G20: Good and bad for UK
Barack Obama said last night that he would do "whatever it takes" to "avoid a deepening recession" and that "we shouldn't worry about the deficit next year or even the year after."
This commitment to pull out all the fiscal stops to avoid a slump, in a recorded interview for CBS News's "60 Minutes", was probably music to the ears of Gordon Brown.
After all, if the US cuts taxes, increases public spending and borrows as if there's no tomorrow, surely that provides cover for the UK to do something similar next Monday in the Pre Budget Report.
But does it? It probably provides political cover. "What's good for America is surely good for us," will be a natural conclusion for many to draw. And in the sense that the whole world would benefit if America's downturn could be a short and relatively shallow one, that would be correct.
It would, however, be potentially dangerous to assume that America's economic policy can simply be replicated in the UK - because, and this is perhaps deeply unfair, international investors condone apparently reckless fiscal behaviour by the US, while punishing similar behaviour by other economies (such as ours).
For all the damage over the past eight years to America's reputation for sound economic stewardship, the dollar is still the world's reserve currency.
Its public sector debt is well over $10,000bn, equivalent to around 80% of US economic output - which is double the share of GDP take by UK government debt (albeit on official figures that many would say understate the true level of British public-sector liabilities).
What's more, even before the advent of Obama, the US national debt has been on a strongly rising trend.
And yet given a choice between buying dollars and pounds, international investors have been opting for the greenback - and how. The value of sterling against the dollar has fallen by a quarter in just the past four months.
Or to put it another way, the US - still the world's biggest and most powerful economy - plays by its own rules. Rightly or wrongly, it is perceived to be fundamentally more robust than our economy. Which means that the US can live beyond its means to a greater extent and for longer than the UK, and yet be spanked less by international investors.
So some will feel it's a little unfair that so much opprobrium has been heaped on the head of George Osborne, the shadow chancellor, for warning that there's a risk of a damaging run on the pound, in the event that our national debt was perceived to have escalated to worryingly high levels.
Maybe, locked in the bowels of the Treasury, there is a secret book of fiscal and monetary etiquette that defines what chancellor and shadow chancellor may say at times of economic crisis. Maybe Osborne has committed a terrible breach of the Treasury's club rules, the equivalent of passing the port in the wrong direction.
That said, perhaps it was the furious reaction of ministers to Osborne's remarks that was more telling, in what it implied about their fears for sterling's vulnerability.
In that context, what mattered more for Brown than Obama's "I-heart-debt" vow was the statement by the G20 group of leading economies on Saturday night that they would "use fiscal measures to stimulate domestic demand to rapid effect."
What would suit the UK would be a massive increase in borrowing by all our competitor economies. Because if all economies were perceived to be shackled by mad levels of public-sector debt, then there would be no reason to single out the UK as being unusually burdened by the expense of service its borrowings.
But even then, the competitive position of the UK in an international beauty contest for investors' cash isn't brilliant.
Right now, our economy appears to be contracting more than that of any other major economy (a view reinforced by the CBI's forecast this morning that the UK's GDP will shrink 1.7% in 2009).
And although there are concerns about whether the eurozone economies will cohere at a time of such global stress, money managers right now prefer the apparent safety of investing in a currency, the euro, that pertains to a huge economy, rather than in sterling and the smaller British economy.
Which is why on the Ten O'Clock News last Thursday I highlighted sterling's weakness against the euro as a particular concern.
As for the other part of the G20's statement, on making financial markets safer and improving the regulation of financial institutions, Gordon Brown can take some satisfaction that the blueprint is similar to what the UK wanted.
Even so, he may regret getting what he wants. There will be significant costs to the UK over the next three to five years - and perhaps longer - of putting the financial economy on a sounder, more stable footing.
The G20's insistence that all financial institutions - from banks, to insurers, to hedge funds and private equity - should hold more capital and more cash means they will conduct less business and will generate significantly reduced profits.
The City of London will shrink. And what was for many years the engine of the British economy, generating a third of economic growth and a significant proportion of tax revenues, will be running at 30mph, not 90mph.
There is a cost to making the world a safer place. And much of the bill is being picked up by the UK.
UPDATE: Thanks to UltraTon for pointing out typo in paragraph three, now corrected.
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In other words ! Go back to the models of ratios and lending respsonibly.
Brown is loving his "new " role. He is doing what he loves best ! Dictating and being a control freak, without having had much of that in the financial sector.
The UK is in crisis and he is digging the hole bigger and bigger. If anyone is in doubt about the problems then speak to local business owners. They are in meltdown and the way things are we will have half our non public sector workers laid off in January.
Browns tax take and the tax rebates after layoff will be the final nail in his coffin. We need to get rid of this Government NOW !
I suppose with his proposed Christmas "freebies" to the NON working class we should buy shares in Booze and fag producers
Had enough
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Robert Peston, the willing fool who has helped this Labour government destroy 40,000 jobs in the takeover of HBOS by Lloyds.
No one needs any lesson from this person on what is good or bad for the UK economy.
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This is amazing.
Robert seems to have recognised that, far from being "best placed" to weather a "global" economic downturn (as Brown keeps telling us), we're heading into a home-made economic catastrophe.
Never thought I would read it here!
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Good post as always. However, think there was a slip in the third para. "After all, if the US cuts taxes, increases taxes..." should read "After all, if the US cuts interest rates, increases taxes," shouldn't it?
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*The City of London will shrink. And what was for many years the engine of the British economy, generating a third of economic growth and a significant proportion of tax revenues, will be running at 30mph, not 90mph.*
And a large part of the remaining two thirds was generated by consumer spending fueled by the cash machine installed in their back gardens plus credit card and other forms of debt.
*There is a cost to making the world a safer place. And much of the bill is being picked up by the UK.*
This sentence is totally misleading. It reads as if the UK had been landed an unexpected huge bill from a charity that it must pay. What the UK has received is not a bill, but a letter from the lenders asking for their money back. Yes, the one that was used to fuel the so-called economic growth that you refer to in your sentence about the *engine of the British economy*.
And to solve this, Gordo wants to borrow even more to allow consumers to carry on spending. Crazy, methinks.
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Courtesy of The Daily Mash...
The Pound is not just great, it's fabulous, the prime minister confirmed last night.
Gordon Brown said he could not understand why anyone would say the Pound had collapsed in value by around 30% in the last three months when that was obviously not the case.
He added: "According to this top secret report from MI5, a pound is now worth at least $47 while my network of spies has established beyond doubt that the Euro is simply a figment of your imagination."
The prime minister spoke out following shadow chancellor George Osborne's nervous breakdown and his outlandish claim that the Pound seems to be doing particularly badly at the moment.
Mr Brown added: "It saddens me when a young man such as Mr Osborne loses his mind and starts inventing fantasy exchange rates and fictional currencies.
"This is a time when politicians of all parties should be in agreement. With me.
"It is certainly not a time to go around pointing things out like some kind of homicidal maniac."
Meanwhile Mr Brown will today outline his latest plan to kick-start the British economy with a series of tax cuts funded by "starlight, sunbeams and happy, happy thoughts".
He will also unveil dozens of multi-billion pound infrastructure projects, including a state-of-the-art hospital for damaged fruit and a high-speed rail link to the undersea kingdom of Atlantis.
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GB seems to think that it is only government borrowing that matters, but when you take all of UK borrowing into account, whether or not you include the unfunded state liabilities, it is clear that, overall, the UK has been living beyond its means for several years because the level of overall debt has grown year on year, at the same time as savings - particularly pension savings - have fallen.
Like a reckless individual borrower, a reckless country must, at some time, deal with an ever increasing debt, either by going bankrupt, or by living within its means, and showing the lender that it can pay down the debt instead of always increasing it.
If our politicians are too weak to face government in austere times, while debt is being paid down, it may eventually fall on others (probably the IMF) to force the issue.
An individual has the option of going bankrupt and walking away from most of their debts, which only stays on their record for a few years, but the consequences of the country doing the same are unthinkable.
It seems to me that we need to think how we can somehow share the austerity fairly without resorting to further borrowing. Government ministers, BoE bosses, FSA bosses and unscrupulous bankers taking a big pay cut would seem to be a good starting point.
The government just borrowing more and more, and cutting interest rates to try an stimulate more individual and business borrowing, does not seem to me to address the fundamental issue
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Wow some minor criticism of the government from the bbc
now all we need is journalists who push for an answer to the question not a prepared statement
shame no one remembered in '97 that you can have a functioning society or a labour government
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It would be nice if the truth could be reported about what was really said fiscal stimulii.
QUESTIONER: What countries do you think should have it?
MR. STRAUSS-KAHN: As I've just told you, I'm not going to make an announcement in place of the countries, but I want to answer your question candidly. Everywhere where it's possible. Everywhere were you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made.
The answer is not everywhere - THAT CAN AFFORD IT
Will we see a balanced and real reporting of what was said.
Or will we just be told Gordon has got a green light?
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May I suggest you teach some of your BBC commentators a few financial facts of life.
Their political take on Osborne and sterling made it clear not one of them was aware of the basics of what they were discussing lets alone that sterling had already fallen 20% against the US$.
Bias is one thing, incompetence is another but BBC reporing on recent economic stories carries both to extremes...
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I think that going forward, we are in BIG doo doo.
As a taxpayer I can say this, I don?t have the stomach for bailing anyone else out. I?m sick of paying for all the scroungers then when it goes wrong, having to pay to bail out the folk who created the scroungers!!!
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Am I wrong in thinking that a weak pound will encourage overseas investment in the UK, especially in the manufacturing sectors? It would be cheaper to invest here now; and British exports would be cheaper in countries with strong currencies like US and EU?
Does the weak sterling also reduce our overseas debts? It's normally a trick the US when it's in too much debt with other countries - just reduce the value of the dollar? Just a couple of thoughts.
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It's easy to save money in our situation as a country at least.
STOP THE ILLEGAL WARS.
STOP THE EVER INCREASING GOVERNMENT.
I shall be refusing to pay my tax bill this year and I suggest all that can do the same until we see some form of accountability and professionalism from this government.
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I agree with #10 - last nights 10 pm news report by Hugh Pym on Government debt stated that debt was back to around what it was in 1997 implying that we were in quite a good position.
It ignored the PPI and massive unfunded public pensions liabilities the state (ie the taxpayers many of whom can't afford a pension) are responsible for.
As a minimum the rather useless and not comparible state of statistics on national debt reported by different countries should be mentioned by BBC commentators.
Having said that I hope the recent statements by some conservatives that real total public debt is around £1600 Bn are not correct as just servicing that will be a real problem in the future (and to add to the gloom this excludes non state debt of around £1100 Bn).
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Very good article Robert!
In the recent past, as you imply, the earnings of the financial services sector have been a net contributer to the UK economy, therefore helping us consume more than we produce. Will this still be the case over the next few years? After all, does not the banking baleout mean that we are paying back private (as well as public) debt to foreign institutions via the issue of government bonds?
¸
Also, the post af attorney general or shadow must be held by a lawyer. It's high time that there was a requirement for the chancellor or his shadow to be qualified in some numerate discpline: - at least A level maths (or equivalent)? This would have excluded both Osbo and Gordon Brown wouldn't it?
I don't necessarily include economics as a numerate discipline either. Like some contributers to this blog, too many economists are prone to start with an ideology as to how they would like the world to be, then mould their perception of the facts around it.
One final point: I wonder whether the hedge funds who finance Osborne's office are long or short in sterling? He may be absolutely honest, but Caesar's wife must be above suspicion. We cannot have any of these people funding any political party. This is not anti Tory: the perceived relationship of New Labour with some of its corporate sponsors has not been one which inspires trust in politicians.
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The crisis-point that we are facing - sooner rather than later, I suspect - is the moment at which foreigners will no longer lend to HMG. After all, why should they take the risk when there is plenty of competition for their funds?
At that point, the Brown strategy - of pump-priming the economy with tax cuts and spending hikes, both funded by debt - will implode, because the implicit borrowing will not be available.
My suspicion is that this crisis-point will be reached in January or February of 2009. Brown and his government will have the last remaining shreds of credibility stripped away. So too, unfortunately, will the UK economy.
The inescapable conclusion seems to be that we are heading over an economic Niagara in a broken barrel.
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When will we here Gordon?s war cry?
?Things can only get better?
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What is now abundantly clear is that the whole world economy was entirely dependent on a credit and housing bubble, i.e. even those countries that were not reckless in this way, e.g. China, Germany and Japan, are nonetheless inextricably bound up and so adversely affected by the mess affecting the USA, UK, Spain and Ireland.
I thus fail to see how any 'fiscal stimulus' will kick-start a system that was itself run on I.O.Us, which, by their very nature, had to be repaid at some point, but are so extensive that there is no likelihood of them being so.
But given that the politicians and economists haven't an alternative to a system that has died, it is understandable that they are desperately trying to resuscitate the body on life support, however futile that may be.
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at the risk of more smirking from those doing very nicely thanks can I just point out that in respect of this masterly euphemism:
"There will be significant costs to the UK over the next three to five years - and perhaps longer - of putting the financial economy on a sounder, more stable footing"
it means vast numbers of people and firms going bankrupt. This is how the banks are 'recapitalising'.
Having a stable, sounder financial economy won't much matter then, except to pay the costs of state support. That's even if he succeeds, which he won't and if people agree to having their livelihoods stripped away, which they won't for much longer.
If Brown had a scintilla of social conscience he would place a moratorium on legal proceedings for recovery of 'debt' right now. But he hasn't, has he?
GC
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@12
You're not wrong in that a weak pound makes exports cheaper and imports more expensive. That's not all good news, though, because:
1. We import more than we export
2. We are trying to export to the eurozone and the US, both of which are about to have punishing recessions as well, so imported British goods may still not sell even if they're cheaper
3. Currency instability is bad for the UK's reputation as a place to do business - if Nissan (say) wants to set up in Germany or the UK, the UK has an advantage of cheapness now, but no reliability of exchange rates relative to the other major European economies, who are all on the euro.
So yes, it's a bit of comfort but not that much.
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Osbourne is being made a scapegoat, it's stating the bleeding obvious that the pound has been devalued and this will continue with Prudence Brown's crazy policy of borrowing way beyond our means.
People on this very site have been saying the same for weeks now, Brown's policies are going to hit us hard in the long run.
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There's a certain amount of financial justice in George Osborne's comments on the exchange rate, as it's doing exactly what the Chinese Government did to kick-start their boom in the first place - force the exchange rate to a point where it becomes financially interesting to do business in and with the UK, ending the macho image of a "strong" exchange rate, the word "strong"'s complete BS here, run at the expense of a strong economy. At parity to the dollar, UK imports cost more than they did, sure, but our exports are worth even more, and there's every incentive to stop buying overseas as far as possible, which is again good in recession. Now it may not be interesting to foreign investors, sure, but who needs foreign investors in markets like these? Without being totally protectionist, an economy as exposed as the UK is has to start considering that charity - and thereby recovery - starts at home. and like you say, that also ensures that prudency in a lot of other matters becomes of the order of the day - including personal credit. The case of the bimbette spending money she doesn't have simply because it's a minuscule part of her existing indebtedness must stop.
Now if that means shops can't keep their turnover up, that's just hot air lost like anything else in reducing the bubble, you can't live on exponential growth in the real world as we have been for many a long year.
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Bert - Gideon is da man
lets score political points and go against the G20!
from memory when Labour came in they were saddled with similar debt ratios !
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Poor grammer by me there, Monday morning That should have read 'hear' in my last post.
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Robert it's not a surprise that the UK economic outlook is grim. As you point out, an economy heavily reliant on the financial sector will inevitably suffer when that sector is in decline. The days of UK PLC as a major global player in high finance is ending.
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Sterling is dead... Long Live the EURO !!
EURO is good for you !
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Surely people can see what is happening...
Since September, LABOUR have re-united and now they firmly believe they can win the next election.
They even had John Reid giving an interview; for the first time in over a year (Andrew Marr - Sunday) in which he also praised GB...
This is a concerted effort to win over the population ahead of a May election...
Their planned tax cuts will be aimed at the lower earners - to buy their votes.
But their plan won't work..
I work closely with the building industry. This has been decimated...
I have colleagues who work in medium sized manufacturing ? redundancies are being made every day?
I have friends who work as Estate Agents ? or rather did?
