Citi and manic Monday
The overnight bailout by the US authorities of Citigroup is big and fairly complicated, but then it had to be: until recently Citi was the biggest bank in the world and even today its assets are not far off the size of Britain's economic output.
Citi has been undermined by its hugeness and global reach, which made it difficult to manage.
And it has near-fatal exposure to the shattered US housing and commercial property markets.
So to reassure those who provide vital credit to Citi, its lenders and depositors, the US Treasury and the Federal Deposit Insurance Corporation have said they will absorb a proportion of future losses on $306bn of dodgy mortgages and mortgage-backed securities.
And the US central bank, the Federal Reserve, is providing a "backstop" borrowing facility, just in case other creditors lose confidence and pull out their funds.
Also the US Treasury will inject $20bn of new capital into the bank in exchange for preferred stock.
In this complicated deal, the US authorities receive a further $7bn of preferred stock by way of a fee and warrants to buy ordinary shares.
The other "quid" for this very substantial taxpayer-funded "quo" includes prohibitions on all but token dividend payments on the ordinary shares and controls on executive compensation.
So this is the end of Citigroup's cherished commercial freedom, its long swaggering history of bestriding the globe as a banking giant.
This proudest of US banks has been humbled: the rescue is about as close to nationalisation as it's possible to get without the state taking 100% ownership.
And the deal is likely to presage a massive shrinking of its international operations, so that it eventually becomes a smaller, simpler operation, more suited to our newly sober age.
Over the weekend, there have been plenty of other manifestations of why so many of our heads are sore after the borrowing binge turned to bust.
Woolworth has been negotiating with its bank creditors and with a buyout firm, in an attempt to avoid being put into administration under UK bankruptcy procedures.
According to those close to the negotiations, even on a best case outcome up to 20,000 jobs could be lost at the iconic and battered retailer and more than 500 stores could be closed and sold.
Then there's the plight of all those overseas businesses that manufacture cars in the UK.
They're being mullered by a massive contraction of available credit and a collapse in sales.
So Jaguar and others want to borrow from taxpayers, since they can't borrow easily from banks or on wholesale markets.
Part of what they've requested is access to the Bank of England's special liquidity scheme which allows banks to swap mortgage-backed securities for Treasury bills (which can be turned into cash).
The motor makers want to exchange bonds or securities backed by car loans for Treasury bills - which would help them provide finance to those who might still want to buy a car, in spite of the inclement economic weather.
If you're shocked by the thought that we as taxpayers may soon be financing car purchases, don't be. You may recall that on 11 November I pointed out that VW said it was trying to exchange securitised car loans for £2.2bn from the European Central Bank (see my note, "The Rising Taxpayer Burden").
And in the US, the Federal Reserve is providing short term loans to all manner of big companies, including motor manufacturers, by buying up their commercial paper.
Governments and central banks all over the world are standing in for dysfunctional financial markets and providing financial support to large but humbled private-sector businesses.
Oh, and then there's the small matter of the UK's national debt, which is rising at a dizzying speed.
With public-sector borrowing in 2010 and 2011 expected to be equivalent to well over 8% of our economic output in each of those years, there's a serious risk that sterling will be shunned by international investors - which could lead to a painful increase in borrowing costs for our government, and perhaps even difficulties in financing the deficit.
So, in a way, the most important bit of today's pre-Budget report won't be the eye-catching tax cuts - which will be implemented more-or-less immediately.
More significant will be what the chancellor says about how he intends to reduce borrowing from 2010 on onwards, how he intends to restore the credit-worthiness of the UK (see Friday's note "Taxes to fall and then rise").
To fill a structural hole in the government's revenue account, Alistair Darling will announce deferred tax increases and public spending cuts.
These rises in tax rates and reductions in public expenditure would need to be both credible and substantial, to minimise the risk of a run on sterling and of a crisis in the public finances.
So what do you have when you put together all the new information to be digested this morning on the ailing patient, the global economy? Just another manic Monday.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~59~RS~)
Comments
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Can I be the first of your disgusted readers to complain about this blog. Once again you’re only looking at the negative Robert. Irrespective of the fact that most countries, banks and many citizens have lived beyond their means for ages – why do you need to tell us? We could have gone on like this for years. You’ve completely ruined our party and this whole crisis is completely your fault.
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Manic Monday! Never! There is a possibility these tax rises might be in place not for one parliament but for at least two. This is not just a change from the last Conservative and the present Labour adminstration we are seeing intervention as great as in the McMillian era. Watchout we are in for a rollercoaster.
Whatever happens today unless the poor public back the tax give aways, we are all in a mess for a long time to come. There is no magic wand or financial instrument to put all these issues in a box and parcel them off to another party. At the end of the day we as voters can vote for change or more the same in 18 months time. Thoughts anyone?
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Dear Robert
Citibank going to the Government Cap In hand, the significance of which was noticed when they sacked 57,0000 people to stay functioning, ??
Well, there is more to this than meets the eye, at a guess the cost now to the Tax payer bailing out thses Banks is going to be three times the original Estimate, already the Northern Rock is repossessing house like it was going out of Fashion, to keep the cost of further borrowing down, BUT it will not succeed, it will have to be Bailed out again,
Utilitity companies ripping the public off regards Direct Debit Payments, to the tune of £700,000,000 is yet another Labour scandal,
that followed the 10p Tax Fiddle, and the rip off over Pensions funds, being taxed by Brown, now he is going cap in hand to the very people he has not taxed the Rich, Middle England and the poor will suffer for this severly, no matter what Darling comes up with in his Budget, "Welcome back Old Labour, and fait tax across the board,"?
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There is a time to come where, as the dominos keep falling, the west will bankrupt itself with bailouts.
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It really is turning into a fantastic farce. When will people wake up and realise that before this entire shambles can come to an end, we are going to have to come to term with some harsh home truths.
The problem is that you simply cannot sustain an economy based on debt. At some point in time, the amounts borrowed have to be paid back, and spending levels go down in response. When people are buying less, economies HAVE no choice but to contract, do deflate. The contraction can be in one of two ways, a slow, controlled contraction, or, as we are finding out all too painfully at the moment, a fast, implosion that deflates all too quickly.
While it may seem that the US Govt. can keep on bailing out and lending money to banks and industrial giants in distress because they find themselves lacking a billion or ten, that money too has to be paid back at some point in time, and if the companies do not recover, and I doubt that ALL of them will, then the taxpayer is left with the bill. The same of course is true in the UK and other countries where the central banks and treasuries are handing over vast amounts of cash.
Then we have farcical situations where countries such as Ireland have guaranteed all deposits in their banks, yet the amount that would need to be paid out is mind bogglingly large compared to the size of the economy, which means that the guarantee is about as much use as a chocolate teapot!
Today of course, Darling is supposedly going to drop the VAT rate to 15% and give us an amazing £2.50 for every hundred pounds we spend back in the reduced TAX. Hurrah! Except that retailers are slashing prices by 30-40% and people are keeping wallets firmly closed, so small cut in the VAT rate is not really going to entice people to go on a spending spree.
What this mess has shown is that far from having the courage to do what is right for the nation, assuming they do know what to do and they are simply not incompetent, they are simply pandering to the lies and threats of the banks and finance industry to keep the status-quo. So, we suffer, the nation suffers, and the bankers and financiers are laughing all the way home.
If only we had leaders with courage and vision to look at the situation and dare to do the hard things, hard things such as being honest that a debt based economy is never sustainable, that in a true capitalist, free market economy you will always get boom and bust no matter how often you say it won't and that simply throwing taxpayers money at the problem without changing the system is no solution at all.
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45% tax on anything over £150k...I think Labour is just testing the water. There has to be much more to come in order to balance the current spending that's going on. They need to target the 'spent' bonuses. That is where all the money has gone.
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#1 If you can see a positive side to the current situation then please let us in on it.
A nice simple 1:1 exchange rate for the pound with the dollar and Euro so we can do the maths in our heads?
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Re: no 1.
For decades we had idiots telling us that everything was rosy and making fat profits out of that lie. There's no place for that sort of spin any more. Shut-up and start facing facts.
Its another day, the start of another week and another phase of the global economic meltdown...
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Old Labour policies, old Labour thinking. What these guys don't seem to realise is that people on 150k per year are already paying their dues, 40% of 150k is a whopping £60,000 tax per year. I think that these people are already paying their fair share.
The real problem is the level of public spending, and the fact that at least 40% of the population have got lazy relying on government jobs and handouts. Raising taxes on those who do want to work, and make money cannot be the answer.
My Grandmother used to say you have to cut your coat to fit your cloth, that saying is more true today than ever. The crisis has been caused by over borrowing, and the Government doing the same isn't going to fix it. I have been a lifelong Labour voter, but we now need a Thatcher style government more than ever, and I thought I would never say that!
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I can agree with postings 2-7 though. Some very good points.
So do we more or less have a consensus now ?
Politicians (all sides) have let us down badly over the last 30 years and we need a change of Government. Not just swapping Reds for Blues, which would only give us more of the same. We need something completely different.
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“Citi has been undermined by its hugeness...”
hmmmmmmmmm...
You did not make this pertinent point when Lloyds was taking over HBOS or during any of the other conglomerations that took place.
It was always the arguement for a bank to be stable it would have to be "big and strong". That was key justification behind all those take over operations.
I just wonder weather we will come to regret the loss of competition that will result from the conglomeration of our banking system.
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Robert
This government has run a deficit for the last 8 years plus the hidden cost of PPI. How the hell are we going to start paying back this debt in the future? Geoffrey Robinson slipped in a "quick one" on the Today programme referring to being able to "fund the borrowing" in the future, i.e paying the interest, not paying back the increased borrowing. This government seems to have brought into the Robert Maxwell school of economics.
Has anyone calculated how much of the growth in the UK economy since 2000 has been down to the increase in both government and personal debt funded from abroad? Strip that out and Gordon's legacy will look very thin.
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All round Todays looks to be a very Black
Manic Monday.
But Messrs BROWN DARLING MANDELSON
will no doubt claim to have a Magic Wand.
Once again Mr Brown:Please Resign.
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I totallly agree with #1. To blame the Government for spending more than even it could tax is ridiculous. This is all Robert's fault.
What I find genuinely frightening is what if this huge bribe with our own money doesn't work? Where do we go from there? Suppose the recession drags on as per Japan in the 1990s (they've never fully recovered). This is not even in our control and will depend heavily on interntional factors.
I think the Government is going about this completely the wrong way. We should be cautious not reckless until we know what we are in for. We are risking calamnity.
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Robert,
I've criticised you at times for dwelling too much on banks and not saying more about the so-called 'real economy' people and firms being dispossessed during this crisis.
But after reading the first reply on this blog I want thanks - for giving this lousy goverment a really hard time in such a high profile way.
Her Majesty's Opposition are being absolutely wet and quite hopeless. They're not putting nearly enough pressure on Brown.
GC
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The real story, surely, is all the changes we have seen to the spin around the PBR package from Darling. The latest package (2.5% VAT cut and a super tax which will raise at best a couple of billion) looks like a substantial row-back from the great Keynsian stimulus which was supposedly on the cards last week.
http://cassiuswrites.blogspot.com/2008/11/real-story-over-pbr.html
Could it be that the money markets have told the Treasury the home truths which the British Press did not dare?
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One aspect underlying this is the falacious definition of capital adequancy. From one point of view, the capital of a bank is represented by the rest of the balance sheet, accounting 101: but if the market valuation of the capital shunts as wildly as has recently been the case, then either huge chunks of balance sheet suddenly slide into profit reserves or the model doesn't work. The theory perhaps is the inverse, that if huge chunks of the rest become valueless, then the market valuation should follow to reflect that, but is this truly the case?
Take housing, as a fer-instance. Bad debts are still in single percentage figures in even the worst cases, price-to-market should only apply to those, so the real loss of value is minimal, maybe 5% of the total housing portfolio. OK, the level of borrowing and other hedging to cover it doesn't float (unless various risk insurances are in place), so the 5% comes straight from owners equity, but that - hopefully - also includes retained profits which take the first hit. Consequently, 60% drops in market value are distorting the true value of these equities in capital adequacy terms, and some better model needs to be found.
The only grounds for market valuation of capital is if you need to raise some more. That then becomes a circular argument, and even a self-justifying one which disregards the above truths.
Unless and until the Banks' Boards take proper and transparent control of their businesses, we'll never therefore get to the bottom of this, as we're into a hunting behaviour where the target is unknown.
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Why should HMG support another nation's industry? If it's concerned with jobs, take the ownership back as part of the deal...
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#1...?????
On Citi, there is a matter of hubris again, by the senior bankers. Yet Pandit is still there and so are is cohorts. Bizarre.
bw
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I think you need another song on the same subject to sum up what's likely to be in the PBR:
And he can see no reason
Cos there are no reasons
What reasons do you need to be shown?
At least from Captain Darling's point of view. And if you want to extend this Boomtown Blackadder analogy further, look at the last verse.
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Oh dear. I always thought the doubty British spirit would see us through this somehow.
But judging fron the responses to post 1 on here, it would appear that we have lost the thread to the very fabric of our society. When the Brits lose their sense of irony, there really is no hope.
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So Darling wants us all to go out MAX OUT
our Cards,empty our Bank Accounts.
Spend it on IMPORTED GOODS.
WHAT A GREAT IDEA.
JOKERS!!! WHATEVER!
MORE TOXIC DEBT MORE TOTAL LUNACY.
We have had a DECADE of LIESs re the
Economy.
TODAY IS THE DAY TO GRASP REALITY &
START LIVING WITHIN OUR MEANS.
GO ON BROWN RESIGN AND SPEND TIME
WITH YOUR FAMILY.
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Oh Dear! Once again governments are throwing money at today's problems in the desperate political game of trying to stave off a depression that is inevitable due to the bubble we have created. When I have a financial problem I am told by these experts to work out what I can afford, and then cut my cloth accordingly.
The government should say we can afford "x" towards this problem - what is the best way to allocate this money. It will be no where near enough to fix things but we can then at least ensure it is spent effectively rather than on a first come first serve basis.
The assumption instead is that the US and the UK are good for whatever they throw at it. Like Iceland, Lehmans, Citigroup there suddenly dawns a realisation over little more than a weekend that someone can't afford it, the short sellers,and margins on CDS's take control, and in a matter of hours, bang - its over.
In the 1930's depression the governments were accused of inaction, but when it bottomed out they had the resources and standing to borrow and invest in an upturn which they could power. This time there will be nothing left in the kitty long before we hit bottom.
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Just another day in the life of a dysfunctional world economy.
Another bank on the ropes, more about ailing car manufacturers, talk of tax cuts, borrowing spiralling up.
Tax cuts = rob Peter to pay Paul. Peter = the future and Paul = today.
Gordon Brown harps on about not being protectionist, but he has no concept of human nature. What would you do, as a leader of a country not so wealthy (poor) as the UK, would you join in Gordons party, or would you act in the best interest of your own country, even if that meant being protectionist. I would.
Now is a good time to rebuild a new economic structure, rather than save the old one that is riddled with excesses and corruption.
The future has already bee written, nobody bothered to read it. http://en.wikipedia.org/wiki/Great_depression
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its just gets worse and worse. Pity no-one can answer ''what next?''.
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robert ''borrowig facility''?
Have you no spellchecker? lol!!
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#1 and #14
So you think RP is responsible for this global mess? You really need to get out more.
The UK is in a global game with other nations. The goal is to say at the table as long as you can. If your nation is perceived as bankrupt by an adjudicator known as "the markets", you have to leave and endure a long period of intense pain.
