number 19.

    Another average piece. Where are all the scoops? Where are the nasty vindictive political pieces? Come on Robert what's up?

  • Comment number 20.

    A record fall in the FTSE eh... Well I guess Gordon Brown can add that to his record trade deficit, the record household debt levels and record house price inflation...

  • Comment number 21.

    The late great J K Galbraith said "The only function of economic forcasting is to make astrology look respectable"

    Listening to the 'experts' with views that change with the winds and contradict each other constantly i think it is clear nobody has a clue what is happening or what will happen. We are in the midst of a panic and a crash. Stampeding herds do not stop until the danger or perceived danger has passed.

    The danger has not decreased just because Brown promises to spend more money that he does not have and cannot borrow without further damaging our country. Talking boldly about Keynsian ecomomic theory no more prevented the last labour disaster than it will this time.

    A deep depression is the only cure it always was and always will be. No one knows when it will finish or how deep it will be. The last one only finished with the second world war.

  • Comment number 22.

    #21 - In the context of your last sentence - is the US trying to goad Syria?

    GC

  • Comment number 23.

    #21

    Well that's it then, the end will be WWIII, let's have now instead of dragging it out 'til after the Amerikan selection.

  • Comment number 24.

    Well, people on the blogs wanted a crisis!

    Anyway, I guess we will see the FTSE touching 2900!

    The pound will hit 94 cents.

    And house prices will stagnate until 2020.

    It would help if the Public sector was given a fair and adequate pay rise to allow for infaltion.

    Say at least the four and a half percent gained by private company employees.

    But with Inflation at ten percent and rising, even four and a half percent won't be enough.

    Just going to check my pension, now wheres my abacus?




  • Comment number 25.

    HSBC shares were down 11pc and Santander 7pc at various points this morning. They were the big two I thought were unequivocally safe. If they're in trouble, then we all are (all the preposterous doom-mongering that abounds on this site aside).

  • Comment number 26.

    George Lennox Sharman Shackle, an economist of note, once said:

    To be a complete economist, a man need only be a mathematician, a philosopher, a psychologist, an anthropologist, a historian, a geographer, and a student of politics; a master of prose exposition; a man of the world with the experience of practical business and finance, an understanding of the problems of administration, and a good knowledge of four or five languages. All this in addition, of course, to familiarity with the economics literature itself.

    John Maynard Keynes, another economist of note, said:

    By “uncertain” knowledge … I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty … The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention … About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know!

    I am minded to observe that no current economist really knows how an economy works, nor how all the constituaent parts interact, nor can predict what is likely to happen, but has the opportunity instead to learn 'real-time' as it unravels how it hitherto worked.

    As a mere student, if I were to predict the future, I would tend to favour countries (wanting to be masters of their own destiny rather slaves to Adam Smith's [offshore] self-interested decisions) protecting individual interests rather than persuing the continuance of free markets and globalization.




  • Comment number 27.

    The clown politicians we have running our country should not just be ejected from Westminster immediately however given the void of any credible politicians in the country who can we replace them with?

    The inept Alistair Darling predicted growth for 2008 (March Budget statement) to be 1.75% to 2.25% a clear example of either lying to the public or complete incompetence either way this man should be removed from office immediately. Given the fact that he himself had just nationalised Northern Rock he should have known the magnitude of the situation.

    But it gets worse why did Alistair Darling and Gordon Brown Feel that nationalising Bradford and Bingley's debt and selling the profitable part of Bradford and Bingley to foreign ownership at cut down prices was a good idea this is bizarre we have given maximum risk to the tax payer here if the loans default the taxpayer pays if the new parent company of the depositors (banco Santander) go under then the tax payer has to bail out the depositors.

    Can the slow learner group of New Labour get any worse of course it can to stop plummeting share prices of the banks they come up with an idea to buy stakes in these banks, ok if we step back and look at what was happening the banks share price was tumbling not because of short selling (this had already been banned) but shareholder had lost confidence in the banks solvency and were worried about them being nationalised also they were sever question marks over top executives. So rather than go into the secondary market and hoover up cheap shares thus sending a message that the UK government was not prepared to let these banks go under and they were committed to them surviving as independent companies they instead decide to dilute current shareholding by forcing an issue of preference shares where is the incentive for me to stop selling my shares if I know hold stock in a company that is going to have to pay an enormous yield to the government at my expense I may as well take what I can get now.

    Then there is the issue of 50bps rate cut given by the bank of England taking the target rate for wholesale lending to 4.5% Now the treasury which fully funds Northern Rock has allowed Northern Rock to maintain their lending at 7.49% almost 3% higher than the target rate of the Bank of England firstly how can this be a target if the governments own bank does not make an attempt to move closer and more importantly what message does this send to the other banks.

    The New Labour government have not only been inept with the public purse but borderline negligent should we really allow these clowns to make anymore costly mistakes (let's be generous and call it mistakes).

    However can anyone of us say the Tories will do a better job I doubt it but we need to make a change somewhere.

  • Comment number 28.

    Well at least we now know what happens when the acronym stew of over-leveraged markets unravels. It was a question often asked by those of us who were sceptical of the boom.

    Nobody knows how this is going to work out and in the end we will see who called it right and who got it wrong.

    I am particularly bothered by all the waffle coming out of Downing Street, the Treasury and the City. Can't they show us some humility and accept they called it wrong for over five years? As for all this nonsense of spening our way out of a recession: the borrowing is just to keep current expenditure afloat never mind neo-Keynsian theory.

    We will hit bottom at some point in the next six months and yes, it will be a slump. Then we will need to get our Keynes from off the bookshelf.

  • Comment number 29.

    Economists are just politicians in different clothes, liars and fools to a man.

  • Comment number 30.

    Call in the IMF, its the only way to get through the Labour lies and find out the truth. Brown and his sidekick cannot be trusted.
    When are you updating the "Brown's Britain" biography Robert? Plenty of material to be going on with, major review required.

  • Comment number 31.

    #26, very interesting since I have read none of either!

    But is this economics at all? I'm an engineer and I'd call it chaos; if I'm right, we now need the Cray supercomputer and a bit of 'chaos theory' to see what's coming next.

    Is anyone working on this?

    GC

  • Comment number 32.

    Ref 15 and 1.

