Forced convergence of China and US
So how much of the US economy, the home of free enterprise, will end up being nationalised or bailed out by the state during the current economic crisis?
So far we've seen banks, mortgage companies, and a mighty insurer all being propped up and bossed around by the federal government.
And now it's the real economy, manufacturing, that US taxpayers are set to rescue.
Last night, for example, the Democrat Speaker of the House of Representatives, Nancy Pelosi, urged Congress to provide emergency financial help for the crippled US automotive industry.
What's being requested by General Motors, Ford and Chrysler is $50bn in loans, on top of the $25bn in low-interest borrowing approved by Congress in September for retooling plants.
As cash-strapped US consumers continue to feel this is not the best time to buy a car, and are purchasing fewer vehicles than at any time since the early 1990s, most at risk of collapse is General Motors, the largest US carmaker.
Pelosi made clear that she felt the big automakers had to be kept out of bankruptcy at all costs, because of the danger that its failure would lead to massive damage to suppliers and connected businesses, with the possible loss of millions of jobs. A recent study by the Center for Automotive Research concluded that the failure of just one carmaker would lead to 2.5m job losses.
The scale of what's at stake was captured chillingly in a quote from a bankruptcy lawyer at White & Case, Alan Gover, who is quoted on Bloomberg: "Trying to reorganise the auto industry in bankruptcy would be as close to reorganising the whole US economy as you could get," he said. "The vast supply chain involves thousands of businesses, millions of existing jobs and just as many retirees, as well as whole communities and states".
But here's what some may see as ironic, even - in a dark way - slightly amusing.
The fundamental cause of America's woes (and ours too) is that its consumers, businesses and government all borrowed too much in the good years, especially from China.
China's semi-nationalised, heavily state-controlled economy generated huge financial surpluses through its massive trade in manufactured goods with America. And those financial surpluses were recycled back to America in the form of loans, so that US consumers and businesses could buy even more from China's factories and workshops.
These massive trade and financial imbalances were unsustainable - and are now being brought closer to equilibrium in a painful way.
Because US financial institutions both borrowed and lent too much, and because many other mighty companies took on far too much debt, they have been facing collapse. And where they are perceived as too big too fail (where the collateral damage were they to fall over would be devastating), the US government is stepping in with financial succour from taxpayers.
For years the great trend in the world was the embracement of free enterprise in China.
But now, in America's darkest hour for generations, the US is embracing a form of state-control and intervention that looks remarkably Chinese.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~53~RS~)
CommentsSign in
You need to sign in to contribute to this page. If you're new to BBC Blogs, creating your membership is quick and easy.
Borrow from China, ho ho!
Be interesting to see if Chinese methods of asset and debt recovery are as Dickensian and punitive as the UK's - or worse.
Take Taiwan as part-payment eg..mkj`
GC
Complain about this comment
Surely this crisis is just a convulsive step on the road towards China becoming the next world leader.
Thank heavens I have lived most of my life through "Pax Americana".
Complain about this comment
I don't agree with propping up anything from the old failed economy that was fast destroying the planet. I don't want the consumer decade reinflated. We need to build a smaller more efficient new economy out of cash flow and the low cost tools of the internet with NO BORROWING. I am someone who has never borrowed, never had credit cards, built my business slowly out of cash flow. I really resent that our government turned my country into a massive credit card.
Complain about this comment
These carmakers failed to design cars their customers want to buy, eg. they failed to adequately diversify their business models. Likewise, suppliers over-dependent upon a single customer also failed to adequately diversify. Finally employees who have poor alternative career prospects have also failed to adequately diversify.
This lack of diversity translates to inefficiency, which is being flushed out of the system by the credit crunch, and this is beneficial in the long run (although not terribly amusing in the short).
By propping up failing industries, government is propping up the inefficiency and thus prolonging and worsening its effects.
The fact that x million jobs are dependent upon the inefficiency is sad, however those affected have nobody to blame but themselves.
The reality is that government intervention is not possible on an ongoing, long-term basis, and thus if those jobs, companies and industries are going to survive, they must be self-sustaining.
They have had plenty of time to see all this coming, and have failed to act. Their best bet now is to evacuate their industry, before the liquidators move in, closely followed by the new, wiser owners.
Complain about this comment
What happens if China asks for the money back?
Where will the taxes come from to repay the loans to bailout these failed giants? From successful companies, who would be more successful if the billions of dollars going to GM & Co were to be invested in them.
Must be my logic that is at fault.
Complain about this comment
So much for 'de-linkage', then ! And for any idea that finance is somehow separate from the 'real economy'.
Another excuse for Gordon Brown to say "this started in America" ? Well, downturn in demand is suden, and pretty universal.
Complain about this comment
If i'm not mistaken General Motors has made most of its money in recent times through GMAC, its financing arm and therefore has made more money through banking than through car manufacture.
Am I correct in this assumption?
If so it helps explain GM's current financial predicament given the state of the finance industry worldwide.
Complain about this comment
I find the whole nationalisation thing in the US amusing in a morbid sort of way. The country that has railed against socialism for so long now becoming the world's leading socialist society. And having to borrow the money to achieve this from the world's supposedly biggest communist state simply adds to the delicious irony.
However, on the subject of bailing out GM, I think this has to be seen in a very different light to the banks etc. With the banks we've seen something of a chain reaction, with weakness in one bank leading to loss of confidence in the entire system, such that we came close to a total banking collapse according to the BoE Governor. That would have massive implications for virtually every individual, especially as the collapse could well have been global.
GM, however, whilst massive and having the potential to cause pain across a large number of its suppliers, would not cause a similar issue. Yes, GM fails, but that won't bring down companies such as BMW, Audi, Toyota, Honda etc, unlike banking where the Lehman's collapse directly led to the loss of funding lines to lots of other banks globally, followed by share price collapses for banks ranging from Goldman Sachs to HBOS. The banking crisis is one of condidence in a highly (over) leveraged industry. GM is close to collpase simply because it makes sub-standard, overpriced products that nobody wants to buy. GM has the wrong product line (gas guzzling SUV's for example), at a time of fears over long term fuel prices ($147/barrel oil remains in the memory long after the price has halved). Also, even Americans are now beginning to realise that global warming is a problem. GM and other US car makers woke up to this far too late. Their European and Japanese competitors have a better range of vehicles to meet this challenge already in production.
If we hadn't had the financial crisis, GM would still be in a mess now. Congress would still be looking to bail them out simply becuase of the numbers of voters involved, in competitive electoral States, and with union contributions to Democrat re-election campaigns to consider as well.
If I were George Bush, I'd bail out GM, thereby immediately placing a huge albatross round Barack Obama's neck. Bush will get praise for saving GM, Obama will get the blame for the inevitable future costs, eg the impossibility of ever getting rid of surplus labour. If Bush doesn't bail out GM, then if Obama has any sense he'll let GM go under, but try and broker a deal where foreign manufacturers (maybe even Chinese ones!) take over some production facilities and make better products. Simply rescuing a company that is failing because nobody wants the products it's making would be the worse possible start Obama could get off to. It would send out the message he's a soft touch for any outfit that shouts at him loud enough, ie he'll be governed by singe issue pressure groups rather than the other way round.
Complain about this comment
It was only a matter of time before US carmakers inability to make efficient cars to sell to the home market and the rest of the world would catch up with them.
The over manufacture of cars is a major problem does the world need all these cars?
I also wonder has no body see Mary Poppins Banks runs on banks?
A bit like the Americans in Tornado alley haven?t heard of the three little pigs.
Don?t underestimate the US?s ability to survive, if only Apple made cars.
Complain about this comment
Actually the Chinese are buying US assets because the US is their biggest export market and they need - now more than ever - to ensure their products are cheap. Buying bonds means USD goes up and RMB goes down. That simple, no "altruism" needed.
If they pull their loans, their economy slows down, civil uprest and the communist party either becomes repressive of old or gets overthrown.... Hands up those who think they'd rather lose money.
Complain about this comment
I'm sorry but if they can't produce a product that people don't want to buy, or more importantly, weather the storm ahead then that's surely their own fault.
However I don't think the whole industry will be wiped out without intervention; they will just have to reduce production, overheads and dividends and turn their attention to research and development, extension strategies and to try and be more competitive. Isn't that what any business is expected to do if they're aiming to succeed/make a profit.
Complain about this comment
I think if anybody in Europe looked at the range of model available to the American car buyer they would be quite surprised just how inefficient the vehicles they offer for sale are. Talk of the EU insisting on 130 g /km in the US! It is quite difficult to buy vehicles with less than double that figure (and similarly inefficient).
US car manufacturers are so out of touch with the reality of austerity that it seems almost unbelievable. This is quite apart from the problems of the car manufactures essentially being pension funds that make a few cars on the side. The consequence of these problems is that adjustment will be very painful for the US auto industry. The adage of when the auto industry sneezes the USA catches a cold may still apply. They should only be bailed out if there is a radical readjustment in their product ranges.(i.e. no more gas guzzlers and the USA should tax the inefficient cars off of the road.)
It is, on the wider position, interesting to note how similar the so called 'free market' and the 'socialist market' are becoming. Is this a good thing, or a bad thing? I don't know. The problem really is if that there is a structural failure in either system, such as the banking failure, the whole World collapses.
Complain about this comment
#4
"These carmakers failed to design cars their customers want to buy,"
Sorry but that's simple wrong, well it was true about 20 years ago, but since then US car makers have been making much the same sort of car as are made in the Far East or Europe - indeed Ford and GM are (more or less) using some of the same 'chassis' as their European devisions - the problem is simply that people in the US are not buying anything like the number of cars that these big companies need to shift each month.
The problem, as RP points out, is not allowing GM or Ford to fail but what effect it would have on the rest of the economy, allowing GM to fail could tip the US from recession into depression due to the knock-on effects in the wider economy. Detroit would be a ghost town...
Complain about this comment
The US makes bad cars.
Despite the success, and the example of Toyota and Honda, US manufacturers have continued to produce gas guzzling, ugly, badly made, technically outdated cars. Little wonder that consumers have bought fewer and fewer of them.
GM, Chrysler and Ford are not only caught in a time warp, they have an unsustainable level overheads and a creative block. They cannot continue in their present form. To keep them alive is probably a mistake.
Complain about this comment
I think it's inevitable that China will become the West's rescue for the sake of the world economic health and its own economic growth. China's huge foreign reserves will start to bargain hunt cheap options in Europe especially UK assets as there are so much fuss and political juggling in US for Chinese soverign fund real assets investment in the past, in the next few months Chinese sovereign fund and Chinese banks will start to take up UK and European assets, I think in the next week or two, we will know that Bank of China will have HBOS as its foot holder in the UK financial industry, then next will be UK's struggling housing builders, the likely target will be Taylor Wimpey as Chinese soveriegn fund knows quite well the limited nature of available housing development land and the huge shortage of afford housing in UK which the UK government predicted nearly 2.5 million new homes in the next decade, therefore the value of land bank stocks of Taylor Wimpey and other UK housing builders will be self-evident and will have a huge returns in 2-3 years time. Also Chinese sovereign fund investers are quite smart and quick to sense the the true values of land bank and housing properties as tangible solid assets and much reliable than pouring money into US treasury bill.
Complain about this comment
To all those calling for business to left to go to the wall...
I agree with the theory, but are you prepared for the civil commotion or even civil war that would follow?
Remember that the Great Depression came soon after the Great War when the appetite for direct action was not there. [As were many of the young people who could fuel it.]
Not so today. Civilisation is only a veneer.
We are seeing a tipping point in World power. No amount of money or state help will change it in the long run. But how the transition is managed will decide if our children remember it as just an economic upheaval or something worse.
Complain about this comment
This is the slippery slope, Robert.
Once the US Govt has started supporting an individual company like this, it cannot stop, and this will lead to huge distortions and inefficiencies in the industry affected. Other companies in the same market who have acted in a more far sighted way, who have better products, will be seriously disadvantaged.
GM should be put in Chapter 11, where many US airlines have been over the last few years, and work its way forward from there.
An extension of the 'too big to fail' policy from banks now to the auto industry, moving on to whatever next, really does signal the end of the US as the economic superpower.
Complain about this comment
So, what are the Gov'ts plans to rebuild Britains manufacturing base ?
Without a good plan we are going to see our exchange rate spiral downwards......
Our economy needs to be rebalanced.
Without rebalancing we are going to be faced with stagnation and high imported Inflation.
It would, be useful to give the Public sector a proper pay rise (all the public sector not just the popular bits or just MP's).
With Inflation running at 7 - 12 percent depending on what you spend your income on, a general pay rise of ten percent to the Public sector as a whole, would boost the economy.
And as Public servants are amongst some of the lowest paid, it would reduce poverty and hardship at a time when many households main earner (in the private sector) may be losing his job!
A lot of Public sector workers are women, their incomes help their households, especially if their husband can't get a job !
So Mr Brown, if you genuinely wish to address social hardship, do something for your own staff!
You could of course create more market confidence in the Stock market, by actually compensating the Shareholders of Northern Rock and Bradford and Bingley for the confiscation of their companies.
A couple of radical ideas for a Wednesday.
Complain about this comment
Surely it's the case that China and the Middle East have a big heap of money tucked away from America's post-war economic system and lifestyle choices.