Unfortunately, there are no rules. And there are questions about the independence of the adjudicator.
In addition, some governments are handed nasty surprises by their banks and other financial institutions as the play goes on. They have to make instant decisions.
No one has ever been in a game like this one before, so there is no experience to draw on.
It really does not matter about economic theory or political persuasion at the moment - it is all down to how lucky you are making your instant decisions and what decisions are made by the other players.
Now if RP was clever enough to construct this game all by himself, then I hope he copyrighted it. Personally, I blame the greed culture that was unleashed on both sides of the Atlantic by the likes of Big Bang. At that point, sensible regulation had to take a back seat. Now it's pay back time.
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When we let financial institutions became bigger than national governments we had trouble coming. It's Darwinian, it was a change in the hierachy. All hierachies can fall, this new one is, and we'll all have to start again from something a lot smaller and poorer.
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#1 no. 1 jonmonst
No place for denial or the ignorant today.
I guess in a disaster movie your the useless one who always says 'i'm waiting here to be resuced' and about half way through the film we see a sticky end.
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I hate to point it out to all you PESTon brown-nosers, but by 'Breaking' the news about NR, he and Auntie caused a run on NR, which is against the law last time I checked. Why hasn't anyone else noticed this? Why hasn't he been questioned by the authorities? Who were his sources? About time you were brought to task Peston.
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This is what I like so much about the internet. One can sit in one's lounge with a laptop fired up and crash the world economy with your fingers. Beats a day at the races.
Des Currie
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I think somehow the intended irony of post #1 was lost on some contributors.
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Agree with the comments about debt and sterling
Two weeks is along time in politics it would seem. When George Osbourn pointed out this inconvenient truth then, his "judgment" was questioned.
He was spot on then and spot on now. The answer to a debt crisis is not more debt!
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Oh for a politician with a backbone, that serves the people and not big business/corporations.
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What is up with all the "cutting cloth" in the comments today?
At least people aren't banging on about the Clapham Omnibus!
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all this bad debt transfere etc will only prolong the problem, in the short it will look good and banks , companies with thrive but those bad debts will return and then the muck will hit the fan.
the americans are a two faces lot on the one hand its success or nothing then on the other you fail big the government will bail you out, shows the country called the united states of america needs to grow up fast or risk bankrupcy.
whats wrong with good ole nationalisation the old labour party used it to great effect during the mid 20th century, this neu labour mob to be honest just dont have a clue and their ways will bankrupt this country as surly as the sun will rise.
the worlds ecconomy is in distress and needs an ennama the problem is no one is willing to start the process.
all the americans and our government are doing is putting a plaster on and using faith healing, eeek gadzooks call in a witch doctor quick.
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The scale of Citibank's problems tells us - if we didn't know already - that even had Brown's control of public spending been impeccable (ha ha) and every private consumer had conducted their affairs responsibly, the nation would have gone bust anyway. Greater restraint by the honest majority would have served merely to feed still larger crimes and excesses by the crooks and the gamblers. The crash would have come later but been bigger leaving ordinary sensible folk like me even worse off. So thanks to Gordon and his army of spendthrifts, you have done something at least to mitigate my plight if only through your blithering incompetence.
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Also, I think post #1 was joking! Lighten up!
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One major overhaul that would have significant effect would be the end of final salary pensions for public servants. Reduce that obligation and a huge sum shifts its position. Wont please the unions; so what? Who is bold enough to make the change? Whoever bites that bullet is the likely long term winner.
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What hope can there be for this country: no manufacturing base, no natural resources, a declining workforce (that was never very productive anyway).
The mony has been syphoning out of this country for years.
Somebody please tell me where the money is going to come from to bail this country out.
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"Old Labour policies, old Labour thinking" - I know the political demographic of these boards is conservative [small c]; but I might say here that the catastrophe of the liberal free market and banking system might suggest we [socialists] were right all along?
Don't say we didn't tell you so!
"Exercise, through the Bank of England, much closer direct control over bank lending" - 1983 Labour manifesto. Plus ca change...
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As thing are its fine to bail out the banks to save the wider economy, but in UK we should have 75% tax on people who earn over £500,000 as this will catch the highly paid bankers who mess us and we can re-cope the money back.
Also this could be the time to bring wealth tax, there could be a one off tax of say 30% on people with wealth over £10m or 3% tax for the same people.
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Cutting cloth????????????????
One wonders when you all last went to a
tailor?
Some of the CITY BOYS i know order 10 suits a time at 2000/3000 a suit.
Then go on to order two dozen made to measure shirts.
Not to mention the shoes at 300 plus per pair.
Shame so few have any CLASS.
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Dear Robert,
Manic Monday? No, just the slow and ineluctable working out of the crazy mixed up processes of a developing recession, an evident period of sharp credit restriction, cataclysmic debt exposure in the financial sector and UK public sector debt levels that are unsustainable. The problem for the government is that these problems are, yes, interlinked, but the linkages are so complex that any policy prescription needs enormous skill.
On the evidence to date, the Treasury doesn't have that skill.
What we are facing is akin to the multiple problems faced by newly emerging economies of the former Soviet Union in the early nineties, or the conditions of the n most severe postwar economic restructuring - not in TYPE necessarily (inflation in both played a large part for some countries, witness 50% unemployment and 10,000% inflation in Ukraine) but in the extent to which institutional, psychological and market factors across financial, capital, intermediate goods and consumer markets were all - variously - affected.
We need the Treasury to start thinking outside of the box that it loves so well, to abandon the textbook (if it has ever used one) and THINK. It certainly needs to think more creatively than it has to date. What about debt cancellation orders? What about suspense sales of state assets? What about capital clearing auctions? We need creative minds now.
What we have, sadly, is the leadership of Her Majesty's Treasury...
And to those who say 'better sober judgement than recklessness', and that the calmness of the Treasury is an asset, I say this: try telling that to addled markets, unemployed workers, negative equity homeowners and bust small firms. Somehow a quiet demeanour may LOOK statesmanlike, but if it is JUST demeanour it is pretty useless.
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The rescue of Citi must surely nail once and for all the misconception touted here by so many that this is a UK problem, all Brown etc's fault.
A few days ago only someone called 'black sheep' was on here bleating that Citi's mass redundancies were simply 'restructuring' and that the American giant's position was better than that of UK banks- whose troubles, according to him /her, were caused not by their own profligacy but by Brown etc.
Please now, free-market gurus, accept that it is the application of your own philosophy to its logical end which has caused this mayhem. Brown, Bush, other political leaders and the central bankers are to blame in the sense that they failed to act sooner to regulate lending big-time. But the underlying problem is that free-market capitalism leads to speculative bubbles, and every so often you get a really big one.
So, free-market punters, please now can we have a bit more humble pie from you, and a bit less blather about Brown etc.
Citibank, RBS etc's woes are their own directors' fault, and the fault of the free-market professors at their business schools. Unfortunately, since we humble taxpayers need banks they'll have to be bailed out by us for many years to come in the form of higher taxes.
Until governments have fixed the immediate problem, it would be better if all you free-market legends sat quietly in the corner.
Let's hope governments can intervene to clear up the free-market mess quickly enough before this gets really nasty.
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45% tax on 150k
Last chance saloon for labour. If labour really meant this why not 45% on 100k but this would loose too many votes for a spring election even though it would have a better fiscal impact. This is a political gimmick, a + + for labour even if in the spring it should loose.
geoffnn
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Without wishing to sound like a conspiracy theorist, does anyone think that the current crisis may have been deliberately orchestrated?
The oil based power of Russia and the Middle East has now been reduced and global food prices have fallen, thus preventing the sorts of mass starvation that was being mooted a few months ago.
Ultimately the current bailouts are quite cheap in comparison to the alternative military costs of achieving the same goals.
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Desperate times, desperate measures required. Channelling additional liquidity through the commercial banks isn't working because of the pressures on them to rebuild balance sheets, the need to service the advances, and the requirement to repay them in the not so very longer term. One possible solution - let the BoE return to its roots as a retail bank (all right, we're talking three centuries back), replace the Northern Rock and Bradford and Bingley signs in the High Street with 'Bank of England', and start channelling money directly to where it's needed. There's something in here as well about pushing funding for mortgages at the surviving mutuals rather than the banks.
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#26 "Borrowig facility"
If even the corporate lawyers are living on credit now, the end of the world is REALLY nigh!
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Robert, why not call a spade a spade. It's nationalisation. If Citi is any indication, we're going to end up with pretty much wholesale nationalisation of the industry.
Let's face another fact. For now that's a good thing, and the right thing. There just isn't any conceivable alternative.
The question is, how and when, if ever, can the state denationalise. It reminds me of Iraq. Everyone agrees the intervention should not belong there, but just how practical is that under the circumstances, given the scale of the 'investment', and the dependencies of the population.
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Do Citi and banks which have received government handouts, treat their cutomers and savers as they have been treated?
Why don't we, the little individuals, get handouts, job and renumeration security and backstop for our mortages and debts?
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#1 - sorry - if you were joking!
It's Monday, humour is a bit thin on the ground at 8.30 am
GC
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Cutting CLOTH??
HEY THERE ANYBODY KNOW WHERE BROWN
GETS HIS SUITS??
Never mind the width feel the QUALITY my
life.
MANDY'S have a style all on their own.
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it seems to me that we have to go by the rules we teach our children. If you are in debt mum and dad throwing money at you is not the answer. It doesn't teach our children to live within their means
We should look at what we actually need and start by encouraging the manufacturing back in the uk. If we increase the duty on imports to make them uneconomical then we can start to manufacture in the uk and create meaningful jobs.
Encourage our farmers to grow the food we require and sell locally.
It all seems obvious to me. Go back to basics
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"It's not preferable, but all major U.S. financial companies will eventually be under government control because the alternative is so much worse", Hugh Hendry, chief investment officer at hedge fund Eclectica Asset Management, said Friday.
"All financials will be owned by the U.S. government in a year," Hendry said. "I bet you."
Nationalizations take dramatic losses from the private sector and places them on the larger balance sheet of the public sector, he said.
"It's not good," but society is vulnerable and society is going to have to intervene, Hendry said.
Shareholders Should Get Nothing
Because the taxpayers are forced to foot the bill for bailout out the banks, shareholders shouldn't be compensated, Hendry added.
(Watch the CNBC video for Hendry's full comments...)
"Actually the shareholders of Citigroup have looked the other way for more than a decade" while management took excessive risk, he said.
Shareholders should take nothing away if it is nationalized, because the taxpayer will be "paying this for a long, long time," he added.
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I want to nominate post #20 by rahere for the:
Post of the year award
Truly an outstanding post !
Thanks
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Posters #7, #8, #19, #27, #29 might benefit from reading
http://www.merriam-webster.com/dictionary/irony
and, while you're at it:
http://www.merriam-webster.com/dictionary/sarcasm
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Good effort, Robert, in including some song lyrics in your report. We look forward to further installments.
And yes, Citi - it's a big package.
But it's going to get a lot bigger still.
Once all these governments have any stake at all in their banks, they simply have to keep on going when worse news comes in, up to full nationalisation. While for the initial deal they have to have asked the banks to come clean about their position, one imagines that a few, err, um, might not have done so (or perhaps more likely, they don't know themselves?!)
Makes one think its going to get worse for the large bank/small countries.... e.g. Switzerland. How is UBS doing at the mo?
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re #9 and several comments I've heard on the radio.
Just wanted to correct a factual error about the tax regime in the UK - tax is calculated on a marginal basis, i.e. the first £5k or so is not taxed, the next £34k or so is taxed at 20% and any income above this is taxed at 40%. Someone earning £150k today will therefore pay in total around £50,000 in tax (not the full 40% of £150k, i.e. £60,000).
In terms of today's predicted announcement I'm assuming that this marginal process will still work so that it would only be any earnings above £150k that would be taxed at the new rate. Thus anyone actually earning £150k today would in fact pay exactly the same amount of tax as they currently do.
Someone earning £200k would pay the 45% rate on £50,000 (i.e. £200k-£150k) - an increase in their tax of £2,500 a year or a little over £200 a month.
I, for one, think they can afford that.
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SACK THEM ALL!
How can it be that when they were lining their deep pockets with cash all these fat cats were for uncontrolled capitalism, but now all of a sudden they have their hand out begging and have been praying for a socialist state?
Did you see what happened with UBS shareholders?
SACK THEM ALL, take back the bonuses of the last 10 years. Lehman went down for $8bn losses, exactly as much as it paid out in bonuses last year.
SACK THEM ALL AND OSTRACISE THEM
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Why oh why is another greedy institution bailed out,if this money had been channelled directly to the small business and individuals that really needs it the worse of the crisis would be over,but to give it to a bank that will just repair its balance sheet is crazy,a new breed of bank needs to be started and let these old fashioned greedy bumpkins compete with it they wouldnt last a year why? because their toxic practices of lending willy nilly in good times and when storm clouds gather they want to take their ball home like spoilt brats is exactly why these failed institutions are in the mess they are,they must be let die or else they will spread diesase right througout the world just like the black plague
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DayTrader post 29.
READ HIS POST AGAIN (POST NO 1).
You might get it next time.
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So as a taxpayer I am expected to add a motor business or two to my conscripted shareholding of financial institutions?
This gets more like a Seventies revival every day.
I can't wait until we get round to May 1979 again.
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I have said in the past the media have exacerbated the whole crisis from initially talking the housing market down to speculating on when a recession might start, to how long and how deep it will be. ( the housing maret had slowed but along came the media and killed it off)
If you talk long and hard enough, people begin to believe anything you tell them.
I wonder what the situation would really have been like now if there had been a news/media blackout??
The media thrives on doom & gloom in this Country. The worse they can make something out to be, the more they like it. They show no sense of responsibility at all, they actually don't care, as long as they get their story out there, first.
They and opposition policticians (whoever they are) always seem to be able to criticise but never seem to have any really credible solutions or alternatives just knee jerk reactions or populist comments.
Any fool can criticise, be rude or offensive but so much harder to be positive and think beyond ones own back yard.
No-one predicted the enormity of the situation early enough to stop it in its tracks or at least stem the tide, so why should anyone now be able to predict the future?
Everyone is speculating, those for Labour are convinced it will work and those for the Conservatives and other oppostion groups are hoping against hope it will fail purely for political gain.
We all have to accept life is not going to be the same again-thank goodness. The greed of the past few decades, which started with Mrs T and has been continued by the present Government is totally unsustainable. The planet just doesn't have enough resources to sustain that greed. We all live on the same planet, we cannot import resources from elsewhere, this is it! We all need to act responsibly and that includes the media, big business etc.
'Small is beautiful' by E.F Schumacher
He held that one's workplace should be dignified and meaningful first, efficient second, and that nature (and the world's natural resources) is priceless.
A book first published in 1973 and still holds good today.
A small statement maybe but one only a greedy fool, with no consideration for anyone or anything would disagree with. We haven't progressed at all in fact we have regressed and its our children and grandchildren who will reap the rewards of this generations greed.
I would love to see the Government, any Government use the opportunity we have now to be so radical, not just try and get back to what was before because by 2030 we need two planets to sustain the current lifestyle and no-one is going to be able to produce that by waving a magic wand.
The Government of the day, any day knows we will all sit down and take whatever they throw at us but maybe we need People Power to take hold and say enough is enough. We can all talk the talk maybe we now need real action if we are going to all be around in 2030 with food on the table, water in the taps, clothes on our backs, homes to live in. Africa is showing us where all this is leading and don't think it won't happen here!! They are not on another planet the are 'down the road' so to speak.