My son works for the motor industry ? their sales are down 80%...
So, GB is offering Tax cuts ? which will really be amendments to the tax credit system ?
THIS JUST WON?T WORK?
Tax cuts are no good if you HAVEN?T GOT A JOB...
It was both the Financial Services Industry and the House Building Sector that drove the economy over the past decade.
It is these that need a major stimulation but that is not going to happen quickly ? or at all?
I urge DC and Co to DO NOTHING - SAY NOTHING ? OFFER NOTHING?
Let GB and his gang do it?s worse.
Let them plan for a May election.
Their core voters will not vote for them if they have been unemployed for 6 months or more.
The sooner it is done ? the sooner it will be over.
(Yes, I know I am shouting ? but I am angry)
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As Cassius puts it, George Osborne is simply the honest child in the crowd when the "Emperor" walks by in his suit of new clothes:-
http://cassiuswrites.blogspot.com/2008/11/osborne-and-emperors-new-clothes.html
I don't think either the Emperor or his tailors emerged from that as a hero!
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Others have noted that during the last recession, Brown has no qualms at all about criticising the government's policies to get us out of it.
One might say he doesn't like it up him. Indeed, you might say that. I couldn't possibly comment...
Osborne had every right to warn that Brown is going to crash us into the buffers at high speed. Indeed, as a leading member of Her Maj's Oppo - he was DUTY BOUND to do so. Well done George.
Will New Labour blame him for sterling's rise this morning?
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While I understand the criticism of Brown in some of these comments, because I share it, and while I would praise say Australia for running a genuinely prudent policy, it's clear that even prudent countries will not escape this global recession. Meanwhile unemployment destroys lives, and anything even tax increases later that avoids unemployment is worth doing. Judging Brown is judging the past, stimulating the economy is saving jobs. Let's do both!!
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'Bewitched, bothered..' and certainly bewildered.
Have I got this right? Our PD is less now than in 1997? Just?
But in 1997 it failed to attract ANY body's attention. Not even the good Robert's eager eye.
And was not some of this Debt paid off?
Yes. We are in recession. And the number crunching is a different equasion.
But don't tell me we haven't been here before - as far as the amount of debt is concerned. And nobody blinked. Then.
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"surely that provides cover for the UK to do something similar"
Not really - because (a) Obama hasn't done anything yet (of course) and (b) despite Labour spin, and despite what Brown desperately needs, the G20 didn't all agree to carry out his plan in a coordinated fashion, as the communique makes clear.
This should give Brown pause for thought, and perhaps it will. But if he ploughs on regardless with unfunded tax cuts, it's just another example of his scorched-earth strategy. We'll all pay - after 2010, of course !
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It is worrying if as hinted Barack Obama thinks he can resolve his countries economic woes by just spending and being protectionist which will put off much needed business restructuring and delay the rebuilding and turnaround and the payback.
It is also worrying that Brown and Darling are using the Obama post election feel good factor to also go on a spending borrowing binge ignoring very expensive off balance sheet PFI debt to claim that our public borrowing ratio must be ok as it is better than Italy and giving prudency the big e.
Of course our currency is knackered with a pair of walter mitty clones at the uk gov economic helm desperately now falling back on old labour economic policies, bowing to their union funders, whilst spouting the mandy/campbell/powell party line that it is all global and not us gov and don't argue differently as that would be anti team GB and any further fall in the £ would be your fault. Also Brown running around the world in his superman underpants for political domestic reasons is bound to pee off other world leaders who do have genuine economic clout like the chinese and indians and japanese and probably the americans as well.
Come on you labour political spin merchants you will have to do better than that to convince the next 1.25 M that are being made unemployed and even the tabloid newspapers.
The lack of responsability of the governmenmt for its past over spending policies and economic mis management is of the same magnitude of the real team GB summer medal haul.
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I'm not a banker.
I'm not an economist.
I'm not a politician.
I have only the vaguest interest in these things, and this interest only stems from self-interest, if you see what I mean.
In 2003 I bought a house in London on the basis that I lived and worked in the area and that it seemed like a decent price. In the Autumn of 2006 my neighbours sold for what seemed like a ludicrous, frankly alarming, price.
I wondered at the time how people could afford this. I did some research into the prices of houses in this one street in Wandsworth, calculating which ones had been sold recently and for how much. I added in the usual mix of statistics about average mortgage levels and borrowing and came to the conclusion that on this one street alone, something like £20 million had been borrowed. Multiply this by the huge number of similar streets in SW London in particular and get get a truly horrifying number. It was clear to me at that point that the housing market was due for a serious correction/crash/slump, so we sold in April 2007 for an even more astronmical price and decided to rent for a year or two and wait for the prices to drop before buying again.
I did some more research and decided that the best place for the large pile of cash that we had was Icesave, and for a year or so that all went swimmingly. In the Spring of this year I sensed from the newspapers a few tremors about Iceland's economy and hit the books once again. The same picture of totally unsustainable borrowing emerged, so I withdrew every penny and put it into a UK high street bank, who fortunately are still going strong.
My point is this:
I am not an economist, I am not a banker, I am not a mathematician or a statistician. I do not work in the financial markets, I do not own stocks or shares, I do not even have a degree - but even the most basic research on the internet and from the newspapers made it clear that the UK economy was heading towards a big problem within the next year or two.
If a muppet like me could see this coming and make provisions to get out of the way, then what exactly was our much-vaunted chancellor doing over the last couple of years when he could have taken action to lessen the effects?
Choosing new carpets for Browning Street perhaps?
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There has been a conspiracy not to talk about Sterling's decline. It has been kept in a dark corner - unmentionable. How dare Osborne raise this as an issue - you are not meant to talk about such things. I agree with Robert that it was the Government's sharp reaction to Osborne's comments that are so revealing. And if any one is responsible for the latest round of Sterling's decline it is Mr King of BoE fame, whose gloomy comments destroyed what little confidence was remaining. A report on the BBC (not Robert) on Friday night indicated that the price of imported goods in the shops must rise. Mentioned were expensive items like IPODs and jewllery - these could even dissapear from the shops. More to the point, what about simple staple fare like imported vegtables and fruit imported from Spain. Mr Brown may cut taxes and borrow to stimulate the economy in the short run, but this will just trash everyone's standard of living. There will be two options going forward to rescue ourselves and our economic well-being - IMF bail-out or joining the Euro. This Government is out of control.
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"which is double the share of GDP take by UK government debt (albeit on official figures that many would say understate the true level of British public-sector liabilities)"
UK debt is more than 100% of GDP if you take into account all the 'off balance sheet' PFI liabilities, NR, B&B... This is why we're in a worse mess than the US.
It's only Gordon Clown who thinks we're not.
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Maybe we should have joined the eurozone after all?
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Time to join the euro, then?
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Calling Osbore-supporters, have you forgotten that he still has some mates who belong to the hedge-fund 'community', and who fund him and the Tories?
I may be a cynic, but I imagine some of these 'spivs' have made a many millions by shorting sterling over the last few months, and days.
Funny how the pound lost about 3% v the USD and Euro the day before 'oik' George's ill-judged 'collapse' comment was published.
All advocates of the free-market, especially members of the UK Conservative Party and the US Republicans, should be keeping very quiet at the moment, not spouting off in newspapers and blogs such as this. Brown et al. are simply trying to fix the mess that the application of your philosophy by banks has caused. If he had tried to rein in UK banks any sooner, you'd have been squealing 'nanny-state' all the way to mummy.
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As an individual, or a financial institution!!, if you spend, spend, spend when you haven't got the money then eventually you have to count the cost and go through some/ a lot of pain.
As a country/world we have arrived at the time to suffer the pain of all this spending money we never had but we are going to try and eliminate it by governments stepping into the individuals/financial institutions breach and, guess what, spend, spend, spend money they don't have.
This may delay a lot of the pain but its going to hurt an awful lot more further down the line I think.
I believe the correct course of action would have been to suffer the pain worldwide, retrench and start again. Unfortunately due to the way all governments are elected no government could allow this necessary short term pain to happen.
In other words however bad things would have become the whole financial system should have been allowed to collapse - I suspect this could have been rebuilt quicker than what is now going to happen will be sorted out.
Good luck to us all!
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There is an awful lot of short memeories around here. Either that or the hatred for Gordie blinds folks to reason. Here are some IMF economic numbers :
UK Govt debt as % of GDP:
1993 32
1994 37
1995 41
1996 49
1997 50
1998 47
1999 44
2000 41
2001 38
2002 38
2003 39
2004 40
2005 42
2006 43
2007 (43)
Note the rapid rise upwards prior to the Labour government coming into power and the levelling of the amount thereafter, even up to the present day. Clearly this contradicts the Tory charge of Gordon overseeing increasing debt.
Now here's the same data for 2006 (the 2007 values are still tagged as estimates) for other countries in debt:
US 60
Germany 66
France 66
Japan 195
Canada 73
Italy 106
So the UK is the lowest! Hmmm
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I agree that the "what's good for America is surely good for us" cover simply doesn't hold water.
However in reality what choices does GB have left - certainly not being criticised for doing something everyone else is doing is a coping strategy. It tends to be the lone sheep that gets eaten by the wolf rather than one stuck safely in the flock.
GB isn't a complete doofus so I think much of the recent plans and statements are aimed to try to get the real motor of the world economy the US to pursue policies which would help rather than retreat to protectionism as has been the lesson of the past. This certainly would have resulted in Depression 2 with the likely same outcome.
That the UK economy was closer to the waterfall than most others when the paddles fell overboard is unquestioned. Can GB stop the UK going over the edge, unlikley as there is not one sector of the economy left which can provide that motor. Whether we hit the rocks or find the splash pool and recover remains to be seen and largely depends on others.
Primarily it is this lack of any need for GBP that is driving the slide - you just don't need pounds for anything other than paying back the UK banks. For trade USD and Euro is all that is needed.
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In yesterday's Observer Will Hutton argued that now was the moment for the UK to finally join the Euro. His logic was - all of Gordon Brown's criteria have now been met and it was the best way of stabilizing the situation we are now in.
I simply can't understand why this argument is getting more air-time. Surely it is a win-win. Are we still not joining the euro because of some residual notion that we have a currency/sovereign status to defend?
Please someone tell me why I'm wrong.
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34 eddixon:
Superb post. A lot of the problems now manifesting themselves have been obvious to the intelligent observer for a long time.
We therefore need to ask whether government, who presumably employ some very bright people, saw this coming.
My guess would be that they probably did see it coming. They must have been equally aware that their own policies were creating the foundations for a massive economic slump.
In that situation, the best policy probably appeared to be to hold out until the rest of the world hit problems, at which point our home-grown crisis could be passed off as part of a global problem for which Labour could not be held responsible.
So I think we need to be clear that, despite the smokescreen of the global malaise, our problems are largely home-grown. Labour has shifted the balance of the economy from the productive to the non-productive, from value generation to value distribution.
The ratios involved are simple ones. Take the total number of bureaucrats, plus the total number of welfare recipients, and divide that number by the total of productive workers, and you will arrive at a ratio that has been getting steadily worse for the last ten years, maybe longer.
Then, calculate total debt including PFI, consumer debt and public sector pension obligations, and measure that as a percentage of GDP. Again, the result is an unsustainable ratio.
The root problem is a culture of bureacracy and welfare which has imposed ever greater burdens on the productive parts of the economy. The gap between the two has been borrowed, but this process cannot, by definition, go on forever.
The trouble here is that the economy has to become bad enough to jolt the UK out of its bureacracy and redistribution culture. Only the most severe of economic crises is likely to be sufficient to do this.
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This is all George Osbornes fault for speaking at the weekend. It's him who has caused trade figures to collapse and the CBI to wake up to the disaster.
Honestly, the labour apologists here are living in delusion. Your man is a busted flush, it's just you and much of the media here who haven't woken up to how utterly wiped this country already is.
The battle can't be won because it's already lost. From here it's just a matter of how fast the decline is and how painful, and what kind of society emerges at the other end.
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Shares...
Prepare for major falls this week
http://money.cnn.com/2008/11/15/markets/sunday_weekahead/index.htm?postversion=2008111615
My forecast for this week is - end of week -
DOWInd less than 7000
FTSE100 less than 3400
long term forecast - as previous..
DOWInd less than 5000
FTSE100 less than 1000
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One for the Labour Party christmas quiz.
Who said "A lie can travel half way around the world while the truth is putting on its shoes."
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Oh by the way Robert, was it you I saw on that forklift carting out that huge box of baked beans from Aldi last weekend? Don't get me wrong, but are you trying to tell us something?
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#41
So you agree that the Tories left Gordon an economy on the up, and by obeying their spending rules for the 1st few years things went well. We're making progress.
Of course, he then benefitted by the creation of monopoly money over the last 8 years, something now being unwound (the fun thing about this palaver is that far from destroying wealth that existed pre-1997, we're just recognising that it never existed anyway)
You also seem to have overlooked Gordons off-balance sheet financing in your calculations. Factor them in, and the forthcoming extravaganza and you'll easily make the stratospheric levels you're looking for.
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Er excuse me.
Do hedge funds short currencies?
I thought it was borrowed stocks and shares that they gambled on.
Can someone who knows please tell us
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This is indeed the begininngs of a miserable time. But we survived the Great Depression, and the Great War and we will survive this too.
Unfortunately we didn't learn from the Great War, and we ended up with a second. Now it looks as though we didn't learn from the Great Depression either.
The history book on the shelf,
Is always repeating itself...
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@drummerboy
If you want to know why the Euro argument isn't getting more airtime, take a look at the comments on any Have Your Say story related to the EU. This is the level of public thought and understanding we are working with.
Willem Buiter on ft.com today suggests that although Euro entry can't happen overnight, the Gvt should announce that it will go for entry as soon as possible, and peg the pound to the Euro. I'd support that.
He also worryingly suggests that the financial services industry has caused a "Dutch Disease" effect for the British economy, with unrealistically high exchange rates and the finance industry starving more reliable industries of human and cash capital.
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Sterling
The next run on the pound, which I predict will be during the Christmas Break or early January 2009, the parity between the Euro and Sterling will make an easy case for the UK to finally join the Euro
We have nowhere else to go. Saddled to large and increasing debt, no real exports, a major recession and tax receipts falling, 2 million unemployed and rising, Brown will finally take us into the Euro.
We are then fully intergrated Europeans, moving to political union in the next decade.
Meanwhile Brown will be off to run the IMG who will see off bankruptcy of UK PLC or he will become Chairman of the New Super Bank at Lloyds/HBOS
Either way, the control power freak gets his way, leaving the rest of us a busted flush. Lets have an Election now!!!!
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#52
Great point on the "Dutch Disease". The undoubted talent diverted to the casino in London has been a loss to industry in general, to the detriment of the country long term.
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Firstly, the GBP is down against virtually all serious currencies not just the dollar. The market is rightly bailling on the UK. Brown's "solution" is simply hair of the dog.
Secondly, banks and other financial institutions should hold more capital and cash? What do you think they are doing or attempting to do right now? And how does the government trying to force banks to lend at summer 2007 levels - ie top of the bubble rate - tally up with the goal of having more solvent and robust banks.
Thirdly, I don't remember Blair and Crash Gordon holding back after "Black" Wednesday. Hands up anyone who has heard that "Under the Tories interest rates were 15%"? Pot, Kettle? I guess when you are brazenly lying to public you don't want someone shining a ray of light on your BS, I mean it's not like the media is doing it's job and pointing out the idiocy of Crash Brown's policies.
Finally anyone who has actually read the issued communique knows that essentially the rest of the G20 stuck two fingers up at him - quite rightly too.
http://online.wsj.com/article/SB122677642316131071.html
Spot the bit on fiscal stimulus - and note "where appropriate" before it. and note this bit ain't getting quite as much press:
"Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption" - wonder who they are talking about?
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Fix site please.
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As a life long fairly right wing Tory voter and medium sized business owner, the comments of George Osbourne leave me speechless. He is SO blatantly partisan in his comments that surely nobody even in his party can have listened to his comments over the weekend without feeling a sense of dread and betrayal. Although I detest GB and New Labour with a passion, the last few weeks have taught the whole country that Conservatives have no new ideas to combat the current crisis, and in recent days GB has even stolen the tax cutting clothes that DC and GO have been too afraid to get out of the wardrobe. GB now has implicit backing from BO and other world leaders for the tax cutting agenda and so I can well forsee GB calling a snap election in February and being returned. More fool the Conservatives for allowing this to happen.