You're right, Robert (as ever), in identifying that America has been living in credit card borrowings and then insanely consolidated into corrupt mortgages founded on a whipped-up housing market. You can only defy gravity for so long. Eventually, reality arrives, the bill comes in and there isn't enough money. It happens with individuals, it happens with countries too.
Question is: where now? Unless the Chinese and Arabs fund the cash shortfall while the American economy weans itself off living on false values, the in-built and spring-loaded distortions of the status quo will unwind at an unsustainable rate. Without hyperbole, the outcome could only be wreckage on a mass scale.
I think the Chinese and Arabs see that and will wind up owning large chunks of America, even more than they already own. The return on their investment is the price that will be landed on next-generation Americans. Pity them.
Complain about this comment
#12
"I think if anybody in Europe looked at the range of model available to the American car buyer they would be quite surprised just how inefficient the vehicles they offer for sale are."
You need to compare like with like, European cars have always been more efficient that those in the US but if you compare cars models from the 1960s with current models in either the US or the EU you will see that both sectors have become very much more efficient - that's not to say the US could not do more, but it's not what is stopping people in the US buying cars. Lets face it many in the US are still totally blind to Climate change!
Complain about this comment
5. joeplumber wrote:
What happens if China asks for the money back?
USA will simply print the money (at the sacrifice of having an hyperinflation) in order to pay back China.
Complain about this comment
#13
Detriot IS a ghost town ...it just doesn't realise it yet!
The World has entered a tailspin into a recession closest in size and shape to that of the early 1930's ...according to Ken Clarke on this morning's Today Programme.
The trouble with bailout rescues whether of banks, housing markets or jurassic car manufacturers is that they only work when the bottom, or near bottom of the recession has been reached. This recession hasn't reached first base...yet.
Complain about this comment
Actually the Western model of free market economy can only work if there is a level playing field between countries.
No level playing field no chance.
At some point protectionist measures will be introduced, it may not be this year or next, but eventually that will be the course of action taken.
Complain about this comment
Hows Santander getting on with the Spanish property crash ?
They were partners with RBS on the takeover too far of ABN Amro..........
They also seem to be spending lots on adverts to reassure people that they are great !
I guess they are getting nervous, perhaps with good reason !
Complain about this comment
Hate to say it, but aren't the US Federal Govt just 'propping up a lame duck industry'. It'll end in tears. Shouldn't the Fed be focusing on regenerating these geographical areas that will be mostly effected by the downturn in its automobile industry. They could relocate some Govt jobs into these areas for example.
Complain about this comment
Another problem for the car manufacturers the world over (in general) is that their products are too good. Cars these days do not rust, they do not fail. I have an 8 year old Renault with 110,000 miles on the clock which still runs perfectly. So why do I need to waste 18,000GBP on a new one? It will not do anything that the old one cannot already do. So now that the credit supply has diminished people can quite easily continue to use their old vehicles and concentrate on making savings eslewhere too. Too many products are available today that we just don't need.
Complain about this comment
Thinking of property crashes, which Housebuilder will be the first to go bust ?
If prices go much lower, and if they continue to be unable to sell sufficient Houses, (and sales are thro the floor) then there will be bankruptcies..........
Complain about this comment
#18
"You could of course create more market confidence in the Stock market, by actually compensating the Shareholders of Northern Rock and Bradford and Bingley for the confiscation of their companies."
Or the complaining share holders could just accept that both companies were heading for (if not already in) bankruptcy and thus they would have lost their investments anyway. Of course had the shareholders given more thought as to how the company(s) was being managed rather than just gloating on how large the divs were...
Complain about this comment
Dear Robert
This is Socialism at work, sorting out Capitalism and Globalisation, and a Banking system that still runs not for the masses but a select few.
Non of the Major players in the world of Finance will loose a penny, already money from the tax payer is being hoarded to financ their losses, and in any case the mass of this money is only paer agreements any way.
Complain about this comment
So the US car industry needs a bail out because they continue to design and build cars to sell in the US which are a generation behind the cars they design for Europe and other markets. Daimler Chrysler used the platforms of the outgoing Mercedes for the next generation of Chrysler cars as they were still more advanced than a typical US car. With such wonderful offerings from the US manufacturers is it any surprise that the consumer buys European or Japanese where the same car is on sale in Europe and the US?
It seems that the US tax payer is being asked to foot the bill for deceades of mis-management. It's difficult not to draw parallels with the British car indstry but at least in the UK there was the excuse that everything was nationalised and then run for political ends.
As for China, wait until China decides to liberate Taiwan and threatens a run on the dollar if the US intervenes - just like the US did to the UK at Suez..........
Complain about this comment
One has to ask at one point does the lunacy stop and dark reality hit home?
Propping up car manufacturers who have products that nobody can now afford and, more to the point, don't need is yet another attempt to deal with a symptom of the malaise and not the cause.
The reality is that the American economy - like the UK's - was an illusion, one sustained only through ever more imaginative forms of borrowing which masked the growing gap between actual earnings and the real cost of living. Turn off the credit tap and the whole edifice collapses.
There will soon come a point when the US will be incapable of paying of its debts, at which point the dollar will be valueless. The likelihood is that they will then pursue protectionist policies, which would put it on a collision course with China.
Dark times indeed.
Complain about this comment
BLOG 3 wrote
"We need to build a smaller more efficient new economy out of cash flow and the low cost tools of the internet with NO BORROWING. I am someone who has never borrowed, never had credit cards, built my business slowly out of cash flow...."
Fortunately for you your customers DID borrow money and use credit cards or your business would not have grown ! The time to boast how successful you are in growing a business without borrowing is how well you come through a downturn. Anyone can grow during a boom. Its going to be very tough for all, especially small business during the current downturn
My own business is solely based around internet sales and whilst I agree "too much was lent by too many, to too many" boy I am glad that some people do use card payments or I too would be asking for a state handout in terms of unemployment benefit !
As you suggest we use the low cost tools of the internet to grow a sustainable economy, I would be interested in you views on just how we do this without internet card or cashless payments ? AND don't forget (I speak in my previous guise as a senior shop steward in manufacturing for 15 years here) The internet and cashless sales are not available to the disadvantaged in society AND they cost jobs for all the high street shops and banks that close as a consequence, so its not that rosy a picture for those who would lose their jobs in your new economy.
The key now is to go back to the old ways of lending and borrowing, IE can you afford to lend and can they pay it back...not rocket science is it !
The internet will continue to take sales from the high street and it provides a new job opportunity for those willing to embrace it but only if it provides a service that cannot be obtained face to face just as easily. My own business has GROWN by 25% this year but that's down to high fuel prices making driving around shopping expensive and offering a quality through the letter box service. Of my own payments this year some 99.9%are card or other cashless payment, so long live the CC :-))
Complain about this comment
12 Wrote : It is, on the wider position, interesting to note how similar the so called 'free market' and the 'socialist market' are becoming
Totally agreed, It depends on the angle though
Are capitalists having to use socialist methodology to dig themselves out of this hole where they will retrench or are Governmnets deciding that the economics of over production creating the illusion of prosperity and therefore, over consumption is, in fact, dead.
The green revolution is seriously helping the latter, where people are getting used to recycling and taking stock of what they have and what they need and scalling their consumables back. Why buy that second car? Can I afford that second car?
The cost of supporting all the jobs made defunct , however, will be too big to succeed
Complain about this comment
#25 dceilar - You're right, however it just isn't the American way. Maybe they will change.
The population of Cleveland Ohio has nigh on halved since it's peak in the 1970's. Large tracts are laid to waste and family sized homes can picked up for a dollar. Imagine if that had happened to say Sheffield (possibly a comparable sized city)
From times gone by, there are lots of old ghost towns in the mid west / and further west where people just moved on. It seems as though it is not beyond the realms of possibility that the same could happen to some of the modern day major cities. It's a chilling thought.
If GM goes under I guess the rust belt has just expanded further into Illinois form Ohio and Pennsylvania.
Complain about this comment
I'm not a Marxist, but some of Marx' analyses were correct. The "crisis of overproduction" is a classic scenario.
In the old days, car manufacturers tried to get round it by planned in obsolecence. In 1986, I bought a brand new metro which was beginning to be a rustbucket by 1990. Then with keener competition, they couldn't get away with it any more. I bought a far better Metro in 1990 which lasted for 11 years. Then because of the sabotage of Rover by BAE, I switched to a Suzuki. That was an excellent car, but got written off in an accident. The car I replaced it with has low emissions, excellent safety equipment, and is very comfortable and well built. I am hoping to keep it for 10-15 years. With the best of modern cars, as with the old pre-war ones, there is no need for regular replacement. We need less car manufacturers: the economy must move on.
If technology can free us from drudgery, fine, but then the future must move away from wasteful consumption. We must find meaning in our lives that does not involve buying things and then trashing them. This will be very difficult as "empto ergo sum" (I shop therefore I am) is engrained in the modern psyche. At least, in the "West" it is; lets not forget those in South Asia and elsewhere who work long hours for a pittance just to feed the fripperies of our throw-away society.
Complain about this comment
Part of the cheap money that flowed in the good years was of course from Chinese surpluses, but people tend to overlook petrodollar recycling.
Since Nixon in the 70's cut a deal with the Saudis to denominate oil purchases in US dollars, the US has been living beyond it's means through OPEC recycling those dollars received for oil into the US economy via treasury bills.
This was long before the 'financial superhighway' was ever conceived. Frankly the US Government then, largely through Henry Kissinger and the other neo concervatives, knew the US economy was going to fall behind the East because of energy reserves, so they got their retaliation in first by forcing the world to purchase dollars for oil.
The US could essentially print money without providing a single good or service. It was the ultimate 'easy money' scenario.
Since then all of Reagan and Bush's (both of them) policies have been to keep US business at the top of the world at any cost, funded by petrodollar recycling and then later further borrowing from surplus economies.
It was always going to come to an abrupt end but up till now this obvious imbalance didn't seem to bother anyone.
It's a shame ordinary people in the US have to suffer from neo conservative world domination fantasies.
But then again they voted them in.
Complain about this comment
World wide deflationary depression - here it comes!!
For the umteenth time!
Complain about this comment
28 and 29
I know it is not popular to take the side of the Shareholders.
But the Shareholders are mainly our Pension Funds !
Bradford and Bingley had 800,000 small Shareholders with a few hundred Shares each.
And many thousands with a few thousand shares each.
Not millionaires, just people who believed they were being prudent and whose mistake was to trust highly paid, University educated professionals, who were supposed to be acting in their interest.
Obviously, Shareholders are being penalised for trust.
The stockmarket will continue to wither as would be investors stay away, knowing that the trust isn't there.
Complain about this comment
#4
And any others looking for a free-market solution (bankruptcy) to sort out the situation.
GM, in particular, has "seen how the wind is blowing" and placed a large bet on its Volt electric car - which has the potential to steal a march on the likes of the Prius.
http://en.wikipedia.org/wiki/Chevrolet_Volt
Yes, you could let GM go to the wall and then let Toyota or AN Other cherry pick just the Volt technology - but what gain is there in that for the US Gvt and taxpayer, when the best placed cherry-pickers are all outside the US?
It seems to me that it is in the US Gvt's interest, both in terms of strategic industrial planning and political expediency, to use any bail out as a transition period for protective restructuring of the industry.
Trouble is, if the banks are anything to go by, the moment Gvt cash gets given, comfortable complacency sets straight back in.
And, yes, when I write that, I am thinking in part of Andy Hornby's reported £60,000 a month, not to mention an earlier posting from a bank worker elsewhere on this blog, who seemed to think that bonuses are an automatic part of the pay package.
Complain about this comment
History shows you dont support bankrupt organisations, but let new ones thrive (we did that in old days eg in automotives british leyland), so business making goods/ services dont want should close and suppliers will need to find new markets - good old competition but prehaps all creditors should be paid by government (ie taxpayer). At least would stop snowballing of bad debts etc across whole economy
Complain about this comment
#28, amen. Capitalism is risk and reward. Shareholders in NRK were amply rewarded and now they are being punished for their bad investments.
Complain about this comment
I am still laughing at loud at Comment 18 that the answer to the economic woes we face is to give public sector workers a 10% pay increase!
Never mind that this feather bedded, non productive sector leeches off the back of people who actually do something for a living, and already gets paid more on average than the private sector (leaving aside the issue of their pensions, which the state cannot support) they now should apparently get even more!
What a great idea. Well done, I haven't laughed so much for ages.
Let the lunatics take over the asylum I say!
Complain about this comment
dceilar wrote:
Hate to say it, but aren't the US Federal Govt just 'propping up a lame duck industry'. It'll end in tears. Shouldn't the Fed be focusing on regenerating these geographical areas that will be mostly effected by the downturn in its automobile industry. They could relocate some Govt jobs into these areas for example.
No, I think the US govt is doing right by ensuring no US car manufacturer goes under. Unlike the UK govt which failed to protect MG Rover et al. It's really sad the UK has no home grown car industry to speak of. The UK has put most of its eggs in one basket (financial services) but we now know this will soon end in tears. The UK needs both financial services and manufacturing amongst other industries.
Complain about this comment
What is Obama thinking of?.