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The only way forward is a rethink of the economic model which has been in force for the last 30 years. Sadly though the Conservatives believe in freeer markets, which basically means more people ending up homeless and an increase in business failures as this confirms the capitalist model as being valid. Therefore for all the collapses etc we are simlpy seeing that the model works!
Makes me think, do we really want or need this model?
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Good idea to tax those on over £150k p.a. How about another couple of percent for those earning over £300k, £400k or £500k p.a?
Its no wonder we all want our houses to increase in value - they represent the only pension we are likely to see and at least we can enjoy them in the meantime. How about cutting or abolishing stamp duty for a while to speed the property market up a bit? Or abolishing stupid HIPs for ever? If your house isn't selling at the moment, you can't take it off the market for a while without incurring the hassle and cost of commissioning another HIP if you go back on the market again in, say, 6 months time.
Banks should slowly cut back the percentage they lend on salaries over a few years instead of pulling the brakes over night. Mind you they should have done that a few years ago and they didn't ........
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Never mind the credit crunch I watched Dragon Duncan Bannatyne talking about his life last night and now I'm really depressed.
GC
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#57 tam-fb
Point noted. Your right. No. 1 is being sarcastic/ironic.
I did not read his entry to the end as i had already got bored at line 3.
Not really high end satire though.
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Reading all the blogs over the past couple of months has been inspirational and uplifting to see how many people care for what is left of this country.
However, the mess that we are in is of a magnitude that could not have been envisaged a couple of years ago.
Teenagers of the sixties never realised the implications of the words we won't get fooled again, but oh have we been fooled.
The teenagers of the sixties grew up and, in the main, became a truely prudent section of society, paying for their offsprings education, having holidays that they could afford and living in houses that were within their means. Many of these prudent people now face an uncertain future as their assets are being stripped away by this government. People who have made an honest living and paid into private pensions will face the prospect of means tested benefits and of course get nothing as their prudence will perhaps just lift them above benefit level.
The whole episode has become depressing with the likely need to continue working well past 65 in porly paid part-time work, if you can find it
Wont get fooled again, Oh yes we have been.
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biggest laugh i heard on tv this weekend was bbc news saying vat reduction of 2.5% would stimulate economy and quoted a plasma tv would reduce from 800.00 to 782.97 and a handbag would reduce from 50.00 to 48.93.
Yep I thought this is the way out of this mess.
I bet dixons & handbag shops will be recruiting ex bankers.
If this is the best our financial leaders can come up with then the show really is over.
A total re think of all fiscal policies/ structures rules and regs are required- cos system is broke.
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To me there are just too many interesting stories but one of the most significant is that Lloyd's wants to offload BoSIF- the part of HBOS that went in for sexy buy side deals. It gives the game away- these banks were just like rogue governments and need a 'good kicking'. Sadly they are an essential part of international trade but only help others do it- they do not create wealth and so should be solid and boring.
For today, I suspect GB and AD will produce a package that might just generate enough confidence to help us reduce the impact of job losses somewhat next year. I think they are also right in using VAT and higher rate taxes. When times are better and there is a risk of deflation- putting the rate back up will be sensible and those with jobs earning high salaries should pick up a higher share of the tab especially as those of us who have done well out of Labour this last 11 years really need to pay some of it back as many of us- even those of us who have always loathed the banks and the excesses of the City- have been at fault in the creation of this debacle- we stood by watching Rome burn and counted the cash going into our pockets. The Chancellor must also signal that our future is in wealth creation- we need to start making things again and using our talents and skills to create wealth not deals. He needs to announce that R&D tax credits should be greatly extended and should include training in manufacturing companies.
What I cannot understand is why GDP =spending- should it not be adjusted for net borrowing so that we reflect the fact that we are spending money we do not have and using future wealth up before we have created it.
Final point is that the media needs to be hammered just as much as the banks- you talk about a 2% fall as if it was the end of the world and as if nobody should have a good Xmas. We are all a bit more cautious but as far as I know if there were 28 million people in work last year there will be 27 and a half million people in a job this year- hardly a meltdown. When the footsie is at 2000 and £1 = 50 cents- that is a meltdown. And we will recover even from that.
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Slightly off topic but still linked to the UK problems even though Brown always prefaces any comment on the UK's economic issues by blaming the US sub prime market! Funny how he claimed it was his and BLiar's policies that were driving the booming economy in the first place.
Anyway there's a very interesting article in the FT saying what we already knew but with ONS stats backing it up.
"Two out of three jobs created since 1998 have been in parts of the conomy dominated by public services .... The dominance of the public sector has been so pronounced that in some areas the number employed in the private sector fell between 1998 and 2006 in spite of the strength of the economy over that period." There's more at ft.com
The public sector is too big and while pay used to be low with good pensions to make up for it that is no longer the case, so we have too many highly paid people with superb pensions being paid for by people who have reducing pensions (my meagre pot is down at least 40% from this time last year) and lower salaries.
Gordon - its time you went back to Scotland with your smug smile and left others to clear up your mess as you clearly can't do it. A reduction of 2.5% in VAT will make no difference whatsoever. 45% higher rate tax will have mimimal impact. If I received a tax reduction I might go off and buy something I had put off buying but only if I could get a low enough interest rate as well. That might help China more than the UK
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i have a gut feeling that the dollar is about to capitulate.
btw, morgan stanley is next on the nationalisation agenda..
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Pardon my ignorance in high powered finance.
By spending trillions globally on handouts and backstops, are taxpayers and governments just indirectly guarantee and safe guard the loans made to financial institutions by the wholesale credit market. Do those who provide the money in those markets even pay the same level of taxes, if any, as we do?
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Post 68 DayTrader
THE CENSORS censor the high end stuff.
Exterminate Exterminate I am A DARLEK.
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47.
Yes Berner I have thought , and still think, that there is a strong possibility that the current global financial crisis has been engineered by the true masters of our universe. But who are they?
That is the question. Any ideas?
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if a government can't manage their country's economy properly (like using all it's savings-gold-to pay it's debts, then borrowing more) then do we really want anything nationalised?
Currently it feels like living with a spouse addicted to gambling!
There will surely come a point when Gordy won't be able to pay his debts, nor borrow more.
Effectively this budget proposal looks like one spouse racking up debt before leaving the marriage for the 'bit on the side' (banking) and leaving the fall out to the other half!
Vindictive. Borrow today, the responsibility of paying back for someone else tomorrow.
How can the government and banks dare to tell the people of this country to curb their spending behaviour when they set exactly the opposite example?
Knee jerk politics of the worst kind
Do they really think the electorate are that stupid?
The government have no idea what's going on, and the banks won't tell them.
Since all this started, many people, including us on the blogs have been demanding full declaration of balance sheets and off book debts for banks AND the government.
As usual, the most important people in this country (the electorate) are being treated like fools.
Many people have no sense of responsibility and do as they please-including those we expect to know better.
Who will be brave enough or incensed enough to call Vote of No Confidence in the House today?
Calling all politicians-listen to your electorate-get Gordon out now, and do what you're supposed to do-protect your people! Prosecute the banks, get all the dirty linen out in the fresh air.
Only then can we start again.
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Robert,
I'm totally confused...unrestrained, unreasonable borrowing apparently got us into this mess, so what's the government going to do to get out out of the mess?
Unrestrained, unreasonable borrowing !
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#47 Berner
I prefer the conspiracy theory that Labour are pushing the Lloyds / HBOS takeover so strongly so that they can "pump and dump" scottish currency (effectively devalued by huge increase in printing) and once it's served it's purpose then give Alex Salmond his independance.
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Why can't the government make the energy companies pass on the savings they are currently making on wholesale energy prices? That will save cash straight away for hard pressed people across the country. It would be an immediate way of refuelling the economy without the long term burden that tax cutswill bring. How can the government possibly think that we can afford these tax cuts now?
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This comment was removed because the moderators found it broke the House Rules.
I was sick to the teeth of listening to Phoney Blurr during his time at no 10 but this man GB is in a different class, he never says anything but blah, blah, blah, rhetoric that I doubt even he understands.
The worst government in living memory.
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Alexander C
Any news on your blog site yet?
How about your banking licence?
Did your CHAPS payment go yet? Or did it leave your bank Friday to arrive today?!
Send the Fraud squad to all the banks and the treasury. What we are seeing surely amounts to financial terrorism!
The statement made by RBS to guarantee loan interest rates etc, does nothing to help the companies they pulled the plug on-be interesting to see what the total human cost of that has been!
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The Government and local authorities have literally billions of pounds available to them - all they have to do is follow the private sector and shut down the golden final salary pension schemes. A report a couple of years ago gave a figure of about 30% of each public sector salary being paid to fund these pensions (and that by now will no longer be adequate, given the rise in mortality and the recent fall in equity prices).
The problem for the politicians is the unions and the inevitable strike action that would follow such a move. However, such a move has to come; the public sector now earn a greater average salary than the private sector and get 30% deferred pay p.a. so that they can retire in luxury. I don't want to pay more in tax to pay for their pensions than I can afford to save for my own and that is the situation that we are very close to.
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77.
Yes, what we need now is George ''collapse'' and his bunch of Bullingdon boys running the show, financed by Hedge-fund whizzkids and bankers.
Great.
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Gordon, we are still sinking ! Well GO drill another hole in the bottom and let some more water out my Darling !
Hi Hi Captain
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Well, Robert... you are always just about spot on with your analyses and observations. However, I'd like to extrapolate further on recent events. About five or six years ago, I suddendly found myself getting a gut, and slightly anxious feeling. The next recession is going to make the last one in the early nineties, and previous, look like a picnic. I always think these insights are part science, part art form. I must have said it many times. When Northern Rock went down, my heart sank. We are at least 12-15 months in on this now and it just gets worse. Citi Bank, once the world's largest, arrived in Accident and Emergency over the weekend. I was right five years ago, and I'm right now. We are heading for a complete financial breakdown. I do hope I'm wrong. Governments around the world will eventually run out of money. Remember, the Great Depression, as my San Diego professor used to chant, never really ended until the USA entered WW2.
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A question for the economics lecturers:
It seems that the script is from the great depression in most respects and that currently governments are trying to jump from roughly 1930 to 1935 without the very nasty bit in the middle.
Will the solutions of 1934/5 applied to 1930 conditions work? or did they only work because conditions were as they were when originally applied?
Or will they just facilitate a faster progress towards Septemeber 1939?
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#54
Spot on, just about what I said a couple of days ago with the additional factor of abolishing VAT and replacing it with import duty.
We must make more stuff and grow more food.
Must admit a vested interest, we have a small handmade furniture business, REAL furniture made from REAL wood.
Prior to that designed farm machinery.
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Robert! "mullered" ?
Really, what does this mean. Is this a BBC blog? Please!
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In the first great depression (1873-96) we all scambled for Africa - any ideas of anywhere else to have a go at today?????
Greenland, N.Pole, Moon................. or back to Africa...........
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Post 20 re the Boomtown Rats song.
We could stay with other Prince penned songs to sum up today equally well.
For the PBR we could have "let's go crazy" or maybe "sign o the times".
Perhaps Alistair & Gordon want us to party like its 1999 though even with a 2.5% VAT none of us can afford a "little red corvette".
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Re 84
Sorry but absolute rubbish!!
My husband has worked in Local Government for over 20 years as an architect but could have earnt twice as much in the private sector. He has been designing and building schools, care home, libraries, fire stations etc.
His pension would then also have been twice what he will get!!!
They don't get bonus' or handouts and have to declare any and all gifts including the odd diary or calendar received at this time of the year, just in case its a potential bribe!!
Why is the grass always greener on the otherside.
Why we cannot work as a nation and see that everyone is just trying to do their best and most ordinary people really do work hard at what they do.
Its funny isn't it how we let off sports personalities, so called celebs, who add nothing at all to the Country and who get paid stupid money for doing so,
Guess we are the stupid ones for supporting this ridiculous culture, not the ones reaping the rewards.
The World would carry on without any of them but would be a sorry place without essential services like Police, refuse collectors, teachers, doctors, nurses, social workers, care workers etc.
Jobs many of us wouldn't and couldn't do
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I don't know about anyone else on this blog, albeit that many of us expect things to get worse, but to be honest I actually want Brown's govt to 'crash and burn' as they say, just get it over and done with and an end to this saga. It's the nail-biting day-to-day flip-flop anxieties that are really 'doing my head in'.
If a great levelling came after, well, not before time. All I can remember in my lifetime is being 'sat on', taxed to death, legislated ad nauseam, bureaucrated by Westminster and Brussels, paperworked, overworked, rendered, interpreted, expected, forecasted, lectured, hectored blah blah. And working harder every day and having to make more with less, getting more and more depressed year on year, the shear humdrum existence of getting nowhere in your own country and all the while every town in Britain turned into an amorphous samey wild-west mess, cameras watching you everywhere, big companies ripping you off and squealling about their huge profits, cheap junk on sale everywhere, no choice, no quality anymore.
When it all falls down, which it will, good riddance to all of it.
GC
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This govement is playing a game of bluff, it dosnt have the money to pull this off, our whole system is based on confidence and it has gone. People are losing jobs left right and centre in this area and I think this crises is snowballing.
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#84
"The Government and local authorities have literally billions of pounds available to them - all they have to do is follow the private sector and shut down the golden final salary pension schemes. A report a couple of years ago gave a figure of about 30% of each public sector salary being paid to fund these pensions (and that by now will no longer be adequate, given the rise in mortality and the recent fall in equity prices). "
I think that would be an extraordinarly bad idea - millions and millions of pubic sector staff are paid this as part of the package - the pay is poor, the promotion possibilities low but you get betters holidays and a pension scheme that costs less to the member than if they worked in the private sector. The pension was revised this year increase the staff contributions and reduce pay out - the PS wouldn't stand for another erosion of their deal.
If the government closed these schemes there's no way the million of so workers who retired each year could support themselves leading to a much higher wellfare bill
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Re: 77
"Do they really think the electorate are that stupid?"
er.... yes, they do, and, unfortunately, yes, a large proportion of the electorate is stupid.
Look at the number of people who thought they could borrow money on their credit cards and get away with paying the minimum amount forever.
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Agree totally with 89
My son is a qualified furniture maker having spent two years at fulltime college at his own expense.( and mine)
He has been working full time as a landscape gardener while he sets up his business but sadly last Friday was laid off.
He can now either sign on and not do anything or struggle to try and get work in with no support. There is no half way house. Why can the Government not give people a five year programme and support them financially on a reducing basis.
These are people with real skills working in a sustainable industry here in the UK. There are so few of them left.
We are told we need skilled people in the Uk and yet no-one supports them.
He and his fiancee are hoping thinking of going to Ireland where skilled crafts people get superb support and are really appreciated.
We have a 'something for nothing' culture in the UK which has encourage big business to source cheaper and cheaper goods abroad for larger and larger profits.
No-one wants to buy anything which will last, so big business builds in obsolesence.
We now have an enormous shortage of skilled workers just when we need them most.
This Country was built up by being highly skilled, ahead of the game, now we cannot even play catch up!!!
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Post 84 a good idea and it has surely got to happen some day soon.
However until the 646 council workers in the Houses of Parliament agree to do the same with their even more generous final salary scheme I can't see it happening
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re my 20
There were some others I considered,
Mamas & Papas' "Monday, Monday" with the lyrics
"But whenever Monday comes, but whenever Monday comes
You can find me cryin' all of the time"
or Cabaret "Monday makes the world go round"
and even Abba "Monday, Money, Money"
but they spoil the synergy...