    It is nice to know that the bankers are still laughing whilst everyone else will be crawling in the gutter for pennies.

    Blood on the floor indeed.




  • Comment number 33.

    This is mainly due to irresponsibility of Bank of England; if they have cut rates to 3% we will not be in this mess. Longer BOE waits the more cuts we will need.

    Only people laughing are the bankers who are still being paid bonuses while all of us suffer. We haven't tightened the rules on irresponsible behavior of bank yet.

  • Comment number 34.

    Robert,

    Your posts today have got to some of the core issues with this crisis. For the past decade or more the world economy has been dominated by crazy, unsustainable processes like the carry trade and the excessive leveraging caused by hedge funds and investment banks.

    This nonsense is now is unwinding at remarkable speed. Already the imbalances in exchange rates have largely been corrected, with the Pound now competative against other Western currencies. The Stock market bubble has largely deflated, though it may well overshoot. On the other hand house prices in the UK still have a long way to fall, and the bloated finance sector still needs to shrink dramatically.

    The Government needs to keep the economy afloat as best it can over the immediate short-term crisis, increasing state borrowing to replace the private sector debt that is constantly evaporating through the deleveraging process. In some ways it doesn't matter if that extra borrowing is spent on tax rebates or public works, though I think the former would have the more immediate effect.

    But then what will we be left with? The more difficult medium-term issues, such as
    - The need to export far more real goods and services, and import far less
    - An uncomfortably large National Debt
    - A pensions system in disarray.

    These are going to take a lot more thought to sort out.

  • Comment number 35.

    Stocks are also falling due to earnings being reliant on people borrowing to spend, now that easy credt has dried up businesses are seeing falls in sales and profits, this is on top of corporate borrowing rates going up and on top of a recession which will depress spending and the fact people have higher bills to pay due to inflation busting increases in bills they pay.

  • Comment number 36.

    All those years Christopher Fildes in The Spectator warned about our balance of payments, and what it meant. You can't keep spending more than you earn without someone lending you the money. And one day they'll want it back. That day's come. As Wykehamist says, I wonder if we're capable of fending for ourselves anymore.

    Meantime, for some reason the public sector workers seem to think they should have more money while the private sector is laying people off and cutting wages. All the IT contractors at Allianz and Barclays took a 10% cut last week. Now someone wants a bigger slice of what less there is left. Nice.

  • Comment number 37.

    Shares have fallen a quater? Go back one year and you can see the real fall.

    Oct 07 FT was at 6750
    Oct 07 Dow was at 14000

    Now

    FT at 3750
    Dow at 8380

    FT and Dow down by around 45 percent. Now thats what I call a fall.

  • Comment number 38.

    As the carry trade unwinds and all eyes move to Asia and other merging economies a fresh bout of turmoil is ensuing. Those banks exposed to these markets including those in Austria where bank problems precipitated the great depresion are taking a tumble.
    Economic conditions in China are reportedly a lot worse than previously thought and this will only speed up the unwinds.
    The question then become can all governments borrow money for bailouts and keynsian investment packages at the same time? Has the IMF enough money to rescue all those governments which will get into trouble? What would it mean to the UK if the budget had to be balanced bearing in mind we spend more money on social welfare than anything else?
    I think the answer may be that we should not automatically count on the safety nets being there when we need them.

  • Comment number 39.

    So as per my previous predicions sadly depression came, the fuel prices got declined & a war lik situation is on hands regards www.lifeteller.com

  • Comment number 40.

    23:

    No one could seriously want another world war.

    Remembering what the effects of Atomic, biological, and ordinary warfare, would be.

    Wouldn't be a very pretty world afterwards.

    An awful lot of Nature would be lost, not just people.

    (Radiation ends up everywhere, so do biological poisons etc).

  • Comment number 41.

    Robert, I have watched your recent reports on the the current crises and have often wondered why you pulled your punches with regard to the governments performance and blame. I thought maybe you were just following the bbc left leaning policy on going soft on the government.
    Having only just learnt recently of your own left wing family background (unsurprisingly) my personal suspicions over your impartiality have been proved correct .
    Indeed, the way you laid into George Osborne (with glee) along with the bbc you really let the cat out of the bag as to your own political leaning.
    Unfortunately for you Robert your reporting career will be plagued by comments like my own unless you step out of the stereotypical left wing position you find yourself in. To be taken seriously you need to report impartially i.e. criticise the govt. when required (often).

  • Comment number 42.

    this all falls are coming in the economy because of Saturn position which states a overal time frame of this depression to 7.6 years from Jan 2008 1st their shal be recpite since this face only differs from 2.6yrs each time

  • Comment number 43.

    'The Government needs to keep the economy afloat as best it can over the immediate short-term crisis, [by] increasing state borrowing...' (Random Thought, Comment 34)

    When I ask, 'who lends to the Government?' the only answer I get, is 'The government issues gilts.'

    But what if no one wants to buy the gilts?

  • Comment number 44.

    38

    ""The question then become can all governments borrow money for bailouts and keynsian investment packages at the same time? Has the IMF enough money to rescue all those governments which will get into trouble?""

    NO they cant, the IMF is not even on the Radar when it comes to having enough. The ONLY way this spending spree can be paid for is by inflating the money supply.

    Food crop futures are going through the roof and eastern banks are having runs on their reserves.

    Lower Interest Rates! people cry, but this will result in double digit inflation and therefore double digit rates next year.

  • Comment number 45.

    With most of the private sector relying on money purchase pensions how long can the electorate/Government put up with/justify index linked final salary schemes for public sector workers?

    It's unsustainable, however politicians and public sector policy makers have a vested interest in keeping the status quo.

  • Comment number 46.

    #2 - PetersKitchen

    " . . . in every country going cap in hand to the governments or the IMF?"

    Absolutely priceless! Greedy, over ambitious foolhardy bankers screw the world economy and, when the victims go to the IMF it is "cap in hand". I suppose the redundant workers in the dole queues will be "social security scroungers" next!

    Blind prejudice.

  • Comment number 47.

    This whole thing is ridiculous, when will people stand up and finally admit they are wrong.