Complain about this comment
13, boiler plated.
Detroit already IS a ghost town, many jobs have been lost over the last decade. America is really knackered, this is going to be very bad methinks.........
Time for a MAJOR rethink on capitalism.....
Complain about this comment
laughingblacksheep wrote:
Actually the Chinese are buying US assets because the US is their biggest export market and they need - now more than ever - to ensure their products are cheap. Buying bonds means USD goes up and RMB goes down. That simple, no "altruism" needed.
The Chinese are not given a level playing field by the US govt. We are only allowed to use our SWF to purchase certain US companies, eg financial but not petroleum companies or those perceived to be related to national security or 'hi-tech'. If the US govt would only be less hypocritical and practice full capitalism as we all know it, the huge trade imbalance with China would be less of a problem for the US.
Complain about this comment
The car companies are all in the same boat even the like of Toyota and BMW have scraped their profits forcast. GM/Ford and Chrysler are the first to talk about going under because they are bloated and inefficient and during the credit boom of the last 5 years instead of investing for the future they have had to tackle the burden of the retiree programs. Also their domestic market was the first to start feeling the pain so we can expect European and Asian car manufacturers to follow as the Recession hits us.
The Problem of letting these companies fail is the knock on repurcusions of adding millions of people to America's welfare program, the reduction in Tax income for the US and the worsening of the recession as millions of employed consumers become unemployed and reign in their spending. This in turn will deepen the global recession as the demand for imports from Europe and Asia will weaken.
Complain about this comment
Andrew martin (3) I thought I was the only business genius out there.... growing a business out of cashflow not loans ? Hey now there's two of us ! I hate to call it the Chinese model though.... I thought it was the common sense model..... better known as get rich slow.... I can't help smile at the collapsing business angels and 'big hitters' who've bought up and developed the highly leveraged retail chains; citing 'Value' and 'Exposure' as the new currency. In The stampede Their MBA's and sharp suits stupidly forgot the fundamental basics of a fully costed product or service and the holy grail of effective pricing. What worries me is their idiocy now leaves businesses like mine in a much harsher environment, where I have to accept lower sales as people struggle around me. But Hey; good on you, keep it simple.... If everyone grew at our pace there'd be no debt and no credit crisis.. the problem is until the authorities stop highly geared lending, or at best set a standard ; the gamblers we co-exist with will continue to distort our reality....
Complain about this comment
Are we witnessing the Systematic Destruction and Appropriation of Corporate UK by the Unholy Trinity comprising the Banks, Hedge Funds and Private Equity?
Basically the process appears to be as follows:
a. BANKS reduce or withdraw funding to Corporate UK
b. HEDGE FUNDS attack and decimate share prices using their short selling strategies
c. PRIVATE EQUITY buys Corporate UK at knock-down prices
d. BANKS finance and support HEDGE FUNDS and PRIVATE EQUITY
e. LOSERS - UK Limited, Employees, Homemakers, Savers, Pension Funds, and Taxpayers.
f. LOSERS - The reputation of Government, FSA and the Bank of England at their apparent refusal to accept that any such Systemic Threat is directed at our economy.
It would be interesting to identify the volume of lending between BANKS and HEDGE FUNDS & PRIVATE EQUITY versus lending to Corporate UK.
Are my concerns reasonable?
Complain about this comment
Yes the irony is not lost on us, we Brits get it, unfortunately the majority of Americans don't and will therefore not see the funny side, this perhaps the real reason we are in this mess, plain stupidity.
Complain about this comment
While it's very tempting to blame the current crisis on the USA's free market model (and therefore implicitly endorsing the advantages of state control) - the real differences between the two economies (and hence the reason for the current mess) are cultural.
Westerners have become ever more decadent in their approach to personal finance. Easy access to credit meant that people consumed first and paid later.
The still recent memory of hardships, combined with a stronger sense of financial management, means that Asians are less likely to resort to credit to fuel their consumerism.
Complain about this comment
#20 Boilerplated
I agree that US cars now are more efficient than they used to be, however, notwithstanding the US (republican and democratic) blindness to climate change there is less money around and to be able to travel (or even live) in some parts of the US people need to be able to move about.
There is no reason at all that US auto manufacturers do not produce European cars with European fuel consumption, except of course their consumption model and innate resource profligacy.
The problem is for us all that the direct extra 3 million unemployed caused by letting the US car companies fail is just the time of the iceberg. Letting the car industry go may result in ten time that number of US unemployed and some in Europe too. Is this the price worth paying? It might be if the rest of the economy was recruiting, but I wonder if it is in today's circumstances.
Complain about this comment
#40
That method has been proved incorrect, Govt has to support native industries otherwise the country becomes just a large cold warehouse were economic pneumonia forms first - as the UK is finding out, we have been first in recession and if policies don't change we will be last out as the country relies on the economic well being of other countries...
Complain about this comment
One wonders what the US industry would have said if it was for example, Japan proposing to subsidize it's car industry to the tune of $50 billion (there is no doubt this sum could never be repaid). I am sure they would be rushing to congress/senate/WTO crying foul and demanding reparation.
The principles which Americans purports to hold dear would suggest that these businesses should be allowed to go to chapter 11 and the stongest bits survive to rebuild.
That any US administration is going to permit this seems highly unlikely, the prospect of Detroit in flames is unlikley to appeal and the workers are Obama's voters so he can't/won't cut them loose.
Bush can of course as is pointed out but even he's not that stup... well anyway probably won't happen.
If as a result of propping up failing businesses America get further towards fully realising its economic world view is plain daft and unbridled capitalism does not work then perhaps it is worth the price. It certain would be a Change We Need to pinch a phrase.
Complain about this comment
you can see why the us government villified the chinease so often start a conflict with then they can kiss there loans good bye it seems some one in the united states has been reading up on european history, for example the role of a certain french king who was in so much debt to a certain organisation he with the aid of a religious leader smashed that organisation just to save repaying his debt.
with the way the world's ecconomy is at this moment in time the people should remain vigilent to governments planning any sort of agressive stance as it will only take a small match to strike wider and more global conflicts.
and i for one dont like the thought of a world war three.
Complain about this comment
The house was built on sand.
Let it fall and build a new one on a foundation of Rock
That is a 2000 year old moral story that needs to be learned.
Complain about this comment
#18 supercalmdown Begging compensation for B+B and Northern Rock is a regular feature of your posts. But these companies have failed. In a proper model of capitalism, they should have just disappeared.
Shareholders would have still got zilch, unless there was a net surplus of assets AT THE MARKET PRICE THEN PREVAILING over liabilities. I know of no evidence that this is the case, au contraire for B&B.
The pension funds, at least in principle, know the risks they are taking. Small investors should not touch the stockmarket, except possibly with unit trusts, unless they can afford to lose the lot. I have a diversified portfolio of shares: they are not doing well, but I knew the risks when I bought in and didn't bet my shirt anyway. If the lot goes down the pan I will not be begging for compensation from HMG.
Complain about this comment
Clearly when it comes to "free trade" the Chinese have been much more successful than the West.
This imbalance is unsustainable and it represents a danger to both parties. The evolutionary analogue is when a predator species becomes much more successful than its prey species, resulting in the extinction of both.
The only solution is to reverse the process. But it seems that this can only be done if the West imposes a form of unilateral protectionism and the Chinese agree to go along with it.
Has human evolution, and particularly the evolution of political thinking, developed to the point where this is possible?
Complain about this comment
@7
Yes you are correct GM made most of its money through GMAC and GMAC were the greatest source of Sub-Prime Toxic debt that was sold on.
GM are probably the most to blame for the whole crisis.
Complain about this comment
#46. yangshanghai wrote:
"The Chinese are not given a level playing field by the US govt"
Neither are inward investors in China I recall conversations with a now major company several years ago that went like this. Can I buy some of your shares? Answer: No not unless you have permission of the Red Army.
The whole world protects to a certain extent. The major risk to us all is 'competitive protectionism', and whilst I agree that the USA has a bad tendency to protect its business I do hope that just because one country does it we all do not use it as an excuse to increase our own protectionism. If we do this (as may be inevitable-sadly) then this depression will be deeper and longer.
Complain about this comment
Why the hell is the dollar holding up so well?
How come fixed income investors(gilts, corporate bonds etc) are shunning the UK over the US (sales of these instruments in past 2 months account for a 75% net reduction from purchases in past 4 years, in the US this figure is only 15%)?
Is it because the govenor of our central bank talks down the UK economy and sterling at every opportunity he gets. The same person who insists for the past 12 months that inflation is a real and present danger then within the space of a month that in actual fact the real danger is deflation! Is this level of incompetance the real reason that investors are shunning the UK. Botched macro economic policy, botched monetary policy, botched fiscal policy. Perhaps they should try the lateral approach and actually try to bring about the collapse of the economy and the opposite might happen!
Complain about this comment
#42
re public sector pay
Not all public sector workers leach off others, of course if you think only in terms of civil servants you have a point indeed (!), many PSW have productive (but largely unmeasurable) employment in hospital/social care/local authority sectors - you would soon notice if your bin wasn't emptied, the streets unswept, the ill were left to die on the street or the mentally ill uncared for etc.
As for your last point, I think you'll find that they have been in control since the 1980s!...
Complain about this comment
.....talk about giving someone enough rope with which to hang themselves by!
This is akin to secretly financing your enemy to buy arms with which to attack you......hang on a minute!....weren't some US and UK banks involved in this sort of activity in Nazi Germany just prior to WWII???
History repeats itself...if only economically this time (so far!).
Complain about this comment
SuperCalmDown - post 18.
I appreciate the point you are making, but public sector workers are already bolstered enough by all other tax payers. You often mention pension funds - their superannuation schemes are subsidised by tax payers money, more so than ever now.
Complain about this comment
#35 Sashaclarkson
I'm not a Marxist, but some of Marx' analyses were correct. The "crisis of overproduction" is a classic scenario.
If my memory serves me right Marx also said that Britain would be the first country to experience revolution, or Communism. The reason given is that as it's the oldest Capitalist economy it will face newer problems before the other Capitalist economies. The USA propping up its lame duck industries is a case in point. The British experience tells us it will end in tears - they are delaying the inevitable.
Complain about this comment
Has andrewmartin never had a mortgage then?
Gordon Thompson
Complain about this comment
The problem has been that after the early 1990s recession the big 3 US manufacturers shifted their focus to the higher margin products (SuVs or light trucks as they also like to call them to avoid emisions rules) and almost didn't bother on cars.
Japanese and European manufacturers had since the protectionist measures of the early 1980s recession started building factories in the US well away from traditional car manufacturing areas where they were welcomed for creating job often in areas of high unemployment.
They built cars far better the the big 3 US and had too to avoid the buy American predujuice. Once they had dominated the car market they moved on to the SUV market built them better than the big 3 and were beginning to show signs that they would go on to dominate there too - the best selling SUV in Texas in '07 was a Toyota!
The foreign car manufactures sales are falling at half the rate of the Big 3 and are in a far better place to face the down turn as they started out with a far leaner set up and no legacy costs at several thousand dollars vehicle.
THe US government would have to pump $150bn to make the big 3 US players competitive and they would still have to over come the build quality perception issue...
Complain about this comment
The unemployment rate rose to 5.8%, up from 5.4%
The number of manufacturing jobs fell to 2.86 million, the lowest figure since records began in 1978.
See we do have jobs that produce things
Whoops, its all imported from china and put together in the UK
Complain about this comment
Ultimately this will all end up with the US refusing to pay back their Chinese loans. All the other deveolped countries are just following the US lead. What have the Chinese got as collateral against their loans to the US?? Nothing, it is in effect an unsecured loan and it could end up in a punch up if they are not careful.
Complain about this comment
#18 supercalmdown: Begging compensation for B+B and Northern Rock is a regular feature of your posts. But these companies have failed. In a proper model of capitalism, they should have just disappeared.
Shareholders would have still got zilch, unless there was a net surplus of assets AT THE MARKET PRICE THEN PREVAILING over liabilities. I know of no evidence that this is the case, au contraire for B&B.
The pension funds, at least in principle, know the risks they are taking. Small investors should not touch the stockmarket, except possibly with unit trusts, unless they can afford to lose the lot. I have a diversified portfolio of shares: they are not doing well, but I knew the risks when I bought in and didn't bet my shirt anyway. If the lot goes down the pan I will not be begging for compensation from HMG.
Complain about this comment
Why should taxpayers be expected to loan these dinosaurs money - when it is apparent they didn't spend the cash they raised in loans from China & elsewhere wisely?
The US model of free enterprise (which we've slavishly followed in the UK) has had it's time.
Natural justice and the cyclical nature of events over history probably says it's time to allow other parts of the world to do some catching up (or overtaking?) and allow the millions who we in the west have exploited for centuries to have a better life.
Tough, but what right to the transient short-term wealth we've enjoyed for the past couple of centuries do we have?
Complain about this comment
#61:
The collapse in gilt sales in GBP reflects that not all the investment managers are that stupid. They could see rate cuts coming and that this would trash the currency so why invest in GBP fixed incomes if the basic investment loses 10% of it's value in 1 month. Any international investor buying UK bonds earlier this year is sitting on large losses (in their local currencies).