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I love this blog.
Full of doomsday merchants.
I can just picture the scenes in households up and down the land as posters rush to the laptops every morning to post their latest doom and gloom predictions whilst the wife calmly nods yes dear, thankful that she doesn't have to listen to their "I told you so" witterings.
Really if those posters are so wise WHY are they posting on a BBC blog and not doing something creditible to aid our nation.
I suppose if you post the end is nigh on a blog every day from now until the end of time one day you can say "I was right."
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This comment was removed because the moderators found it broke the House Rules.
Two things:
1. Does it not worry anyone that after we have all been spending beyond our means for years, the government's cure is to encourage us to spend more?
2. And Robert, you keep using the term "mullered". Stop it please. It's cheesy slang, detracts from the intellectual force of your arguments, and as far as I am aware tends to mean "blind drunk" rather than "broken".
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LOL post #32! Perhaps irony is the first thing to suffer in these 'serious' times...
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#79
Scottish independence? Yes please... We need desparately to get out from under the malevolent and stifling influence of both the City and Treasury.
This morning it's being reported that once again a Norwegian company is buying one of the two most high tech oil/gas exploration companies we have. The Norwegians bought the other one last year.
Both companies are university spin-outs so not only has the development of their technology cost the tax payer money but due to the more forward looking and intuitive attitude of the Norwegians we will now loose the potential the technology created.
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The US gave an average of $1200 (£600 as it was then) a few months ago.
Didn't do didly sqat apart from provide some supermarket managers a slightly bigger bonus for the month as folks ditched the high end shops for walmart.
So what is the result of the spun -2.5% Vat reduction and boogus 45% higher rate tax going to do?
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I would'n't mind such excessive levels of government, if they actually could run things. They can't, and I apply that to Labour (not so new) and the Conservatives (not so blue). Time for a Liberal Democrat government, just to keep the others out of power for a while (can't be any worse). To the many excellent posters here, thanks for some great posts.
johnconstable posted this link the other day, maybe simplistic to some, but I found it informative and a little scary. We are not even close to facing up to our real problems.
'The Crash Course' at
chrismartenson.com
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Looking forward to seeing an item in the shop that previously cost £9.99 now costing £9.78 - are the retailers really going to pass this on? Let alone the cost of re-pricing everything. What a joke !
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94
and you think Brown did all that!!!!
sorry but successive Governments have played their part and will continue to do so. Makes no difference who is in power at all because politics always attracts the wrong kind of people.
There are those who come in to it with all good intentions but overruled by party politics or rubbished by the media.
Life is about balance its not red or blue but as we have a two party system nothing is going to change.
We have allowed business to get too big, too powerful, uncaring. We have no human scale to anything anymore.
Go and read 'Small is beautiful' it makes so much sense.
shame it was written 35years ago and nothing has changed
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59. At 10:18am on 24 Nov 2008, jamer11 wrote:
Someone earning ?200k would pay the 45% rate on ?50,000 (i.e. ?200k-?150k) - an increase in their tax of ?2,500 a year or a little over ?200 a month.
===========================
45% of £50,000 is £22,500 - NOT £2,500 - which makes £1,875 per month
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One of the commentors said about 6 months ago that
"Labour governments always run out for money - this one has just taken somewhat longer than expected!"
How right he was.
However, if we're all going to hell in a handcart why's the FTSE currently up nearly 200 points?
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Come on Robert, we can't be expected to bail out the auto industry since we don't have one anymore.
If Jaguar and Land Rover want Government money let them go to the Indian tax payer and ask them.
For the UK, this would be a bail out too far.
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Re: 1
Don't blame the messenger for reporting on the dire state of the global economy.
Even worse blame him, when all our greed and bad regulation caused the problem.
It's bound to be all bad news for a year or three, so if you cant take it ... read fiction.
Keep up the good work Robert, the enlightened learn, adapt and innovate by reading your blog.
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A six month payment holiday to all current mortgage holders would solve this current credit crisis & recession overnight.
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Robert
PLEASE take the time to consider the mathematical probabilities and full implications of this comment. I need an informed assessment of the beyond- chancenesss -anyone qualified to comment out there - PLEASE.
I first posted this prediction on 8 Oct on another site and later on Have Your Say. It read:
" Added: Friday, 24 October, 2008, 15:25 GMT 16:25 UK
Re: Dow Jones closing price.
I see the next significant low being 7,6ish (7,652 to give almost certainly unreliable detail).The significance of 7,6.. is-
- It occurs when Bush is less affected by share prices and no longer seems to take responsibility for the markets, indicating it will be at least not until very close to the election.
-After it occurs, trends become much less chaotic as the full implications of actions taken by Bush in the first week of Oct become known."
On 23 Nov I posted the result:
"Context - DOW closed at 9,447 on 7 Oct.
SINCE 7 Oct there has been a continual downward trend in the closing
price.
ON 20 Nov the DOW closed at 7,552
"NEW YORK, Nov 21 (Reuters) - U.S. stocks surged on Friday to cap
another volatile week as investors greeted with relief reports that
President-elect Barack Obama has chosen his point person to combat the
U.S. economic crisis, lifting a major uncertainty from markets.
Stocks limped into the day after a back-to-back pummeling that had
left the S&P 500 at an 11-year low, and spent most of the day drifting
in and out of positive territory. They shot higher around 3 p.m. when
NBC news reported that Timothy Geithner, president of the Federal
Reserve Bank of New York, would be nominated as U.S. Treasury secretary."
Comment
The prediction was the sum of two parts. First, I identified the
APPROXIMATE closing price at it's next significant low. I took this
to be 7,6(ish). Then the same technique was applied to find the
detail (i.e. the last two numbers). I took these to be 52 and simply
added them to 7,600 without considering the issue of rounding. I
neglected to take into account the fact that 7,552 is nearer to 7,600
than 7,652. I inadvertently rounded up, I shoud have rounded down.
It is interesting that I chose to share the detail I regarded as
"almost certainly unreliable" and that it has lead to such a valuable
learning experience for me."
Berner - you raised the question earlier about whether the current situation was "deliberate" - my prediction came from remote viewing Bush's thoughts regarding how bad things would get whilst he was still accountable. I consider my prediction was at least broadly correct, therefore I deduce he had been provided with very accurate forecasts and the current situation was anticipated.
With best intent
Loraine Connon
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Re: 110
You're right but they'd already have been paying 40% on this amount so the increase is an extra 5%, i.e. 2,500 pounds
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As always there is nothing new:
We contend that for a nation to try to tax itself into prosperity, is like a man standing in a bucket and trying to lift himself up by the handle.
Winston Churchill
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#77
Hear hear. Unfortunately, none of them will have the cojones to call for the vote of no confidence. Nothing (to me anyway) has shown Cameron's unreadiness more than his constant punch-pulling instead of going in for the kill. He aint ready and the Tories aint ready. As a lifelong Tory, I hate to say it, but its plainly obvious.
Do they think the electorate is that stupid? Well, yes, I honestly think they do. Mind you, with the celebrity obssessed, me too, I'm alright Jack mentality that seems to pervade through large swathes of the population, maybe theyre not far off the truth. If we were all less stupid, we would be poking our MP's in the chest demanding answers, reminding them all who they are accountable to. Whether this crisis will be enough to awaken those that have been politically apathetic over the last 20 years, who knows. I wouldnt like to bet on it though. Its almost certain that we are going to see more of the same ad nauseum until the electorate finally decides it has had enough and the BNP have their eureka moment which suddenly makes them electable.
And that is why, at the earliest opportunity, I'm going to emigrate. Life is short enough as it is without being lied to and fleeced for 80% of it by these idiots. I'm lucky if I've got 20 years left, if that. I'm damned if I'm going to stay here slowly drowning.
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"THE DENIAL BY THIS GOVERNMENT FOR RESPONSIBILITY OF THE MESS WE ARE IN IS LIKE THE CAPTAIN OF THE TITANIC BLAMING THE ICEBERG FOR GETTING IN THE WAY".
I don't take any credit for that statement as I read it in the press over the weekend but it sums up the situation perfectly.
Who was notorious for raising taxes by stealth and spending not putting any money aside in the supposed good times. Not you and me but this government, we are paying a desperately high price for their ineptitude and incompetance
All we can but hope is Messrs Brown and Darling realise the game is up and go now, never to return.
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It seems that GB and AD are adopting pound-shop economic gestures; a Woolies-style pic n' mix selection of cheap gimmicks - a 2.5% cut in VAT and a 5% increase in tax above 150k for instance - these initiatives will have a negligible (and conveniently unmeasurable) impact on the dire situation we're in, but it will make it look as if the gov't are doing something and 'showing leadership' .......
But all this budget really says to me is that if you're on the deck of the Titannic, the boat has already hit the berg and is sinking, the lifeboats don't work or are stuck, and you happen to be a member of the ship's orchestra, then you may as well play a tune or two whilst waiting to disappear beneath the waves ... glug glug glug
The Citigroup story is bigger, and its importance here in the UK isn't lessened by it coming from NY and Washington, as we're all on the deck of the Titannic together; several of us said on Friday that Citigroup would be gone by Monday and it is gone for all intents and purposes - effectively nationalised; will this stop the rot and restore confidence in the banks? doubtful but we have to hope it does I guess
Instead of relucant nationalisation a bit and a bank at a time it might soon be the moment for the US and UK govts to bite the bullet and go for wholesale and total nationalisation of the banking sector! that would mean that public policy could be applied directly to tell the banks to lend, whilst sacking the old bosses and freezing dividends
The Bush and Brown administrations still desperately want to believe in market solutions, so we'll have to wait for Obama on Jan 20th before moving on to that stage I guess; by then we'll have exhausted all the other options as this crisis is moving fast
In the meantime our govt could do some things which would be much more useful than the VAT and top-rate tax gimmicks: for instance they could guarantee the insurance on lending by banks to businesses, which would free up credit and help to start cash-flow again, which is urgently needed.
Whilst waiting to hear this afternoon's budget pronouncements and wondering if we are going to sink into a depression in the longer term, we should try to chill out a bit with some good music to keep our spirits up, and I'd like to recommend Ry Cooder's CD 'My Name is Buddy' - (Buddy is a big old red tomcat who hits the road as a hobo); the CD has a depression-era theme but is generally positive and uplifting, as signified by the last lyric of the last song 'There's a Bright Side Somewhere':
'People got a good job somewhere, got a
lot of good friends somewhere
Got a little suitcase, got a little
family, over on the bright side somewhere'
This CD might be about 20p cheaper by the end of today so why not spend the £8 or so and have a listen! Who knows, it might cheer you up
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good to see the Brown Broadcasting Corp is still up to speed
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For all the doom and gloom around here have you noticed that the markets everywhere are staging a bit of a rally?
Now that we know that governements will essentially bail out any large-scale financial entity no matter how much of a basket case it is AND have seemingly endless supplies of money to pump into stumuli packages then what have we to worry about? I'm not being sarcastic, it seems that whatever numbers are deemed necessary to increase confidence in the stock markets can be produced at the drop of a hat..
It may all be smoke and mirrors but the traders and analysts in London, Tokyo, New York et al. seem to be loving it!
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111.
I believe the rise in the FTSE is because of the US rescue of CitiGroup
Just heard an interview with a city stock market guy, who said, in effect, they take all the political posturing with a pinch of salt. Not sure the politics make such an impact now.
Currently sterling is steady against the dollar, but down 1 cent against the Euro.
Apart from having to watch incompetents fall over themselves today with the budget (not to mention Darling's dancing eyebrows and Gordon's sneaky looks), I am more concerned with what will happen to Sterling.
We have already seen it drop dramatically over the last couple of weeks, and if foreign investors remain unconvinced by the budget, then who will Darling and Brown blame for a run on our currency?
Me, probably! After all, they both seem completely incapable of accepting any kind of responsibility for their actions!
And to answer the person wishing all us 'doom and gloomers' to do something more than sit and type on this blog I say this:
I have tried contacting both my local MP and Gordon Brown directly - I haven't even had a reply to my letters.
I am watching and contributing to this blog because HERE is where the truth lies. I cannot trust what I see and hear on television/radio/newspapers as they report only what they wish to. The whole story is here.
I have a small company which employs local people - my staff are the most important resource in my factory. The information, discourse and advice found here have so far enabled me to balance my on views, and keep my company going.
I am not a pig-headed boss and I get as much information to ensure that we make the right decisions.
And neither do I pay myself a huge amount of money at the expense of my staff.
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Now is the time for all good men to come to the aid of the EU.
This whole debacle will run and run. America is in no position to the lead the world economy out of this depression - and depression is where this whole downturn is going. The new US administration will be forced to fall back on historic practices and close its doors to the world. Protectionism will become the watchword for the foreseeable future.
Over 50% of our remaining exports go to Europe. The EU is now big enough and diverse enough to almost feed, clothe and defend itself. So why are we now not drawing up plans with our partners to create a defensive union that seeks to maintain our economic standards.
An anathema to most Conservatives! Well who cares! The statements coming out from them are reminiscent of those of the 1930s. Soon they will be saying that we will have to cut the "Dole" whilst also cutting the higher rate of income tax!
Believe me. China and India will collapse economically, oil will fall below $20 per barrel and the US will retreat to an isolationist policy. If we start now to act in concert with our EU partners we are more likely to prevent the soup kitchens of the 1930s than if we keep trying to act on our own to prop-up a failing economic system
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If the biggest bank in the world was allowed to sink then what kind of signals are being sent around the world that efforts are under way to bring financial stability to the global economic crisis. The rescue of Citigroup should come as no surprise. However the surprise was why did the authorities failed to act sooner which may have prevented and or reduced the loss of jobs within the organisation. The danger signs were written all over the wall.
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#101 - I can understand why you might think that way.
Let me tell you why I write here and what else I have done to earn that right:
1. I stood in the last Gen election (for UKIP as it happens though I resigned shortly after). I generated my own campaign and paid for it too whilst running my firm at the same time. I predicted door-to-door that if folk voted Blair they'd get Brown and I warned he would be a disaster for Britain. Many laughed and said 'UKIP? Wasted vote.
2.I have blogged Brown relentlessly as 'Gifted Gordon' on my own site since he took office.
3. I have written innumerable letters to both of the Labour and Cons MPs in my area, to David Cameron many times and Nick Clegg too. I have written to the Secretary to the Treasury about help for small business.
4. I have voice my concerns about dispossession on every blog on this site, including Today (aka Toady) Evan Davies and Newsnight repeatedly.
5. I have written to the Bishop of Lincoln and the Archbishop of Canterbury, raised a No10 petition on the subject of reform of the insolvency laws. I published details of THAT petition weeks ago here, it expires 9th Dec and so far 30 (THIRTY) people ONLY have signed it.
6. I have advised personally numerous worried individuals face to face and by telephone about debt and what to do.
7. I have written to every single National Newspaper and to the Evening Standard too about the dispossession crisis.
8. I posed questions for Question Time twice on this site and wrote at leaset 4 times on the blog about 'how is the downturn affecting you?'
9. I put forward a question regarding dispossession et alia to the team organising a Commons Select Committee to grill the Treasury over the crisis some weeks ago.
At the same time I have worked as hard as ever to keep my race engine business afloat.
And what response have I had? One bland letter of Govt policy from the Treasury and a nice letter from Bishop Lincoln saying he agreed with everything I said and that was that.
What have you yourself done? If nothing, fine, but there may be others who have tried to do something within the scope available to us in Prison Island as it is today. My feeling is that in my case the fault lies with those who read what I wrote and did nothing. If people are just right fed up and write here good luck to them.