    This article just shows how some people steadfastly stand by their theories even in the face of total failure.

    http://news.bbc.co.uk/1/hi/business/7691839.stm

    So if I understand this right - some 'economists' - faceless nobodies who haven't predicted the crash coming - have decided that Darling's actions are completely wrong because the Government will be deciding the areas where the investment should go and that may lead to wastage of resources - probably true.

    So how about the fact that the 'market' has led us down this road of recession by over-lending for far to little money - creating the boom and therefore the bust, by lending too cheaply in areas that didn't need it - thereby 'wasting resources and investment'.

    As a result of this money is now not pouring into the areas that need it (Small businesses) - BECAUSE THE MARKET THEORY IS BASED ON LOGIC - NOT HUMAN SENTIMENT.

    The banks are / were afraid to lend simply because that are / were afraid of their liabilities. Note the use of the phrase 'afraid' - because this is a HUMAN emotion, and not a logical one.

    When will these 'Economists' learn that you cannot predict human behaviour with a calculator.

    The credit crisis may have started this, but this recession (as with all recessions) is now being carried by human sentiment and emotion.

    .....and yet they still try to find market solutions for these problems.

  • Comment number 48.

    Criticise the gov't? - Surely no one actually believes this is a gov't mess we're in?

    It's bigger than that, the gov't are controlled by unseen hands,all gov'ts are controlled by unseen hands, this whole thing has been orchestrated and is most certainly leading to a new war, much much bigger than we've ever seen before. The future really is bleak, the world as we know it is coming to an end, the new world is on the horizon....

  • Comment number 49.

    guycroft,

    Do not bother reading the books, just consider what the learned men said! Economics is an art, not a science, so the ability to forecast is mere guesswork. We are watching what happens when a card at the base of a house of cards is removed. As an engineer, you know the result. Dominoes come to mind.

  • Comment number 50.

    As we all said during the UKIP campaign - and were derided as a party by so many 'a nation should stand on its own two feet'.

    Unless the global re-orientation means Britain should now concentrate on growing spuddies, this is now inescapable and unfortunately the Great Prevaricator Gordon Brown is making it harder and harder as the hours pass for us to recover ourselves.

    We are an inventive and hard-working nation and we can do that, given the chance. But if the people in charge of Prison Island don't face up to the reality, for as long as they survive 'in charge' they are making things worse and worse.

    I am no longer with UKIP but, my goodness, we were right. We said get out of the EU and that would have been the start. The linked-in 'global economy' model, it doesn't work does it. No longer in UKIP but still the owner of a renowned motorsport firm with great export potential.

    Anyone got a better idea, start making things again and selling them? Or do you want a 'service sector economy' (led by the City, and 'inward investment (ergo - working for the Chinese for peanuts..)

    GC

  • Comment number 51.

    38:
    As I said in response to Peston's other blog today, the IMF has about 2OO billion in ready cash (that is, they can mobilise it within a year). If the countries start to fall (I think it's the worst idea for any country to go to the IMF, but that's an opinion), then it will run out very quickly, so the FED and ECB will have to work in overtime to print money, because there is no way that the US and the EU would agree on rearranging the quota in the current situation and hence loose their veto power in the IMF.


  • Comment number 52.

    41:

    No doubt that the government made a number of mistakes, primarily not letting banks fail (that is writing off existing shareholder value and then recapitalising them), but the sad truth is that the UK government has no means to develop or implement economic policies even if it was willing to do so. It is partly historical, partly a consequence of the neoliberal drive since the mid-197Os, of which 18 years was Tory rule.

    There is actually a consensus among the three major parties about the current situation. It is a sad or even tragic consensus, but there you are. The political elite more or less agrees on what the government is doing, because doing anything else would require a serious upsetting of the status quo and the elite is not ready to contemplate it (yet?).

  • Comment number 53.

    Robert:
    I have to say because the balloon of the markets were too big and it is going to release the air slowly....

  • Comment number 54.

    What we need now is some of Mr.Balls' most excellent neo-classical endogenous growth theory.

    Take some twice a day whilst standing about prudently talking up the economy and all will be well.

  • Comment number 55.

    43:

    It could happen, you could call it a negative liquidity trap, when the government cannot increase the yield (or it becomes irrelevant) as everybody wants to sell.

    One of the big problems with the bank rescue package is that banks were pretty liquid in securities, but illiquid in cash. Now they are liquid in both, so for them there is no need to do anything.

  • Comment number 56.

    guycroft-
    What are you talking about?
    Being a member of the EU means that trade deals between the likes of China and the US are done on European level, Europe being bigger than either China or the US.

    How lucky do you feel that the UK would get the same deals with China and the US if we had to work outside of the EU.

    If the trade barriers that the EU put in place came down if we left Europe then China and the US wouldn't sign a similar deal with the UK, we wouldn't have any thing to negiociate with meaning that imports would come flooding in destroying millions of jobs.

    UKIP are a pointless group , if they can come up with a plan to negiociate the same trade deals with the US and China as the EU currently does then real voters will listen.
    But UKIP doesn't offer a solution to this meaning if the UK pulled out of the EU we would be flooded by even more cheap goods as EU protection barriers would come crashing down that the UK couldn't replace.

    UKIP threatens to take the UK out of Europe removing all our trade protections that larger countries wouldn't renew with us meaning millions of jobs would be at stake.

  • Comment number 57.

    I think that it is time to put a bit of perspective on this situation.

    As I see it the situation is this.

    1. We are no longer in a Credit Crunch as all of the worlds major banks are or are about to be recapitalised.

    2. However despite the fact that the banks have been recapitalised, they have not been strengthened by additional rights issues and are thus no stronger than they were in 2000.

    3. From 2000 to 2006 the banks have effectively pump primed the world economy beyond their capital base.

    4. Consequently the words capital base has to shrink to a level that the banks can actively support. As they cannot at the moment provide liquidity to everybody that requires it and thus support the capital base as it currently stands.

    5. Savers cannot support the current economy. As they need their funds to finance the infaltion the banks pump priming has caused.

    6. Consumers cannot support the current economy as they are starved of liquidity.

    7. Investors cannot support the current economy because they are now illiquid as a result of the house market, stock market and commodity market crashes.

    8. Pensioners cannot support the current economy as they are about to hit by dividend cuts and substantial interest rate falls.