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#53
All the talk of the retreat to the safety of the Euro misses one question; Will the Europeans want to take our toxic economy onto their balance sheet, and if so at what price (rate)?
No such thing as a free lunch, you know.
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Question: - What is the difference between competitive protectionism in tariffs etc. and deliberately allowing the devaluing of our currency?
Answer: - Very little.
So I find it a bit rich for our Prime Minister to be lecturing the other member of the G20 - when he has 'deliberately forced' a 25 percent devaluation in the pound. In this he has connived with the Tories to achieve an effective 25 percent surcharge on all imports and a similar benefit to exporters.
Seen in this light Mervyn King's action in cutting interest rates to improbably low long term levels and letting it be known that 'he' will lower them further was a deliberate attempt to provide a protectionist barrier to trade.
This action by the powers that be is a deliberate attempt to impoverish the British working people. We should stand up and say so, not act in the supine manner that our press has adopted! The poor pay for the rich to continue playing their city games at our expense!
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There are two problems. One is the global one precipitated in the US. The other is the domestic UK problem which is present due to poor policy and strategy. G Brown continues to try and muddle the two but it does not wash. If the UK is vulnerable and facing a bigger bill than other European countries it is because of the domestic policies of the last few years. It remains the job of government to effectively regulate the market place and the job of the private sector to exploit the market place. That balance has been lacking in the UK. Any idea that other countries will just sit back nad not exploit the UKs weakness to gain commercial advantage is unsound. The rules that apply to the UK do not apply to the US which is far more dynamic as a economy with a history of quick recovery compared to the UK. G Brown is in trouble but all that means is we are all in trouble and it is not going to go away quickly.
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Re 50...
Hedge funds - Buy/ Short / Go long on Anything they think they can make money on.
If you really want to know read Roberts book...
http://www.guardianbookshop.co.uk/BerteShopWeb/viewProduct.do?ISBN=9780340839447#
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It must be now becoming increasing clear even to most jingoistic that Britain should be in the Eurozone. This would bring much needed stability. The pound is in real danger of being sqeezed between two powerful currencies used by the two most powerful trading blocks, the USA and the Eurozone.
As part of the Euro we would be able to increase our borrowing as the rest of Europe and the US will do without the exchange rate constraints we now find ourselves in. The pound only has the backing of the 60million who live in Britain, the Euro has the backing of 440million who are the most industrialised people on the plant.
One of the reasons it would appear Gordon Brown opposed the joining of the Euro was in large part to allow our bloated banking sector to carry on making enormous profits from currency exchange which adds unnessecary cost to doing business with our main customers. Surely the folly of appeasing the banking sector is now clear to all.
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Re 61... Forgot to add... Only £5 at TESCO's
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Look as far as i see it the best way out of this mess is just to change the way we calculate the figures...
To keep inflation low everything that was going up in double figures was removed house prices etc etc...
So all that has to happen is not include anything bad in the figures.....then you use personal attacks against anyone who notices....
As for this G20 lark the message that came out of it to me was......
Each country is not going to follow Brown to the promised land, but they are going to do what is right for themselves...infact it looked to me as though he was marginalised in the world press rather than he would like to be seen , as some sort of financial messiah....
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#41
nice work putting actual figures into an arguement which is a welcome addition. However as no doubt the Gordie bashers are eagerly pointing out GB has been doing an Enron on the nations finances for many years with off balance sheet PFI. So the IMF figures which rely on official on balance sheet HMG figures don't reflect this additional borrowing, it would be interesting to know if this was included whether the figures still look so good compared to other leading nations.
If they still look good it would still not neccesarily back up borrow to spend (which afterall is the root cause of world/UK plc's problem) arguement as there is still a major question of how without a rampant impecunious financial sector or overblown housing sector UK plc could afford to pay any of it back. Other countries, Italy excluded, even if they don't pay down the debt - their economies could still in theory do so in the medium/longer term. As we lack a significant resource base we cannot use this, we lost much of our industry, our service sector is by and large un-exportable and we seem to be dumbing down our education to a point where an idea's based economy seems beyond us.
All we seem to be able to export is our capital base, talented people and pensioners who ultimately dont bring much back in to UK plc as their tax income is lost.
So all in all whilst certainly we are not at lights out stage we are badly placed in all aspects until we resolve as a nation what it is we want to be.
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I think it is accepted by all that the country desperately needs to try to rebuild some manufacturing capabilities. Reliance on paper shuffling, smoke and mirrors and insider dealing for the informed is not going to repay our colossal debts.
The pre budget report next Monday should include large tax incentives for investment in manufacturing capacity. I would, as a start, give 200% or more capital allowances for such approved investments. I know that we cannot compete with the Far East in labour intensive manufacturing, but what's wrong with supporting manufacturing by machine?
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I have been watching this financial disaster unfolding and the belated action being taken by the Governments of the world. Its like a rollercoaster - the slow buildup to a crescendo, then the wild, runaway ride, with chancellors holding on for dear life, chucking money hither and thither in an attempt to gain a modicum of control.
Into this all strides George Osbourne, looking like a man who's lost his nerve, and effectively says "I want to get off"
Its far too late to push the prudence button - The Tories sold off the leavers with which some measure of control could be applied (National Utilities etc.) and deregulated the markets, New Labour have continued these policies.
So, for George to shout "Prudence now" would lead to a greater catastrophe, as we would get caught between two stool, and on neither. The punishment handed out by the markets would be greater still, as we'd doled out the money to stabilise the financial sector, but let the rest of the economy sink without trace. Such an imbalance would leave us in a worse position and stuck in a stagflation recession without the stimulus to get us out, unlike other 'spending' economies.
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#62
It's not jingoistic to be wary of being governed from elsewhere, as is inevitable with currency union. We can disagree, but should do so respectfully without resort to tarring us with unpleasant feathers.
Secondly, why replace bad domestic government with a foreign one? We might have had better domestic government and been able to profit from this fiasco.
Finally, I hate the idea of making policy from weakness. It smacks of panic and that never makes for good decisions. Failing to address fundamentals got us into this, ignoring other fundamentals - such as the ability to make domestic policy remains valuable whatever the situation - could compound the situation.
Don't be so certain that Europe has a better long term (>20 years) future than Britain. It ain't necessarily so.
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G20 said about fiscal stimulus...
"Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conducive to fiscal sustainability."
One sentence in a 3,000 word document.
Well done Gordon, you really pushed the point home.
FISCAL SUSTAINABILITY.
Also, UK Govt debt as a percentage of GDP is not 37%
That excludes Northern Rock.
If includes is 43%
Next, add Network Rail, PFI repayments and the bank bail-outs.
All debts that government has to repay.
It tops over 100%
Now, a tax break of say 1% GDP minimum, 2% to have a more pronounced effect.
WHERE IS THE MONEY GOING TO COME FROM?
MORE BORROWING IS NOT THE ANSWER, SEE G20 QUOTE ABOVE.
BORROW NOW, PAY MORE LATER.
Cut government spending, cut taxes.
No borrowing, taxes will stay cut for longer and stimulate the economy more.
Basically, more bang for your pound.
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The difference in opinion about national debt is farcical.
As so much depends on accounting rules perhaps we should ask potential lenders rather than our warring politicians.
Is it really lower than most developed nations (Brown and Darling) or is it dangerously high (Osborne and Cameron)?
You can't have a debate when there is such a fundamental uncertainty about the starting point.
How can you put Northern Rock, unfunded state pensions, railtrack and PFI projects to one side...? No lender would allow you to discount these so why should politicians pretend they are not part of the equation.
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At last, the true status of the UK economy - known to some of us for some time - is slowly emerging into the glare of everyday news reporting. And, of course, the true status of the UK economy is pretty much in the basket case category.
The government has been spinning for all its worth over the past 6 - 9 months as it's become ever clearer to interested parties that UK economic management over the past decade or so has been little short of criminally negligent.
Gordon's master plan to borrow, tax, spend and waste money on a suicidal scale, shifting the UK economy's main effort from wealth creation and productivity to a welfare dependent, unproductive client-state beholden to Labour remaining in power has been a spectacular success.
The problem is that Brown's theory of economic and social nirvana is a politically-centred construct whose end is simply to keep a political party - the Labour Party - in power. The other problem is that it relies on endlessly milking banks and taxpayers of their cash to keep the edifice upright.
We've now reached the end of the road and run out of cash. Gordon's answer at this time? Er, borrow more cash and keep spending. And the Tories' answer? Hello? And the Tories' answer? Hello? Is anybody there?
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Comment 44 : Friendlycard
I think you make the mistake of believing that it is possible for elected government to carry out "best policy". For them to be able to do this, they have to be powerful enough to be able to override the irrational short-term self-interest that is the motivation of vast numbers of the general public.
It's just not possible. Really the best that government can achieve is to filter out the worst of the catastrophic short-term stupidities that result from the public's inability to multi-consequentialise.
Our politicians are not drawn from the brightest and best in society, but that is because we, the democratic public, have rejected the leadership of the best. We have insisted that our politicians are drawn from those who embraced mainstream thought-patterns, and we choose the skills of the TV presenter rather than the intellect of a statesman.
As the whole of our national culture becomes more and more dumbed down and adolescent, this weakness in our ability to govern ourselves effectively can only get worse.
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In addition to some of the erudite posts above, we need to add the following:
Fall in tax revenue (not counting proposed tax cuts)
Massive increase in welfare payments (2-3 million unemployed)
A truly depressing situation, I might have some faith in a bold fiscal stimulus package if I thought our economy had even half the dynamism of the United States'. The only possible way we can start to get out of this hole is to massively reduce public spending very soon... does'n't look like that is going to happen.
Our politicians are beyond contempt!
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£1-2 trillion in debt (dosnt include the latest bank bailouts) and Darling proposes to borrow hundreds of billions more, which apparently he is going to pay back in the 'medium term' when the economy gets back on track!
Well call me stupid but arnt we supposed to have just had 11 years of growth yet still have a budget deficit of £100 billion
Is it me or do the sums simply not add up?
Im anticipating paying a Zimbabwe style £11,982, 512 for a loaf of bread in 2011 if GB and his gang of chancers win the next election
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Never forget Brown is borrrowing vastly many more billions with our own money and when you borrow you will be asked to pay that money back and we will be asked to pay that money back with higher taxes.
So lets face it he is going to give us tax cuts this year in order to try and win the election next year. He will then present us with the bill for his wonderful work in the form of tax increases. Up till now even you were Robert were bing fooled by this.
See his answer when asked if this was true some rubbish about not being time to play politics ie: the same line he uses to try and cover up when he has been found out!
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Any direct fiscal stimulus via tax cuts must be backed up with a stated objective to cut government spending in the future, and not through higher taxes. At the moment I do not trust the fools running this country, so all the savings I am achieving through interest rate cuts I'm putting aside to pay off the mortage. Otherwise two to three years from now I am going to be hit with massive tax rises, leaving me with a huge debt to pay off.
To cut spending in the future the government desperately needs to gain control over unfunded public sector pensions, otherwise we are literally will not be able to afford to pay a basic pension in the future. Example: We paid off the two senior met police officers in the last few weeks, both in their fifties, and on a combined pension payout of over 200K per year, index linked. These guys could live until their 100 and we will be liable for over 10m pounds at todays money. Did they ever add 10million pounds to the GDP of this country? Answer: No. They did not even get sacked for the mess they made, but instead they were paid off with a lump sum.
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guycroft at 19
I agree with most of what you have posted but you keep going on about a moritorium on legal action to recover loans etc.
Sorry mate but I disagree withyou on this.
I have no loans or any debt - so why should I be punished by low interest rates and all the idiots who overstretched themselves be let off? They should have calculated the risk before signing on the dotted.
No, a different solution is needed.
The government should step in and lend these people money direct - using similiar stake gaining options as they are applying to the banks.
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What a good cover for a pre-election bonanza!
If Gordon is bothered about how we pay it back he could start by not replacing Trident and cancelling the two Aircraft carriers we do not need.
My 21 year old student son has a high propensity to spend - convert loans to student grants.
Meanwhile in the real world my part nationalised bank is offering me 10 months free of interest credit card if only I get myself into debt. When do we start learning?
in answer to 47 it was Jim Callaghan of crisis what crisis repute.
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Shall we, shant we? All irrelevant when the banks have not gone pop yet as many surely will.
Vatman & Robbing will have to print and print more cash. Its a riddle instgated by the joker.
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Labour was hoping to issue fixed term debt to fund the bailouts, but after last week when the German government debt auction failed and some US debt auctions have failed then they must know the game is up on rising sovereign debt. Even the US is now struggling with debt and the rise in the US dollars can be seen as a short term affect linked to US investors pulling money from emerging markets and bringing it home. All it would take is some negative sentiment like GM going bankrupt and suddenly the US dollar may not be so attractive as US investors change heart.
There is an alternative, which is to just print money to cover the debt. For a short period and perhaps specifically the US may be able to get away with this, but the consequences for the UK will most likely be bad. I expect Labour to try this next and the will probably be surprised when sterling?s value drops even faster as a result. Thus lies the road to hyperinflation Zimbabwe style if we are not careful.
We can pretty much guarantee that politicians will have taken their eyes off the ball. They will not have picked up problems with letters of credit, supplier credit insurance, inventory run downs leading to production destruction, commodity price hedging failures, US protectionism of US owned manufacturers.
As for the Euro then it is only as strong as its weakest member and you might want to look more closely at credit insurers attitudes to Ireland. There were an awful lot of car loans and unsecured loans arranged through Ireland and the full impact of that has probably not come home to roost just yet. You could also look at Greece and its exposure to shipping or Austria and it banking exposure to eastern Europe. I think we are not the only ones who will be enjoying a rollercoaster ride.
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#34
well said that man!
I did rather similar, I now have no debts and cash in the bank.
So if dumb@sses like us could see it why couldn't the people in charge.
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After weeks of watching all this on the TV and watching Robert entertainingly giving us the blow by blow account each day, I would welcome the opportunity to speak about the elephant in the room which no-one mentions: the banks never had the money which they are crying about losing.
95% of the money in the UK has been generated by the banks through debt. It never existed and it never will. And unbelievably, when they lend it they lend it at interest. It gets worse. If you cannot pay them back this money which they never had then they will sell your debt to professional heavies who will intimidate you. By allowing banks to generate a nation's currency through debt mechanism means that the money lenders now "own" most of world's assets.
Both the Uk and USA should take a lead with this and begin to withdraw the banks' ability to generate credit at interest, which is after all a tax, and to restore one of the main functions of government: to issue enough currency to enable a sound economy. We should not be continuing with the model of allowing banks to issue a money supply as credit with interest from which only they benefit. The USA has a precedent for this when it established its independence from UK banking system over 200 years ago.
Counting imaginary money which has been created through debt mechanisms as an asset has to stop- its madness. Give us our curency back!
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Another incisive and informative piece. Contrary to one or two other comments, I am ever grateful for a steer through the maze within a conundrum that is the current financial mess. Thanks Mr P.
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Is the typo in the update paragraph about another typo meant to be a joke, or does RP know something about UltraTron's weight, calling him UltraTon? lol
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"There will be significant costs to the UK over the next three to five years - and perhaps longer - of putting the financial economy on a sounder, more stable footing". Too optimistic I'm afraid Mr Peston. In the same period that many commentators are now referring to as the time it will take to dig ourselves out of Gordon's masterly crafted economic pit, we shall start to experience the full effects of the world's looming energy crisis. Just when we could be thinking it's safe to come out, we shall be hit square-on by a steam train carrying the name "Peak Oil" emblazoned on the front. If you want to know what things are REALLY going to look like over the next 5 - 10 years, read this: [Unsuitable/Broken URL removed by Moderator] As usual, our politicians barely know this problem lurks around the corner, let alone having the faintest idea how to prepare for it or deal with it. Just like the global financial crisis really; where did that come from all of a sudden?
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Dear Robert,
Citigroup are cutting 75,000 jobs, the rot is moving, the bankers have got the jitters, and this will be the first of many
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#72
Superb point. The flipside of the death of deference has been the celebration of ignorance, and so we get politicians who earn credit for being "young" or "in touch". I've not heard society being described as adolescent before and I like that, it sums it up perfectly.