I had a robust and profitable export-based from till this mullarkey broke on us. I do not shoulder ONE iota of blame for any of it. If you know of more that I should have done to gain the right to speak here I should be pleased to know and as far as being a 'doomsday' merchant when your takings drop from £2k a week to £30 in a MONTH or nothing at all - you tend to be pretty frank about the way things are.
GC
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#90
A fruit corner, my dear...
#74
The classic model is Bank/HMG funds wholesale markets to fund retail banking and corporates. Most dealing balances out in the wholesale, Bank/HMG takes out the rest, hoping like fury not to be printing too much money or spending too much in the priocess, as this stokes inflation better than ever do price hikes. The Banks pay Corporation Tax and dealers Income Tax, unless they're working from so far offshore even European witholding tax is invisible, like most wise men have been for the last fifteen years...trouble is, the machine stopped (go research that reference too)
#88
We're trying to get from A to B without wasting any more time picking daisies along the roadside as we go, like Coolidge and Hoover in the 1920s. We all survive by productivity, and have seen too much taken offshore of late, killing the golden goose.
The model we are headed for is darwinian trade, each best fitted suppling the needs of the others. There's another model, marginal trade, which may fit with this, in that there's no point in shipping food we can produce ourselves, but trading for the unavailable essentials. The fault with the Chinese model was that although they had cheap labour, they also have no reliable quality because of lack of government. OK, the Chinese had the old production lines, now let's fit new ones and really show them how to do it - return Birmingham to the Factory of the World.
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Here's an idea. Instead of spouting nonsense about things none of us actually understand why don't we all roll up our sleeves and do some work? There's plenty needing done.
Given the propensity of 95% of posters here to spout right wing claptrap a bit of 'on yer bike' should be warmly welcomed.
Why is this going to be The Worst Recession Since The Great Depression? Em, because we're all saying so? I am not advocating a national Pollyanna day be declared but equally could some of the more pessimistic amongst just cool the jets a bit.
It's actually banal but this is the first recession of the internet age. Stuff is flying around at a speed unthinkable in previous downturns. In 1989 the Sevenoaks commuter knew his desirable pad was tanking in value but it would take another 3 years for the crofter in Unst to twig that his property was worth less than it had been before. It seems bigger because nobody can shut their mouths about it for longer than 10 seconds and instead of nutters being left to mumble in the upper back seats of busses they all get to go online now and treat the rest us to their very deep thoughts.
It's also the first recession in living memory where you've had a couple of unphotogenic Scots at the helm. Some of the jibes here ('go back to Scotland') if directed at jews/sikhs/muslims would not be allowed.
It is contrarian to say this but I count myself very lucky - I have food to eat, clothes to wear and I have an expectation of a reasonable leval of medical care and education being available for myself and my family. I think that this will be the position of most posters here. Compared to a day labourer, a slum-dweller or a refugee in Darfur I'm on easy street.
The quicker we all get on with it , the quicker we'll get over it.
Unless you actually enjoy spreading fear, distrust and misery please resist the urge to do so.
Picture the secne a generation from now - toddler perched on old-timer's knee "Grandad, what did you do in the Great depression?"
Answer "Erm, I got online and hyped it up"
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# 5
Said with precision.
I agree.
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The economy is like an engine: you must not let it stall, but you must not damage it by over-revving it.
The interest rate is in effect the throttle control and we have been frantically over-revving for the past few years. It looks like we have caused the pistons to seize and the only remedy is a rebuild which equates to a depression.
The future remedy is to apply mathematical limits to minimum interest rates. They must be set a minimum of 1% above an independently measured rate of inflation that includes house prices.
If this had been the case then Greenspan's kickstart of the US economy after 911 would not have been allowed which ultimately led to this mess, but was played along by incumbent Governments since it was to their short term advantage.
In the meantime we can use this budget to thrash the engine one more time before we accept the inevitable and have to get the toolkit out.
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# 5 HovellingHermit
Hear, hear!
All we're now doing is putting off the inevitable collapse of our debt-fuelled and, therefore, fantasy way of life. We've spent decades generally, and the last decade in particular, having a party that, in fact, we could never afford. That party has been based on the assumption of infinite cheap energy and so endless economic growth. The end of cheap energy is now with us and so the party's over.
In the face of the end of cheap energy, our politicians are now betraying our society with a vengeance. We'll never be able to pay back the suicidal levels of personal and public debt now being encouraged and run up the government.
Not one political party has the guts to face up to what's happening here and, moreover, tell it to the people straight. Some commentators foresee not just crippling economic problems ahead, but civil unrest too. Such unrest has already been seen in China, Iceland and Italy to name a few.
Our politicians are stampeding in a panic. The situation is unprecedented and I don't think they have a clue what to do. We're going to need another Churchill-like figure to get us through the next decade and beyond and, sadly, I see no such man (or woman) waiting in the wings.
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Thanks so much GB & AD for sorting things out.
What a cracking, low VAT Christmas we're going to have!
Get your "Pick 'n' Mix" while stocks last.
Stun guns at the ready chaps.
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#128
I don't think you quite get it.
Everyone I know WANTS Brown to FAIL and for that to be the end of him. And I know a lot of people. No-one I know wants the blethering windbag to share in any success over this, they want him GONE and his party with him.
If it's any consolation, Brown doesn't get it either.
Gc
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This comment was removed because the moderators found it broke the House Rules.
#130,
the pistons won't seize from over-revving, but the springs will lose control and the valves will hit the pistons. It's called valve float, when the springs develop an independent, chaotic motion of their own out of tune with everything else.
GC
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Right now, I wish the government would just rip it all up and start again - like a really bad essay!
Now wouldn't that be easier!
I will be watching/listening to the budget for the dissention in the ranks to be of more impact and to receive more clarity of response from Gordy and Co than has hitherto been the case!
Robert, please tell your Treasury friends to answer direct questions with direct answers - there is more respect for an honest 'I don't know' than a rhetorical response of no substance!
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"Its the right thing to do, its right that we do this, what's right is that we are seen to be doing......."
Will your stupid, stupid government stop telling me that it is right when it is clear that it is not. I am cabable of making my own mind up.
If you say the damn word often enough it wont be enough to change the outcome!!!!
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I recall when VAT was raised from 15% to 17.5% (late '80s IIRC), it was done to "head-off rises in rates" (aka Council Tax).
They're now going to lower the rate (aren't we lucky?), albeit only for 1 year, amidst dire warnings that we're going have to pay it all back, with interest.
In the time VAT has been 17.5%, Council Tax has gone stratospheric and shows no signs of coming down. I don't really think I have to be a bloodhound to smell another con?
Never mind, we all have to do our bit and I don't mind getting on average £10 per month benefit from the reduction in VAT and splurging the lot on meaningless purchases, provided I can pay it back at the same rate -precisely £10 per month - for a year.
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So the banks in total harmony with one another lose billions of $'s and £'s respectively. Focus has been placed on sub prime loans, that being the risky relatively small area of high risk loans as being the danger point.
However I suggest that this small area in terms of number and amount does not account for these losses.
More likely is bankers greed, where bankers wallowing in (other peoples) money created artificial inter bank markets to trade these funds and then got very gready and began to siphon off disproportionate amounts to reward themselves for thier imagiantive ingenuity.
So having suddenly realised that the money they were trading was non existant they can no longer play the lending game and all subsidies from complacent governments are merely shoring up the unimaginable losses.
The banking industry, never wholly trustworthy, now no longer trusts itself and more importantly knows the scale of its loss and hopes that somehow the cracks can be papered over.
We live the legacy of Margaret Thatcher's government,s desire to make Britain into a new Switzeralnd abandoning our industrial flare for an economy which does not produce anything of any significance.
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#135
What a wonderful description - so very apt!
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Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
Hamlet Act 1, scene 3, 75–77
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finally, robert , i think your posts are relevant and you are now asking the big queations.
poster 9# - too true
the 45% on those on over £150k is just the start. once labout get back in they will say they have a "mandate" to increase income tax on all "high earners".
they'll change rates to 50% on those earnings £50k or more.
vat up to 22.5%.
anything the can do just to keep the tax credits paying out in labour heartlands
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Completly unrealted to collapse of Western civilisation but could we have some software that shows pound sterling signs for this board and not little "unknown character" boxes?
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123.
What makes taking notice of the contributors on this blog better than taking notice of any other pundit?
For all any of us know, many of the 'doom n gloomers' on here are talking up their own positions, perhaps they are short bank stocks and sterling, and long gold and AK47s...
If the £ goes down it will be up to all you captains of industry to export us out of recession.
It will also be because London is the new Babylon, and shorting the £ is a proxy for shorting capitalism in general.
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Guy Croft (94, 126, etc)
I wondered whether you had thought of using your expertise in engines to offer a "maximise your fuel economy" service to the general public.
You could even do it in Supermarket car parks.
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no. 135: maybe, as you say, the valve will hit the piston, but has it occurred to you that your fan belt might be slipping?
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THE GREAT BANKING SCAM
Makes us all impoverished and enslaved to the banks
How’s this for a little gem of information then ?
“I’m afraid the ordinary citizen will not like to be told that banks can and do create money. And they who control the credit of a nation direct the policy of governments and hold in the hollow of their hands the destiny of the people.”
Reginald Mckenna, past chairman of the Board of the Midlands Bank of England came up with this nasty little truth some long time before today’s credit crunch; and boy oh boy. Just how right he was.
Because the banks can destroy money even faster than they create it in the first place - and that is exactly what they have just done over the entire World economy in just a few weeks recently.
That is why people are being made homeless and losing their jobs all over the World; why the whole fabric of society in Iceland is disintegrating and it’s citizens queuing in doleful lines for food handouts to stop previously middle class professional families starving; people everywhere losing their savings and why we’re all going to have a lousy Christmas this year even if we don’t lose our job; because the entire World economy is going bust. This is because the sheer incompetence and greed of banks has paralysed the supply of money and is rapidly shrinking the total amount available for all of us to spend.
Without the ability of all us to spend, businesses go bust on an epic scale, putting more and more people out of work. This further reduces the amount of money which people would normally be spending at an ever faster and faster rate. A spiral of wanton destruction destroying millions of lives just because the banks are both incompetent and breathtakingly greedy.
They are so dishonest they cannot even trust each other. That is why they don’t want to lend to each other and why they now cannot find enough money to lend to businesses or anyone else.
The financial system relies entirely on banks lending to each other and if they don’t, there is no financial system and there is no money at all. With no money business and trade simply cannot function, so ultimately no one will have a job if the process is taken to its logical conclusion.
So, at a stroke, they are completely destroying the World economy as they close down ever increasing numbers of businesses and turn out hundreds of thousands, possibly millions of people, out of their homes and onto the streets.
Quite simply, the banks have destroyed everyone’s trust in money and set about the process of destroying money itself and the only means of World trade.
Decades of building up wealth have vanished in an instant because greasy, immoral, devious thugs have somehow wormed their way into the banking system to wreak havoc with it as they made continuous increments towards ever increasing risks and constantly pushing at the boundaries of honesty and probity.
That famous phrase ‘The Big Bang’ seems to spring effortlessly to mind. This was the phrase used to describe the ’deregulation’ of banks. For ‘deregulation’ read ‘ be as dishonest as you can get away with’. It certainly turned out to be quite a bang, didn’t it ? The whole World economy is now going up in smoke.
There is no honesty or probity in banking anymore; just raw, savage, heartless greed. Banks are liars and thieves. There is no honour amongst liars and thieves. That is why the banks know they cannot trust each other and so it is why they are now so reluctant to lend to each other.
As about 95% of all the money in circulation is apparently created by banks during their process of taking deposits and then making loans, this means they are just as capable of destroying 95% of all the money in circulation if they continue to be as greedy and stupid as they have been in the recent past.
This is how the great banking scam works.
There is something called a fractional reserve ratio. It is a neat little conjuring trick, conjured out of thin air by the bankers getting together in a huddle with the government in the past to persuade it to pass a law saying banks could lend many times the amount of money actually deposited as savings.
A fractional reserve ratio of 9:1 allows banks to create and lend £100 000 from a deposit of only £1 111.12p - an actual multiple of nearly one hundred times the original sum as the money is lent and re-lent at a diminishing amount of nine times the deposit sum each time; gradually diminishing to ever smaller sums before aggregating at about one hundred times the original sum. At 6% interest this provides the bank with £6 000 annual interest income which is roughly six times the original deposit of £1 111.12.
At 18:1 it would be twice the amount or £12 000 income for the bank from just £1 111.12p deposited.
The need for deposits from savers is entirely dispensed with when the bank or mortgage company charges a loan ‘arrangement’ fee. This fee simply allows the bank to conjure up the complete amount of your loan or mortgage from thin air without the tedious business of the bank having to be in possession of a single penny in the form of a deposit in the first place. Effectively, by paying your ‘arrangement fee’ up front, you are simply creating your own loan or mortgage out of absolutely nothing !
It seems rather a pity we have to bother with doing it via the bank instead of just creating how ever much money we want to spend ourselves. It really wouldn’t be any different - except there wouldn’t be a nasty, grasping bank to repossess your property if you failed to make the repayments on time !
How’s that for a financial conjuring trick then ?
Some banks and mortgage companies have recently been rumoured to use fractional reserve ratios of up to 40:1. This would mean that for every £1 111.12p in cash they get their hands on, they can lend £400 000 , earning £24 000 a year in interest at 6%.
But of course the interest rate is often a great deal more. In the case of credit cards it might be 30%, for instance. Hmm. That would make an annual income of £120 000 for the bank from just one single deposit of £1111.12p then. Nice little earner, isn’t it ?
You could say it is just a teeny, weeny bit excessive.
Just for the avoidance of any doubt whatsoever, that translates into immoral and dishonest, which in turn really translates into a form of theft. You might call it conversion really; whereby the bank dishonestly converts honest savings from customers into entirely dishonest and misrepresented and risky loans which have now put the entire World economy at risk and threaten all with imminent recession and poverty.
So, when you pay your mortgage company £1 111.12 as a mortgage ‘arrangement’ fee, they might lend you just £200 000 and then have another £200 000 left over to lend someone else - or possibly pay themselves a large bonus instead, what ho ! Good little wheeze, don’t you think ?
How else do you think all those meaninglessly huge sums of money sprung into existence from nothing - along with all those gigantically huge banker’s bonuses running into billions of pounds ?.
Why, the bankers simply realised they could conjure up as much money as they liked and spend it how they liked because they had complete control over it and virtually no one else understood how the whole thing worked.
Now we are all paying for their dishonesty and misrepresentation as our lives disintegrate around us. It’s about time our Government rounded all the bankers up and shot the lot of them. They are worthless fraudsters.
I came across this interesting observation by the Credit Manager of the Federal Reserve Bank, Atlanta, Georgia, USA, Robert H. Hemphill in a film called ‘Money as debt’.
“Individual debts paid off leave individuals with more money. All debts paid off leaves society with no money at all. So there it is, we’re totally dependent on continually renewed bank credit for there to be any money in existence. No loans, no money.
“This is what happened in the great depression as the money supply shrank drastically as the supply of loans dried up.
“This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every pound we have in circulation, cash or credit.
“If the banks create ample synthetic money we are prosperous; if not we starve.
“We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible. But there it is”.
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I bet all those on >£150K will be happy that instead of avioding 40% tax they will now be avioding 45% tax, a 5% pay rise overnight.
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#128
Guy, this called cutting off your nose to spite your face.
The consequences of Brown failing will not only affect him and the 300 odd Labour MPs, it will affect almost everyone.