    9. The government would like to support the current economy but they will have to cope with substantial falls in tax revenues over the next few years to do it, which may well be unsustainable.

    10. Property owners on fixed rate mortgages or investment linked plans cannot support the economy because interest rates are too high, base asset prices too low anf the current fixedd rate deals will take years to unravel.

    So within all of this gloom, where is the hope. In my view it is this.

    1. Despite the gyrations on the world markets the Sterling/Euro Floor of 1.20 Euro's has remained in tact and in my view any attacks on this floor will be repelled.

    2. Sterling is now severely undervalued and over sold.

    3. The worlds stock markets are now severely oversold.

    4. However you do need a period of solid liquidity restoration to bring about the recovery and the only people who can bring about this restoration are the over and under leveraged borrowers in our societies on flexible mortgage deals.

    5. So once the libor rates have been normalised, interst rates should fall to as close to zero as possible, to allow these people to benefit from lower credit card rates and repay the capital part of their loans down to a level that property market and the banks can safely support without havinf to pump priming the economy.

    So only a major encouragement to property holders to substantially reduce their secured and unsecured debt, as a result
    of historically low interest rates, can stabilise the situation ans restore liquidity that the world economy badly needs.

    SO THE SOONER THIS IS DONE - THE BETTER.

  • Comment number 58.

    For all those who are calling for a BoE rate cut.

    Once again you are making the same mistakes as the past - even though we haven't dealt with the consequences of those mistakes yet.

    Just because you are being stung by the increased payments on your mortgage, or because you were borrowing on the belief that your asset values would never fall.

    In our household we are currently more than £200 a month better off due to rate cuts and falling petrol prices.

    Those of us who weren't stupid enough to borrow in this manner do not want to suffer 'hyper' or even normal inflation because the foolish politicians and public want their injection of growth now - ignoring the future consequences.

    If the BoE cuts the rates again you can forget about the following for the next 20 years

    1) Holidays or trips abroad
    2) Sterling being a respected and safe currency
    3) Interest rates below 8%

    This is the future you will create if you keep banging on about interest rate cuts. The situation may not be pretty now - by why are you lurching out of one crisis by creating an alternative one.

    The US have cut rates so low - and it's made very little difference. Don't worry about the sterling - dollar rate today. The Dollar will start falling again soon once the Fed cuts rates again out of desparation.

    Basically the only way out of this crisis is the hard way - there is no easy way. We need to unwind our credit bubble and it's going to hurt. Simply re-inflating that bubble may assist in the short term but in the long term will be disasterous for this country.

  • Comment number 59.

    52.
    classic left wing response trying to project the blame beyond new labours 11 years in power (" 18 years were under tory rule").
    history shows labour get in,make a mess, tories get in and have to tidy up.

  • Comment number 60.

    I have to agree with poster #5 wykhamist

    The UK and US economies/governments have no room for manoeuvre and therefore the only course of action open to them will be that of protectionism or buggar-thy-neighbour, as some have put it.

    However, the US is big enough to sustain itself as it still has sizable manufacturing and farming industries. However, the UK can't boast the same.

    Not sure about how the US will tackle its oil addiction though! But maybe that's what will save the almighty US dollar.

    Looks like the Euro for the UK is only another 20 percent of devaluation (on the pound) away!

  • Comment number 61.

    Why is the stock market falling so hard, so fast, so far? Simple. Trillions of dollars were loaned away to people who couldn't pay them back. This money was lost. To compound the problem, these loans were considered assets because they were expected to create a return on investment. They were used to justify creation of new investment instruments which amounted to ten, twenty, fifty times as much as the loans themselves. The defective loans were the backing for the new instruments. This is the leveraging effect, using money to create investments many times greater than the assets backing them. It is a multiplier effect magnifying both risk and potential reward. Then this was spread all over the world. When the original loans inevitably failed, so did the house of cards built around them. So instead of a 5 trillion dollar problem we have a fifty five trillion dollar problem. It's more money than the entire world has. With no money left, there is no value to anything because there is no money left to buy it with. There is only one way out and that is to create more money. Not 700 billion at a time but five and ten trillion at a time and not once but multiple times. This will inflate the entire economy making the losses on those loans shrink. When they are paid back with nearly worthless currency by previous standards, the world's economies will resume and those who held those worthless investments will get what they deserve...nothing of value. If banks go broke, so be it. New banks will be created to replace them which don't have those liabilities. Of course this will hurt the friends of those in political power in large economies who own and run those banks but that's their tough luck. There is inevitably a price to be paid for being stupid.

  • Comment number 62.

    #56

    come off it! The trade with USA and China is a one-way traffic and well you know it!

    And please note - I no longer speak for UKIP - resigned years ago but still hold with some of their ideas/ideals.

    GC

  • Comment number 63.

    Post 33 you have it completely wrong re the Bank of England it is all the fault of one Gordon Brown. Allow me to finish before people get mad.

    In late 2004 and early 2005 the bank base rate should have risen probably by about one half of one percent or maybe three quarters. It didn't because Gordon changed the gaolposts re the inflation rate to follow.

    Had we have been still folllowing RPI rather than CPI then interest rates would have had to have risen. However a couple of interest rate rises within six months of a general election would have seriously damaged Labours chances of re-election and had they not won then Gordon would never have got to be PM.

    By ignoring real word fundamentals CPI allowed the base rate to stay artificially low right up to the Northen Rock crash.

    I remain convinced that a rise in interest rates in late 2004 and early 2005 would have taken off the top 10 to 15% of the property market bubble. We would have had a mild slow down and not a massive crash.

    The same applies in the USA where it was critically important for Bush to get re elected in November 2004 in what was an incredibly tight race.

    We are all paying for Gordon Browns vanity and will be for at least the next decade. Millions of pensioners will be poorer as their pensions which come due over the next few years will be worth much less. So if you have to carry on working or retire on much less in the next five years look no further than number 10 for the blame.

  • Comment number 64.

    Re: 1 - Why are bankers going to get bonuses this year?

    Well some of them have made huge amounts of money for their respective banks despite the crisis. Why shouldn't they receive bonuses?

    Moreover, for the banks that have taken the government coin - any intention they have of retaining more talented staff (and therefore having a better chance of making a profit and repaying the money that the "decent, hardworking taxpayer" has invested) will be severely damaged if competitors are free to give out bonuses.