I would rather have as PM someone who I feel has the intellectual strength to know better than I what should be done, and to whom I would feel confident to entrust my fate, but such people are driven to make billions in industry rather than lose out to empathic nobodies like Blair and Cameron.
I left out Brown because in addition to being useless he's also got no charisma. He's made it because in the political world of the intellectually blind, the one-eyed man looks smart.
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82. At 1:28pm on 17 Nov 2008, Aristotleson wrote:
95% of the money in the UK has been generated by the banks through debt. It never existed and it never will. And unbelievably, when they lend it they lend it at interest.
The money does exist, it is just used over and over and over...
If you don't want a bank to make money on your deposits then you can't expect to be paid any interest yourself, can you? In which case you can always put notes under your matress (or in a safe-deposit box).
Or, if you are happy doing your own debt collecting, you could invest your spare cash directly in new businesses.
Or if your name is mandleson or blair you don't need your own money, you just borrow from rich friends and keep any profits. By the way Robert - any update on Mandlesons eu tariff discussions with Oleg?
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I've been watching my revenue dropping since Q3. I don't give a four X for all this economic jargon because I run a firm and all that matters is making the books balance. I am not sure I can much longer. I've been hoping for some socio-economic miracle of some kind that will either make things better or so catastrophically bad that nothing will matter.
I've just realised that what many of us are feeling is what people must have felt during the Great Depression. Or how, for example, the victims of the Final Solution must have felt in the early days (before they knew what was coming) when they were herded into Ghettos. That you are totally powerless now and completely at the mercy of other people.
I explained to my wife last night was bankrupcy was and she burst into tears and there was nothing at all I could do or say to console her because if it happens to us I do not have the power to stop it. She has always depended on me to fix things. That is a really terrible gut-wrenching feeling, especially for a man, absolutely nothing you can do or say that can fix anything now.
GC
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Re: #55 laughingblacksheep
I guess when you are brazenly lying to public you don't want someone shining a ray of light on your BS, I mean it's not like the media is doing it's job and pointing out the idiocy of Crash Brown's policies.
Except, of course, for the most excellent Bremner, Bird & Fortune. Despite having been all too aware for the last 5 years of the coming car-crash which is the UK economy, I found last night's episode of B, B & F (Silly Money - part 3) extremely scary. Perhaps it was just the fact that someone else had come out and verbalised my fears over the state of the nation's finances.
I strongly recommend that anyone who missed it catch it when it is repeated this week.
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Sorry to be a spoilsport, but who is going to lend us and the USA and anyone else that asks, the money they want?? Where has it all gone? Was I correct in feeling that all the Banks had been dealing with for so long was 'mythical' rather actual money??
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Re: #68 bogbrush
Here, here.
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Re: #91 passininterest
Sorry to be a spoilsport, but who is going to lend us and the USA and anyone else that asks, the money they want??
Or, to re-phrase your question slightly, "who is going to lend us the money we want at an interest rate of 3% (or considerably lower, as Mervyn King heavily hinted last week)?"
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Surely any amount spent by GB in a fiscal stimulus is minute compared to the 700,000,000,000 spent (rightly) rescuing the banks.
If we have a run on the pound this will be the cause of the run and not the few billions (or even tens) of billions spent trying to avoid deflation.
The pound was way overvalued anyway. In 2007 GDP per head in dollar terms for the UK was higher than Japan, Germany or the USA. Have a reality check, we are not richer than Japan, the US or Germany. The high pound may make you feel richer on holiday, but it destroys jobs in any company that has to sell abroad.
This devaluation is long overdue. We may even avoid the inflation you would normally expect.
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90 Yummy:
Agreed, very funny and disturbing ... PFI = pure financial incompetence?
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Re: #90
I too watched Bremner, Bird & Fortune last night. Even accepting the fact that a little bit of hyperbole helps with the humour - seriously scary
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Apparently, we all just about to get £75 rebates, a reduction in certain VAT items and winter fuel allowances.
Costed at £15billion and being used as a sweetner before a Spring election.
I hope they dont mind me leaking this before Monday?
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I am very sorry to hear that Mr Croft. Genuinely.
I like many otherssaw the writing back in 07 and sold and got out. My job and status now sucks big time but I have more security here in the east and no debts.
Good luck with all.
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Sorry moderators, forgot that I'm not allowed to leak
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72 Excellencefirst:
Agree entirely. In my earlier post, I was wondering whether a really bad economic crisis (which I now regard as inevitable) might be sufficient to jolt the UK public out of their short-term and stupid attitudes, in the way that really big shocks have done at various points in history. I am not particularly optimistic on this point, however!
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This comment was removed because the moderators found it broke the House Rules.
The stances of our politicians are childish; no one believes that our current predicament is all down to a world-wide crisis, and it has been obvious to everyone that sterling has been falling.
As has been said we are in a scary situation, and one that needs everyone to act as rationally as they can; i.e., looking after their own interests and doing what they can to help the general situation. As Marcus Aurelius put it: "What is good (bad) for the beehive is good (bad) for the bee".
The government's much advertised plan of borrowing in order to stimulate (or limit the damage to) the economy is probably the only sensible thing that it can do. Obviously the trick is to spend just enough; too little will probably result in avoidable damage, too much will probably result in a run on the pound.
Our politicians ought to realize that we are all in the same boat.
Idea for a cartoon. A lifeboat is adrift in a wild sea, two sturdy seamen are struggling with the tiller and are trying to keep the boat pointing into the next towering wave, in the bow a tiny schoolboy points at the wave and says: "Yikes! I say! Lookout! A wave!" Needless to say, the seamen look like GB and AD, and the schoolboy like GO.
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89,
Time to manufacture a break up and stuff the money in your wife's name (although not necessarily iin that order).
Well, The banks get away with it ;-)
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OK Here goes:
THE EURO:
It seems like an attractive option to many on here. Maybe so. However
a) At what rate do you propose we join the Euro?
b) More importantly - What would be acceptable to our European partners?
There are no easy answers, and it would take a *long* time
STIMULUS TO THE ECONOMY:
Assuming that this is a wise course of action. Don't have tax cuts. People will hoard the money and / or pay of debts without consuming more.
How about the issuing of an alternative currency. i.e. time limited vouchers to every citizen and business - issued every 3 months. They can be redeemed by any business and on presentation, the face value is deducted from the particular businesses tax bill. People get the goods they need. Businesses get valuable tax breaks, the government can regulate the amount in circulation at very short notice.
OK maybe a bit of a beggar to set up. However in war time conditions we managed to almost move mountains. We are soon approaching that backs against the wall situation.
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bogbrush: "why replace bad domestic government with a foreign one? We might have had better domestic government and been able to profit from this fiasco."
Your post makes two fundamental errors:
Error one: being part of the EU/Eurozone means 'being ruled by a foreign government'. No, it means taking part in a collective government in which as a big economy we have a loud voice.
Error two: people who want to join the Euro do so because they think foreign decisions will be better than British decisions. No, the reason is to be part of a bigger economic pool, and to use a currency that's a global reserve currency. Why? Global reserve currencies are less prone to currency crises. Also, using the same currency as our biggest trading partner means our businesses aren't damaged by huge currency fluctuations of the sort we've seen in recent months.
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102 ''The government's much advertised plan of borrowing in order to stimulate (or limit the damage to) the economy is probably the only sensible thing that it can do''
Thats fine if you can afford it, it does not stoke inflation and the really important bit, that people actually are able to spend and borrow
On all three counts it fails and as a consequence so do the banks as they have a choice of either lending to people that can not pay back to support their failing business models or they continue not to lend until they collapse in on themselves.
Look at the stimulus dished out in the states earlier this year. Walmart got a bounce, the stats had a minor bounce upward and then a continuation of the slide.
Thats exactly what will happen in the UK, that is why it will be targeted just before an election as any feel good factor will be short lived.
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#105
I'm sorry Anthony, but the errors are your own.
Firstly you assume we would have a big voice. Why? We haven't got one now and as an invalid economy joining by your own admission in a distressed state, we'd have less.
Secondly whilst it appears better to be in a big currency, and I concede the attractions of that, the flip side is that without a floating currency the massive trade deficit would be terminal (it probably is already as we've gone so far, but at least a weaking currency gives us the chance of trading out through improved competitiveness).
Without that adjustment we remain locked into static terms of trade with a declining economy and complete the transformation into a failing region that would need to depend on regional aid (as my own home city of Liverpool does in Britain, for example), but of course we don't receive aid from the EU do we?
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105:
Good points, but there are some of us who would prefer good European to bad domestic government, and are pro-European for that reason.
I used to be broadly Euro-sceptic, but fifteen or more years of UK governmental stupidity has convinced me that we should become more closely integrated into Europe.
The EU used to be portrayed as fiscally irresponsible and hag-ridden by bureaucrats. That boot is now firmly on the other foot - the European Union has a far better grasp on fiscal reality than Brown and co.. Joining the Euro would make sense, for the rather sad reason that it would impose financial discipline on our own government.
As members of the Euro we would be subject to ECB financial rules. Had this been the case in the recent past, the UK would have been compelled to cut spending and/or increase taxes. We are going to get to that point eventually, of course, but only when the money runs out and no one is prepared to lend us any more.
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Re: #106 PetersKitchen
Look at the stimulus dished out in the states earlier this year. Walmart got a bounce, the stats had a minor bounce upward and then a continuation of the slide.
Exactly. The "econmic growth" the US stimulus package fostered was heralded by many commentators at the time as having fixed the US economy and averted a recession. Wrong. It was just a temporary blip, not a change in trend.
And no doubt, for the same reason the vast majority of the population, believing the commentary of the financial experts, truly believed that the UK's economic growth over the last decade was actually genuine and not some sort of "Emperor's New Clothes" illusion.
You can fool all the people some of the time...
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Ok, so everyone borrows huge amounts of money to shore up their ailing economies ...
just a minute. Didn't all this chaos kick off because everyone (in the fincncial world) borrowed huge amounts of money and couldn't repay?
It cannot be both true and safe for everyone to borrow huge amounts of money. Who exactly is to lend this money, everyone else? This is just more madness, and all countries will be carrying other countries debts ... and all it needs is one country to fold and down the plughole go we all!
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Not the greatest article I've read. Who cares about the US National Debt ? What about the total realistic US Fiscal Debt which not only includes public and private debt but also includes projected government spending - such as Medicare, Social Security etc ? This amounts to over $60 trillion. And please notice that I do not write it as $60,000 billion to make it sound less.
This makes the the US Fiscal Debt approx 6 X The US National Debt and 14 X US GDP.
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This fiscal stimulus maybe the only way to prevent, as the economy retreats, that scorched earth policy so reminiscent of the Thatcher years, so if and when recovery does occur there is an economy to go back to.
It may also replace some of that money the banker are extorting from us so that they can pay back the money that they owe us. Capitalism ? don?t you just love it!
Anyway - Euro here we come!
It only gets worse from now on ? what about union with France? Oo-la-la!
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It must be a hard place to be in; being the government and the opposition, the master of prudence and the advocate of borrowing as much as you can. So one question comes to mind: where is the opposition? Why can't we hear a solid and coherent alternative.
The other day Mr Osborne talked about a run on the pound. He sounded like a professor who turned out for a postgrad lecture with 'O' Level scripts. Even my granny knows that borrowing weakens the pounds, now take your argument further Mr Cameron and we will digest it
So What should Mr Brown do? We have an economy that was dependent heavily on thousands of city workers passing around the same money hundreds of time and keeping some for themselves in the process while other countries produced tangible goods. Those countries have infrastructure for recorvery. So perhaps Gordon should sound out a message that we need to create real jobs for
In the long term it will become even more obvious that the pound is becoming a small fish in the sea of sharks like the dollar, the euro. The pound will get eaten up. Inevitably we are going to end up in the Eurozone
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> The City of London will shrink. And what was
> for many years the engine of the British
> economy, generating a third of economic growth
> and a significant proportion of tax revenues, will
> be running at 30mph, not 90mph.
Rejoice - at least it will only be able to waste 1/3 of
the money it was going through before.
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#24
JavaMan1984 wrote:
Poor grammer by me there, Monday morning That should have read 'hear' in my last post.
priceless!
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When the Pound hits ninety cents to the Dollar maybe they'll change their tune !
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Which housebuilder will be nationalised first ?
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bogbrush
"Firstly you assume we would have a big voice. Why? We haven't got one now and as an invalid economy joining by your own admission in a distressed state, we'd have less."
Even in these bad days we're still a G7 economy, one of the EU Big Six and a UN Security Council permanent member. I admit that we'd have had more influence if we gone in 2000 rather than hanging around sniping and lecturing the eurozone countries for years, but there we are.
On the second point, economic stagnation is a risk, but competitive devaluation won't get us out of it, not with the large number of inputs being traded cross-border, usually denominated in euros or dollars.
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Might I suggest that we just send Gordon Brown to Australia as it will be kinder than watching him dig all the way there.
I have been fearful for the British economy since the day he became Chancellor and there is nothing happening now that makes me feel any more comfortable.
However, having said that we have to appreciate that New Labour pronouncements of new initiatives are always packaged to sound bigger than they actually are.
I expect a small fiscal boost to serve the electoral interests of New Labour. All their perceived client groups will be rewarded but little else will happen. This will only serve to frustrate and annoy everyone else.
The economy will continue to go south and evetually have to mend itself with all the attendant pain, delay and misery.
I do not expect Labour to be returned in the General Election of 2010. They dare not go in 2009 as this would appear opportunistic.
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RE: post 111
Govenment 'debt' does not appear to be the same thing as the debt that ordinary citizens find themselves dealing with. The US may theoretically owe Ten Trillion Dollars to various financial entities, however those entities are still prepared to lend even more absurd amounts of money because US Treasury Bonds are all Triple A rated investment vehicles.
What happens when or if Government debt becomes greater than 100% of GDP, will the rating agencies have the balls to downgrade US Debt? THAT will trigger the kind of financial meltdown that makes what has happened so far seem like dropping a fiver in the street, but its what happens to thousands of people every day in this country on an individual basis..
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#118
But Anthony, the G7 is yesterdays news and it's our nukes and history that get us on the Security Council. Not much to shout about.
BIRT are the people who have to be listened to (because they have all the money) and do you think they care what we think? I bet Brown was pouring the (Brazilian) coffee for them last week.
As for being an EU big 6 player, well ok but imagine us saying what an achievement it is to not be the 7th biggest in Europe. Anyway, not big 6 for long I fear.
Go in the Euro if we must, but please let's admit it's because we're entering as a beggar into the Sally Army hostel. Not because it's big and clever, but because we're broke and have nowhere else to go.
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Have you noticed the banks are getting another kicking today?
Any thoughts that the CEOs are happy about this so their share options will be X10 in 5 years time when weve all forgotten about this
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I think godwins law should be extended to the mention of thatcher.
If Labour still claim not to have 'fixed' what they see as wrong with what she did, then they are useless and incompetent and should be thrown out now.
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#72 I sympathise with your sentiment, but you provide no examples of "the irrational short-term self-interest that is the motivation of vast numbers of the general public."
Equally you do not mention what the Government has done to "filter out the worst of the catastrophic short-term stupidities that result from the public's inability to multi-consequentialise."
Similarly you don´t tell us how the general public has "rejected the leadership of the best." or "insisted that our politicians are drawn from those who embraced mainstream thought-patterns."
Perhaps you may recall the widespread anti war protests prior to the invasion of Iraq - protests that were comprehensively ignored by the ruling elite. In this instance history now demonstrates that it was not the general public who were guilty of "catastrophic short term stupidities."
Do the general public insist that our politicians must embrace mainstream thought patterns? What about such figures as Tony Benn, Arthur Scargill, George Galloway, et al - all of whom had something to say, and all of whom have been the subject of long term systemic smearing by the media.
Was there some kind of public insistence that substantially all official statistics be manipulated and massaged to the point where they become meaningless?
Did the public clamour for Rupert Murdoch to become the most powerful media magnate in the land?
Did the general public insist that Britain should adopt an immigration policy without limit?
Did the public demand that Manchestger City football club be sold to a human rights abuser and now convicted felon?
Do the general public demand a greater blood fest in Afghanistan?
Did the general public demand that hygene standards in hospitals be essentially abolished so that everyone can have an equal opportunity to contract MRSA?