So whilst I doubt that anything which turns up in a couple of hours will solve the problem completely, I certainly hope it at least stops the declining trend and injects a realistic upturn to it.
Abject failure as you want will kill not only your company but a large number of others and will turn recession into depression.
Whether he will or won't will be seen in due course.
If he does succeed then great (no matter how unlikley) but I certainly will not be forgiving as I trust everyone you know will not either.
The impression you give though is that no matter what is done you would never vote for him or labour - therefore what point is there, in a democratic system, in listening to your view, even if he does what you want/suggest you won't reward him for it with your vote.
A situation of the post war election is to be hoped for - Churchill saves the nation but is dumped unceremoniously as a thank you. Just replace Churchill with Brown and everyone is happy (until the next problem)
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I didn't think I had any real opinion either way on this subject and read the news and blogs to help me form an opinion. What ever I read and where ever I read it all points me to the possibility that civilisation as we know it is going the way of the Incas, Romans and Ancient Egyptians. Now, is this just co-incidence that the people contributing to this blog are all in the same camp or is this a true reflection of the opinion of the general population? I have never, ever read a pro Labour, pro Darling, pro Brown comment anywhere. Why? Why isn't there anyone out there who believes in what the government is doing and who are so incensed by the negativity in these blogs that they feel they have to say something? Does that person exist? I really fear that they do not. Why do I fear it? Because it implies that the end of the world predictions are probably weighted towards the 'going to happen' end of the scale. The only survival strategy for our current way of life is to get off this big blue spinning ball and find another one out there in the dark and starry yonder.
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With all this bank bailout news and the focus on banker bonuses....Here is the City are reporting that Barclays will be banking this whooping bonus of GBP 30million. Link is here http://news.hereisthecity.com/news/business_news/8488.cntns
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We have heard an awful lot from Gordon and Alastair about how the bank directors and shareholders need to accept responsibility for the mess in the banks - and should expect to be penalised financially for their errors.
How about Gordon and Alastair relinquishing their "right" to untaxed pension pots that near enough everybody in the private sector could only dream about. Have they not yet made a sufficiently large mess of the economy to warrant some "punishment? And why was Gordon allowed to get away with this iniquitous arrangement whereby ony the PM, Chancellor and High Court judges are exempt from this tax?
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"no. 135: maybe, as you say, the valve will hit the piston, but has it occurred to you that your fan belt might be slipping?"
Maybe someone can lend Captain Darling a pair of nylon stockings for an emergency repair job!
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#149, thank you for your considered reply.
You mentioned Churchill. Interesting historical reminder. I don't think contemporary politics has the least chance of fixing this one. I want to see Labour outed on a vote of no-confidence and a wartime-style coalition from all three main parties formed very soon, long before any election.
That's the least I want, actually I want a non-EU English republic with independent Wales and Scotland. I really have had enough of the old 'establishment'. When Mick Jagger took his award from the Queen he remarked the old establishment was gone, but it's demonstrably not. If it was the guys who got us into this mess would be in gaol. It is thrashing around in its death throes and will take everyone down with it, just like every other old establishment in Europe did in the 20th century.
Time to put the country on a 'war' footing, heck we're fighting two actual conflicts already and this is another. Is it such a big deal?
Historically, again: the rise of the 'far right' is inevitable otherwise and by no means just in Britain.
Britain's big mistake was not to have a revolution when the French did, people power in France is something that govt are certainly wary of, not here - nothing touches them.
GC
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#147
Just a pity that it was all out and out rubbish!
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This comment was removed because the moderators found it broke the House Rules.
Re: 114
An explanation of how this will work-
In an instance money will go straight into peoples banks, money will be left in there for those who don't need it & those who do will instantly generate the economy to grow.
Stop talking in technical ways all the time.
We need to take immediate action- Not knocking off 'this' raising 'that'. This will not be quick enough.
You all need to speak in laymen's terms as this way has got this country into this mess in the first place.
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On the subject of the impending reduction of VAT, has anyone thought that since everything is sold on price points, most products won't change in price!!!
Or does Alistair think that 99p products will become 97p???
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Let’s face it, too many had their snouts in the trough for too long. Anyone think that its funny watching the folk who caused this chaos running around trying to fix the mess? They won’t / can’t fix it because they took too much out and gave nothing back.
Our financial system is in utter ruins, much worse to come as the politicians are too busy trying to fix something that can’t be patched up any more.
The gigs up guys.
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150
Although I do not support everything Darling and Brown have done, I do make some posts which point these rabid free-market bloggers back to the true cause of this calamity, the pursuit of greed via the free market.
The problem is that many people cannot escape that their own beloved free market is to blame, it's like a religion to many in business / finance.
Also, you have to suspect that some bloggers here have utopian fantasies about what life would be like after the breakdown of society- all caused by 'Gordy', of course. They may well be hoping that they personally will reign supreme in Surrey as a chieftain with their bunkers, supplies of tinned food, weapons etc.
In the post Gordy world these fantasists hope to rebuild a free-market civilisation- with the peasants in their place- worshipping at shrines of St. Maggie.
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America gives away $1200 per family and we get 60 quid
America goes further into the doo-doo and we have a PM who saves our souls and prevents our recession turning into a depression with his masterly economic mathtrick
Its the RIGHT thing to do you know!!
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citibank....sh..tybank.
It seems that Robert Pestons immortal line "judgement tainted by greed" is relevant here.
Western bankers have been suffering from a nasty brain virus...called selfish stupidity.
The UK gov has been asleep.
A friend of mine said recently...only one man has caused more damage to this country than Gordon Brown...his name was Adolf Hitler.
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Here we go again, all the moaning and complaining and the laying of blame on the government for private business failings. Which one today you may be wondering has caused me to respond, well its the comment about PRIVATE utility companies charging extra for direct debit which and I quote "to the tune of 700,000,000 is yet another Labour scandal".
And pray tell what would have happened if the (Labour) government had intervened and imposed DD conditions on the financial dealings of a private company? I can tell you: all manner of complaints from the CBI, Cameron and every single "I hate Brown" blogger here. Exactly the same as would have occurred if they had imposed conditions on the banks lending 5 or 6 years ago.
This government has made mistakes but by no stretch of the imagination is the current crisis or many of the failings of business its fault. It's all PRIVATE business doing what it does best: trying to make as much money as possible as quickly as possible for as few as possible and crying cap in hand to taxpayers when it fails!. A consequence of the monaterist policies of the 80's which is when legislation and privatisation laid the foundations for the banks and the utility companies current behaviour. Read a book, a history book!
The biggest mistake of this government is listening to the leaders of these large institutions as if those leaders know what they are doing. In addition they pampered to their obscene greed in wanting tax exemptions and havens in the sun. Guess what: if every single person with over £150,000 (topical number!) was to "brain drain" abroad what would happen? There are 10 times more people just below them ready, willing and able to take their vacated positions. The vast majority of these "top" people are not exceptional, they only think they are and have got there due to being in the right place at the right time. Sometimes with a little help from family and friends ;-) Let them go it will help the unemployment figures as we all shuffle up.
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The tone of these comments aren't in keeping with the public opinion, which is that Brown has done a good job and is the man to sort out the mess. Just shows how easy it is to con the public.
It's actually quite stunning how Brown has played a good hand, very badly and yet nobody has called his bluff yet.
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@158
99p to 97p yep thats exactly what Move over Darling thinks will happen
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gosh if only we had kept the americas colony we wouldnt be having these problems now.
may be we wouldnt have had to suffer the blair and brown years.
the americans will not nationalise fully becouse its too close to lenninism for their tastes.
the thing i have noticed about this neu labour government we suffer is that they do try to act very american playing to the media acting all presidential but achieving nothing whatsoever except ruining this country's ecconomy and fleecing the people.
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#160, when you say:
"Also, you have to suspect that some bloggers here have utopian fantasies about what life would be like after the breakdown of society- all caused by 'Gordy', of course. They may well be hoping that they personally will reign supreme in Surrey as a chieftain"
be aware that for many being dispossessed in this crisis that would be a most attractive option. A Utopian dream? No, a Utopian dream would be that it had never happened and the growth and prosperity that Brown assured was real.
I imagine you mean well but folks are losing hope because hope is being taken from them.
Perhaps you'd like to tell them they are better off the way they are now, after they've lost their job, their house, are living in council accomodation (if they're 'lucky' enough to get any), with no bank account, no car, a bankcrupcy order against them and after their marriages have floundered etc etc? And given that many will never work again because of breakdown or age?
No? How do you address them then? Does one perhaps say 'ah, you should have known the UK economy was going to crash, you have only yourself to blame..?'
GC
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@164
They're just waiting for him to go all in.
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We need to cut taxes, cut the public sector and simplify the system:
Raise the personal allowance to say £10K
This takes the lower paid out of the tax system altogether so we can at a stroke:
a)cut public sector non-productive jobs
b)cut taxes and
c)lower public sector spending.
It also simplifies a ridiculously complicated system. I am fed up with this government's liliy-livered tinkering by taking with one hand and giving back with the other; witness the 10p tax fiasco
The next thing to do is to stimulate productive work eg public building works; increase work in alternative energy sector; revival of traditional crafts; less intensive agriculture requiring more manpower etc etc. More people would have meaningful work instead of paper shuffling in out-moded government offices.
The present system doesn't work any more and hasn't done for at least 10 years. Someone needs to grasp the mettle instead of fiddling while Rome burns.
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#166
'gosh if only we had kept the americas colony we wouldnt be having these problems now.'
If that'd had happened, the capital would of still been in WDC and we'd be the 51st state (I'm guessing like a sort of Chilly Hawaii!)
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There was a time, not too long ago, when many of us were beginning to question the relevance and purpose of Governments as we all headed towards a global economy directed solely by market forces. And, as it turns out, we were wrong.
However much people may criticise Gordon Brown and others for lack of prescience (we all failed in that respect by the way) there is at least a powerful central force that is able to mitigate what feels more and more like an unprecedented disaster by taking centralised control of major parts of the economy.
I may become an unreconstructed Leninist again. And a firm believer in the mathematics of chaos theory.
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The problem IS (of course) economic in a very real sense...but at the same time (as someone didn't famously say) Really '"It's the morality, stupid"...
That the Bankers seem to have engineered their way out of the Moral maze with ethical equivalents of the Financial derivatives that caused the problems isn't be so surprising--- Blame Default Swaps and Guilt Securitisation instruments have been proliferating every bit as much as the original financial equivalents
And I suppose that Gordon Brown and his Govt now posing as the calm and innovative leaders in control of the events, is equally non-surprising.
But it is just.... "aaal rang" (As they say in Newcastle)...especially when recalling that it was Gordon Brown who fatally weakened "Europe's best private pension system" because it was a 'pain-free' way to get some money without raising taxes.
That action didn't cause any of this...Gordon was just acting like the Bankers finding an "easy way " to get some (more) money.
However that recurring rake of his from the Pension industry has now proved anything but 'pain free' and has infact greatly aggravated the pension shortfalls now beginning to impact on people...shortfalls that won't ever now be made up.
I don't suppose the son of the manse considered it in any moral way back then; there wasn't any need..markets always went up and the shortfall would get lost in the next few 20% year on years----- for him, as for the Bankers it was always "The economy, Stupid.." that would bail them out , until now.... and now it just looks as if it's been "All Wrong!" ..all these years
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I worked for Standard Chartered in Malaysia in the 70s.
Citibank was the rich cousin muscling in on our traditional patch. They lent far more freely than Stanchart or HSBC which are largely run by the Scots of course. Many Chinese timber tycoons and other businessmen were sceptical. If they could get finance from one of the British banks they knew this was tantamount to a seal of approval for their business plan. If not they could probably get finance at Citibank, among one or two others. Oddly perhaps Chinese businessmen trusted UK banks, but they were outraged at the UK's tolerance of industrial anarchy at the time and the collapse of Britain as a world power. They told me many times what would have happened in China......... but they still trusted the UK banks and this, as well as extremely prudent management, has made HSBC perhaps the largest bank in the world.
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#150
Have you not noticed that media and bloggers all love to be on the pessimistic side? It is basic human psychology, we all love tragedy and drama. It dates back to our simian ancestry; monkeys love to scream at each other when there is a threatening predator around.
Good news is no news.
If this is the worst recession for 16 years - excuse me but nobody died of the last one. There are positive things to say about the credit crunch. People who should be able to afford to buy a home will be able to buy a home. The contributions you are now making to your pension funds are being bought at or near the bottom of the market... and maybe we will learn that bankers minus regulation equals rampant greed, and the American no-holds-barred model of capitalism will be seen as extreme, and a gentler European style social democracy will ensue. The end of the single-superpower world is nigh; many other countries will have more influence in future.
As it is, a portion of VAT, a regressive tax, will be replaced by the 45% income tax rate for high earners; a progressive tax. And that isn't a bad thing, although I speak as someone who could soon be affected by the higher rate.
Doom-mongers are usually wildly wrong. The world is not about to end. Sense will in fact prevail.
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163.
Great post, first bit of sense I've read on here for ages.
What about the well-paid in the Public Sector as well?
Now we're going to have to make large economies, why not cap public sector salaries at 150K? Yes, there are quite a few getting more than that...
Why not also order instant pay cuts of say 25% for all those public sector workers earning over 100K?
Why not also cut those public sector salaries between 50K and 100K by 10%.
If they didn't like it, tough, there's plenty who'll be ready to take their places, as you point out.
Then we could make a really big tax cut for the low and middle earners in both the public and private sectors.
Is it possible that we may get social justice out of all the corporate carnage?
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We are the dumbest nation on earth, we think that it is a good idea to pay less Vat for one or two years to maintain spending then pay more tax for ever afterwards.
In a nutshell the Government is going to give us about £300 a year for the next few years then we are going to give back about £500 in 2010 and more for ever after that. How can this be a good idea?
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We should all ask Dear Prudence what will next years indebted graduates do for a living to help us out of his mess.
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At junior school the teacher used to play a trick with us by offering to swap three penny's for a five pence coin. As we were little the three coins looked like more than the smaller single 5 pence coin, it seemed like a good deal. I wonder if our financial leaders are trying to fool us again with this stupid swap of lower vat for one or two years followed by a vat increase for ever after that? Anyone want to swap my three tenners for a £50?
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#171
Not true, some of us called this and have the correspondence with government ministers from 2004 to prove it.
And, no, they didn't buy into the risks. not at all.
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#168
"They're just waiting for him to go all in."
That's today I reckon - B&D are going all in with all our futures Finger's crossed that the right cards come up!
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I feel that Brown's policies, having caused most of the problems in the first place, are now rapidly making the situation worse.
Given that we seem to be descending into a kind of subsistence economy maybe we should be diverting funds into:
1. Making the land productive in a way that can make us self-sufficient for food.
2. Creating a revived textile industry making use of wool/hide and imported raw cotton in order that we may be clothed.
3. Reopening the coal mines in order to provide heating for our homes.
These new homespun industries can provide jobs for those laid off by local government and those formerly in the services sector.
It sounds drastic, but the only long-term solution to our problems is for folks to make stuff we both need and can trade. We have to reinvent ourselves as a new 'emerging market'.
I would also love to see us kick Labour out, stop meddling on the international stage, and get away from the oppressive police state we have become in the last 10 years.
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Guy Croft
My worries exactly!
I can't imagine how any family must feel - losing their income, and then their homes.
My heart goes out to them and I say to everyone:
'There but for the grace of God...'
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28 MINUTES TO DESTRUCTION MR BLOFELD.