When investments in gilts increases you can take it a sign that the investors think the pound has bottomed out.
The dollar remains a better bet because no matter where you are you always need dollars - every global commodity is traded in USD so there is a ready market. 1$ is always worth 1$ but this year has been worth between 50p and 70p.
Complain about this comment
#18
The Govt has absolutely no intention of rebalancing the economy. It's effort and our cash is going only into propping up the financial services sector.
Regarding cars I'd like someone to explain why it is that the Norwegians can do this
http://www.think.no
but Scotland despite having had two of the biggest and most profitable banks on the planet couldn't.
Complain about this comment
65 From this I am taking it you are inferring that he was wrong about Britain being the first.
Actually, according to Marxist ideaology, none of the previous 'revolutions - Russia, China etc etc met the basic required criteria to be succesful so they don't actually count because they shouldn't have been done in the first place.
One of the basic rules is that it must be an industrial economy - which neither China or Rissia were - or it will ultimately fail.
Complain about this comment
Why blame the cheap money from China? If you learn about economics and finance, you will learn that low interest debt is a blessing. Nope, it is not China's fault that we're in today's crisis. It was what we did with the debts that we're ended in today's situation. When you borrow money not to invest but to consume and wars, bad thing bound to happen sooner or later.
Complain about this comment
#49 "Are my concerns reasonable?"
Just because you're paranoid, doesn't mean they're not out to get you! ;-)
Complain about this comment
#61 Good Point.....why is the $$$ doing so well, you could add that the traditional safe haven of Gold is underperforming.
The only thing I have to offer is that there is nothing happening in this crisis that follows the "norm". Perhaps people feel that anything linked to the largest economy has to have the best chance....I don't agree...they started the mess.
As to Capitalism being over, or the worst thing for us all, there is clearly a void which needs to be filled by people who can objectively learn and who are visionary.
I am going to hide in my Bothy up a hill and come down the mountain when it is all over....hopefully what I find will be new.
Complain about this comment
This finanicial crash and disolving trust in banks has been a collective "9/11" for Wall Street and London and many other power centres worldwide.
The collective mind is in full denial of the consequences of some US$27.4 Trillion dollars taken off equity market values on global stock markets in less than one year, still falling.
Fundamental changes on both wealth and standards of living of Western Economies, particuarly the USA will change to lower levels for possibly a generation. The greed and glutony of the borrow and spend jet set and bling people is well and truly over.
Massive wealth is now seen as not a good thing and bankers are lepars at best. Most of us need ot examine or own morality and values. We need to spend what we earn only and save for our own futures too.
Borrowing now in massive Billions is not the "right thing to do" as Brown keeps harping on about. He had ten good years with lots of stealth taxes and has nothing to show for that except debt and sold off gold reserves. If he is allowed to get away with a Blank cheque now, sterling will crash and we shall have the IMF teams in London before the Spring of 2009.
Reform, wiser spending with less on Public Service quangoes, gold plated pensions and off book projects would be a start. This man Brown will go down in history as the worst Chancellor and the worst Prime Minister in the past 100 years or more.
His character is flawed in that he has no reflective ability or humility to realise, understand then learn from his own mistakes. An arrogant, preening man, who thinks he knows better than anyone in the whole country as to how to live our lives.
Complain about this comment
#1 No way, Jose !! For the last 20-30 years China has waged a very successful economic war against the "renegade province" (Taiwan) to the extent that currently there is unrest in Taiwan over the number of jobs lost to Fujian province across the straits.
This is a very good application of an ancient Chinese philosophy that - Business *IS* War !! So they applied all the tenets of warfare to business.
Already the current crop of Taiwanese leaders are falling over themselves to be particularly nice to the visiting Chinese big-wigs. Of course, there will always be the the few local jingoists and nationalists who will cause trouble for the bilateral relationship. Neither England, Scotland nor Wales are immune to this problem as witnessed in these blogs these past few days !!
Many now see that Taiwan (or the renegade province, as the Chinese calls it) will be economically forced to reunite with the motherland !! No need for a shooting war !! After all, shooting wars cost money and lives; so why waste money and lives when it can be done economically !!
When the British fought several guerrilla wars in the '50s and '60s, they used a method known as "the wars of hearts and minds". When the Americans got involved in Vietnam, the Brits offered them their expertise in this but the Americans were reported as saying,"Grab them by their crown jewels(note 1), and their hearts and minds will follow" !! We all know what happened there !!
Well, the Chinese took the American saying, gave it a slight twist and applied it successfully. They grabbed them by their wallets and their hearts and minds followed !!
note 1: this is sanitised to avoid moderation by the BBC !!
Complain about this comment
To the guys at 3 and 48. Well done you! Perhaps you can sell your products/services to each other, while the rest of us revert to our ancestral hunter/gathering.
You can have alternate client meetings with each other, discussing the plight your revenues are facing due to everyone else's recklessness.
Of course if everyone had done it your way, never borrowed a penny, and we all had nice sustainable 'growth', we might never have got out of our forefathers huts in the first place.
I can see while you're frustrated, but most people in this bubble economy were just playing the cards they were dealt as best they could.
Complain about this comment
#18 & 62 - You guys are surely having a laugh with regard to increasing the pay (or defending the idea of increasing the pay) of public sector workers.
No 62 is correct that it would be immediately noticeable if the ill were left to die in the street. To those of with experience of these matters it is also immediately noticeable if the ill are left to die on trolleys in hospital corridors.
At least there is some form of brutal honesty in just leaving them in the street, as opposed to the perverse dissembling intelligence that is required to achieve the same result but with "improved optics." - A dissembling intelligence that I am expected to pay for!!
How many people does it take to empty a dustbin? - the answer is it takes a lot less if they just empty dustbins and don´t bother with putting cameras inside peoples rubbish bins, or hiring an army of lawyers to see if they can use anti terror legislation to prevent fly tipping.
Far from giving these people a pay rise I´d vote for a special tax on them - let them fund their pensions the same way everyone is required to fund them. If they don´t like it they can go find work somewhere else the same way that everyone else is required to behave.
The UK has many problems and none of them are helped by creating, fostering and developing a special class of public functionary. They long ago ceased to be public servants - what public service is performed by fiddling practically every statistic produced on virtually everything?
Complain about this comment
Perhaps the reason why the credit crunch has become such a global phenomenon is because we now entering another phase in the history of world order where civilizations have been seen to rise and fall or come and go.
It might just be that what we are now witnessing is the first real evidence of the demise of the western democratically run economies and if China does become the next global superpower then these events will have turned full circle.
If that is the case then for most of the people living in the USA, Europe and UK we might be entering a period akin to the dark ages.
Complain about this comment
5. "At 09:17am on 12 Nov 2008, joeplumber wrote:
What happens if China asks for the money back?"
What happens if we all laugh and refuse to pay it back? Are the chinese going to send in the bailiffs?
Complain about this comment
Robert,
I think you're slightly missing the point. GM is a huge pension fund/health care provider which just happens to make cars to support this activity. I think it costs around $1,000 per car produced to support this social welfare. Clearly it is doomed unless these costs are reduced. The unions know this so their next wheeze, having bled the company dry, is to get their newly installed president and congress to get the taxpayers to subsidise them. The taxpayers, many of whom would dream of this level of welfare protection, would be mad to intervene.
What next - the airlines, house builders? Taxpayers should not be bailing out dysfunctional companies. That's the responsibility of the managers, directors, shareholders, unions, employees, banks and debt holders to sort out.
Complain about this comment
superschnorb #26,
Absolutely spot on!
My feeling is that the real fundamental principle that is driving and will drive this amazing unwinding of the whole system is...
...that we just don't need 60 - 75% of what we buy today!!
So the western economies may have one hell of a long way to fall.
Complain about this comment
#2 "Pax Americana" is on the same level of oxymoron as "military intelligence" !!
#8 "I find the whole nationalisation thing in the US amusing in a morbid sort of way. The country that has railed against socialism for so long now becoming the world's leading socialist society. And having to borrow the money to achieve this from the world's supposedly biggest communist state simply adds to the delicious irony."
This is what had me chortling for the last 3-4 years now. The fact that Capitalist America is in hock to the tune of US$ 2 trillion to the Communist Chinese is too delicious not to savour !! And this is not counting any personal or corporate debts !!
To "banks/companies that are too big to fail" we must now add "debts that are too big not to repay" !! With their clout, the Chinese can force the US economy into junk status and the US$ into the Zimbabwean league if the Americans try to welsh on their debt !!
Will we soon be seeing the American province of the Peoples' Republic of China ??
Complain about this comment
#74 RedLenin
65 From this I am taking it you are inferring that he was wrong about Britain being the first.
I was inferring that Britain WILL be the first. I agree that Russia and China don't really count as there was no bourgeoisie in those countries to revolt against in the first place. I think Marx said that a country has to be Capitalist first and then turn Communist. Communism, I think, is to be seen as post-Capitalism.
To add to #65 the IMF has said that Britain will suffer the most of all the developed nations in this recession. If sashaclarkson is correct we should hold on to our hats . . .
Complain about this comment
#61, number of reasons:
1) The interest rates in the US are not running at -2% in real terms.
2) The US's economy is not **solely** based on a property asset bubble, financial services and oversupply of credit
3) Everyone, apart from apparently reporters, realise that GB is an utter incompetent that is doing his best to put off the day of judgement.
4) Last but not least, the US is a major importer. If the dollar depreciates too much the large exporters such as Japan, the Gulf, China etc will intervene to push it back up. The UK isn't as important.
Complain about this comment
#63 bankslickerminusther
I agree there was quite a bit of commercial activity by some businesses during WWII, benefitting both sides. You do not really think this was a one off do you?
The Taleban at first were a rabble, disorganised, untrained, ill equipped and no concept of modern war strategy. Now they are at least the equal of the coalition forces.
They are now well trained, well equipped and versed in modern warfare strategy in NW Pakistan by nationals of an oil rich country that is supposedly a coalition ally. Much of their financial support comes from the same source.
And who trained the nationals of this oil rich country? Well, as part of the deal when the UK flogged quite a few dozen jet strike aircraft, worth several billions, former SAS, Paras and Royal marines were sent to the Gulf to train their Armed forces personnel in advanced warfare techniques.
I have also wondered what exactly this oil rich country intends to use this potent air force for? I mean, if you add the projected new order for the new Eurofighters (about 50 I believe) this Air Force will only rank behind US, Russia and China. is it too much to assume that the UK government knows what it is doing?
Or am being too cynical?
Complain about this comment
#81
re public sector pay
You seem to be mixing up management and those who actually do the work, sure, make management fund their own pensions but you can't expect those who are are earing such a low wage that many are eligible for benefit claims to do so.
BTW, I've seen the waste that occurs in hospitals/ NHS trusts, very little of that waste is found in the front line services but within the back offices and trusts.
Complain about this comment
A slightly different take: Service industries and social welfare are only possible because people in producive industry make a surplus over their own needs. In the past, this could broadly happen in one country. Now it has gone global. The West is in effect existing partly on social welfare financed by China.
We had better be nice to them!
Complain about this comment
How do we really know that China has the funds to buy anybody out? A while ago Russia was cash rich, today it is very different.
When times are tough the sorts of things and quality that China exports are the very things we can do without.
Maybe we are in for another round of "Buy Bristish"....are we making anything anymore?
Complain about this comment
#16 "But how the transition is managed will decide if our children remember it as just an economic upheaval or something worse."
They will also remember how their parents put them there in the first place, having sold their children's birthright for their own frivolous living !!
Complain about this comment
#87 Marxist predictions were confounded by Keynesian fiscal policy and the welfare state. The future is uncharted territory - perhaps we are headed for a global welfare state of sorts - with the productive economies calling the shots.
I don't see communism as an answer, but perhaps a new form of free market post-capitalism based on the Social Credit philosophy of Clifford Hugh Douglas (minus alleged antisemitism).
Complain about this comment
#1 in jest was partly correct.
The Chinese should insist on Taiwan as security on loans to the US intended to rescue of its economy. That matches the scale of the problem.
Interesting to see the future world number one socialist state (USA) going cap in hand to the future number one capitalist state (China). We should see more of these sort of reversals as the massive de-leveraging continues.
Complain about this comment
#88
"4) Last but not least, the US is a major importer. "
Up until now. It is surely going to run out of credit (borrowing ability) very soon.
On the subject of GMAC, hasn't GM sold it?
I see the EU are going to clamp down on the Credit Rating Agencies. In my view they have a huge responsibility for rating a lot of the Toxic Debt as AAA. There should be ercords of this. Perhaps some of them would like to show how they arrived at these ratings.
Complain about this comment
#92
"Maybe we are in for another round of "Buy Bristish"....are we making anything anymore?"
I think that would have to be a "Buy European" these days, for the very reason you suggest, at least some of the more enlightened EU countries decided that keeping a manufacturing base (and mixed economy) was a safer bat than just becoming a large warehouse for far eastern production...
Complain about this comment
# 60. John_from_Hendon wrote:
"I recall conversations with a now major company several years ago that went like this. Can I buy some of your shares? Answer: No not unless you have permission of the Red Army."