Did the general public demand an end to intellectual rigor in the education system?
No! The average man in the street does not want any of these things - but he´s kept quiet by having his attention focused on reality TV shows, eating junk food and binge drinking. Any deviation from the allotted task of consuming and you´ll be thrown in jail.
This system is working out exactly has its designers intended it to work. They´ve even got working people to fund a drug addled, morally bereft, rotting underclass - so when things get really bad you´ll all have someone to blame - much better sport than looking for the real culprits behind this mess.
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#87 Bogbrush
"the one eyed man looks smart"
All the more apt as (if you didn't already know) GB does only have one eye!
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If Gordon Brown took some time to study GCSE economics with its inevitable (and to an extent healthy) cycle of ?booms? and ?busts? we would have been able to steer through this downturn with boosters already firmly bolted into the right parts of the economy.
Instead Blair and Brown have encouraged a shift away from engineering and science based disciplines to university light weights such as media studies and the arts. The weak pound should now establish the success or failure of this economic model as we are now in the position to export ourselves to the world. I really hope we can find something better to sell in shop window UK than Simon Cowell.
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I would like to say this is an exciting time to be studying economics(amatuerly) in my case. It seems like all the rule books seem to have been thrown out of the capitalist top floor window. I would like to say that Roberts Blogs and the comments which follow them are very interesting to me. I have always found Economics a rather challenging subject to grasp. But I believe I am learning alot. I would like to finish on a rather gloomy question- is there a chance things will never get better?
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"Euro here we come .... What about union with France?" Says vonGrunt
And the French elite would want us and the mess created by our elite?
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Only way to create mass employment is to make jobs in the City of London to go. This will help pound fall which in turn will make exports more competitive and import expensive.
Also this will help government and private sector cut wasteful expenses and jobs, for e.g. look at council job adverts or the wars we are fighting (it would have been cheaper to do special operations and wipe the terrorists leadership and the funders than fight like this).
I believe we should restrict immigration especially from Australia and New Zealand as they are allowed to come hear freely but we are not allowed to go and work their freely. As things are government should increase immigration controls, as it is it will help to reduce unemployment.
We cannot have a economy if China and counties alike export to us and loan us the money to buy these goods, its not good for them or us in the long run; this is what has come back to hurt us and this is one of the root cause of the problem. Also oil rich countries used to invest their money back with us now they are investing in there country so it didn't help the situation either.
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Are we comparing like-for-like national debts ? Since Brown is telling the banks and other countries to have better transparency, could he please set an example by 'fessing up to the large Enron-style off-book hiding of debt in the British economy i.e. the unfunded public-sector pension and PFI liabilities ? Then we might find that we aren't actually a low-debt country, and can't really afford a Labour government ever again.
Robert, it would be helpful if you could give us a scale for the size of the debt run up under this government e.g. is it of the scale of WW2, say ?
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Brown is
'very disappointed' with Osborne
for identifying that the Pound might suffer.
Could someone tell Brown that I am
'very disappointed' with Brown
for getting the UK finances into such a mess that the Pound will more than likely suffer protracted pains as a result of Brown's latest on his list of not very good ideas
'That seems a good idea - let's borrow enough foreign currency to sink Britain. '
Dependant of course, on anyone in the world wanting one of those Brown-backed promisary notes.
You know the sort of things.
They finish up being worth half of what you paid for it, but the Tax-payer has to pay twice what they were originally worth.
Only suitable for the very dim, so Brown is just the man to think it up.
thanks
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46 - I shall watch your prediction.
Personally, I don't think the experts have got a clue what is going on or how to stop it. And I include the bankers and the politicos in that, not just the brokers.
I think they all saw something bad on the horizon, buried their heads in the sand in the hope it would sort itself out before it got here and now that it didn't and it's here, none of them have any idea about what to do, how bad it is going to be or how long it will last.
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127 Colombiantaxpayer:
"...is there a chance things will never get better?"
Depends how wide the question is, but here are some thoughts.
If you are thinking about the UK, it is by no means impossible that the economy might collapse completely. In this event, the probability is of an IMF rescue, but subject to very severe terms and conditions. The longer term picture is one of relative decline anyway.
If you are thinking about the global picture, I think that an economic recovery is likely, but the recession (or depression, more accurately) might last for far longer than most people expect, ten years being by no means improbable.
Globally, the biggest danger is Peak Oil. Most experts seem to agree that there is no imminent danger of oil decline, but I suspect that Peak Oil is rather nearer than most people think. Without abundant oil, our present economic system cannot function, and feeding a world population of 6 billion might not be possible.
So yes, there is at least a slight possibility that things may never get better.
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Gordon Brown is a man with a mission
Unfortunately it appears to be to bankrupt this country whatever it takes.
The new US president has already made it clear that he intends to protect US jobs. We will see what he means by that when he comes to power.
The G20 was no more than a talking shop but the reality is that every country will put its own house in order apart from Britain.
Brown will make sure of that by borrowing or printing as much money as he can for his own political ends.
Borrow to spend now but what about next year when things are much worse and the year after?
There is no proper plan in place and there will be no one to help us when the money finally runs out.
Opposition challenges to him are water off a duck's back. He totally ignores them.
His own party will have to get rid of him before its too late for all of us.
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#125
I'd love to claim credit for that, but although I did know, the allusion was unintentional ;)
Just as well anyway or the Beeb would have given me a 3 month suspension without pay for causing offence to the partially sighted.
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The deleveraging of the banking system (though necessary) is enormously deflationary. The banks might as well be piling up huge mounds of money and setting fire to them. This is all happening far too fast and is forcing even well-run companies into huge losses and redundancies. The Government must counter this deflation by an equivalent amount of reflation.
This can be done by borrowing, though as previous posters have pointed out this may not be so easy in the future. Or it could be done by printing money. If the aim is just to counter deflation then the latter doesn't seem such a bad option, though of course the Government would have to be careful not to overdo it.
As regards the exchange rate, the current rate is now more or less at purchasing power parity with both the Euro and the Dollar. It is the past 30 years of overvaluation (and associated high interest rates to keep it that way) that has done the long-term damage to this country - destroying much of our manufacturing industry and leaving us dependant on imports.
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I (and quite a lot of other people, I'm not trying to take credit!) have been saying on this blog for months that kickstarting the Registered Social Landlord (RSL) housing development / building schemes would benefit the economy.
I just heard that they are the top of the newly cautious banks' list of risks, so even the huge RSLs can't get credit to invest in LAND and PROPERTY -
As I understand it Home and Places For People each made HUNDREDS Of MILLIONS of pounds last year, but as registered charities and "not for profit" are still forced to borrow to fund further housing schemes. Schemes that it is generally agreed the country desperately needs!
If a company that made >GBP200m "profit" last year can't get cheap credit to buy LAND, what chance have small businesses with less solid business models than property?
Cutting off credit to RSLs reduces new affordable homes and really hits the poorest in society. I am ashamed of our banks for engineering this "double whammy"!
Especially in light of the fact we're only in this mess because of their behaviour and more and more of us will actually need social housing soon!
I guess "safe as houses" isn't a phrase any banks have heard!
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Pehaps a concerted attack on Tax Havens by all countries could lead to companies and individuals paying fair taxation rather than evading tax.It would be nice to see Mr Murdoch and his mates paying for the services that they get in the UK.
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I recall the Tories when going through the recession stated "If it isn't hurting, it isn't working"
What they meant was that tough decisions were needed to correct the economy. Those are the decisions that led to the longest uninterrupted growth record that we have seen.
It could perhaps have continued, had Brown applied the brakes at the appropriate times. Instead he allowed the economy to continue to grow beyond it's sustainable level. That is sustainable without massive increases in debt (both public and private).
We now have the consequences of that failure to apply the breaks.
The country has difficult decisions again. No solution is pain free. One solution involves more pain in the short term but will put the economy in the right position for it to perhaps beat the record of uninterrupted growth.
The other solution will still involve pain, but it will be much longer lasting. Perhaps lasting decades as the debts incurred by the Government have to be repaid; and as Brown has often stated, Government money spent on paying interest cannot be spent on paying for hospitals and schools.
Let us remember that when he tells us of the benefit of this massive borrowing splurge he intends to have.
His profligacy will mean poorer education and healthcare for decades.
It is a continuation of the live for today and to hell with tomorrow attitude that got us into this situation. But Brown doesn't care. he is not thinking long term and doesn't care beyond the next election.
He will have his pension and his memoirs. His children will have his inheritance.
The rest of the public will pay for it.
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How can tax cuts be a good idea?
Everyone (well I think everyone) now accepts that the mess we are in is down to the fact that, as a nation, we have borrowed too much in order to spend on ourselves, without paying it back.
The banks have now been made to realise this and hence the nation is unable to spend as much as it used to because the banks wont increase our lending any more.
A recession is now following because our economy was based upon consumer spending which can't increase because the banks won't lend us the money. Its nothing to do with lack of confidence and doom and gloom becoming a self fullfilling prophecy.
The Governments solution to this is that they will lend money on our behalf (without any idea as to how it is to be repaid), because the banks won't, so that we can continue spending.
ITS INSANE.
Just where is this going to end.
At some point we have to start repaying the debt and it already looks more than we can afford.
If the Nation was an individual it would have been advised by the Citizens Advice by now, that its best course of action would be to enter into a voluntary liquidation.
If the nation was unable to pay its debts when it was doing so well in the previous years (yeah right!!!) what chance have we got now.
Where is the private sector going to earn the money to payback not only the debt plus ever increasing interest, but also the public sector spending.
The private sector can't afford the bill at the moment and the sector is currently shrinking fast.
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@130
Nobody can tell you the full amount of debt as this tusami which is rolling along is gathering it on its way, try asking 18 months from now and somebody might be able to answer you.
First our economy was to shrink by 0.5 percent then 1.3 and now its 1.7 and growing. anyones guess on the next figure out
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#44 Friendlycard
I don't think you can credit Labour with moving the UK from primarily Manufacturing to Service industries. Baroness Snatcher had already decimated any meaningful manufacturing base this company had.
I'm all for criticising the government for their stewardship of the economy (on their watch), but fair's fair -
The reliance on Financial (and other Services) was doing the best with the hand they were dealt -
It's just a shame so many of their other decisions were awful!
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I think everyone is still missing the point. The World just cannot sustain the growth we have seen. We have been warned time and time again the clock is ticking but either everyone is deaf, just not bothered or hope it will all turn out alright!!
We needed this wake up call but I think most people are still asleep or sleep walking into oblivion.
We all need to appreciate that life has got to change radically. This Country should look to working towards self sufficiency. What bird brain privatised all the basic essentials in life, water, gas, electricity and thought we would all be better off. Most of the utilities are owned by foreign countries, profits going abroad and we are at the behest of volatile foreign politicians.
We fly food in instead of growing it ourselves. I believe we import some 40% of the milk we drink. How daft is that?
Instead of buying quality clothes, made here in the UK that will last, people want lots of cheap throw away stuff made abroad.
All those wonderful skills, all that inventiveness thrown away, discarded for cheaper and cheaper goods and higher and higher profits.
A house is a home to live in, to bring up one's family in, to retire in, not a profit making machine. This greed has meant our children can no longer enjoy what we have taken for granted.
If we had an elagitarian society like in Sweden, where the differentials between pay are so much less and where people are respected for doing their job to the best of their ability, regardless of what it is. It is appreciated for a society to run smoothly all jobs are important, if we had this maybe people would be more content.
Everyone is always looking for the next fix!!
We have encouraged a generation of young people its OK to get into massive debt through student loans because they have all be told they need a degree instead of encouraging some that its perfectly respectable to do a trade. We used to have master craftsmen, who were highly respected members of society and built the wonderful old buildings we take great pride in today We don't take pride in anything anymore, we have a 'that'll do' culture.
In most of the western world we have far more than most people of the Wolrd could ever dream of and yet we still want more and more.
Why not take a moment to stop and listen, you will hear the clock ticking, take a moment to enjoy the natural World around you.
Why rush through life, we only get one go at it and possessions only become a burden on those we leave behind.
I know I have just had to empty my late father's house of his entire life's possessions. They meant something to him but most of it was irrelevant to me.
I don't intend burdening my children with such an awful task.
Memories, family and friends are far more precious than anything money can buy
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114 Jacquescartier.
I wouldn't rejoice to much if I were you.
I'm no apologist for the banks but the nation received ten billion in tax from the banks last year. How are we going to replace those revenues.
More money we need to borrow
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Robert - good and balanced article.
Importantly, you pointed out the potential for dispute around the UK debt figures - ie whether to exclude public pensions, bank guarantees and capital injections, PFI, etc. Or not.
However, Hugh Pym did NOT highlight this critical argument last night. It is central to the debate as to whether we really can afford tax cuts or not. Instead, listening to his remarks, he basically supported Labour's central thesis that there is enough debt headroom to borrow more to support the economy for now.
Either he doesn't understand what the markets have been telling us via the recent plummet in sterling (why else has sterling fallen so badly versus our competitors, many of whom are already in recession?), or he is backing Labour politically and biased.
If the former, he is incompetent and would he please go and do something else within the BBC. If the latter, he should resign as he clearly cannot contain his pro-Labour bias and therefore violates the BBC's charter for impartiality.
The public have a right to expect much, much higher standards from the BBC over the reporting of such critical matters. Putting both sides of the argument is fine; omitting a key point and then relying on this omission to back the government is totally unacceptable.
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# 129
Alphaglen,
There are a number of assertions in your post that don't stand up, I'm afraid.
Firstly, it isn't the case that Aus and NZ individuals can work here freely. Those with UK parents or grandparents can get two-year (I think) student work visas that allow them to do some limited work. In theory, it should only be small-time stuff to allow them to pay their way while they're here, though I accept they used to get away with (and probably still do) doing higher value temp work in areas like financial services. However, they have no permanent right to work.
Increasing immigration controls is unlikely to have any real impact on unemployment. Unfortunately, many of the home-bred unemployed of recent years have simply not had the skill set to take on the jobs that were created, whether it's in construction, IT, or finance. As these jobs are now destroyed, recent immigrants will probably return home (as is already happening with Polish construction workers in Ireland). The decline in GBP will accelerate this, as it makes remittances back from UK to Poland etc less attractive in local currency terms.
Finally your comments on China and oil exporters contradict each other. You assert that "it's bad" for China to sell us goods and then invest the money here, yet you also say it's bad for oil exporters no longer to be investing the proceeds of their oil sales to us here. Presumably you don't see importing oil itself as a bad thing? You can't have it both ways, though. Either all imports (and consequent recycling of GBP back as inward investment in UK assets) is bad, or it's all good. Personally, I remain a supporter of Adam Smith's on this matter.
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# 51 - Perhaps the Abba song should be our new national anthem?
#64 - GB the new global pariah?!
#34 and 81 - If GB and co look at what people post on here, they just ignore it! After all, us mere mortals can't POSSIBLY have any idea what we are talking about! We have all been predicting this for at least a year.
Well, everyone, are we surprised? A whole lot of woffle designed to try and pacify markets. Just what we would expect from policitians surely?
I read somewhere that what little has been resolved could have been achieved without all the main players meeting - another excuse for an expensive trip then?
The run on sterling? How is George Osborne irresponsible? We all knew it would happen as soon as Mervyn King reduced interest rates - the rats left the sinking ship en masse!
Guycroft - know how you feel - totally. We are a small business, no overdraft (work and personally), but even the most prudent of us are suffering, and things can only get worse.
Our esteemed Prime Minister should take his fingers out of his ears and really listen to his people - what good is £75 to any family who have no income cos they've lost their job? It won't even buy a week's food, let alone pay their mortgage. Bet you won't see him walking around the rubble and ruins of our economy giving handouts to businesses and people so they can keep their jobs and homes.
Protectionism - another jargonese word I think - has it replaced Nationalism? What country is going to give any available funds to another when their own country needs them? Each country has to fix its own economy, before it can worry about someone else's.
Frankly, we're beyond blaming and shaming the architects of this disaster. We're seriously in the mire, and it appears only to obvious that our country is crashing around our ears.
We need to fix this first, and then hold the enquiry.
Many of us predicted this would happen before the cut in interest rates happened.
If GB needs radical saviour policies, he should look at these blogs.