    RBS, Lloyds, and HBOS would start haemorraging staff. On top of the 20+% they are already looking to cut.

  • Comment number 65.

    #58

    "If the BoE cuts the rates again you can forget about the following for the next 20 years

    1) Holidays or trips abroad
    2) Sterling being a respected and safe currency
    3) Interest rates below 8%"

    Excuse me while I die laughing!!!

    GC

  • Comment number 66.

    64. OKnotOK wrote:


    banks and -talented staff-



    Pure comedy gold!

  • Comment number 67.

    59:

    If you think that subsidising the closures of manufacturing to the owners and using the entire North Sea oil revenue and getting resources by reducing health care expenditure, among others, to finance the way out of the problems an economic policy, then fair enough.

    I counted the neoliberal drive from the second Wilson government by the way and if you saw, I included the last 11 years.

  • Comment number 68.

    All aboard the skylark!

    All aboard the skylark!

    Next stop hyperinflation city.
    Followed by a trip to the IMF by one of the G7 countries that failed to save during the good times so that they had money to spend to kickstart the economy in the bad.

    Any guesses which country?

  • Comment number 69.

    You can tell its half term.
    All the normal Labourite school teachers arent on here spouting their usual lefty tripe

  • Comment number 70.

    "26. At 12:24pm on 27 Oct 2008, foolishblogwatcher wrote:

    I am minded to observe that no current economist really knows how an economy works, nor how all the constituaent parts interact, nor can predict what is likely to happen, but has the opportunity instead to learn 'real-time' as it unravels how it hitherto worked."

    Not true at all.

    What you mean is no FASHIONABLE economist really knows how an economy works. Ludwig von Mises predicted it in "The theory of money and Credit", published in 1912.

    You might want to reflect on the title of the following paper:

    "The Trade Cycle and Credit Expansion: The Economic Consequences of Cheap Money" published in 1946.

    Unfortunately, the "get rich quick" boys in the city who *really* run the UK simply wouldn't be able to "get rich quick" under Austrian economic system, so our government doesn't do that.

    There are however many current Austrian economists who understand what and why this is all happening. The only question was "when".

    I wonder if Terry Pratchett now understands Mises a bit better...

  • Comment number 71.

    #63 - It's the economy stupid!

    No good blaming Brown, Thatcher or anyone in between. We are working with a system that continuously begs for freedom, whilst continuously proving it cannot stand up on it's own two feet.

    For those with chilren - it's like your teenage son or daughter.

    I watched this game in the 90's and now I'm watching it again. I seem to have learnt from this, but strangely my 'highly intelligent' counterparts in Government seemed to have missed this elephant in the room.

    A lot of this comes down to wages - we pay peanuts to our politicians and they act like monkeys.
    £100k may seem like a lot to the average joe, but tell me if you're PM and earning that, but you know your job with JPM (Blair) afterwards will net you more in a year than your entire time in office - where would your priorities be?

    The fools don't stand a chance against the 'pig bankers'.

  • Comment number 72.

    It does seem curious that this debate about interest rates never seems to mention the saver. The effect of cutting interest rates will be to reduce further the lamentable savings ratio. In other words, it will give another lifeline to the borrower by cutting the wealth of the saver. How exactly is that going to help in the long run?

  • Comment number 73.

    Shares aren't oversold if they aren't worth anything !

    See Northern Rock and poor old B and B.

    The way B and B was handled was wrong and there really should be an inquiry.

    Perhaps criminal prosecution of Directors would be appropriate.

    Anyway FTSE touching 2900 by Christmas.

    Dollar parity about the same time.

    Tell me why I'm wrong.

  • Comment number 74.

    71

    Hmm, if politicians were paid on results, they wouldn't be getting much at all right now.

    For people who sit around shouting at each other all day they get very well paid indeed, with a nice pension and high pay rises.

    Anyone else has to go to a pub or sporting event and pay for the priviledge, if they wish to sit around shouting at other people !

    Either that or they are discreetly removed to a place of safety by the NHS......

  • Comment number 75.

    #71

    Underpaid!! Ok cut the numbers of politicians by 50% and pay the rest 25% more - better?

  • Comment number 76.

    Can we nail the phony argument that individual pensions are long term investments?

    Nothing with a deadline can ever be a 'long term investment'.

    You need to be out of risky investments (say) two years before any deadline for cashing in.

    So if you are retiring at 65 then your pension needs to be out of risky investments by the time you are 63, however that is a new deadline. So you have to be out two years earlier at 61, but this is a new deadline so you need to be out at 59 and so on... deadlines right back to your current age...

    It sounds facile but it is true - nothing with a deadline can ever be a 'long term investment'.

    Collective pension FUNDS are long term investments for the fund managers because they run for ever - but an individual pension never is...

    Anyone who took the governments tax bribe in return for having their retirement savings gambled by 'pension fund managers' has only themselves, the industry and commentators (including the BBC's money box) to blame.

    I hope those of us wise enough not to risk everything on the goodwill of every government between commencement and retirement do not get penalised for our good judgement by having to bail out others.

  • Comment number 77.

    Robert has clearly described how entirely logical and predictable the collapse in share prices over the last month has been.

    Just a pity he dididn't predict it a month ago!

  • Comment number 78.

    All of which means we are in for a technical bounce, before,C.P., returning to the normal trend.

  • Comment number 79.

    # 47
    Finally someone has had the sense to realise that economic markets rely on human beings as either consumers or units of labour. Human behaviour is impossible to predict accurately which is why economics is not a science. The danger has been in the past that it has been treated as a science, and as such people have thought that they could 'control' and 'predict' the market's behaviour. Nobody-not even RP-has any real idea about what has gone on, what is going on or what will happen in the future!

  • Comment number 80.

    The most outrageours thing I have seen is that these people in the banks are still to get bonuses this Christmas.

    Absolutely scandalous. They really are having a laugh at decent, hardworking taxpayers.

    ---------

    The same hardworking taxpayers who's belief that they have a right to a large house and two foreign holidays a year so have borrowed on the back of cheap loans way beyond their means and started this all off in the first place you mean ?

  • Comment number 81.

    When Gordon says he has spoken to the banks, he had not, he had spoken to the bankers.