The Red Army only exists in Russian or in China in the 1920's 1930's. I guess you're talking about the People's Liberation Army in China which has many commercial companies in which case you naturally would need permission from the PLA to become a shareholder just as you would need a UK local authority's permission to hold shares in their companies. As it happens I'm currently helping one local authority to set up a local housing company and it clearly states in the articles of the company all shareholders needs permission from the local authority before selling shares to outsiders.
"The whole world protects to a certain extent."
I agree with your statement but China is not trying to woo western investment to bail them out of a crisis at the moment so I find your comment off-topic.
Complain about this comment
#25 Those who do not learn from the lessons of history are doomed to repeat the same mistakes.
The Brits have their taste of that by trying to prop up British Leyland and where is that now ??
The Americans will soon find out the cost of doing so !!
Complain about this comment
#28 "Of course had the shareholders given more thought as to how the company(s) was being managed rather than just gloating on how large the divs were..."
I totally agree with you.
They do say that the road to Hell is paved with good intentions. In this case, I think it was paved with good dividends.
Complain about this comment
I agree with those who have said that the growing global role of China is frightening. It is not fashionable to say so, but China is a one-party state in which freedom of expression and freedom of belief are unknown, human rights are minimal, and the party (a.k.a. the Army in civilian clothes) tolerates no dissent.
But we need to look at why we, in the west, are in this mess. It is a simple cultural matter of greed and stupidity - using supposedly-easy credit to live beyond our means. People seem to think that they have an entitlement to go on doing this ad infinitum. Reality hurts, and politicians, unions and bureacrats connive in hiding the reality from the public.
At times, the stupidity which this involves is mind-boggling. Take the recent rises in energy prices - the knee-jerk response is to call for windfall taxes, and those who point out that we need to spend at least GBP 100 bn to avoid an energy gap get ignored in the pursuit of short-term comfort.
Or pensions. Since 1997, GB has sucked at least GBP 200 bn out of pensions to pay for government spending, and then we are supposed to be surprised about pension deficits.
Or the blanket smoking ban. I understand the health rationale, but this has probably cost at least 200,000 jobs in pubs and clubs alone. Might it have been wiser to have flexibility and choice rather than PC dogma on this?
We seem to have some kind of economic death-wish based on short-term greed. It is all very depressing.
Complain about this comment
#99
"British Leyland and where is that now ??"
Sold down the (Yangtze) River?...
Now, rather than make cars and export them to earn GDP we import cars and thus increasing our balance of payments deficit.
Complain about this comment
Does it really matter how much the car makers are re-organised and restructured? If there are no customers out there for the product of the automotive industry, then no amount of tinkering is going to raise sales. The only reasonable thing to do is to radically downsize them, perhaps by up to 3/4 of their current bloated size. This is necessarily going to mean job cuts in the industry and down the line to suppliers and associated businesses, it is simply a sad fact of life.
Look at our own problems with British Leyland and then Rover, those old dinosaurs simply did not invest in new technology, they did not up build quality and suffered from the more pro-active Japanese. However, when the crunch came, it affected whole communities, look at the effects on Birmingham when Longbridge shut down. Yes it is painful, but you cannot simply pump money into an industry if the customers are not there. You might as well give the customers vouchers to go and buy the vehicles if you want to keep up demand, but that does not solve the problem.
Perhaps letting them fail and allowing new companies to emerge to fill the gap, companies that will produce more efficient and better built cars and perhaps also educate the American public into being more efficient will be good for all.
Complain about this comment
Returning to the original post, the myth of Chinese competitivity was rooted in a fixed exchange rate, much complained about, ineffectually, at the time. Does this mean that the US will fix its rates too, then? Or that if you get your population to slave for nothing, you still have an economy left? It was entirely forseeable, and foreseen, that the tiger economies would simply reequilibrate the distribution of income: the problem if you live in the UK is that that to some extent transfers the world's unemployed from the back-streets of Peking to the back-streets of Peterborough. Ultimately, it will be a question of resources per head of population, viewed large, and that will cause a serious problem to the Chinese, that they're short on almost everything, and their wealth, based on a false exchange rate, may disappear faster than it came. At least the UK can, if push comes to shove, still feeds its population, even if it can't send them jetting long distances on holiday every year.
Complain about this comment
#98. ChineseInUK
Yup, those were the guys - The PLA. - the Army anyway. The implication was that for the company I was interested in only the Army could hold shares and they were not for sale to foreigners at all. (About 10 years ago in the the ... industry.)
The point was that the company was competing with non Chinese companies whose shares were tradable and the Chinese company's were not. I did get the name of the army wrong - thanks for correcting it. But the point I was making remains valid. Opening things up is a two way process.
Your local authority housing company sound to me like its parent is trying to avoid actually setting up an independent company and deliberately frustrating the purposes of the legislation under which It was 'persuaded' to 'sell' its housing stock to an independent company. Does the HMG know what is going on?
I also wonder if it is possible to actually enforce such restrictions even if they are written into the memorandum and articles? Such restrictive covenants, when challenged in court, may not be as water-tight as your lawyers may have led you to believe. Generally the court seems to insist on clauses such as 'such permission shall not be unreasonably withheld' even if they are not included in the written text. The only place I have seen restrictive covenants sustained in recent years has been where gifts of land or property have been given for specific purposes, such as land for a hospital.
Complain about this comment
99. At 12:32pm on 12 Nov 2008, ishkandar wrote:
#25 Those who do not learn from the lessons of history are doomed to repeat the same mistakes.
The Brits have their taste of that by trying to prop up British Leyland and where is that now ??
Chinese Nanjing Automobile Company
Complain about this comment
Jaguar and Land-Rover
TATA motors
See a theme?
GM
Ford
Chrysler
?????????
Complain about this comment
#101, Not taking windfalls only makes sense if the profits will be invested back into development of new power generation facilities of whatever kind, coal, nuclear, gas, wind, solar, wave etc. If the profits are simply being distributed to shareholders then not having a windfall tax is not going to lead to more investment as the money has left the industry already!
Complain about this comment
#47 "This in turn will deepen the global recession as the demand for imports from Europe and Asia will weaken."
Not necessarily so for Asia. Many of their exports are low tech daily necessities that are too expensive to produce in America !! So their exports will continue. It is the low tech, *non*-necessities manufacturers (e.g. toy makers) that have already gone to the wall, thus clearing out some of their manufacturing deadwood.
Steve (throw a chair through the window) Ballmer had announced that Windows(tm) 7 is soon to be (foisted ??) upon us !! It will (very) probably need much more hardware resources to run than a bog standard Windows XP will. Any one wishing to use the all-singing, all-dancing shiny new Windows O/S will have to buy a new, more powerful Made-in-China PC to run it !!
There's still synergy to be had !!
Complain about this comment
#44. virtualpagan wrote:
"What is Obama thinking of?. "
Tell me this article isn't true!
Made me feel physically sick!
2 years to elect yet another lizard!!!!!!!!
Complain about this comment
#101
"At times, the stupidity which this involves is mind-boggling. Take the recent rises in energy prices - the knee-jerk response is to call for windfall taxes, and those who point out that we need to spend at least GBP 100 bn to avoid an energy gap get ignored in the pursuit of short-term comfort."
The problem is not the price rises, most people are intelligent enough to understand that if the whole-sale cost goes up so does the end user price, it's the fact that these energy companies have been making record profits for years yet they have preferred to pay director and share divs rather than invest - now the customers are feeling as though they are having to suffer the double whammy of a whole-sale price increase and what amounts to a surcharge for the investment that has been put off for the last 25 years.
Complain about this comment
#104
"At least the UK can, if push comes to shove, still feeds its population"
More minced credit card, anyone?
Complain about this comment
#53 "That method has been proved incorrect, Govt has to support native industries otherwise the country becomes just a large cold warehouse were economic pneumonia forms first - as the UK is finding out, we have been first in recession and if policies don't change we will be last out as the country relies on the economic well being of other countries..."
All this would not happen if the workers do not price themselves out of the market !! Even the ever-efficient Japanese have discovered this and have moved much of their manufacturing to China !! Unfortunately, the Americans have not and still insist in producing over-priced cars that cannot sell !!
Since all these cars are made of essentially similiar materials for similar costs, the only variable is the cost of labour.
Reduce labour costs and the manufacturing sector will recover. This, however, is impossible given the fact that most, if not all, the workers have high expectations of a good life and demand to be paid to enjoy that good life regardless of the effect on the economy.
Complain about this comment
Do these people learn nothing? The whole reason we are in this state is through unrestricted borrowing and a lack of fiscal control.
Even the Bank of England is implying we should borrow our way out of trouble, surely of all people they should realise that is a sure way of stimulating a re-run of the current crisis in another 10-15 years.
We need to learn to live within our means, and say 'no' to children who want everything now, rather than wating until they can afford it...that goes for 3 years olds as much as 30 year olds.
Complain about this comment
#109
"Not necessarily so for Asia. Many of their exports are low tech daily necessities that are too expensive to produce in America !!"
Not so, nothing is too expensive to produce locally if/when recession or depression bits, remember that the long term unemployed (state sponsored or not) will be more than happy with a lower paid job that is still far more than any benefit they might be receiving - this is why all the talk about not entering a protectionist phase is so silly, it will happen at some point if this (world) recession is anything but short and shallow.
"Steve (throw a chair through the window) Ballmer had announced that Windows(tm) 7 is soon to be (foisted ??) upon us !! It will (very) probably need much more hardware resources to run than a bog standard Windows XP will. Any one wishing to use the all-singing, all-dancing shiny new Windows O/S will have to buy a new, more powerful Made-in-China PC to run it !!"
Or they just won't upgrade, this is the point that many forget - even Win95/7 is still alive if not well - only those who need to run the latest soft/hardware upgrade and most people will not be upgrading in a recession...
Complain about this comment
113 Reduce labour costs and the manufacturing sector will recover. This, however, is impossible given the fact that most, if not all, the workers have high expectations of a good life and demand to be paid to enjoy that good life regardless of the effect on the economy.
How dare those workers demand a good life, how dare they. Feed them gruel, no in fact sell it to them in the canteen. What, why do we have a canteen? Get rid of the canteen. How much is my bonus? What, get rid of someone and tell the others to work a few hours more.
If this carries on we will have all those nasty social employment laws they have in France. Spit, Spit
Complain about this comment
# 73 Wee Scamp
If you go to
http://en.wikipedia.org/wiki/Think_Global
you will find that it's not a simple matter of The Norwegians going it alone.
In a globalised economy, it's not surprisig to find, e.g., that "GE invested USD 4 million in Think and USD 20 million in A123 Systems to help A123 roll out batteries for Think."
You will note that both GE and A123 are US based companies.
Also, in a bit of enlightened self interest to support the "home team", the Norwegian Gvt has also ensured that, in Norway, "EVs are exempt from taxes, have free parking, pass toll roads for free, and are allowed to drive in the bus lanes avoiding traffic congestion".
Initiatives such as the Th!nk may provide the fresh shoots of recovery after the forest fire which is this crash, and a Greener recovery at that, but at the moment it's so small scale (100 cars as of Aug 2008), and minimally capitalised by the standards of the car industry, that it hardly registers - I'm afraid.
Complain about this comment
The Yanks need to do what the Japs did in the 60s.
Buy a few German car models take them to bits & copy them but try to do make them better.
Problem solved.
On a non PC note.
Bin Laden must be smirking no need for suicide bombers.
USA PLC has its own suicide bankers.
Complain about this comment
108, 111:
As well as reinvesting in essential replacement capacity, the big energy companies also need to provide a return on capital. So yes, they pay dividends, and these sound like big sums simply because these are big companies.
One company which got a lot of flak over price rises was Centrica. In the first half of 2008, Centrica earned GBP 400m after tax, which, when reported to the public, sounds a lot.
But the company has assets of GBP 17 bn, so the annual aftertax return was less than five percent. If we are going to say that a five percent return on capital is unacceptable, NO company or investor will be prepared to invest in new capacity. If we want new capacity, we must be prepared to pay for it through reasonable returns on investment.
So my answer to the unions and politicians on this one is - fine, take a windfall tax if that is what you want, but spend it quickly, because one result of this policy will be that the lights will go out......
Complain about this comment
116:
The workers are also the consumers. Part of the good life that they want is composed of buying best value with their wages, in cars as in anything else.
If Asian manufacturers, with lower wage costs, naturally produce cheaper cars, western consumers are going to buy them, and jobs in western plants will go. The only alternative (on the existing free-market basis) is subsidy from the state, which the workers (collectively) end up paying for through taxes anyway.
The real problem, in my view, is one-sided globalisation. China, India and others can export to us, but you try and export to them and you face stiff import tariffs and other restrictions. Unfair, and we have been idiotic to tolerate it.
It is time to wake up to unfair trade practices. We should insist on parity of tariffs and market access. If this does not happen, western voters are going to wake up to the unfairness of this and demand protectionist measures. If this happens, globalisation is dead.
Complain about this comment
#32 Penninebooks,
The solution you seek is called a debit card. I swear by mine.
Yes, it's unfortunate there's no buyer protection, I may take a bet that this is the subject of future action by the OFT.
As for your customers paying with credit, that's not a good sign. You want your customers to be overflowing with cash. If your customers can only buy things because someone is lending them the bux, guess what's gonna happen when the lending stops?