But he won't. There is far more to come - we never got the balance sheets and off book debt declarations from the bank, so what chance have we got of truth and clarity from a government who flounder around having got caught in the tide of financial disaster. They must have seen this coming, but, like tiny children, they covered their eyes - if they can't see it, it can't be real.
They are still pretending we're not in recession for goodness' sake, just that we might be soon!
Will they avoid the 'D' word as much as they have the 'R' word? Surely the 'D' word is what's coming now? No, don't tell me, there is some ridiculous formula which makes it official! Well exactly what do you call massive rises in redundancies, repossessions, and unemployment with no hope of recovery any time soon?
Just what does Gordon Brown expect to do with the increasing repossessed dispossessed? Do tents now come with running water, central heating and TV?
How do we sack a Prime Minister? Come to think of it, how do we sack an entire government and governing body of the Bank of England.
YOU DIDN'T NEED TO BE AN 'EXPERT' TO SEE WHAT WAS COMING!
I'M A MORTAL! GET ME OUT OF HERE!
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#133 Friendlycard
I hear you!
By the way Vince Cable is not so great you know. I lived in Twickenham (his constituency) for 10 years and have to confess to once being a member of the Liberal party. I even leafleted for him to get him into parliament in 2001.
Their policies will wreck this country even faster than Labour. I know he highlighted the debt issue in 2005 but his cure is poison.
Remember the local income tax nonsense.
Fireman married to Nurse will both pay an additional 8% tax (£3,500) in place of council tax of say £1,200 while Granny Hurrah-Jones retired Guardian Reader, daughter of Champagne socialist Harry Hurrah-Jones, son of capitalist tea broker Sir Cecil Hurrah-Jones, living on Richmond Hill in her £3m house pleads poverty based on her now depleted income and pays nothing. Now Vince says anyone earning more than £40k, which in London is nothing special and next to nothing next to the cost of houseing in proposing taxing more to give to the economic idle. So Vince wants hard working public sector workers to pay for ecentric millionaires to stay in mansions they cannot afford just because they are old.
I could name 3 or 4 more ridiculous liberal policies that Vince was the achitect for.
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#124
You make a good list of some of the consequences of the irrational short sighted approach of the majority which #72 argues.
It is the consequences (intended or unintended) which flow from bad policies are what cause all those things to happen.
To use one of your examples: Did the public insist Man city be sold...
No they didn't but they did insist on having their football clubs be successful and therefore wanted owners of their clubs with very large amounts of cash to throw at the club to buy the best player/manager/success. I missed the hordes camped outside Man City's stadium saying no we don't want this man's money - most just didn't care so long as the money came and bought the players they wanted.
So they got a dubious owner with lots of cash - the focus was on the cash.
Same with voting, the vast majority vote for who they believe will make them richer - not society - just them. It isn't a particularly pleasant thought but time after time this is the case. Labour was voted in because everyone at the time could see the state of public services and finally Labour still had to slave itself to the economic policies of the Tories - prevailing thought, these policies will make me richer.
Step forward to last election and imagine a manifesto based on - you are borrowing too much so we will make credit hard to obtain (for your own good), house prices are rising too much - we will stop this (in case you end up in negative equity, we will make mortgages minimum 10% deposit (sorry you can;t afford that but it's really more prudent)
Would anyone have voted for that party? I doubt it.
But there is no doubt that some reigning in then would have had a benefit now.
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143 - you're right in so many things
The economic downturn was the perfect time to stop and reflect - and it may yet still turn out to be no more than a warning since more atmospheric turmoil will come soon enough.
The trouble is there was never any plan to change the way_we_live (I use the 'we' term globally since already some live much better than others) and the opportunity has been missed for all time. That said, it may still yet be foist on us..
Trouble is Brown - to cite one world 'leader' only, is something of a schizophrenic - on the one hand wanting to cure world poverty and cure social injustice - and on the other scrabbling to prop up a system that IN REAL TERMS benefits but a few. I don't think he has the faintest idea how to balance ethical moral judgement with anything anymore.
Take repossessions and foreclosures eg: the system has gone completely rampant yet he turns a blind eye to people's misery saying, typically 'repossession - turning people out of their homes - should be a last resort'. It shouldn't be a resort at all and he has the power to impose a blockade on that kind of thing - a moratorium for say a year - but he doesn't. And petrol - it's cheaper and we should be conserving it - he could impose a national 50mph speed limit and yet he does nothing. He will dwell interminably on one case of child abuse in the Commons but yet do nothing to really make a difference for millions of elderly folk, many infirm, trying buy food and keep themselves warm. And do nothing to stop the rise of the feral generation attacking each other and everyone near them with any weapon that comes to hand ...the list goes on forever.
There is nothing more stomach-churning than seeing a weak man like Brown masquerading as a strong man.
GC
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Now if you want a good bubble to pop, why not have a go at the Art market. A load of Antiques Roadshow hoo-hah over the weekend and what does it turn out to be ? A Council-owned macquette of a modern monstrosity, neither antique nor of any worth other than as scrap. Perhaps that's one thing they can put up to refinance activities, if it truly is what these so-called experts say.
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Remarkable. All those pundits - journalists as well as practising economists - who earlier last year so signally failed to call the credit crunch and/or the 'recession(s)' are now bombarding us with inexplicably precise forecasts of how long our current problems will last. We're being told that it will be 6 months, 14 months, or 3 years, or whatever, depending upon the source. Even the projected job losses are given with extraordinary precision (and not a little relish). As a University teacher of economics of 40 years' standing, I'm pleased to see the subject attain the status of an exact science.
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KEYNES;
I am sure that Keyneswould turn in his grave if Brown and Darling uses his name to legitimise their stupid policies to jusify the enormous budget deficit at this stage of the trade cycle.He spcifically warned of running up deficits unless there were massive unemployed resources.
The economy is already swollen with personal debt the speculative building booms and crazy house prices. It needs cooling to counteract the reckless lending, spending and borrowing of the past years.
The fall of sterling causes rising import prices for everyone.
Browns policy is entirely dictated by seeking personal popularity and opinion poll ratings. It will have the opposite effect.
Rosethorn2
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GB, Mandy, Ally and all backbench lemmings continue to sprout the same lies:
1. The economic problems being felt worldwide are NOT the sole responsibility of the USA. I live in Spain. Was it George Bush who was behind the corruptiuon and overbuilding here. Of course not.
2. Was George Busg responsible for GB racking up huge debts, not saving fior a raing day and stealth taxing the economy to death.
3. Did George Bush claim that house prices would never be allowed to rise out of control as GB thundered in 1997. No he did not.
4. Does anyone believe that G B did not know what was going on in the City during the "good years". After all his best chum is Gavyn Davies. Of course not. And if he didn't know, what the hell was he doing all day?
The Nu Liebour project has been shown up for what it always was. An empty vessel. They told us we could have our cake and eat it. Well we all know that life is a tad more complicated than that. Only the Nu Liebour spin freaks believe otherwise.
Zapatero and his Iberian Nu Liebour doltheads
tell the electorate on a daily basis that it's all those nasty American's fault that the economy is in the poo. Rubbish.
Typical socialist tosh to blame someone else. The crisis has shown Brown up for what he is. An utterly irresponsible Chancellor.
It's time for GB, Mandy, Ally and the Nu Liebour apparatchiks to bag their bags.
It's also time for the BBC to drop the bias of their reporting.
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148 Daytrader:
Good points - local income tax would be a bit of a disaster. I think the core problems here are (a) that we don't have any really able potential leaders, and (b) we are so short-term focused that really able leaders would not be elected anyway.
One almost longs for a latter-day Oliver Cromwell to stride into the House of Commons and tell them all to go away.
I get a sinking feeling that we are merely trying to postpone the day of reckoning and that, when inevitably it comes, it will be far worse than most people expect. If politicians do not force us to live within our means, economic logic will intervene to do so.
I particularly dread the consequences as vested interests try to defend themselves irrespective of the broader economic damage.
The cost of government has risen to levels that are far higher than can realistically be afforded.
The division now is not between political parties or ideologies but between government and governed. Perfectly good businesses are being bled to death to pay for a useless bureaucracy and a bloated benefits gravy train. Logically, the solutions are not hard to find - higher taxes on those with high incomes, combined with a cull of bureaucracy and government waste. But to expect the current governing elite to slash the cost of government is a bit like expecting turkeys to vote for an early Christmas.
When the economy reaches near-collapse and the tax and borrowing gravy train hits the buffers, the fight to defend vested interests could be truly horrible. I foresee great social and political conflict in the near future.
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Those who watch' Bremner Bird and Fortune' will know what's really going on that the political and economic jounalists already know but seem to be warned off from reporting on..
It might damage the reputation of the country.
It's a bit too late for that.
For those of a mild disposition it would probably be too scary for them to cope with.
A programme that Gordon Brown and the Labour spin doctors would love to eradicate off the face of the earth at this moment in time.
In the name of comedy it is a service to the nation.
That's what public service broadcasting is really all about.
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First of all, signing up to make a comment is not a 'simple process'. It is roughly equivalent to the information you have to supply to get Internet access to your bank account information.
Considering that this is a moderated forum, I don't see why this is necessary. If I were to post a message consisting entirely of obscenities, presumably the moderation would deal with it.
Why is the BBC so uptight about free speech?
For Mr Peston, my comment was "might cause a damaging run on the pound". If you're sitting where I am, living abroad on UK pensions, there has already been a pretty devastating run on the pound. The 25% that the pond has fallen reflects directly in my monthly income!
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#34 is a great post and i am in a similar position, Though i doubt i made as much money as i dont live in london. I am a bricklayer and i could see this coming twelve months ago so how i can be expected to beleive the experts didnt is actually quite insulting to my inteligence.
Anyway i have a question to the brainboxes in here. If we changed to the euro what would my savings in sterling actually be worth ? I mean would it just be swapped for market value or would i lose a chunk somewhere?
Not that im distrusting of our wonderful government
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To everyone wanting to join the Eurozone
What would your reaction be to a statement issued by the ECB.
High unemployment in the UK is acceptable if we have to reduce inflation in Spain/ Italy/ Portugal/ France/ Belgium?
Enough said.
(Other than a quaint curiosity there is no reason at all why a 1:1 correspondence in the value of the Pound: Euro should encourage entry into Eurozone - just ask any of your relatives who have come back from holiday!)
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AGree with the speed limit idea, however i would change the figures to kilometers per hour. No one really needs to drive as fast as you do in the UK. Save money and the planet etc.
Anyone remember 'the white heat of technology'? Well Brit universities produce literally hundreds of viable patentable ideas each year. These are generally snapped up by foreign companies or left to rot.
Instead of tax cuts how about some form of private business development funds based on uni research.
On the subject of future power demands, fund the reopening and development of coal mines and more efficient coal burning power stations.
And really, can anyone here deny that the infrastructure of UK plc does need considerable investment and upgrades?
If we must spend our way out of recession lets make this a decent country in which to live rather than the toilet that it is becoming. (Apologies to those that live in the beautiful contryside).
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Once again a BBC reporter starts his report with Barrack Obama-sensationalism. Every political leader is talking about 'rapid' action, something Obama can't do - he isn't president for another 3 months, and wasn't even at this weekends G20 meeting.
I have also heard Mr Peston on television (loving his daily slots even more than Gordon Brown, during the slump) describing Communist China as a 'sovereign' trust, along with the UAE and Saudi Arabia. China is rich, but does not have a sovereign. All this shows, which Mr Peston doesn't want to admit, is that democracy means unregulated power by the wealthy, which power corrupts (the love of money is the root of all evil) and leads to the small man on the street being bugg*red by the rich. So quick to announce the 'death of communism' when the Berlin Wall came down, no-one is heralding the death of Capitalism now that every Democratic Capitalist country is in freefall, and China due to be the worlds richest economy by 2020. Even certain businessmen are now raising their heads above the parapet and saying that the 'special relationship' with America is now a dead duck, and that Britain should be looking to the East and Middle East more.
Even so, the BBC remains obsessed with the USA.
Mr Peston states that the dollar is still the worlds reserve currency, but for how long? 60 years ago it was sterling that gold and oil were priced in, but we had to sacrifice that for fighting against Hitler. In another 30 years, will China still deal in dollars, or will it use its financial power (and the fact that it hasn't attacked the Saudis and UAE as undemocratic monarchies that should be eradicated - as expressed by the American president) to change that.
Only 20% of our finances are dependent upon the US, and that is a decreasing amount. The rest comes primarily from Europe (40%) and the rest of the world (40%). I suggest that the latter of these proportions will be growing over the next 30 years, and Americas contribution will lessen, and that within 50 years, noone in Britain will care about the US economy, focusing on China, India, Brazil and Russia - 1 communist, 1 democracy, 1 a dictatorship under Putin and 1 socialist democracy.
However, I suspect that the BBC will still ignore reporting on events in Russia, China, Brazil and India, an continue cowtowing to the dollar.
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#129
It's not the Ausies or The Kiwis we should be worried about. It's the Scottish. They were a problem to the Romans and they're still a problem now. Their aim is the destruction of the English. Gordon is their master weapon. Can't you see?
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@houseallwayswins
The savings would just be automatically translated into euros at the fixed exchange rate that would have been published beforehand. You'd go to bed with £1000 in there, and the next day wake up with the same amount in euros (say, ?1,200). No currency transaction charges or commission.
I was in Ireland during the transition and it was very seamless.
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@159 weejonnie
Can you point to an example of the European Central Bank ever doing that with a current euro member?
No, thought not.
They take their decisions on the basis of the whole Euro-area economy, which is their job.
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#109, here is the graph of the effect of the stimulus:
http://4.bp.blogspot.com/_-VeC39yh6nc/SRB6tQB4EwI/AAAAAAAAB_s/Va28hWqScBw/s1600-h/us-disposible-income.gif
Money well spent...
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#124, most people didn't care about Iraq. Even by the inflated figures of the protesters they never amounted to double figures in terms of the percentage of the population.
Apart from sucking up to the worst dictators in the Middle East what exactly did George Galloway have to say on the UK economy? Rather than being smeared, I think it is safe to say this toerag has been soft-soaped by the media.
As for the fudging of stats, again most people simply don't care. Brown could get away with it because people simply didn't want to hear the facts and didn't understand them when they did hear them.
With respects for the "without limits" immigration policy, these immigrants have been working for sub-minimum wage doing the jobs british people won't do - or won't do for the wage they are paid. How do you think Crash Gordon has been keeping average wage inflation down? You see how well the economy does without Chinese, asians and eastern europeans to do the menial jobs you won't do.
As for deviating, maybe you should join Gorgeous George when he next "expresses his regard" for Assad Jr and see what happens in society where "deviating from the plan" really does land you in jail.....
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#154 "2. Was George Busg responsible for GB racking up huge debts, not saving fior a raing day and ...."
Not wholly, but the Iraq and Afghan wars have done nothing to help our public finances nor those of the US . Also, as these wars may well have been a factor in the poor dollar exchange rate over the last few years, this could well have contributed both to previous excesses and the current hangover?
"...Typical socialist tosh to blame someone else..." All right wing politicians speak the truth then? Pejorative labeling, political tribalism and potted thinking are not going to help get us out of this mess.
We need an economic truth and reconciliation commission: Get all the main players to admit publicly to their mistakes and lack of foresight, ... in return for not being hung from the lampposts. (joke - at the moment).
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#165 Unfortunately the graph we don't have is what would have happened without the stimulus. Maybe it would be the same, or maybe half a trillion less than it is now. We'll never know.
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#41, interesting choice of stats, here are the amount of gross debt - it doesn't say if this is in constant terms, ie adjusted for inflation:
http://www.econstats.com/weo/V030.htm.
The figures you have chosen - by coincidence i am sure - flatter Labour because of the all the "growth" Brown has overseen...
Also note that in terms of the quarterly deficit as a percentage of GDP, we are currently only lower than Egypt, Pakistan, India and another country whose name i forget - it is third world.
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"What would suit the UK would be a massive increase in borrowing by all our competitor economies. Because if all economies were perceived to be shackled by mad levels of public-sector debt, then there would be no reason to single out the UK as being unusually burdened by the expense of service its borrowings."
This is NOT what would suit the UK - it is what would suit Gordon Brown since the damage he has done to the UK economy would not be exposed. Peston's confusion of the present Government's interests with the national interest is just one indication of his disgraceful lack of impartiality.