Well as the usual abuse of Parliament its all
been dripped out via the SELECTED media.
So WHAT GEMS of FISCAL IMprudence are
about to be unleashed on the PLEBS?
Like a Parrot: To You Darling?
Borrow BORROW BORROW SPEND SPEND
spend.
OH HECK THERES NO MONEY
BILL BILL BILL BILL TAX TAX TAX TAX TAX
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Retail therrapy must not fail! ,we must act now before its to late to stabilize the sinking titanic by shopping till we drop .
Monuments will be errected in shopping malls to commemorate those selfless types who ,though maxed out ,still went over the top into a hail of special offers with faith that "Your country needs you"Gordon will bail them out.
,On memorial day each year there will be 10 minutes silence, as future generations ponder the sackrifice of the fallen and will still hear their forlorn cries "beam us up scottie", "ive forgot my pin number"and "wheres my fiscal stimulaaas"
Never was so much spent by so many, to save a few
Go out and shop ,you know it makes no sense ,loonyland economics awaits you
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#96 and others
Various contributors have mentioned the unfunded liability for public sector pensions. As I understand it, when this is added to official public sector debt and PFI liabilities, the real figure for UK plc's debt is something in the region of £1,500 billion (give or take a few billion). What scares me is that if you break this down to an individual level, it comes out at a liability of around £25k per person. If you then break it down to a figure per person in work and paying taxes, the figure is more like £50-60k. If you then break this down to a figure per person in work in the private sector (on the basis that public sector employees do not directly contribute to the national wealth) the figure is getting close to £100k per person. Even if you exclude the unfunded public sector pension liabailities, the amount of debt per private sector employee is probably not far short of £50k per head. My arithmetic may be a little out, but even if my figures are a bit out, they are nonethless truly scary.
What is my point? To repay all of this, the tax burden will have to increase massively and there will also have to be massive cuts in public spending. Cutting pension entitlements in the public sector may be part of this; it will of course be deeply unpopular but it may be a necessity. I also anticipate that there will be other public sector cut backs in education and the NHS. The problem as I see it is that we are already a highly taxed nation and there is a limit to how much more tax the Govt can squeeze out of us. The 40% top tax rate may not seem too high but if you add on council tax and all of the indirect taxes such VAT, road tax, fuel duty etc, the tax burden is already high.
The reality is that the economy (and therefore the Govt's tax take) has been fuelled by debt and our public sector is too big and expensive. Unfortunately we can't afford the current level of public services which we enjoy. Borrowing money to pay for public spending and leaving future generations to repay it is unfair. What we are asking today's 30-something year olds to do is to repay large mortgages for houses which they have bought at or near the top of the market, pay taxes to repay public sector debt, PFI liabilities and unfunded public sector pension schemes and then save for their own pensions. This is unfair particularly once you factor in the change in demographics; the population in work is becoming an increasingly small proportion of the population.
It is time to emigrate!
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TigerJayJ
Looking at Blog option & license via FSA etc.
Lets see where the loons take us all today?
May just pack up and leave Blighty behind.
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To the Blogs regarding Public Sector Pay??
As average pay is circa 25.5K
I feel No public servant should earn over 45K
Theres been a pay explosion at the top end
over the last 10/11 years while at the low
end for example
many council workers live on Tax Credits to
subsidise pitiful pay levels.
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post 185 nedafo
Your PFI estimates are fairly close to the mark.
BUST BIG TIME.
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was post number 1 gordon himself
and number 14 AD
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An inept management team being rewarded by the taxpayer! The entire board should be fired, with zero golden parachutes, and legal action instigated against them for their gross mismanagement. To reduce the value of the BAnk by 90% really does take some skillfull incompetence! If I did that in my business the tax authorities would be after me for acting against the interests of my company.....
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Why is no-one bothered about what really matters because if we seriously don't stop the obscene greed we have seen over the past few decades we will have nothing to worry about because we shall all having nothing by 2030 and neither will our children and grandchildren. How very selfish we are.
People are dying across the World due to our greed.
Big business have continued to exploit humans and resources and are allowed to get away with it under the guise of being entreprenurial- what rubbish.
City slickers have been allowed to keep their illgotten gains and we are having to bail them out for their incompetence. Why?
No-one bailed out the miners, despite there being very good sources of coal available and now we are at the mercy of others around the World for our energy. The coal is still there but no-one qualified to extract it!!
Agreed coal is only one source of energy but lots of good, hard working people lost their jobs and no-one cared. Decisions were based on political views, not based on the long term need of the Country and the media were party to this
'Small is beautiful by Schumaker could so have easiliy been written this very day but was written 35 years ago and still we are treading the same old footpath.
We really do have to take our very survival seriously.
The greed of this generation will impact on our children and grandchildren and we owe it to them to stop and take stock and realise that we simply cannot go back to this need for more and more, whether its more goods, more profits.
We all need to accept that the whole World has hit the buffers and will need to go into reverse and we shall all have to accept less in terms of possessions. Quality not quanitity. This is seriously not the fault of any one man, who people seem to delight in trying to 'hang'. Its the fault of each and everyone of us, egged on by big business for bigger profits and bigger bonus'
Now they have spectacularly failed they are all out with the begging bowl and suddenly the Government seems to be an OK Chap!!
We also need radical changing of our political system because like any business we need long term planning, not short term politics looking always to the next election.
There are some basics in life that do not need to be left or right, blue or red or any other colour and we need consensus on these, so the Country can plan ahead for a generation at least.
We all need the basic essentials in life like heat, light, water & food and shelter. These should not be in the hands of those looking only to make obscene increased profits, year in, year out
We need a superb educational system for all, not the privileged to give everyone life skills , responsibility, social awareness etc so they can take on the mantle.
we need a healthy society and for those less fortunate we need a health service to meet their needs.
These things should not be politically motivated and always be the ball they all delight in tossing around.
We need to become a self sufficient society not held to ransome by volatile Countries or currency fluctuations.
We have to look at imports and ask ourselves do we really need all this manufactured stuff that comes pouring into this country, often made for a few pence and sold for much more.
Things we do need should be sourced as close to home as possible.
Time is running out fast and all the talk at the moment is not adding anything because everyone is concerned about their own well being not the greater good of all and more especially of future generations.
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Its got worse since my first comment.
The usual head the balls and dooms day hopers have really gone to town since.
Looks like we are heading for 10,000% rise in breakdowns, people scambling in the bins for food etc
Basically we are back to neanderthals.
In the name of goodness people wise the head up.
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Mr Curzon,is there any word about the new design of the fiscal prudence lavatory paper banknotes?
I have heard mutterings that it might have Gordon Brown on the reverse side, looking very serene,and wearing a crown of thorns.
I`ve also heard that it will come in rolls for added convenience.
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post 191 Everything said was spot on. Should be our next primeminister. Everything said was spot on. But polititions who think like that get weeded out at an early stage because they dont play the game. The bit about politics is the main problem because they all have thier own agenda
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Fabulous budget, real give away!. VAT down by 2.5%, NI UP, fuel tax UP, Booze tax UP, Ciggies tax UP.
Still 60 quid for the pensioners to keep warm this winter, probably get best value by burning it.
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How long before the reduction in Vat filters thru to increased sales? It's been a couple of hours now.
Be tomorrow I guess, when folks have gone home and had tea and watch the news, figure they would have no way of knowing otherwise, right? I mean not like they could check it out on the internet.
So, till tomorrow then!
GC
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For those that say people in the public sector are badly paid apparently Gordon Brown is only the 195th top earner in the public sector.
Four earned more than GBP 1 million a year.
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Just having a look though and I notice that Mr Peston seems to have re-written this blog numerous times over the last few weeks.
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#154
Guy, I agree a government of national unity would be a good start and is called for whichever way it came about.
Sadly your surmise on the far right I fear is also correct.
However we will never agree the rest of the position.
Anyway after the sadly predictable result of the budget statement I have to go out and buy some pain killers and a rubber ring to sit on.
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Don't miss the massive High Street sale - starts Monday. 2.5% off everything (except food, books, childrens clothes).
Just look at some of the bargains.
Plasma TV was £499, now just £488 - save £11
New suit - was £199, now £194.75, a massive £4.25 off.
MP3 players slashed from £99.99 to an eye watering £97.87
Get your bargains before stocks run out, they be flying off the shelves.
(I expect the £ signs will not work so this post will look rubbish!!!)
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@196
Guy you missed the detail.
VAT change not until Monday and Darling "hopes" retaillers will pass it on as soon as possible.
So no purchases this weekend then, and hold off next week waiting for retaillers to think about whether they will pass it on ar leave their goods priced at the price point they were already at and pocket the difference.
Lets face it are you going to knock £25000 off of your £100000 race engine?
Tesco certainly wont knock 9.99 of their £399.97 flat screen TV
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What a lot of waffle that was!
Brief interim help for small businesses - spread the cost of taxes - I'll believe it when I see it!
Alexander C and Guy Croft
Time to leave the sinking ship!
Just where on this earth could we go?
Advice please - much I love Scuba Diving I think the Muldives is a little to flat and at risk of rising sea levels.
Perhaps we should all self-exile, regroup, and mount a come back?!
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Darling & Brown must have Got this lot from
WOOLWORTHS.
One wonders if they shoplifted it when they
were KIDS??????????????????????????????
UTTER UTTER BUNKUM.
IMF Send in the Lads.Please please please?
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Re 194
thanks but I seriously will not be going for the job.
There are a few in politics that started out with very good and honest intentions but get stiffled by party politics or rubbished by the media.
Sadly until we get rid of party politics we will never move forward. Life is about balance its never wholly red or blue, left or right.
We also never learn from the past because there is always those bright young things who feel they know it all and can do better than those who have gone before. There in no humility anymore.
Primitive cultures respect their elders and learn from them. Here they are seen as deadwood. Primitive cultures respect the World around them and only take what they need not want they desire.
We however do have only one planet, what we have here, is what we have and there is no importing of another one when we have exhausted this one.
No politician is going to be able to wave a magic wand and hey presto out of the hat come a brand new spanking world for us to exploit. No pre budget or emergency budget is going to do that!!
Almost everyone on this blog has condemmed Mr Brown and Mr Darling for spending what they don't have and yet everyone is quite happy to carry one 'spending' the World's resources without a care in the world.
Of course we all want the best for ourselves and our families that is quite natural but we all have to be mindful of the fact that none of us actually owns anything, we only rent the space we inhabit for the time we are on this earth and have an enormous responsibility to our children, grandchildren and those that come after we have gone to leave it fit for purpose.
Our generation, unless it wakes up pretty smartish is not going to fulfil that obligation and sadly we have heard nothing today that will make an ounce of difference.
We had an opportunity to put in place radical measures to ensure stability of the planet, not stability of the market place.
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Who on here thought that was a good budget?
An absolute shocker to say the least, they have just ensured a prolonged deep recession !!!
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I have just been listening to the PBR, and am shocked. I am wholly convinced that this is a full-blown disaster in the making.
The most scary aspect, for me, was the Chancellor's assumption that the economy will begin recovering quite briskly from the middle of next year, an assumption for which he provided NO evidence whatsoever.
My own view is that this is at least a five-year slump, not a one-year dip. If my view is right, borrowing will escalate to levels that markets will not support. In other words, we go bust.
The indicator to watch now is Sterling. Mr Osborne's predicted collapse now seems much more likely.
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This comment was removed because the moderators found it broke the House Rules.
"Just where on this earth could we go?
Advice please - much I love Scuba Diving I think the Muldives is a little to flat and at risk of rising sea levels.
Perhaps we should all self-exile, regroup, and mount a come back?!"
Well when you do come back lets hope you are not in charge of Education.
Post #204 makes a lot of sense.
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@ #147 Mudshires
I thoroughly enjoyed your post, and ever since I first read about fractional reserve banking and it's (evil) mechanism, I have not read a single intelligent, informed rebuttal of your description of it .
I had high hopes that #155 FutureFinancier was about to remedy this lack when he/she wrote:
"#147 Just a pity that it was all out and out rubbish!"
but evidently the explanation for why it was all rubbish was inadvertently truncated.
As is usual, when fractional reserve banking is mentioned on these blogs, it rarely receives more than a couple of token replies (pro or con) before it sinks beneath a tide of other posts. But these other posts, however much they disagree with one another, all seem to assume there is no other possible monetary system than the one we have, which is based on frb.
Someone on these BBC blogs recently posted a link to their simple program that would calculate how much money (debt) could be created under varying input parameters in the fractional reserve banking model. Here is the URL:
http://www.novapoly.com/articles/finance/fractional-reserve-banking-model/
(Sorry I've lost the author's user name, so I can't thank them.)
Another poster responded that the problem was that at 100% reserves this model simply did not apply. Unfortunately, he/she did not go on to explain what model would apply.
Could someone please, please explain why they believe there is nothing wrong with our frb monetary system? (It would be helpful to go beyond the common and apparently erroneous criticism that all opponents of fractional reserve banking insist on a return to the gold standard.)
Mr. Peston, could you offer us your thoughts on this sometime?
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Broke the house rules? For wanting to emigrate and for wanting Labour out? Oh and minding that I'm paying more tax to keep layabouts in a job?
Joke!
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The wealthy have been shafting the poor on a grand scale the world over since the year dot. They are still doing it now and will still be doing it long after we have all gone
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#204
I agree with your sentiment but, as I see it, unless we can persuade the world to abandon capitalism and we can subtantially reduce the world population, the world is stuffed. It is only a matter of time.
Unfortunately there are just too many of us on the planet and, if you add the consumption which drives capitalism to the pot, then we have serious problems.
I take a gloomy view of our future and, as a father of young children, I take no pleasure in this. It seems to me that if you add up rising world population, the end of abundant cheap energy in the nearish future, top soil erosion, climate change, etc, we are heading for some global catastrophe certainly within the next 50 years.
In my view, the "green" solutions offered by most politicians will simply delay but not prevent the catstrophe.
To be fair to the Govt., this is not a problem that can be dealy with by the PBR.
I would add that my views are mainly based on common sense. I appreciate that this is not very scientific but I just can't see how a planet with finite resources can support a constantly growing economy fuelled by consumption forever.
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"If you're shocked by the thought that we as taxpayers may soon be financing car purchases, don't be."
Your argument that we should take the plunge because everyone else is doing it, is nothing but an argument for succumbing to peer pressure without analysis. You are setting a poor example to the nation's young people.
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@ #204. timetoponder
I'd like to quote most of your post, but will limit it to this:
". . .none of us actually owns anything, we only rent the space we inhabit for the time we are on this earth and have an enormous responsibility to our children, grandchildren and those that come after we have gone to leave it fit for purpose."
So sad so many are so forgetful of this fact.
And thanks for reminding us of Small is Beautiful ; think I'll log off and re-read it.
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Quite clever that give away vat and claw back tax on Nat ins and IT over £100/150k.
If no one is moved to buy anything then the VAT gimmick is limited in cost to current (ie reduced spending). However the yield from the NI and IT hikes is pretty much assured.
Of course the VAT thing means we are "seen" to be doing the right thing.
Loved the Green bit which sounded so plausible and then bottling out of the Car Tax hike (which was one of the major non-banking factors in the recession as it pretty much killed of anybody's ability to sell their old car and buy a new one!)
All good stuff from the "you couldn't make it up" department.
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Well, we watched the "pre Budget" statement all day. Globals, Fiscals, VATs, the Prudence triplets, hard working families, doing the right thing etc. All for a pittance on the VAT rate. The extra bit of income my wife and I will get will not even cover the increase in gas prices over the last year.