Complain about this comment
#119
re UK energy companies
"So my answer to the unions and politicians on this one is - fine, take a windfall tax if that is what you want, but spend it quickly, because one result of this policy will be that the lights will go out......"
Poppy-chock! If the lights did start going out the only looser would be the directors and speculators as the industry gets renationalised. Those running these utility companies would never dare to allow the lights to go out as they know that they would be turkeys voting for Christmass...
Complain about this comment
It is easy to notice the differences between such discrete countries as China and US--the so-called Communist and Democratic blocs. All too often, macro-level economic and political analyses pit the totalitarian state control against the democratic freedom.
The unconvenient truth is that neither the socialist China lack 'practical' freedom especially on the micro-level of the individual; nor can the market or political liberty embraced by democratic societies be free from of regulatory authorities.
The dazzling differences, or indeed different emphasises in rhetoric, sometimes make it difficult to see how remarkably similar the generic form of society is.
Complain about this comment
#74 "Actually, according to Marxist ideaology, none of the previous 'revolutions - Russia, China etc etc met the basic required criteria to be successful so they don't actually count because they shouldn't have been done in the first place."
You are correct. Too many people confuse Communism with Marxism simple because the early Communists including your namesake hijacked the name "Marxism" to give them a veneer of respectability !!
In fact, with all the mess going on with the British economy currently, I will not be surprised if a real Marxist revolution will come about !! Something that Gormless Gordon and his socialist/Communist cohorts fear most !!
Complain about this comment
#84 What exactly is your point? That GM workers should be denied access to healthcare and pensions? That the unions and workers are somehow nefarious in seeking these kind of benefits?
Who exactly do you expect to benefit from any denial of healthcare and pensions to GM workers?
#113 You are missing the point at every level. Most ordinary workers are deeply indebted largely as a consequence of a real estate asset price bubble. Unless you define wanting to live in a house as "high expectations of a good life" then I fail to see your point.
Even if you have a point then it remains the case that GM and many other industrial enterprises are suffering problems as a consequence of a decline in demand. If you take the axe to workers wages then how do you expect those workers to buy and consume things?
Complain about this comment
89. At 12:12pm on 12 Nov 2008, excellentcatblogger wrote:
"The Taleban at first were a rabble, disorganised, untrained, ill equipped and no concept of modern war strategy. Now they are at least the equal of the coalition forces."
Which explains why we're losing less than one soldier a week (mainly to bombs) while the Taliban are still playing at 'The Somme V2.0' and running towards our machine gun posts and losing hundreds while doing it.
Neither did the Taliban have 'no concept of modern war strategy': they're using the same strategies of guerilla warfare that they used against us 200 years ago and that some of their members used against the Russians 20 years back. They can never win on the battlefield, but they might just cause enough casualties that we pack up & go home.
Complain about this comment
#89 "They are now well trained, well equipped and versed in modern warfare strategy in NW Pakistan by nationals of an oil rich country that is supposedly a coalition ally."
Can I suggest that you read "Charlie Wilson's war" or watch the movie ?? It was the Americans that supplied and trained them to be used against the Russians !!
Similarly, it was the Americans who supplied and trained the Viet Minh to be used against what they considered to be an unacceptable colonial power, France.
We both know what happened when those respective wars were over.
Complain about this comment
#122. Firstly the people who bought energy shares are regular people like my dad who bought £5000 while a junior doctor. He sold those and part funded my degree with them. Most of the rest of the shareholders are pension funds, not 'fat cats' whatever those are.
Secondly 'if the lights went off' the company directors (who mostly live abroad) would be in a much happier position that the rest of us. How long do you think the life support machines at your local hospital run on back up power? How long before the local hoodies take advantage of the black out and unleash hell.
Do you really think the state can manage our power generation any better than the health service or army? I don't.
Complain about this comment
#90 I concur. I have always said that the one major mistake the Thatcher government made and carried through by the subsequent governments is to install "managers" into NHS hospitals !!
This was compounded horribly by the Blair government with their "targets" that were no more that spin and the massaging of statistics. Meanwhile, the NHS services have *NOT* got better despite the "billions" poured into it.
Complain about this comment
#92 You certainly can !! In fact, you can start boycotting all things Chinese by not using your Chinese-made computer to post on this blog.
Welcome to the Brave New World - Aldus Huxley(c)
Complain about this comment
128:
Spot on and superbly put. These are mostly global companies. If we decide that we do not want them to earn a satisfactory return on investments in the UK, they would simply invest elsewhere instead. As you say, we would get hurt far more severely than the energy companies if there is a lack of investment in new capacity. Government may be OK at running social services - even this is debatable - but is hopeless at running industries, as the Leyland experience (amongst others) surely demonstrates.
In any case, I rather think that the windfall tax case is dead in the water anyway. I cannot imagine that EDF would have agreed to a massive investment in the UK nuclear industry if they had not sought and obtained a cast-iron 'no windfall taxes' guarantee in advance!
Complain about this comment
#124
"In fact, with all the mess going on with the British economy currently, I will not be surprised if a real Marxist revolution will come about !! Something that Gormless Gordon and his socialist/Communist cohorts fear most !!"
And the multi-coloured Cameron and buddies fear even more, whilst 'Gormless Gordon' might have to go back to his socialist roots 'Cameron the Chameleon' will be all at sea like Captain Bligh...
Complain about this comment
#98 Furthermore, the Chinese government has banned the PLA from ever owning *ANY* businesses and made them get on with defending the country instead of getting rich on the proceeds of their businesses.
Quite a few of the PLA higher-ups were "retired" in the process.
That reported conversation must be at least 20 years old !!
BTW the Chinese government are now working on their party functionaries and quite a few were made into involuntary honoured ancestors including a former mayor of Beijing !!
Complain about this comment
#128
Your point being what?...
Complain about this comment
#105 "Such restrictive covenants, when challenged in court, may not be as water-tight as your lawyers may have led you to believe."
They have been and will be water tight because they were based on the common law concept of "family-held" companies !! Shares could only be sold within the family unless the whole family (or whatever percentage is stated in the M&A) decides to allow a sale to an outside party.
There are many family-held companies still in existence in Britain today !! Clannishness is alive and well as still lives in Britain !!
Complain about this comment
#115 "remember that the long term unemployed (state sponsored or not) will be more than happy with a lower paid job *that is still far more than any benefit they might be receiving*"
This just proves my point about high expectations and pricing themselves out of the market !! I totally agree that they *CAN* make those goods. The question is whether they will *WANT* to make those goods at a low enough cost or expect some Mexican illegal immigrant to do so for cheaper ??
Expectations is the problem. Marx talked about "needs" *NOT* "wants" !!
Complain about this comment
#73 & #117 Norway also has something that most nations on earth wish they had - a surplus of cheap, almost free electricity from their fjords !! This makes *any* electric car a viable proposition.
Their means of making more electricity is renewed every winter when the snow falls on their fjords and around them !!
Norsk Hydro, as the name implies, is a major supplier of this stuff !!
Complain about this comment
#131
re energy companies
I assume that you speak as a speculator too and as such I note your optimism!
Perhaps you could inform the blog just how EDF could 'asset strip' a UK nuclear power station (quite possibly ringed by the army personal holding submachine guns), indeed it would be difficult to 'asset strip' a gas/oil/coal fired power station...
EDF's best guarantee is the fact that the UK would not normally want a fully head-on diplomatic incident with our nearest EU neighbour, but that said if EDF were to cause UK lights to go out who knows!
Complain about this comment
#125 Most healthcare in America is paid for by insurance !! They do not have an NHS like we have in Britain.
"Most ordinary workers are deeply indebted largely as a consequence of a real estate asset price bubble."
If this was the *only* problem, the solution would be a lot simpler. Then the "bubble" will also not affect the many cut-price budget airlines that sprang up to service their needs (e.g. XL going bust in a big way). Who buys those thousands, if not millions, of flat screen TVs imported from abroad ?? Is that also a necessity of life and how was that financed ?? The list goes on....
Complain about this comment
#136
"The question is whether they will *WANT* to make those goods at a low enough cost or expect some Mexican illegal immigrant to do so for cheaper ??"
I think it will come down to how low the US economy sinks and how quickly 'protectionism' rears it's head. Mexican illegal immigrant could well be breaking back into Mexico if the US economy goes into a tail-spin and people again start asking if someone can spare a Dime...
Complain about this comment
#134. My point is that contrary to what the previous poster stated we are at the mercy of the multinationals that run our infastructure, not vice versa, and any attempt at state control or nationalisation is likely to hurt the regular people in the country far more than 'fat cats', mainly because 'fat cats' don't really exist. Shareholders are mostly pension pots - i.e normal people.
Understand?
Complain about this comment
#127. Thats about 80% right. The Taliban didn't exist when the Russians were there. The Americans armed the Mujhadeen, who turned into the northern alliance after the Russians left. The Taliban were created in response to the Northern alliance acting like gangsters and were initially quite popular. Obviously some alliances changed and there are SOME US trained mujhadeen with the Taliban, but not very many. The weapons the US gave them are long gone or time expired.
My enemy's enemy is my friend is very true in central asia.
Equally the US (or rather OSS) armed the viet cong to fight the Japanese (in the same way we armed communist resistance groups in Europe to fight the nazis). I'm unaware of active US help for the VC post-war, although the OSS/CIA have been know to act on their own 'initiative'. The French in indo-china were also largely US equipped, especially in the air. It was B26 bombers they used for ground support.
Life is never black & white.
Complain about this comment
138# "Perhaps you could inform the blog just how EDF could 'asset strip' a UK nuclear power station (quite possibly ringed by the army personal holding submachine guns), indeed it would be difficult to 'asset strip' a gas/oil/coal fired power station..."
By removing the technical staff (of which you only need a few dozen to run the plants) and crashing the computers. Its not easy to restart a nuclear reactor with a submachine gun.
Equally you may wish to check how much electricity we import from France. Remove that and we have serious power shortages in the South East.
Complain about this comment
94 - Keynes theories are only correct if you apply and adhere to all of them. If you 'penny-packet' and cherry pick then it will fail - Keynes says so.
In the UK we have never applied keynes properly. In the 20/30's we pulled out of the depression because we broke the link between sterling and gold in 1931. We didn't apply any Keynsian theories at all. In fact quite the opposite - we reduced public spending and slashed welfare.
Complain about this comment
#139
"#125 Most healthcare in America is paid for by insurance !! They do not have an NHS like we have in Britain."
...and who pays for that healthcare insurance, this is why the failure of GM would be such a problem, if the USA think they have a problem with vast numbers of people without health insurance it will be nothing compared to the number should GM go bust!
Complain about this comment
139 - In excess of 40% - which is mainly the US working class - have no medical insurance whatsoever as it is to expensive for people on normal wages. A further 20-30% (mostly lower-middle class) have limited health insurance for the same reasons - mainly cost.
Less than 40% of the US population has full health cover.
Complain about this comment
#141
Yes I do understand but I fear you don't, your explanation reads more as an excuse than a reason, pension funds can be safeguarded by the Govt. just as the banks have been.
Complain about this comment
Honestly, when was the last time GM, Ford and Chrysler have NOT been in trouble? These 3 companies have never been allowed to fail when they should had. All the excess baggage - trade unions, bad designs, will NOT go away even if you keep throwing money at it. The US government should just bite the bullet and let them fed for themselves. A few car companies are nowhere on the same level as the financial industry. If Pelosi thinks they should be bailed out she should give her own funds.
Complain about this comment
#143
"By removing the technical staff (of which you only need a few dozen to run the plants) and crashing the computers. Its not easy to restart a nuclear reactor with a submachine gun."
Err no, they would not be in a position to crash the computer as they would be dead before a finger hit the key boards!
Complain about this comment
let me put a different angle on this.
Half the problem ist the tax policies over the last 25 years.
Taxes have been radically reduced for the wealthy + captial but not as much for(or as in germany raised) the working class.
Through this the consumers have less money too spend on new cars as ever before.
Even Japanese+European car makers have this problem.
Surely it would be better to give taxes bakc to normal workers and to pay for it increase taxes on the very wealthy?
If you´ve got 10 billion pounds you dont need 100 cars or not?
Complain about this comment
The point I've been trying to make here - on energy and on other economic issues - is that we have been living in a never-never land of "I want it, I cannot afford it, but I will buy it anyway". You want a 20k car but have not actually got 20k? Fine, borrow it. You want to spend 5k on a holiday but do not have 5k? Fine, borrow it. Similarly, "we want reliable electricity, but you are not expecting us to actually pay for investment in it, are you?"
On a national scale, this means that we borrowed 625bn from wholesale markets - essentially, from foreigners - last year, to top up value generation (GDP) of 1,300 bn. A huge proportion of what we spend is not earned. This applies to government, businesses and individuals. The whole assumption seems to have been that this borrowing will be available year after year, and will never need to be paid back.
One economist has called this "goldilocks economics" - have whatever you like, even if you cannot afford it out of income.
That era is OVER. It has got us used to a standard of living that we are not earning. It has to be paid back, eventually.
The current stage we are at is that of transferring debt from companies (such as banks) and individuals to government. But that, too, cannot go on indefinitely. It will have to be repaid.
Low interest rates are not a solution - how, exactly, do low rates encourage us to save, or to live within our means?