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146. At 5:10pm on 17 Nov 2008, JayPee28bpr wrote:
I used to work in the city there are loads of Aus and NZers working there, most get British Passport through there grand parents or are let to work here as they are under 30. But we don't have that option, so why should we allow this to happen? On under 30 there are restriction on the two years (only part of it they are allowed to work) they are allowed to travel but they abuse it and work all the two years.
I wasn't contradicting on China and Middle East, as soon as they want their money back (which they loaned us to buy their things) we have a problem, as we haven't got it, to pay them back.
A lot of Polish work in the farms, as cleaners, etc; which are unskilled work; problem with our work force is that they want to be get benefits and don't want to work. Like other EU countries except Iraland there wasn't a need to let Polish in but our government did it predicting only 75,000 will come but ended up with one million. Rather than this if we have cut benefits most would have been forced like the Polish to find work.
This country was hugely successful once that can be created again with the correct policies.
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Timetoponder for PM
#143 hits the spot for me.
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Today at Western Union 1 GBP bought just over 740 XAF, down from around 800 XAF over the summer. That's the CFA Franc, used in a number of African countries, and pegged to the Euro.
Not much fun if you're sending remittances to support your family.
This crisis is hurting many people in many ways, not all of them much reported in the mainstream media.
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Have just read post 34.What a great read.
I bought a loft conversion in Battersea in 2001. I was concerned about the price but decided to go ahead as rents were so high and I'd fallen in love with the space.
Also, I was a cash buyer. Most of my neighbours were 30 something city types. I recall a conversation with one of them who told me that there was no need to worry about the property market as the city would always find a way of allowing us to take on debt. I wasn't convinced. I have never liked debt which made me even more queasy about his views.
I sold my place in the Spring of 2005 and recovered the price paid plus my stamp duty and a "profit" of less than a grand!. At the time I thought I had done well. Three years on I am jumping through hoops.
If the writer of post 34 was Chancellor perhaps we wouldn't be in this mess. No-one could be worse than the arrogant and incompetent Mr Brown who has never had a proper job in his life.
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Surely the downward correction in the value of sterling could just be a drawn out version of black wednesday.
With commodity input prices falling faster than the currency, an increased availability of skilled labour, consumers increasingly patriotic in their purchasing and a potential export advantage developing, maybe the brown man will restart the economy in the same way the grey man did!
As history shows us, just don't expect an electoral advantage from accidental salvation!!
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In May 2008 the Fed sent out tax rebates of $68billion to eligible households in the US.
This equated to $1200 per family, the equivalent of 600 pounds Stirling at that time.
In September, the Treasury rebated tax to the sum of 60 pounds per person in the UK, a direct result of pressure put on the government over the removal of the 10% tax rate.
The biggest benefactor of the package in the US was Walmart as people spent their rebates on petrol and food. In itself an indicator that their weekly budgets are being stretched and even blown.
The stimulus had an initial bounce effect on economic data, but was far less than envisaged.
What on earth does the UK government think it will do with its own version of a stimulus package next week?
It is now set in stone that any package to encourage people to spend will only have a minor impact, if any impact at all.
In order to grow the economy people need to spend, borrow and/or save. Without individual liquidity and disposable income there is nothing that can be done until disposable income is increased and available consistently. A monthly stimulus package does not cut it.
Peoples salaries either need to increase and/or everyday outgoings need to decline. Debt has to be repaid in order to kick start borrowing again, assuming the fraudulent pyramidal financial model is to be kept. Until this crucial element is tackled, the repayment of personal debt will stop every economy suffering from it in its tracks.
There is only one way that this can be achieved quickly, where the shear scale of disposable income that would be made available would allow the economy to prosper again. It is happening now, but needs to go much further. A house price crash.
It will take many prisoners, but the reduction in the value of land in the UK to a point where the average wage can can afford to get a mortgage at 3/3.5 earnings with a suitable deposit would cut hundreds of pounds off peoples mortgage and rental costs each month providing the disposable income needed to massage the economy.
Tie this in with long term interest rates instead of the variable rate system the UK seems to love and you have the basis of stimulus package that may cost many who bought houses in the last 5 years, but will catapult us out of the other side of this cesspit
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Woops. Have just re-read my post at 154. Full of typos. Apologies. And I haven't even been at the sherry!
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"54. At 12:38pm on 17 Nov 2008, bogbrush wrote:
#52
Great point on the "Dutch Disease". The undoubted talent diverted to the casino in London has been a loss to industry in general, to the detriment of the country long term."
Yes.. Obviously our best and brightest live and work in The City of London.
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"140. At 4:50pm on 17 Nov 2008, forfuturessake wrote:
ITS INSANE.
Just where is this going to end.
At some point we have to start repaying the debt and it already looks more than we can afford."
NO NO NO NO NO NO NO NO NO...
Don't you get it. Our money is created from debt. If you repay debt you destroy money and make the problem WORSE.
We should be declaring bankruptcy at the drop of a hat. Repudiating the debt and leave the money circulating.
Under the current monetary system... The banks should have been allowed to fail, declare bankruptcy, and new (clean) banks set up to replace their lending.
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Britain, like Iceland, in big trouble
http://www.iht.com/articles/2008/11/17/business/views18.php
t was unwise for a senior politician to say that Britain faced a possible "sterling collapse" if Prime Minister Gordon Brown weren't careful about his borrowing. Top elected officials, even those in the opposition, should not predict runs on their currency - as that itself could provoke panic. Even so, George Osborne, the opposition's finance spokesman, has certainly put his finger on a serious issue.
Put simply, Britain has an air of Iceland about it. The tiny island state was brought down when foreigners lost trust in the government's ability to bail out a banking system with massive foreign currency debt at a time when the country was also running a huge trade deficit. After foreigners refused to finance its banks, they went bust and the currency sank like a lead balloon.
Britain's excesses are much less extreme, but too large for comfort. British banks' foreign currency liabilities were nearly three times gross domestic product at the end of June - compared with seven times in Iceland. Of course, British banks also had massive foreign currency assets. But there was a mismatch. Their liabilities were $381 billion more than their assets. The flip side of this excess foreign currency debt is an excess of sterling assets. But if the pound keeps falling, the debts will loom larger when translated into sterling and a hole could develop in the banks' balance sheets.
One might think that doesn't matter. After all, the government has just recapitalized the big banks and offered to guarantee up to £250 billion of their borrowings. What's more, it is even guaranteeing borrowing in foreign currencies. The snag is that the government's own foreign currency reserves are pathetically small. They are only a 10th of the size of the banks' currency mismatch. If push came to shove, therefore, the state could have to beg or borrow hard currency to make good on its guarantees.
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Over the last 2 months haven't all of the countries in the world contributed to the, for want of a better few words, saved the arses of the financiers?
Now they are placing limits on goverment spending.
errm, am I missing something?
sorry to quote Sir Tel, but is it me?
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I am not quite sure where the problem is here.Under our communist regime we have watched the secret police(non proffit public sector)Grow to silly levels.They have only one objective the destruction of the working man.Soon under our glorious leader gordon brown he will have completed his dream and serve as dictator for life to control the crisis as no one else knows how to.Good job we are not in a democracy because if we was when some of the public sector start to realize with no private sector there will be no money to pay there jobs it will see labour into a wilderness that they couldnt imagine in there worst dreams.Is this not what we all wanted the downfall of britain because gordon sure does.
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~143 for me also. When the credit crunch started my personal opinion was to let the banks etc go to the wall even if it meant living on rations for a while. One of the main problems with society today is we are all victims of choice and what we need is a great big slap in the face to make us realise how privaliged we all are. Even the poor in this country live like kings in the big scheme of things. In times of poverty people reflect on what is truly important to them and maybee thats what we all need. Who knows we may even have time for strangers like in the good old days
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#34
Well put! So obvious wasn't it! I'm astounded that others can't see beyond the smoke and mirrors (economists and politicians jargon).
OK... So where do we go from here???
Britain is broke, so is the US, those holding greenbacks and sterling in the East have woken up. They realise we can't pay up. No more credit guys, no more on the slate.
What happened this weekend? What was reported.Nothing to us, eh #34.
I have an idea what went on...
It's embarrassing when a mate asks you for the fiver he lent you for a beer.
Where do we go from here? We stop drinking in the local, pay back our mate as soon as we can and start contributing to the economy. It's called hard graft.
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The way its going, I think the economy is heading for a 'brown out'. Brown's Christmas present is all about buying VOTES. It will take 12+ months for any effect to come through on spending, just right for the election feelgood factor. Then brown stuff will hit the fan after the election and we'll all be in it very deeply. What's happened is that the media are being 'Worked' by old nu-labour spin merchants and they are not being pinned down for substansive answers like they should be. Robert, while you mention UK's off-balance sheet stuff, there is no figure given - why not?
What exactly is the point in giving tax cuts to the poorer members of society- these people will not hoard, true, but WILL by cheap goods (eg chinese) WE DON'T MAKE CHEAP GOODS ANYMORE. Time to cut back on health and socialservives methinx!
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#178
I know you think you're being clever, but if you actually believe that the people populating the City aren't of extremely high average IQ then you're simply advertising that you aren't.
The banks actually haven't caused this problem; without their false money this problem would simply have developed over the last 8-10 years anyway; they aided Brown when he was fixated on spending and needed their fantasy to maintain his.
Oh, and they made billions for themselves which they haven't lost. I might not like what they've done but I don't think it makes them stupid.
You confuse your sentiment over their actions with your assessment of their ability, a fundamental mistake.
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The NY Journal has a piece today - not fating Brown but comparing us to Iceland.
Peter Riddell says the Tories were right about Sterling -and there is no convention.
On that note read this article in the FT where it quotes Brown in opposition on sterling. This is the best bit:
'The reason is that a weak currency arises from a weak economy which in turn is the result of a weak Government. A Government unwilling to introduce an industry strategy and unwilling to take the measures necessary to bring us out of recession will leave our economy, and our currency, weak.'
Now it appears Reuters are reporting disagreement between the countries about what was agreed at the summit ; they say 'disappointing even for such low expectations' and that the leaders are not in agreement about who will do what.
Strauss Karn says you should only do a fiscal package if you can afford it.
How much of this has been on the BBC?
Isn't it Brown who is talking down the economy to sell an election package despite the risks of bringing it down further.
Please guys, we know you like Mr Brown, but do your job.
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I supported the joining of the 'common market' believing that it would prvent european countries from going to war with each other. Is now the time to join the 'euro', to prevent the uk from being isolated, from the big decisions that the 'euro zone' members will agree among themselves.
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#149 I cannot allow you to get away with your comments regarding Manchester City Football Club.
The supporters of very few clubs demand less success than that demanded by the supporters of Manchester City. Through decades of failure these people have braved the Manchester rain in order to cheer the blues on. Even the multiple successes of their near neighbours did nothing to quell their ardour for a team that many times could not even win a raffle.
Not many people that I spoke to ever thought the Thai had any real interest in City, and most people doubted that he had any actual cash.
All different now of course - this time around the cash is real.
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@41
Good point but i think your missing something............
govt debt uk as % of GDP
1998 47.6
1999 45.2
2000 42.4
2001 39.0
2002 36.0
2003 32.0
As you can see when house prices rise the goverment debt falls, due to higher public spending. The buble burst in 92 catching the con party out which is why govt debt still fell in 2003. but as public spending fell govt debt grew again by even more upto 50 ,billion in 1997 when the labour party tuck charge. from then house prices began once again to rise and govt debt fell. In 2001 govt debt was at 38 billion and should of kept falling right upto 2007 but not only did it not fall but rose by 5 billion. The amount of public spending over those last six years are the likes never seen before, and so the govt should of been able to cut spending by at least 5 billion year on year. so where the govt should of had govt debt down at 8 billion, and yes i know your surprised. thats what it should of been, if not even lower. So now where in a hole far deeper then when labour first tuck charge in 1997.So how is that you may say. Well let go back to the last buble that bust. over 4 years the con party cut govt debt by 15 billion when things where good and increased debt by 18 billion to then get us out of the bad time. this time the goodtimes lasted 10 years 2.5 times longer than last time and over that time govt debt as only fallen by 7 billion put public spending 5 times higher. what does all this mean you may say, WELL..............
The goverment debt 43 billion add that to the 30 billion they should of saved then add the 51 billion it going to take to get us out of this mess and the total govt debt just a few years from now will be 124 billlion
then you may ask how is it possible for this to happen, its easy just increase the population of the country year on year.
in 1997 in the usa a fifth of the population was 53.2 million people now it is 60 million. an increase of 6.8 million. why a fifth because thats around the total population of the uk.
so we know it as taken 6.8 million people to increase the house prices there over the past 7 years, an increase of nearly 1 million a year.
So its fare to say that as house prices here grew more than the usa. so then you have say that it must take over 1 milllion a year to increase house prices by between 8,000 and 10,000 a year . so the population of the uk must be at least 67 million, well that cant be, Well i think you,ll find it can and is..
So the big question his does increasing the population benfit us fiancial? ONE THING WE DO KNOW IT CERTAINLY FUELS DEMANDS FOR HOUSES
BY THE WAY UNEMPLOYMENT AT 3 MILLION??
i think a little higher than that, by a few million
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This whole thing about Brown complaining about Osborne's comments bringing down the value of the pound - it was all a "stage whisper" surely, something we were meant to hear to embarrass Osborne. He's so bad at predicting anything, we don' t really needto worry and GB knows it.
I have to say I'm beginning to wish we had Sooty and Sweep instead of Cameron and Osborne as opposition - at least they would make us laugh. Go on, visualise the exchanges with GB...the shock, the surprise, the outraged squeaking - you'll begin to enjoy politics all over again.
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What will happen next? Well not the disaster that some may think. First the Pound and Euro devalue to a point probably already agreed. Then US has a sudden 'problem' and Pound and Euro gain against dollar but now all three are substanstially less in value than they were. A little bit of adjustment to Yen and perhaps the Cad and hey presto we trading partners can all crank up the printing press to pay off our debts and China's currency has just been appreciated for them.
People in the street will hardly notice the difference, of course oil got expensive again and those cheap Chinese goods are no longer cheap but thats all.
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#192
I bought quite a few things during the summer. All but one were made in China, the one that was not was a pair of shoes, made in Britain. I'd definitely notice that Chinese goods are no longer cheap. So would the Bank of England, inflation would be about 25%.
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Oh, and can we stop blaming Brown for the devalued pound, it's being going on for a very long time. It's always been popular to compare pound to dollar, it's like picking out the only two rotten apples in a box and deciding which is the better one.
Pound v Yen early 1980 over 570 to the pound, today 145 or about a 75% drop.
Pound swissie 1981.... 4.62 to the pound, today 1.20, again nearing a 75% drop.
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@ 41
got the years wrong
1988 47.2
1989 45.2
1990 42.4
1991 39.0
1992 36.0
1993 32.0
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The Euro won't save us; Gormless Brown massaging the figures won't save us; Marvelous Mervyn with his pretty U-shaped rebounding graphs of recovery won't save us; RBS laying off less than 2% of their workforce isn't going to save us (I bet they can lose that in natural wastage alone -shame on them). We are going to have to dig the UK economy out of this mess by ourselves.
GB has to do everything he can to stimulate the 'production' sector. The over-bloated public and services sectors aren't going to generate wealth, they just stir it around at best, and bleed us dry at worst.
He has to cut public sector employment dramatically, cut the pensions burden, and free up industry to transform exports. This government, like all others before it, is entirely useless at spending public money. The PFI schools and hospitals, the Olympics, the Dome, Inland Revenue & Home Office re-organisations were all vastly over-blown in cost and time. All poor value for money (most of which went back to the banks who got their snouts in the trough ... ) So don't let control-freak Brown stifle investment by keeping it under a central government stranglehold.
A low-value sterling is fine, and low interest rates are ideal. Anything that suppresses imports is good. We are all going to have to survive on a much lower standard of living than we have been accutomed to.
We can't afford any imports and will have to learn to do without them. Joining the euro would only open our high streets up to even more Italian, Spanish, German, Eastern European goods, as well as from further afield.
If everyone hasn't yet understood that construction, manufacturing, agriculture and natural resources are the engines of recovery -oh and innovation, then -Captn Mainwairing- we're doooomed.
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I'm lining up candidates to step into Oliver Cromwell's shoes, with Guy Fawkes as his deputy!