    There should be more about what was said to the Icelanders and when it was said and by whom.

    When Gordon said he was attending to the crisis from the time he woke to when he went to bed how did he find the time to go to Glenrothes for some elctioneering.

    When will somebody explain that the Dow Jones Industrial has to be the worst index against which a market should be judged. Only thirty stocks and no weighting, ridiculous.

    If you go back to 1929 you cannot compare stock market falls, there was no index, so how do we know how far the market fell in October 1929.

    Action was taken in 1928 to protect the stock market falls in that year by pumping money into the economy. The same as today only the effect will be much worse. Just wait until next year.

    The price of wheat is collapsing, the farmers won't have enough money to buy the seeds to plant next year, unless the banks change their policy, there is a disaster looming.

  • Comment number 82.

    Re 59. How short memories can be when you are an ardent supporter of one party or the other!!
    We have had abolition of retail price maintenance from Edward Heath, which started this slide into chaos. I would much rather know the real price of what something costs than trail round to find it cheaper elsewhere because at the end of the day you win some, loose some. I would much prefer to have reliable, honest customer service and quality goods that last.
    I would like a train fare that I can rely on not have to go on the internet, spend hours searching for the cheapest price and have to travel when it suits the train company not me.
    Now we have a situation where all the famous British manufacturers no longer operate in this country, in order to sell us cheaper and cheaper goods, they have all relocated abroad. Instead of us being a self sustaining country we are at the behest of flucturing currencies, political turmoil and adding to the carbon footprint by having goods brought to us from half way round the World. Compounding the situation, we have lost skills that generations had handed down. GONE!!
    Then it was Mrs Thatcher's poll tax, great concept, shame they got the detail wrong. Of course every working person should contibute to local taxes, based on the ability to pay.
    Then nationalisation of trains, gas, electricity, water etc etc. so we could all become shareholders!!!! Another Tory concept, another total disaster. Now we have to pay shareholders on what are the most basic essentials in life and most are in foreign ownership, most profits go abroad and again we are hostage to world politics. What bright spark thought that was a good idea?
    and yet more Tory ideas. Student loans, now we have a generation of young people who have been encouraged to get in to debt, live with debt, its OK.
    In order for the housing market to flourish we not only need affordable houses, we also need young people to get on the first rung of the ladder, which they now cannot do. Housing market stagnates.
    Selling Council houses,yet another great Tory idea but the money they produced should have been used to build more affordable housing, that more people could buy in to.
    I don't recall any of Shadow Cabinet arguing against free markets, capitalism etc. I am sure they have all done very well thank you over the past 11 years!!.
    The one sad thing in all this is that history repeats its self over and over again and we never ever learn from history because the next generation always thinks they know best. The World around us might have changed but basic man has not evolved at all, greed getting the better of him everytime and of course this time it has all been exacerbated by the very thing I am using now-- computers. Computers are now working far to fast for mere mortals who have been left holding their heads, whilst computers have led us all down this blackhole!!
    Finally. Now that the press & media have succeeded in pulling us down in to a recession and they have been great contributors to the doom and gloom. I am sure they have rattled nerves, which they seemed hell bent on doing, for some bizzarre reason, best known to themselves, do you think we could now how a concerted effort by each and everyone of them to haul us back out of this mess by instilling a sense of pride in ourselves and our country.
    Despite everything, and nowhere in the World is there eutopia, we do have a lot to be proud of and which many people take totally for granted.eg. we have a health service most of the World would be proud to have. For those who have never lived abroad they have no idea as to the costs most people have to acommodate, just to visit their GP let alone anything else. My daughter recently had her 2nd child abroad, cost £10,000 of which their medical insurance picked up 90% but they stll paid £1000. (she was in hospital overnight).How many in the UK would even consider this as a reasonable cost???
    or in another EUcountry £10.00 each time you visit your GP, more for a consultant and this isa country that boasts free health cover!!
    We have fantastic scenery all across the UK amazing historical buildings, art, literature, sport all of which should be celebrated. Other Countries are proud of who they are, why are we so self deprecating all the time on every front?
    We might complain about the weather but we don't have hurricanes, monsoons, devastating earthquakes, drought, famine, starvation, rampant inflation, dreadful infant mortality, war and all the horrors that brings etc etc.
    All that has happened over the past few months has been self inflicted misery brought on by greed by each and everyone of us for cheaper and cheaper goods, more and more profits personal and corporate. We need to get back to commonsense, a word that appears to have been erased from the dictionary because the World cannot sustain continual growth as we have seen over the past few years. When a greater proportion of the World is starving and suffering and likely to suffer even more so as a direct conseqence of our own greed, party politics of any persuasion and name blaming seems a very churlish thing to be even raising at this point in time.
    We need to be pulling together as Obama says we are all in this together whatever!!

  • Comment number 83.

    69:

    Last week was half term in many schools... Another failed theory...

  • Comment number 84.

    In cases of serious trouble, it is a good idea to shoot the wolf closest to the sledge. In the present circumstances, the wolf in question (in terms of consequences) is the likely collapse of the pound. Before the Brown-Darling axis moves on to stimulation of demand as a solution for all our ills, by printing money to fund a vast public works programme, it needs to stabilise the currency – whatever that takes in terms of short-term pain and high interest rates, or even exchange controls. This blog and the comments say a lot about why the pound has become so vulnerable. Interesting, but irrelevant. It's time for those in charge to recognise that we have an emergency on our hands and to do something about it. For a start, a National Government and Vince Cable in No 11.

  • Comment number 85.

    I watched this game in the 90's and now I'm watching it again. I seem to have learnt from this, but strangely my 'highly intelligent' counterparts in Government seemed to have missed this elephant in the room.

    A lot of this comes down to wages - we pay peanuts to our politicians and they act like monkeys.
    ?100k may seem like a lot to the average joe, but tell me if you're PM and earning that, but you know your job with JPM (Blair) afterwards will net you more in a year than your entire time in office - where would your priorities be?

    ------------------

    It's an even bigger problem than that. Politicians are elected to represent the people of a constituency, for that they need a certain set of skills.

    Unfortunately those who run the country are selected from this very limitd bunch of people who were elected as represetnative, not economists.

    The country is run by a bunch of unqualified people in effect, through little fault of their own.