We need to start living within our means, both as individuals and as government. The mindset that says that "we cannot possibly make big cuts in public spending" is the same mindset that says that "I cannot possibly survive without spending 5k on a holiday". Well, we are going to have to get used to both. At the moment we are mortgaging the taxpayers of the future rather than face up to the fact that we are living way beyond our means. What happens when foreigners will no longer lend to us?
This situation has come about through irresponsible government spending, through a ludicrous belief that we can exist by moving money around, through an equally daft belief that pumped up house prices represent wealth, and through a "want it now whether I can afford it or not" mentality created by the media, politicians, advertisers and lenders.
Reality is going to be painful.
Complain about this comment
#149
"Err no, they would not be in a position to crash the computer as they would be dead before a finger hit the key boards!"
Derivative Death Rays?
Complain about this comment
The issue is that the assets underlying the mortgage bonds had been so minced up in the securitisation packages into which they were tranched that there is no longer an efficient method of getting good collateral out of those bonds.
The only economic agents in place in the US are the "sharks" who buy defaulting loans from banks and other lenders who are faced with a write off and therefore sell them at a low price.
It is there that the failed debt can be bought out by funds sufficiently capitalised to extend the lending term on property that has some residual value and where the borrower can afford the extended period.
Then the real no-value defaults can be isolated, removed, and value retained in the system.
The question is will anybody trust the Americans again?
It was the Fed that put the rate up which effectively killed the sub-prime market. That was hailed at the time as being a good montarist thing, but everone else outside the US has ended up paying for it in the form of a damaged monetary system and a singular distate for the method deliberately used by the US to export their crash into the Global Economy before it happened.
The debtor is now giving the foreign creditors lessons in common sense: i.e. the US will soon be insisting that everyone else play their game of rounders their way.
Do we play their rules, or train them in cricket?
Complain about this comment
~152
Marked to Market or M + Ms ?
Complain about this comment
@147 Boilerplated
"pension funds can be safeguarded by the Govt."
But they haven't, they've been sabotaged by the government, to finance their criminal activities in support of Bushco.
In the same way they jacked up debt and property prices to raise income.
Now we are paying to bail out their rich friends.
Complain about this comment
After some dull ones recently, this is a fascinating post. My financial education continues and I ask myself, just how bad is the present crisis? I suspect much, much worse than we are being told by our "leaders".
America, in truth, is close to bankrupty. The UK much the same. Vast levels of unrepayable debt gridlock these economies and its getting worse. The present government borrowing (in order to lend) is just fiddling with the deckhairs on the titantic.
The debt remains, indeed increases. No one answered the last question I posted. Never mind. Here's another one.
How is the UK going to emerge from this recession? It manufactures little. It has few and diiminishing natural resources. It has a growing, but not very well trained workforce. It has ever rocketing public expenditure demand. The recession is worldwide. What great development will end it? Brown does not inspire confidence nor King, nor Cameron.
When I look to China I feel that I see the future alright. The future of my children with the income, rights and lifestyle of your average Chinese peasant.
Complain about this comment
"These carmakers failed to design cars their customers want to buy,"
"Sorry but that's simple wrong"
Yes and no.. at the time, they built the vehicles people wanted to buy. They both realized at some point that they could put a cab on a truck bed for 15k and people were stupid enough to buy it as a high end suv for 40k.
The problem is that they turned over most of their development and factory space to making these monsters.
In the mean time, Toyota and Honda were building for the future. When the turn around came, as the Japanese predicted, then GM and Ford were toast.
If I had any simpathy for GM, I lost it completed the day I watch the documentary 'Death of an Electric Car"
They had a viable, sporty electric vehicle that with todays batteries, would drive 300 miles on a charge.. and as soon as they defeated the laws in CA that required them to make such cars, they hunted down every single one that had been made (loaned) and destroyed them.
A great quote by someone recently..
You can't have capitalism on the way up and socialism on the way down.
Complain about this comment
#152 Nope !! They get whacked on the head by a Tardis materialising just above them !!
Complain about this comment
A reorganisation under Chapter 11 needs to happen. The so-called Big Three have been unable to manufacture cars at a profit for years due to onerous legacy costs. A bailout will do nothing to change the loss-making business model, it will simply shift the losses from creditors (the banks) to the government (the taxpayer). No-one has said anything about running the companies to make a profit.
Complain about this comment
Here are some very simple thoughts - comments (and corrections!) welcome:
- The US was an economic superpower in the post-war years because of (a) resource self-sufficiency and (b) manufacturing prowess (much of it learned during WWII). This went wrong when the US became a net importer of oil, and aggregate spending began to exceed net wealth generation.
- Britain was an economic success in the C19th because we were the world's premier manufacturer and were huge exporters. Our resources came from the Empire, and were paid for with manufactured exports. The public were paid less than GDP - the surplus went into investment and reserves.
- The routes of China and others to economic success are relatively simple - manufacture, export, and live within/below your means. The prosperous countries are those with a trade surplus, in which the population are paid less than per-capita GDP (the surplus going into capital investment and financial reserves)
So, despite all the emphasis on demand-boosting, the secret lies in (a) living at less than your income (hence creating a surplus for investment and accumulation of reserves) and (b) generating a positive trade balance.
Who would have thought it was this simple!
Complain about this comment
#156
"When I look to China I feel that I see the future alright. The future of my children with the income, rights and lifestyle of your average Chinese peasant."
As lived in un-interesting times, that may soon be an enviable existence.
Complain about this comment
Various posts have mentioned the virtues of a electric cars.
Currently (sorry!) they use Lithium in their batteries. This is filthy stuff. It is found in the brine below salt lakes and Bolivia has most of it and is unlikely to allow foreign mining of it.
It is not cheap. Bamber Shilling (sorry,Gascoigne) of U. Challenge fame said on the radio that he uses two batteries a year at £13,000 a pop, yep £13K a time. He does get a discount on parking and CG because his car is electric.
The Hybrid cars with engine and battery are less economical than some SUV's.
You will ahve to pay to dispose of these batteries. I know, the manufacturer has this liability but they will have charged you for that when you bought the car.
This downturn/slump/recession/depression is going to blow a hole in the planned increase in vehicle Excise Licence charges and the LEZ charges in 2009.
If you do not have a Euro 3 spec van in the London Emission Zone next year you will be charged £100 per day, PLUS Congestion Charge.
Complain about this comment
#160: It really is as simple as living within your means and investing some surplus wealth and it is true at any scale.
Unfortunately Britain decided that it would do better leaving its safe but dull factory job and using its savings to daytrade on margin. Like most others who try that, it caught a couple of lucky breaks but things did not work out in the end. Now the future is DSS accommodation and beans on toast every day. Our politicians are the voice of denial saying the situation can be put right if only they could borrow a bit of someone else's money. What is the right answer to give?
Complain about this comment
Back before the whole Credit Crunch started I read (possibly Robert Peston) that the USA financial system was facing melt down -
In the days when China was making vast surpluses the Chinese authorities poured money into US Bonds - whilenilly. So being good businessmen the US Government dropped the returns on Bonds down, and down and down. But still the Chinese bought. Eventually the returns got so low, US investors (Pension Funds et al) could not get a serious return on their Funds, so they looked around to find other sources of returns. And what did they find, but SubPrime Mortgages. At the time these returned a much higher rate of return than they could get on US Bonds. So the American Pension Funds (and German and Swiss Funds who had the same problem because of the moribund European Market) piled in.
Then the Chinese Government changed its policy, and started to invest directly into the US Stock Market buying large shares in US Companies (see Pestons current story). Short of funding, the US authorities raised the rates of US Bonds. Once they went above the rates being paid by Sub Prime Mortgages, the conclusion was obvious. Everyone wanted out, and this is where the current Banking Crisis came from.
Comments ?
Complain about this comment
Bailing out the US carmakers would be convergence with 1970s Britain, not China - their growth hasn't come from subsidising state enterprises. There are plenty of these in China but they are a drain on the rest of the economy. Similarly, sustainable recovery wont come from Chinese savings continued to be borrowed by US Govt & Consumers - it will come, partly, from the Yuan being allowed to float, i.e. rise
Complain about this comment
61, 77 - isn't it because US institutions are repatriating their overseas investments to pay off debts, which creates demand for US Dollars? - that and funds pouring in to buy US Treasuries
Complain about this comment
#151
re energy companies
The point I made, or at least was trying to make regarding energy (and the other utilities) is that we - the customers - have been paying for the required investment ever since the utilities were privatised but the profits being made by the private companies have gone in bonuses and divis rather than being invested.
The point is, these utilities have acted just like the banks, they know that 'they can't be allowed to fail (in fact these are probably more important than banks in many respects) and they know that if push comes to shove Govt will find the money - this is why they need to know that nationalisation beckons if Govt. does have to step in to either put up the money or subsidise end user prices, I think it's called arm-twisting...
Complain about this comment
#157
"They [the US car makers and public] both realized at some point that they could put a cab on a truck bed for 15k and people were stupid enough to buy it as a high end suv for 40k."
SUV's became popular was due to purchase tax reasons, nothing to do with how much extra they can be sold for, in fact quite the opposite - it could be said that the SUV actually saved the US auto industry back in the 1980s!
Complain about this comment
#Boilerplated. Do you actually know anything about the energy industry or do you just inhabit a fantasy world where the British army solves all problems by machine gunning a few French nuclear technicians?
On what factual basis do you suppose that customers have been paying for required future investment ever since privatisation?
Perhaps you have in mind the period in the early 2000´s when power consistently traded at below its cost of production.
Who has diverted investment funds into bonuses and dividends. Perhaps TXU (a former owner of Eastern Electricity) who enriched themselves to such an extent that they went bankrupt, or perhaps you are thinking of the fantastic returns earned by AES that forced their Drax power plant into administration and very nearly brought down the entire company. Maybe you are thinking of the multiplicity of gas fired power plants whose owners handed back the proverbial keys to the financiers due to the fact that they were losing so much money.
Maybe you are thinking of Entergy, Reliant, Williams, Calpine, NRG, Mission or anyone of a number of other US investors who all exited the UK. Why did they did this? Because profits were too high?
If these companies are too big to fail, how do you explain the bankruptcy of the criminal entity Enron, the bankruptcy of TXU and the multiplicity of failures of individual power plants?
British Energy has needed rescuing by the Government - not because it is too big to fail, but because it too dangerous to be allowed to fail. It has needed rescuing because the cost of its product was below the cost of producing that product.
No-one in their right mind would build new nuclear power plants, so I confidently expect this Government to build a lot of them. However they are so grotesquely incompetent that they will not even manage this until long after the lights have gone out.
...and how is this lunacy being achieved? Why through some kind of semi secret clandestine deal with the French state. Surely if bonuses and dividends were so high and so assured there would be no need to involve Governments as the private enterprise capitalist pigs would have their snouts in the trough of dividends and bonuses.
Complain about this comment
Isn't it ironic that perhaps the only way for the U.S. to get out of this mess is for it to become a communist state?
Complain about this comment
#94 sashaclarkson
is this the same linking of income to profits that Ted Heath tried - looking a Wikipedia ( C.H.Douglas ) to refer to what you have been saying - it seems very much like that to me.
Any way how can we here in GBland make any comment about indigenous industries - we haven't had any since they were all sold off in the great Thatcherite/Friedmanite ( spelling?) drive for market forces economics . We have even sold our utilities on this altar of capitalism..
Complain about this comment
Not as ironic as the way the US set out to export freedom, democracy and good governance, only to discover the place it was needed most was right at home.
Complain about this comment
Er so let me get this right
A car company ( GM) which makes a product that even the most patriotic flag wavers don't want, it goes bust and the tax payer pays wages and pensions for eternity.
oh I get it now.
Complain about this comment
Another irony here: the US consumer doesn't feel he/she can afford to buy a car. Via their government they are going to buy a car industry.
Complain about this comment
Let the market decide whether General Motors, Ford or Chrysler survive. That's the ideology that's been rammed down the throats of many third world countries whenever American style capitalism has been thrust on them as part of the conditions for receiving IMF or World Bank loans.
They've had to surrender essential services, such as energy generation or electricity supply, or strategic industries such as mining, to the whims of the free market and have suffered badly as a result.
Let America taste some of its own medicine in the hope that they finaly realise the damage their ideology has wrought on other, weaker, economies.
In any case, trying to prop up failing industries isn't going to work. After they've received government monies, they'll use them to pay back some of their debts and then what? Back to square one: they're making a product no-one wants right now and it will take too long to retool to compete with leaner competition from the Far East. They're dead ducks, just as British Leyland and the rest of the UK car industry was in the past.
Complain about this comment
We've propped up those thieving creatures who run our banks, so why not the auto sector. Atleast thats is an industry that is making something real.
Complain about this comment
I'm just wondering why we seem to be marking ourselves in the wrost position when it wouild seem that Germany, Ireland, Spain and a lot of other are fairing worse. Is this a probolem of our press?
I have a few jobs planned and don't have financial worries but I've decided to put them all on hold. If we are all doing this it is goping to make matters a lot worse.
Can we have more honest comparative comment please.
Complain about this comment
#169
More nutty fruity cake sir?