But the most puzzling thing of all : why did Globals Brown get the bloke with the white hair to read his budget speech out for him ?
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#209
You are correct about FRB, the need to always grow and expand is a requirement of this system, ultimately this cannot be sustained and bust happens.
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"209. At 5:36pm on 24 Nov 2008, papanca wrote:
Another poster responded that the problem was that at 100% reserves this model simply did not apply. Unfortunately, he/she did not go on to explain what model would apply."
I'm sure I did. With a 100% model of banking, the banks essentially become brokers for cash and bonds. The money you put into an instant access bank account does not have interest paid on it. Instead you pay for the use of the bank account and bank's facilities.
In order to gain interest on cash with a 100% reserve the money has to become unavailable to the depositor. He or she is essentially buying longer term bonds (3months - 5 years) in the bank. A "Certificate of Deposit" or "Time Deposit".
At no point is the bank paying interest on a fractional reserve which it is unable to lend. Either it is lending the money, paying interest and making the money *unavailable* (because it is loaned out) to the depositor. Or there is no interest being paid on the money and the depositor has instant access to it. This is why the fractional model doesn't apply to 100% reserve banking, there is no fraction. You don't get to have your cake and eat it. This is actually the way 99% of the population mistakenly THINK banking works.
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When will this government realise that borrowers will always be borrowers and savers will always be savers.
The borrowers are up to the hilt in debt but the government wants them to go on spending.
The biggest supplier of readies was peoples homes, and countless numbers took out annual sums of money from these to fund their bloated lifestyles.
This avenue has now been blocked off, meaning that people do not have access to large sums of money anymore.
If spending is increased it will nothing like the sums required by the government!!.
I am an OAP with no debt, but I do not see why I should go out and buy something that I do not need in order to bail out GB.
The next worry for the GB is when thousands of people exit Premium Bonds when interest rates reach 1% or less. I think 22 billion pounds could be lost from the governments coffers. Why lend GB money for nothing!!.
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I think this just about proves there is now NO way out.
We have entered into a vicious downward spiral, and this is being FED by increased government debt, as well as collapse of consumer debt, AND property values all pretty much simultaneously.
The 1929 crash took several years and was about inbalances between supply and demand. The west is now on very thin ice, because if Russia and China falter (Russia is about to have a collapse of the rouble), then the west cannot finance its debt any more....so the next step in 12 months will be hyperinflation as countries like the UK & USA print money, which no one wants to buy.
1Euro=£1.25 SOON!
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@ #218 true-liberal
"I'm sure I did. With a 100% model of banking, the banks essentially become brokers for cash and bonds. The money you put into an instant access bank account does not have interest paid on it. Instead you pay for the use of the bank account and bank's facilities.
In order to gain interest on cash with a 100% reserve the money has to become unavailable to the depositor. He or she is essentially buying longer term bonds (3months - 5 years) in the bank. A "Certificate of Deposit" or "Time Deposit".
At no point is the bank paying interest on a fractional reserve which it is unable to lend. Either it is lending the money, paying interest and making the money *unavailable* (because it is loaned out) to the depositor. Or there is no interest being paid on the money and the depositor has instant access to it. This is why the fractional model doesn't apply to 100% reserve banking, there is no fraction. You don't get to have your cake and eat it. This is actually the way 99% of the population mistakenly THINK banking works. "
Thanks very much for expanding on the point you did make on a previous blog concerning alternatives to the FRB system:
127. At 3:35pm on 14 Nov 2008, true-liberal wrote:
"What would happen instead is the banks would become brokers for bonds, and holders of cash. Charging for both services."
I'm sure there's much more to how an economy might function with a monetary system such as you describe, but your post really helps one start thinking about it. (Doesn't sound like "rubbish" to me!)
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300 years ago, 50% of total global output was represented by Indian and Chinese civilization, until the colonialism robbed it. Couple of years ago, someone forecast that the balance of economic powers of these two countries will reach same level again by 2050. One thought came to mind that how this change would occur with limited global resources. Can it be that we are actually watching this happening while the economic dynamics taking their own shape? The western markets are saturated and even more lending wont help to spend. Actually, China and India are two largest markets with very low debt levels. Is this the change already taking shape?
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What I see is depression, depression and depression!
The government succeeds finally to get businesses and house-buyers to borrow and banks to lend.
The government then cannot raise the money cheaply.
1n 2009 interest rates go up - perhaps to near icelandic levels.
More bankruptcies and reposessions subsequently follow.
Facing financial Armageddon, Britain goes to the IMF which imposes draconian conditions. Depression, Depression, Depression!
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The Worldwide DEBT is the problem.
The best solution for the present economic crisis would be a REBOOT or restart of the entire debt system for the ENTIRE WORLD.
1. A data base listing ALL DEBT, government, business and personal needs to be created. The list would need to list the debt and debt holder with a bank that could make an accounting of the debt. Included would be all national debt of all nations, all mortgages car notes and credit cards for individuals. All outstanding bond and other debt for corporations, The idea is to list ALL DEBT of any kind owed.
2 . Every government on the planet would need to call a special session of it’s legislature.
Using the same authority that governments have to use or create FIAT CURRENCY the legislatures and Central Banks need to authorize the creation of ACCOUNT CREDIT in an amount equal to all the listed debts in the world.
3. The Various governments and Central Banking Systems then need to make an accounting change equal to the debt in the form of an ACCOUNT CREDIT or CREDIT zeroing out ALL THE DEBT in the entire world, and crediting all debt-holders in the world.
The following day the economy of the entire world would restart and the Stock Markets of the world would react to the new renewed capital in the banking systems, the Capital now available to restart all business and the disposable income to the individual people would restart and grow the retail sectors and the manufacturing sectors of the entire world.
Allen Charles Report
http://allencharlesreport.blogspot.com/
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For years westearn economies were boasting about the size of their inflated digits and now with the AAA's removed they are looking a little short and in need of a fig leaf after taking a prolonged bite out of the big apple
Debt will sink those who cling to its shibboleth [housing ] ,leaving the meek to inherrit the Earth ,proving their is life after debt
Fractional revese banking has only just begun ,there will be weeping and gnashing of teeth [now that the tooth fairy no longer wants them]
Carpetallism is over get ready to be lamminated by the farewell state .
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I can't believe I managed to read all the way down to here and you did too.
Well done Peston! You really got the public going this time.
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Drastic situations require drastic measures. However, increasing model hazard at the expense of the taxpayer while other alternatives remain.
The current step of a £306bn bail-out and a £20bn injection with prefernce didvidends at 8% under high Tier 1 capital ratio maintenance will slow economic activity as more and expensive capital has to be placed against lending. Furthermore, there is no oversight as to the kind of risks it may take.
A bold and drastic step, if Citi is seen to be too large, is for the government to take over those portions which are deemed to large to fail and the associated capital of Citi covering these portions but leaving the toxics in Citi with whatever remaining capital. This is to done with the view of transferring the bank back to the private sector after a period of repair and stabilisation while contuning to lubricate the wheels of economic activity.
The employees who maintain the "good" businesses remain but as temporary government employees and those who perpetuated and failed to manage the toxics fall into different employment alternatives, if any - after all, that is why they got the risk premia in their bonuses.
The drastic element is that it goes against the mantra that has been drilled into the American psyche that the government only takes a lot more than it gives. the invisible hand has already been proven to have failed. Now comes time time where there is need of a bold step in acknowledging what went wrong and taking bold steps to save the situation in the short term with as minimal long term costs as can be incurred, and then repair it properly at a slower and considered rate.
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What is more amazing than this spin and drivel that we are getting from our 'responsible' saviours in No. 10 is that people are buying it. The only thing that those jokers have got right is that the scale of this crisis is unprecedented. I remembered the last downturn in 1992. It was bad but I never thought for a moment that we would not pull out of it or that our government was completely irresponsible with the public finances or that people would have fallen for such a bundle of lies. I am not so sure this time as I am afraid that there is nothing left in the public or private kitty and ultimately all you get with Labour is 'tax', 'spend' and 'IMF' albeit in a different order this time.
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''Fresh bulls for the slaughter, much needed.''...from ''Sparta F.C.'' by The Fall.
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Liked the post from *97.
Other posts berate HMG for spending money in the past.
Are these the same people who would have been posting about HMG's reluctance to spend on what they would have viewed to be essential items?
You can't have it both ways.
An argument could be raised about how the money was spent, but I don't believe HMG saying that they weren't going to spend in case there may be a bad case of banks going bust would have been greeted with much enthusiasm.
The root cause seems to be a simple case of greed.
Money men thought up ever more ingenious ways of making short term profits, and consequent bonuses.
Householders were more than happy to see house prices rise, funded by access to very very easy credit, so that they could use the excess .HMG happy with increased tax revenue.
Neither the money men nor the householders thinking that it couldn't last, nor even caring.
What's the solution to the current crisis?
Not a clue.
Nor,I suspect have the majority of posters who tend to adopt the Daily Mail posture of ban it or sack it.
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"I had personally informed them of the impending disaster,'' he said. ''Neither SCB nor Citibank are specialized energy traders nor do they have the wherewithal to provide a hedge to the CPC for a huge exposure of $2 billion''. At de Mel's press conference, Citibank Sri Lanka chief executive Dennis Hussey said the Sri Lankan government started the hedging process following a special cabinet approval, which has been carefully documented. SCB's Sri Lanka chief Clive Haswell said the bank had received a written undertaking from the CPC that the latter was aware of the risks.
http://www.atimes.com/atimes/South_Asia/JK26Df01.html
Citi pirates strike again....
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Things I can possibly do different from Mr Darling if I was chancellor
a) Promote "production" and not "consumption". By consuming we are only moving money out to china as we practically import every thing. Therefore encourage people to work and produce and build our exports. Therefore no need for VAT reduction.
b) Instead reduce basic and top rate of tax. And possibly national insurance as well.
c) if the problem is "housing crisis" make mortgage interest tax deductible. This will help people who really "earn and pay taxes" to own home easily and may stabilise the housing markets. It will also give confidence to banks to lend (because they know that the interest is coming out of tax which would have been paid anyway by the borrower)
d) Encourage people to go to work. Put a cap on benefits.
e) Think which industries we can still create and what can Britain export. We killed our manufacturing but with hard work, it can be revived.
f) Promote Saving - increase ISA allowance (or make them unlimited - why can I not invest without paying capital gains tax)
g) possibly remove capital gains tax if the investment came from money on which UK income tax was paid. Instead raise stamp duty. This will encourage people to hold investment and make longer term investments.
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DISHONEST, IMMORAL MORTGAGE LENDERS
HOME OWNERS FLEECED BY DEVIOUS BANKS
The Smoking Gun of Predatory Lending
“An important factor behind the increase in mortgage foreclosures is the rise of so-called subprime loans. Subprime loans are made to borrowers with credit deemed insufficient to qualify for a standard home mortgage. They sometimes entail predatory practices including exorbitant interest rates, additional fees and prepayment penalties that make it virtually impossible for the borrower to escape from debt. Subprime lending is targeted disproportionately at the poor, minorities and the elderly.
The increase in home foreclosures is linked to the rise in subprime lending. Studies in Boston and Atlanta conducted during the 1990s showed foreclosures by subprime lenders tripling, while foreclosures by other lenders remained steady or declined. A similar study in Chicago, which began at an earlier date, showed an even more dramatic increase.
During the 1990s the practice of “risk based’ pricing increased. Banks began charging higher than normal interest rates to certain borrowers deemed to have lower than average credit worthiness. This practice was justified on the grounds that it opened home ownership to those who would not otherwise qualify for mortgages. However, by their nature, subprime loans carry a higher risk of default because they impose an additional financial burden on those who are in many cases least able to afford it. Further, subprime loans have become an arena for outright fraud and abuse. Cases of “redlining” have been documented where whole neighborhoods, usually poor or minority, are deemed to be substandard credit risks, forcing residents with otherwise excellent credit to pay subprime interest rates.
One of the most flagrant offenders is CitiGroup, headed by Bill Clinton’s former treasury secretary Robert Rubin. In March the Federal Trade Commission charged CitiGroup with deliberately “steering” and “misleading” borrowers into accepting predatory loans.
It is alleged that CitiGroup, its affiliate Associates First Capital and sister company CitiFinancial engaged in predatory lending practices such as inducing borrowers to take out high-interest loans even though they qualified for prime-rate loans.
It is also charged that CitiGroup engaged in another predatory tactic known as “flipping,” where borrowers are pushed into progressively higher-interest loans by repeatedly refinancing their mortgages. The bank is also alleged to charge “excessive and unjustified” fees and impose impossible loan terms that lead to foreclosure.
Despite these serious allegations of a criminal character, CitiGroup and its executives were able to escape any major consequences by paying a mere $215 million in restitution to defrauded home buyers.
Such practices are by no means the exception. Subprime lenders often impose interest rates far higher than anything that could conceivably be justified by factoring in costs associated with added risk. Borrowers are often unaware of provisions hidden in fine print that require additional fees, balloon payments or the payment of compulsory life insurance premiums. In some cases lenders simply lie to borrowers, stating installment amounts that are far lower than what the mortgage holder is actually required to pay.
There are indications that the speed of home foreclosures is increasing. This is also tied to the rise of subprime lenders. For example, the above mentioned study in Washington state noted that of all foreclosures reported in 2000, subprime lenders were responsible for 58 percent of fast foreclosures, defined as foreclosures within the first two years.
Powerful financial interests have intervened to block even token reform. For example, the Ohio legislature enacted a bill in February 2002 prohibiting local communities from passing laws against predatory lending”.
MONSTROUS SOCIAL INEQUALITY
“This is a source of political perspective to those troubled by the monstrous level of social inequality, which has produced an ever-widening chasm between the wealthy few and the mass of the world’s people.
The financial crisis now enveloping the entire world economy sharply poses the need for the international unification of working people. Transnational production and global financial markets have changed the face of capitalism forever.”
( This is from an interesting political website and I just couldn’t resist quoting some of the article as I couldn’t have put it better myself)
The whole of the really interesting research paper by authors Harold L. Bunce, Debbie Gruenstein, Christopher E. Herbert, and Randall M. Scheessele can be seen on the USA Policy Development and Research Information Service website here:
Subprime Foreclosures: The Smoking Gun of Predatory Lending
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232.
agree with much of what you say.
not much point in making most things if we can't make them cheap enough to compete with China, still weak pound might help.
Exception is in high value added areas, ie things like wind and wave-power etc, where we could be much better than we are, with obvious benefits to the wider economy.
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No. 233. Mudshires.
A very good (and long post) but indeed for the most part you omit the term 'ALLEGEDLY'
Here in the UK I took out my first endowment mortgage (early 1980.s) based on the recommendatins of the company that sold me the house {Moderators, this is not libellous or slanderous, it was before relevant legislation takes effect and has proven in law to be acceptable} The name is similar to a famous Scottish golf establishment. And I am pleased to say that since the early 80.s they are an impeccable establishment above reproach.
At that time i was told by the estate agent that the endowment would cover the mortgage..... well after several resales to different companies it is one third short.
The point? The salesmen will get away with saying to a client ANYTHING within the existing legal framework.
READ the small print.
Dont blame the muppets that take the loans.
Dont blame the salesmen.
Dont blame the regulators - they try but are watered down by lobbists.
Blame the corporate bosses and the administrations. (Same things)- they all have directorships/consultancies)
I listened because I was stupid it was my first house and - despite having a degree - had to accept the guidance of a professional.
Sub-prime is not necessarily about the fault of the people taking the mortgages.
look higher up please.
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