  • Comment number 86.

    post 76 you are partly correct re the need to move into safe investments.

    Anyone less than three years away from retirement with all or nearly all their pension pot in volatile investments such as shares or property quite frankly needs their head examining. Either they are very stupid or very greedyor have been very badly advices.

    People need to look at a pension as a 40 year investment that is likely to have to keep them for 15 years, maybe more afterwards.

    As such there needs to be a degree of risk during the early years but this risk should be "closed down" within the last five years of their payments to get into either cash or very safe bonds.

    If you have more than ten years to go to retirement then the years 2009 to 2015 may well be the time to get into UK shares and property and also probably US shares as well. Expect a bounce maybe not next year but into 2010 to 2012.

  • Comment number 87.

    Much of Robert's blog and the comments are over my head, although I've been reading with interest for a few weeks now.
    I recently inherited a spread of equities and OEICs - at the time their total worth was a little over £100000 - and my intention was to sell and, via an IFA, reinvest for income .
    Advice always seems to be 'hang on and the prices will rise again eventually' - my question is: is that still good advice when, as I read in someone's comment, 'we are in uncharted waters now'?

  • Comment number 88.

    #81 - yeah,
    "The price of wheat is collapsing, the farmers won't have enough money to buy the seeds to plant next year, unless the banks change their policy, there is a disaster looming"

    they'll have to tuck into their brown envelopes, those poor grain barons, and nary a subsidy in sight..

    GC

  • Comment number 89.

    #80

    Ah, I wondered when Mr Drapers' Tory Propaganda Rebuttal Unit would be logging in.

    Look. If you can take your head out of the sand for long enough, cant you realise that its not only the idiots who bought above and beyond their means who are affected by the economy, but also the prudent, silent lot out there who didnt?

    After all, the general public had nothing to do with CDS's and the other complex financial instruments that made a small amount of people hideously rich off the back of fresh air

    The general public have no control over failed regulatory bodies such as the FSA, who through their own incompetance failed to deliver to thier mandate.

    The only thing the general public can shoulder any collective blame for is electing this bunch of self serving power crazed idiots in the first place and not chucking them out three years ago when they had the chance.

  • Comment number 90.

    Re. Bankers' Bonuses

    It is possible that some bankers will still get bonuses, though that's likely to be in March / April rather than Christmas time. But those who do get bonuses will have earned it more than ever. The size of the pot that gets split up for central functions will undoubtedly be smaller as will the number of people it gets split between.

    Aside from that there will be a lot of people who are incentivised through targets. If they meet these targets then they are entitled to their bonus. I am sure payouts will still be greatly reduced but there will be some. Those who haven't done so well, wherever they may work will be working in the fear of becoming part of a cost cutting exercise.

    It's a stressful environment at the best of times but rest assured, those in the industry are under more pressure now than ever before, prospects are worrying if you do lose your job and wrong as it may be, many will have budgeted on these bonuses to go towards mortgage costs (and I am not just talking about those with six or seven firgure salaries).

    As previous posters have already pointed out, it's very easy to just jump on the media bandwagon and point the finger at "greedy bankers" but it really isn't that simple. When the banks were making a lot of money, they were paying a lot of taxes to the government, they were lending a lot of money to businesses (which were able to grow as a result), they were providing a lot of employment and, of course, those well remunerated employees were paying their own taxes and spending their disposable income in the "real economy".

    So we've definitely had a lot of benefits (our pension funds included) from the rise of the banks but now we're feeling the pain, all of us, not just bankers. It's about time that people took a step back and stopped seeking a scapegoat for all their woes. Yes banks will undoubtedly have acted with a profit motive, as most businesses do, but we as investors, we as borrowers, we as savers, we as voters have all contributed to the yo-yo style economy we live in today. It would be great if we could focus on improving the future rather than finding someone to blame for the past. I don't want to sound "commie" but let's as a country pull together and as a nation, show some positive intentions and pride rather than snide comments, resentment and embodying all the worst elements of a blame culture.

  • Comment number 91.

    #82, where do people like you get off?!

    Speak for yourself when you say these kind of things, I can't believe how you set out to make a point and start with an unsupportable generalisation like this.

    "All that has happened over the past few months has been self inflicted misery brought on by greed by each and everyone of us for cheaper and cheaper goods, more and more profits personal and corporate"

    It's NOT true and it's insulting.

    GC

  • Comment number 92.

    *56 Andrewknight,

    "If the trade barriers that the EU put in place came down if we left Europe then China and the US wouldn't sign a similar deal with the UK, we wouldn't have any thing to negiociate with meaning that imports would come flooding in destroying millions of jobs."

    Talk about shooting your own argument in the foot!

    If we were not part of the soviet socialist republic of Eurasia,then there would be no "imports flooding in destroying millions of jobs".
    That is the current situation as it now stands(!),where we cannot pursue our own nation`s economic self-interest.
    Like the failed USSR,the E.U ruling class will make itself hated by the citizens.Some would argue that the process has already started with the ignored referendum results,and the despised Lisbon treaty.

  • Comment number 93.

    well said #92!

    a '3 year old' standing at any container port in Europe could figure it out.

    'Daddy, why do all those containers come from China?'

    or

    'Daddy, what is China doing with all the money it makes from flooding the world with second-rate junk?'

    "they're building up their strategic capability armed forces with the money, son"

    Very bright my (notional) 3 year old.

    GC

  • Comment number 94.

    Slightly off topic - but I was listening to the Beeb (Radio 4) last night, and they were discussing the various "blogs" that different presenters provided.

    Fact is, there seems to be a difference in concept of what a "blog" orignially WAS and a "forum" is NOW - this (and other reproter's 'blogs' are more of amalgam between "blog" and "forum" - albeit a "moderated" blog (no, the "blog" is not moderated - it is the users comments, i.e. the forum part, that is moderated)

    I TRY to keep up with not only this (RP's "blog") along with many others from the BBC, which, indeed I find, in general, most enlightening. But (don't start a sentence with and, but, there, also, etc... sorry) it is virtually impossible to absorb the lot, unless you are either unemployed, or in a job that "really" doesn't take up too much of your time!!!! (???? no further comment on that)

    Point I'm getting to - is - lots of folks posting on the "blog/forum" seem to expect that the "blog" originator is going to read these comments - I DON'T THINK SO - not because they wouldn't want to - there are NOT ENOUGH HOURS IN THE DAY and our comments probably do little or nothing to flavour the future thoughts or comments of the reporters - this is not a criticism - but - come on to the "blog" late afternoon - a couple hundred comments later, you're engrossed in the train of 'consciousness' and - suddenly - missed dinner and it's time for bed !!! Do you really believe that Robert, or the other reporters, actually have the time to read these posts?