These energy companies have had 25 years to invest, they still have not done so - FACT. If the UK Govt. decided to nationalise there would be very little the power companies could do, remember that through Ofgen the Govt. makes the rules.
What I was pointing out to the person who said that someone would 'crash the computers' of a nuclear power station is that would be the last thing even the French would allow to occur as it would leave the reactor without proper monitoring and possibly unstable - Chernobyl anyone...
Complain about this comment
169:
A very good post. Energy professionals understand this situation, but I think that the public, even when well-informed on other things, are woefully ignorant about the energy situation.
It seems to me that the consumer wants energy below "cost" when cost is calculated to include replacement investment as well as opex.
Part of the problem is the loss of the North Sea legacy, which gave us cheap energy while it lasted. But we burned off huge volumes of gas - and exported gas from a far-from-abundant reserves base - in the interests of short-term gain.
More broadly, the public are used to being told by government that we are a rich country. Deduct the borrowed component, and allow for public sector waste, and we're not a rich country at all. But getting embittered consumers to swallow this nasty reality is difficult. We need to get way from this sense of automatic material entitlement - in energy as in other areas.
Complain about this comment
# 177
Ireland is definitely in a worse position than the UK (I live there). The banks have State guarantees, but no recapitalisation as the State cannot afford it. Our Budget has just seen cuts in public expenditure and tax increases, ie just what the economy doesn't need right now.
How come we're in this mess? Well the economy has been totally dependent on property speculation for over 10 years (EUR interest rates have been far too low for Ireland until 2007-2008). The banks are all highly exposed to residential mortgages (eg I was offered 5x my salary within a week of moving to Ireland with no credit history etc here), domestic buy-to-let (or even buy-to-not-let, ie just sitting on emtpy property for a while then flipping a profit), and overseas buy-to-let (the latest "hot" property market could recently be deduced just from checking new routes on the Aer Lingus network). Just to compound the problem, banks also lent vast amounts to the developers to build all this stuff.
On top of this, Ireland has seen a huge growth in financial services over the last 10 years, primarily in the area of administration of investment funds. These organisations are typically subsidiaries of mainly US-based entities, which are in trouble domestically. They have also suffered 35-50% falls in revenue, as they are typically paid a proprtion of assets administered, and market falls and redemptions have savaged asset levels. We're seeing evidence of "hidden" job losses in this sector as firms seek to cut costs to match these revenue falls, eg paying people, say, 6 months salary if they agree to go off travelling for 2 years. Official unemplyment numbers are at a 12 year high, and in 2009 the State expects to see more emigrants than immigrants for the first time in over a decade (mainly Polish building workers returning home).
In general, those economies with high exposure to property ownership are suffering the worst downturn and have been impacted first. Not surprising when the cause of the problem is a scaling back of credit. The economies most affected are Spain and Ireland (both becuase EUR interest rates were too low for them for too long), as well as UK (and US). Iceland is, of course, another (and the biggest) basket case for slightly different reasons, as it became a kind of sovreign private equity fund over the last 10 years, borrowing from overseas (lenders attracted by high interest rates paid on deposits by local banks) and buying up things like large tracts of the UK retail sector. However, the downturn is now spilling over to other economies in a second wave, including Germany. Germany, interestingly, is the country with the largest exposure to Icelandic bank deposits.
I don't think the problem is with the UK media as such. it's just that there are many people who have little exposure to economies ex-UK, and who really don't appreciate just how inter-connected the global economy has now become. Movement of goods and capital is now much more free than it was in the 1920s which everyone is comparing the current crisis to. The benefit of this has been access to cheap products made in places like China, the downside is that a crisis of confidence in US investment banks (which was what this started out as) quickly spreads across other financial institutions and geographies, and then into the wider economy.
Complain about this comment
#178. On the contrary. If you crashed the computers on a modern nuclear plant the reactors automatically shut down specifically to prevent chernobyls. Actually restarting the reactor is difficult (and it was a shut down followed by a far too fast restart that lead to the chernobyl reactor burning)
If you think the army would storm into a nuclear power plant and start machine gunning power station staff (and god knows what THAT would do to the computers) then you've been watching too much 'ultimate force' on ITV.
The other thing you need to remember is that the government sold off the utilities so that THEY didn't have to invest in more power plants and so far every damn scheme for new nuclear, hydro, wind etc has been torpedoed by NIMBY's who want cheap power generated 'somewhere else'. Perhaps you, Ross Kemp and the rest of red troop should take your submachine guns and shoot the next person who objects to a wind farm? It would do more good.
Complain about this comment
Surely with so much of the US industry and economy beholden to China, China will be the saviour of the US by buying bits of it - if it got a chance.
Don?t forget the US is really very protectionist as BA found out as it cannot buy moribund US airlines due to protective industrial legislation and that the Doha round stalled because of subsidies to mid west cotton farmers had to stay.
It would be ironic for China (a sort of communist/ centralist state) to help the US (the home of capitalism) by using free trade and pure capitalism and buy bits of the US (which is now becoming centralist with the state funding that Hank Paulson is applying).
So if the old adage and golden rule of ?the man who has the gold sets the rules? applies and China bought bits of US industry then GM or other companies could be the outlet for the products that China produces in the orient. As GM now makes automotive dinosaurs with more expensive labour and labour practices collapses the principle of Adam Smith will apply.
The economic restructuring of the US and probably world economy could happen with a jolt ? a hard landing ? and not gradually ? a soft landing- as happened here with our shipbuilding and other heavy industry demise over the last couple of decades if free markets prevail. Unfortunately with so much at stake US taxpayer?s money will be used to soften the blow. Whatever way it gets sorted, its going to be a long downturn and a slow recovery and the world will be quite different in 10 or 20 years time ? more different that the change seen in the last 20 years.
Complain about this comment
#178. I don´t know what you understand the meaning of the word "fact" to be, but it would appear to be something materially different from the definition contained in my dictionary.
If it is a "fact" that energy companies have had 25 years to invest but have still not done so then how do you explain the existence of gas fired power plants in locations such as Roosecote, Keadby, Medway, Seabank, Chapelcross, Kingsnorth, Coryton, Spalding, Teesside, Killingholme, Sutton Bridge, Baglan Bay and Barking to name but a few.
All of these plants were financed by private investors and all within the 25 year time frame that you reference. The first was Roosecote in 1991 and the last wave comprised of Kingsnorth, Coryton and Baglan Bay in the late 1990´s.
The foregoing is just a sample of the new build conventional plant and does not include the vast proliferation of renewables or the GBP hundreds of millions invested in retrofitting FGD.
Who, apart from you, is talking about nationalising the UK power industry? What rules do OFGEM and the Govt make?
Do they make a rule that suddenly endows the UK with sufficient indigenous expertise to design, and construct nuclear power plants? Do they make a rule that compels world markets to deliver coal, oil and gas to the UK at a time, location and price that they also rule on? Do they make a rule that just magics into existence new generating capacity?
I have no idea why anyone other than a terrorist would have any interest in "crashing computers" in a nuclear plant or indeed any other plant. If your point is that plants can be made unavailable at short notice in order to manipulate price then this is possible - but it does not require the "crashing of computers" or the army being called out to shoot people - it metrely requires an adjustment to the maintenance schedule. I know that this is more boring and less dramatic than your preferred apocalyptic scenario - but it is also true.
By recognising certain easy to understand facts it is possible to reach an informed view as to the likely future - and with each passing day the most likely future is a future involving widespread power blackouts. The responsibility for that will lie with this Government for their unswerving commitment to short term expediency, and their consistent failure to anticipate obvious problems and issues.
You can blame who you want - but it won´t alter facts.
Complain about this comment
I'm afraid I've little sympathy with businesses who can't adapt to change and like dinosaurs they should make way for more efficient firms.
The banking sector had to be supported because the whole deck of cards would have collapsed and taken a lot of good businesses with them.
However with regard to G.M. and others who have got themselves into this mess through their failure to make products people want then I don't see why they should be bailed out. I seem to recall we went through a lot of this restructuring of the real economy under Mrs Thatcher and came out the other side better fit to deal with the modern world and I'm afraid America will have to do the same.
My old economics lecturer always used to say if Country A makes widgets better and cheaper than country B then Country B should'nt be in widget production and concentrate on doing something else - that I'm afraid is the lesson that we learned with our motorcycle and a lot of our car industry and propping these firms up is just throwing good money after bad. Monies should be spent on retraining and new technologies.
Complain about this comment
#183
Sorry but you are the one who doesn't understand the facts, if you are correct why does the UK need to build more power station if they are already built?
These power companies have had 25 years to invest but they have not, more power stations have been closed (taken off stream or demolished) than built.
You can read all the investors chronicle's as you like but it won't change the physical fact that the UK has a shortage of generating capacity - as was pointed out, the UK has to import electricity from France...
Stop eating the nutty fruit-cake, get your head out of your Bloomberg terminal, sniff the coffee instead!
Complain about this comment
The Americans have always made very very bad cars. I think its is mainly because they have long straight wide roads and cheap fuel.
What that equates too is cars that don't need to be good at going aroud corners and don't need to be good on fuel.
Hence why they get such a extraordinarily tiny amount of BHP out of their engines.
Its also why US cars are so cheap. As in a 400bhp corvette costs less than £30K! Such a car here would cost around £70K upwards here there is a reason for that! Poor 1960's engineering, cheap plastics, cheap upholstery. cheap inefficent big block engines that need 5.7litres to produce less horsepower than 4.2litres would in europe.
Complain about this comment
#185 As I said you are free to believe anything you want - but be advised you are talking absolute rubbish, and the consequence of this kind of thinking is looming power cuts.
I´m not really sure that inanity of this level warrants a response, but I´ll give it a go.
Power stations reach the end of their life and close, and new ones need building. New build is necessary both to replace closed capacity and to meet increases in demand.
There has been no substantial conventional new build throughout the lifetime of this government. This was initially due to a formal moratorium (i.e. it was illegal to build power stations), and later due to the fact the the Govt. re-engineered the trading mechanism such that power prices fell to below the cost of production. More latterly planning and consenting has become more difficult (witness the protests at Kingsnorth over the proposed Eon coal fired project).
Contemporaneously with the foregoing the Govt. has always known the timescale for the closure of the existing nuclear plants, and it also knows that by signing up to various EU emissions directives that the closure of existing coal plant will be accelerated.
Put simply the Government has overseen a suppression of new supply whilst simultaneously taking steps to ensure the removal of existing supply.
Why has it done this? The answer is almost certainly related to a theological fixation on nuclear. However nuclear is fantastically expensive and its true costs must be hidden from the public. "Oh what a tangled web we weave when at first we practice to deceive"...and this explains the rest of the complexity, confusion and obsufication.
The UK is now in a position where it has effectively bet the ranch on new nuclear. So how is this going to work? One mistake from the idealised timeline and power cuts are a guaranteed certainty.
The Govt. must love people like you. They have created this situation, there is a mountain of evidence to support this contention and yet you blame "private companies" without ever feeling the need to name precisely which companies are responsible or detailing exactly how they have sinned against you - other than by declining to provide you with free electricity.
For your information I have never read Investors Chronicle and neither do I have a Bloomberg terminal.
Complain about this comment
#185
looming power cuts
To blooming right, that is what we are facing in the not so distant future because the power companies have yet to invest some of the profits made in the last 25 years - again if the UK was self sufficient in power generation we would not need to import electricity from France...
If the power companies had invested we would not be talking about power cuts, who runs the power stations is irrelevant, the generating capacity is the problem. The fact remains that, other than at times of strikes (often nothing to do with the electricity industry), at no time did the post war nationalised electricity industry cause the lights to go out, how ever much some might now wish they had.
Complain about this comment
#188
Oops, that should have referenced comment #187
Complain about this comment
#188 Either you cannot read or you gain amusement in being wilfully obtuse.
Power companies invested on a massive scale throughout the period 1990-1998 - see my earlier post for a partial list of new privately financed power plants that entered construction during that period.
Thereafter investment fell away as a consequence of the Government firstly outlawing further new investment, and subsequently altering the market mechanism so as to ensure that further large scale investment was unattractive.
The Government justified its moratorium on the basis that the UK had a surplus of generating capacity. At the time (1997) that contention was true, therefore it follows that in 1997 the UK was fully self sufficient in power generation.
Notwithstanding the foregoing the UK continued to import power from France. The original interconnector was sold to the British public on the basis that it would provide for 2 way trade. In reality it has seldom, if ever, exported power to France. The reason for this is because of the inflexibility of the French system and their system is inflexible because of their heavy reliance on nuclear, and a feature of nuclear is its inflexibility.
In addition to suppressing the development of new conventional capacity the Government has signed up to various initiatives that it knows will accelerate the closure of existing coal fired plant.
The only reason that the UK may experience power cuts is because of a combination of action and inaction by the current government. The facts support no other conclusion.
Complain about this comment
#190
So we don't need to build any new power station then?
More nutty fruit-cake sir or do you want to wake up and smell the coffee?...
Complain about this comment
#191 I think the point poster 190 was making is that we DO need to build new power stations but its the government mucking about refusing to actually do anything that is the problem, not the utilities companies who are more than happy to sell us the electricity they generate at a far profit.
Complain about this comment
View these comments in RSS