    This is NOT a criticism, I just don't believe it possible!

    Keep up the good "blogs" (one-way statements with no response from the blog originator), and the "forums" / "fora" with the thought train of many!

    Yeah, keep it rolling, TY Beeb ( I rarely sleep and just about manage to keep up with four of my favourite reporters' "blogs" / "fora")

  • Comment number 95.

    #85 hackerjack

    Absolutely! It's very disconcerting when you hear George Osborne say at the start of any interview "Well, I'm not an economist, but...". Fine, enough said - Get out of the job and find me an economist to run my country's economy!

  • Comment number 96.

    Just refereshed page - reached #92 -

    yep, well said

  • Comment number 97.

    80.hackerjack
    The same hardworking taxpayers who's belief that they have a right to a large house and two foreign holidays a year so have borrowed on the back of cheap loans way beyond their means and started this all off in the first place you mean ?



    Not this again please. Can I say as someone who has never taken a loan, mortgage, or ever owned a credit card, that I am sick of bankers, and financiers attempting to divert attention away from the mess that they created and blame the public for the current crisis.

    Most people who did borrow, did so on the belief that the banks 1. had the money to lend and 2. knew what the hell they were doing. After all, surely that's what they got the big wages for.

    Many others fell for the government's and the city's propaganda machine, still churning out the nonsense right up to the crash itself that house prices were going to rise for the next 20 years or so. That boom and bust had been eradicated forever (ridiculous of course, but no-one is the press bothered to question it. They were too busy making programmes about buy to lets).

    Most people are naive, most of them still (even now) trust their government and so-called betters.

    That's what the banks preyed on, that's why they sent out billions of unsolicited letters offering loans to anyone and everyone. That's why they never asked where the money was going, or what it was going to be spent on or whether the person they lent it to would ever be able to pay it back.
    It didn't matter, as long as the profits were looking good that year, they were on to a winner.

    Like I said, I was lucky enough to recognise a con when I see one. Many were not.

    Don't forget where the blame lies, not on the sheep who will be crippled by debt for years, unemployment or turned out of their homes in droves, but the wolves who lent out money they knew could never be repaid, took their million pound bonuses and ran.











  • Comment number 98.

    ooh, I don't know, #94..

    but the rest of the English speaking world might..

    But I figure Declan Curry might read the comments on his, wouldn't take him long.



    GC

  • Comment number 99.

    Now that all these shares are being converted into masses of CASH, the banks must be AWASH with the stuff.
    But what to do with it all?
    But wait! Instead of a miserable annual bonus of just ONE country estate each, they can now have 2 or 3 each.
    No doubt the bankers have already worked this out.

  • Comment number 100.

    Imagine trying to construct a fishbone diagram from the following subjects in order to determine where it all went wrong and why we currently have a run on the GBP!

    Credit crunch (or debt crunch?)
    Thatcher
    deconstruction of UK manufacturing, steel and mining industries
    The City
    free market liberalisation
    Big Bang
    Blair (lawyer)
    wars
    lies
    light touch regulation
    cash for honours
    cronyism
    Bernie Ecclestone
    JPMorgan
    Brown
    economical with the truth
    PFI's (off balance sheet)
    Lisbon Treaty
    tripartite financial regulation system
    BoE independence
    an end to -boom and bust-
    CPI (not RPI)
    doctored figures
    pensions raid
    Gold reserves sell off
    debt bubble fuelled prosperity
    housing boom
    end to cheap energy
    $147 per barrel
    Darling
    Trotskyist lawyer (Entryism?)
    BoE
    Mervyn King
    moral hazard
    interest rates
    inflation target
    Fictional Reserve Banking
    EU expansion
    SFA (a sleep at the wheel)
    Hesctor Sants (new boy)
    Adair Turner (friend of the Rothschilds)
    Bankers
    greed
    inflated bonuses
    leveraging
    CDO's
    CDS's
    SIV's
    off balance sheet
    sub prime
    property crash
    lending freeze
    LIBOR
    fake profits
    Sir Fredwin Goodie
    masters of the univiverse
    Lloyds TSB / HBOS
    Nationalisation
    Bradford and Bingley
    Northern Rock
    self cert mortgages
    125% LTV
    lost share value
    Barclays, HSBC, RBS
    old fashioned bank run
    queues around the corner
    silent run
    Robert Peston (only joking)
    Brown associate
    Bank re-capitalisation
    privatise the profits, socialise the losses
    US Banks
    Clinton
    sub-prime
    liar loans
    Bush
    wars
    Wall Street, The City
    Money pushers
    fictional money
    Main street, the real economy, real money
    real jobs, real profit
    real industry
    Wall Street
    Bear Stearns
    Lehman Bros
    Failure
    AIG
    bailouts
    Merril Lynch
    take-overs
    Goldman Sacks
    JPMorgan
    investment bank commercialisations
    TARP II
    US bank bailout
    $700bn
    Federal Reserve
    Greenspan
    Bernanke
    US Treasury
    Paulson (on bended knee)
    begging
    hedge funds
    short selling
    deleveraging
    silent run on the banks
    Mandy (the last straw)
    cronyism
    liar loans
    Osborne
    Nat Rothschild
    Corfu
    super-yachts
    Russian billionaire oligarchs
    Brown
    cronyism
    hard working families
    This global crisis that originated from America
    FTSE collapse
    Dow Jones collapse
    dead cat bounce
    hyper inflation
    protectionism
    begger-thy-neighbour
    run on the pound
    devaluation
    IMF (sovereign country bailouts)
    business defaults
    job losses
    house reposessions

    ...there's probably a few more to add.
    Anyone care to add to the list?

    I suspect at the end of the day......it would all just boil down to a general absence of integrity, morality and honesty from our so called leaders and political elite!

 

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