I'm really worried that our country is being governed by a man with a God complex-except he lacks the humility of Jesus. Time he learned from the moral lessons in the Bible, Khoran and other religious tomes. You don't have to be a practising member of any religion to understand the messages they all have in common. From what I understand, GB was raised in a Manse-isn't that a residence for a religious person? So where are the values he was raised with?
This man is dangerously out of control. He is unfit to lead our country-what would a psychological profile reveal I wonder?
A truly great leader is like a great parent-they earn respect, show that they really care, and Stand by family members in times of crisis.
Leaders with such massive egos - history books are full of them! Megolomaniacs all!
I am very scared for my future, and those of my children. Even newspapers are so full of bias you wonder who is telling them to print propoganda in the hope the people of this country will believe it. Perhaps the thought behind it all is that when we are all desperately trying to save our homes and keep our jobs/businesses going that we will forget about all the rubbish coming out of our politicians mouths.
Why, oh why will none of those in a position to make a real difference and sort this out do all the wrong things? Just what will it take for the press to be the voice of the people again?
The only people to not be affected are those who never owned their own home, never earned a proper wage, and work the benefit system to get their money. The way they increase their income is by having a child a year-irrespective of the fact that they have no interest in parenting. These people only respect those giving them handouts-and therefore raise their own children to believe the benefits they receive are the best way of getting designer clothes, fancy TV's etc.
The pride of having a job of any kind and respect for others is non existent. Is this the future Gordon Brown wants? The majority of his electorate reduced to living in bed and breakfast accommodation with benefits our only income?
If all these houses are repossessed what will happen? Noone will be able to buy them, so how will that help the banks? Ghost towns going to rack and ruin? Are we going to see to ressurection of the poor house?
What a tsobering thought-when will Gordon listen? We can't exactly repossessed no 10 downing street.
The unrest that is growing daily cannot surely be ignored for much longer, can it?
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Re: #120 citygambler
What happens when or if Government debt becomes greater than 100% of GDP, will the rating agencies have the balls to downgrade US Debt?
I remember reading that Standard and Poors were considering doing just that a few months ago. But having been "allowed" to rate sub-prime asset-backed securities as AAA, I'm sure there will be a great deal of pressure on the ratings agencies to maintain the top-notch rating for the United States...
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Re: #127 Colombiantaxpayer
I would like to finish on a rather gloomy question- is there a chance things will never get better?
It really depends what you mean by "things"... As dire as the current situation is, I don't see this spelling the end for humankind (although things could turn decidedly nasty if America gets all protectionist over China basically owning most of the country and its assets, or simply decides to default on its national debt), so barring Armageddon, yes, the world will move onwards and upwards. But I fear that the outlook for the UK is pretty bleak for a considerable period of time.
If you consider the performance of a large company that has expanded by taking on a huge amount of debt, the weight of servicing and repaying that debt invariably serves as a severe handicap. They can't afford to pay to retain the best people needed to deliver the required profits, so they "borrow more to increase investment in the business", and eventually a debt-for-equity deal is usually the only viable solution to the situation. Now scale that up to a country's economy, and you get an idea of how things will probably go.
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'After all, if the US cuts taxes, increases public spending and borrows as if there's no tomorrow, surely that provides cover for the UK to do something similar next Monday in the Pre Budget Report.'
Let's state this another way--'If an American decides to disprove the Law of Gravity by jumping off a cliff, surely that gives an Englishman justification to do likewise!'
Before both nations become the next Argentina, I'd urge my British cousins to rethink following us over the cliff.
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One rather important point that nobody as yet (either here on anywhere else in the media, from what I've seen) seems to have considered is this: it's all very well Mr Prudence deciding that the country needs a fiscal stimulus through lower taxes and higher public spending, but surely he first needs to check that someone will actually lend him the money to allow him to do this...
(Aside: for someone who preaches - or at least used to preach - prudence at every turn, he doesn't half like to rack up vast mountains of debts.)
A LOT of people (the vast majority, probably) actually believe that Governments are all-powerful, that they can fix - one way or another - any economic problem with which they are confronted. But in reality, a Government can basically do 3 things: print money, set domestic tax rates, and (to some extent) set interest rates for their own currency. (Writing large, long-dated IOU's are another, but that effectively boils down to printing money and/or setting tax rates) And they can only wield these three tools effectively if they can convince the majority (of their own citizens and the Governments of other countries) that they offer correct stewardship of the economy.
I would suggest that the tactics used by Enron to give the impression of a fundamentally strong, profitable company are the antithesis of correct stewardship.
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Re: #133 Friendlycard
Globally, the biggest danger is Peak Oil. Most experts seem to agree that there is no imminent danger of oil decline, but I suspect that Peak Oil is rather nearer than most people think. Without abundant oil, our present economic system cannot function, and feeding a world population of 6 billion might not be possible.
I would suggest that Peak Oil is a secondary issue to climate change. If the planet develops a severe greenhouse effect (not quite on the scale of Venus, hopefully) - and, after watching "The Mathematics of Chaos" that was on a couple of weeks ago, this would apear to be a frighteningly unquantifiable possibility - then frankly it doesn't really matter how much oil you have: the human race will come close to extinction.
But hey, fingers crossed and all that, let's just have a bit of fiscal stimulus to try and maintain current levels of consumption...
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This country is about to commit economic suicide.
And it would appear that nobody can do anything to stop it.
And this is what happens in a democracy?
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41 Gorden Browns golden rule is a lie and the father of them .
Hitler said if you tell a lie tell a BIG one and no one will notice .
The golden rule WAS built on the idea that spending tax revenues derived from a credit buble were equivalent to spending tax revenues derived from an economy without[or lesser] a credit bubble .
The delusional assumption behind this premise is that credit bubbles can expand to infinity and beyond ,ie things can only get better
Sooner or later the economy built on such a buisiness model colapses producing an added responsibility or burden on government spending ,whilst consumers cut back spending and pay off debt
Private spending goes down Government spending goes up proving the golden rule to be no more than one could expect from the delusional insane ie the Midaas touch in reverse .
Tax revenues derived from the increased income strems produced by credit bubbles should have been set aside ,as Cameron has said without fully understanding why , for the time when consumers cut back to clear their debts causing a decline in tax revenues when most needed by government .
The fiscal stimulaaas ,though now necessary is more about disguising Gordons imprudent midaas touch in reverse ponzi than saving the economy
by allowing government to gain tax receipts on ITS own borrowed monies ,such borrowings to be added to taxpayerrs shoulderrs at some future date with their own credit burdens
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Why doesnt the government pay off everyones high interest credit card debts ,who, are taxpayers anyway ,giving people the chance to change their ways or max out again.
Its seven years since the colapse of the twin towers ,and todays fall of babbleon and time for a jubillee
If A jubilee year is good enough for the Jewish, then its good enough for anyone else
Surely the taxpayer would prefer to use the fiscal stimulas to clear high interest credit debt than spend it on more roads to nowhere or a one way ticket to labour palookahville .
Alternatively the government could take over the credit card debts and charge BOE base rate with tax credits for all past accumulated credit card interest up to
£5000
After all ,should labour inject all their cheap liquidity into underperforming bank AAA's holes,who only wish to squeeze out every drop leaving nothing for the workers
and What about the shirkerrs [what about them]
Cameron now is your moment to wrong foot the opposition ,if governments have reduced interest rates to save indebted property owners then why not reduce the interest on credit cards through above measures or similar ,its got to be a vote winner producing instant salivation and will make labour look like fat cats who sat on the mat with the rat HI pack
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#194 care to name a serious currency that the pound is up against? Maybe the RMB?( haven't checked )
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#198, the general consensus is that usually a country will not default on debts in it's own currency as it can simply print more money and inflate those debts. One seems to forget in all the excitement that credit agencies measure just one risk and that is default risk, if for example Zimbabwe inflates the currency to worthless then it hasn't defaulted but your investments are worth less.
An easy remedy to this crisis would be to force people to repeat 100 times a day:
"High credit rating is not the same as safe. I will not get excess return without taking excess risk".
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#205, tiny little problem. The total amount of household debt currently stands at £1,457bn and GDP is 1,400bn GBP - roughly. Given the government has claimed to have "guaranteed" all depositors - another 400% of GDP - it's kinda hard to see where all this money is going to come from unless we replace Crash Gordon with Mugabe.
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208
20,000,000,houeseholds x £5 000 ==£100billion
IfC
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#203 "And this is what happens in a democracy?"
Oh yes !! Democracy is where the sheeple can be conned into electing an idiot to take control of the country and run it into the ground. Where decisions are made for populist reasons rather than based on cold hard facts.
Where the person who trumpeted to the world that there will be not more boom and bust now says that he is the man to lead you out of a history-making bust of his own creation by doing more of the same things that created the bust in the first case !!
It is reported that Bin Laden is "cut off". My feeling is that he is in a cave somewhere laughing himself sick over the self-inflicted destruction that even he could not have dreamt of.
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This comment was removed because the moderators found it broke the House Rules.
#201 "And they can only wield these three tools effectively if they can convince the majority (of their own citizens and the Governments of other countries) that they offer correct stewardship of the economy."
In many an earlier post, I have said the same thing. To wit, when Gormless Gordon stuck out the begging bowl to the Arabs, he probably got back three wooden dinars and a bit of camel dung. If he had got the loans he wanted, he would have proclaimed it from the rooftops !!
To wit, the selective manner in which he reported on the G20 meetings and the resultant statements. He claimed that these nations will spend their way out of the recession *WITHOUT* reporting that the only those who need *NOT* borrow will do so successfully. Those that need to borrow will have to get the loans *first* before trumpeting their spend, spend policies. Any other method will result in a hammering of their currency by the foreign moneybags.
Having made his boastful spend, spend statements without first securing the money, he now blames George Osborne for the hammering of the sterling. However, foreign moneybags can see through his rhetoric and bluster faster than he can create them and they will deal with him accordingly !!
Is anyone willing to bet *against* the fact that this will be the worst Christmas trading in a decade ??
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#200 Absolutely correct. I couldn't have put it more succinctly !!
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208 you wouldnt see Mugabe humiliate himself going cap in hand to the monetary fund or Saudi Arabia and at least Rhodesias inflation is up front, rather than like ours stored in Dorian Gray bonded warehouses to be turned in due course into Lehmanade
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211 you deserved that ,dont let it happen again or else youll be framed for a laugh
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203 Nationalizing the Banks was the step too far for many international investors.
The Inflation lie, of course, is well known.
The Pound bubble is now burst, with out the international investors to prop it up, the Pound will fall to more realistic levels against other currencies.
So a Pound a Dollar is just round the corner.
And that is if speculators don't sell the Pound.
If they do it could be lower.
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Any British recovery will have to involve a rebuilding of the manufacturing sector.
Without a balanced economy Britain will not be able to pull itself out of this hole.
Unfortunately not one of the Parties has advanced any ideas on this issue.
All the Parties are sitting on their hands hoping that jobs will magically reappear in a few years (in the service sector).
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Just checked and my personal cost of living is up eleven and a half percent.
But then I don't buy tellys every year!
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Once upon a time a group of stuctural engineers decided to
build a dam to provide water and power supplies to their
local community. When the dam was built they realised that
some parts of the dam were under particularly high pressure
and would have to be reinforced. The reinforcements were
completed and the local community settled down to a comfortable
existence with their new water and electricity supply.
Over time, most of the contruction engineers, who were now
involved in maintenance of the dam, moved on to other work
or retired. One member of the new maintenance team looked
up at the dam and couldn't understand why the support stuctures
had been built. He suggested that, if these stuctures were
removed, the cleared space could be used to build new homes
and businesses. This would boost the local economy and increase
the wealth of everyone living in the area.
One of the retired contruction engineers heard about this plan
and wrote to the new dam administrators warning about the dangers
of removing the additional dam supports. The administrators
read the first few lines of the letter and decided that the
retired engineer was now an old man and obviously didn't know
what he was talking about.
The dam supports were removed and the new homes and businesses
were built. As expected, the local economy expanded, the people
grew rich and everyone was happy. A number of awards and titles
were handed out in recognition of the contribution to wealth
creation of the new dam management team.
Unfortunately, after a period of particularly heavy rain, the dam
burst its banks. A number of people were killed or injured and
many more made homeless. At the inquiry into the disaster the current
dam maintenance team were asked why they had removed the additional
dam supports. They replied that they had inspected dams built in
other countries and they didn't need any axtra support so why should
this one. This explanation was accepted by the majority of the community
though some had their doubts. All of the dam employees raimained in
their jobs and were given the task of rebuilding the dam and surrounding
infrastucture.
The dam was rebuilt and, for additional safety, even larger supports
were added to prevent the catastrophe happening again. The shattered
community gradually rebuilt their infrastructure and returned to
their comfortable existance. Though, for some, things would never
be the same again.
Over time, most of the new dam engineers moved on to other work
or retired. One member of the new maintenance team looked up at
the dam and couldn't understand why the additional support stuctures
had been built.....
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ultimately the G20 meeting did very little by the looks of it! Or maybe it did and we're just stuck with with a megalomaniac compulsive liar as a PM who's developed self delusion into an art form!
The alternative is that he knows exactly what he's doing in moving onwards at fast old pace to bankrupt the country.
For me, the second is more scary, after all, we can forgive a fool!
I loath politics but the freshness and clarity shown by DC and GO are refreshing. Experienced politicians have ruined this country-new young blood may well pull a rabbit out of the proverbial hat as they may well be able to think more creatively.
At the very least, once GB has resoundingly destroyed the country, all the new politics has to do is rebuild a new one.
Well done all those politicians who are making an effort to speak for the electorate. Keep going, please! Check out the blogs-the answers are all here, and none of us mind a little plagiarism if it means the right things are said and done.
I care not a whit which political party you belong to-just nail GB to the wall and make him squirm!
Don't listen to the polls by the way-I have absolutely no idea who runs them, but I, for one, have never been contacted for my opinion. Therefore I would suspect they only contact a certain group of people each time!
I'm sure there's a procedure called vote of no confidence-do it now please!
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G20, so effective in the crisis that the next scheduled meeting is April.
And what of the G20 'steering committee' ??..................
Sorry, I meant quango, committee's are always elected.
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fantastic..interest rates on savings at brad and bingley reduced by over 1 per cent...so thats another wage cut for me. Am i being simplistic here, or are we not encouraging people to spend and borrow again!!!people like me lose out for being sensible, i may as well be like the rest and be reckless..help!!! is there anybody out there on my side!!!!how long do we have to put up with this rubbish government.
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I don't understand why the government is going to have to borrow so much?
- There's a rapid contraction in the money supply due to debt, or 'new money' created by the banks as loans, being sucked back in as the banks hoard cash.
- If the money supply shrinks faster than our economic activities do then there will be deflation.
- So, why can't our government just print more real money, i.e. new money not from debt, not borrowed from anywhere, to replace some of that being destroyed at a level that keeps inflation around the 2% target?
As I understand it, if the government 'prints money' and then spends it on things that will stimulate the economy over the long term, i.e. infrastructure (bridges, rail, maglev, whatever), there shouldn't be any resulting inflation anyway?
I'm sorry... once again... WHY does the government have to borrow its own money? I don't understand :/
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Just about every contributor to this blog sounds like a monetarist Tebbit clone. Next you'll be telling us that Brown should get on his bike all the way to the IMF.
So, monetarist gurus of finance, can you please answer:
Do you hold the UK Govt. responsible for the overleveraged actions of every major bank in the developed world over the last 5 years, including UBS and Citibank, two of the worst culprits?
How exactly was the UK Govt. expected to burst the global credit bubble without destroying the City's pre-eminence as a financial centre, at great cost?
Every time Brown tried to increase taxation, by tiny amounts, during the 'boom' years, why did every free-market punter yell 'stealth tax' at him, when they all now bleat that he should have taxed us all far more?
Which public services should Brown cut in order to fund tax cuts to help those on the lowest incomes stay warm this winter?
Perhaps child protection services? Wouldn't affect most monetarists, as their kids are being 'looked after' at boarding school.
Perhaps the NHS? Most monetarists wouldn't be seen dead being treated in the same hospitals as the proles, so who cares if we have to go back to the days of 2 year waiting lists for hip replacements?
It really is amazing that all you doom n gloom, Britain=Iceland or Zimbabwe merchants all seem to offer solutions which assume that free-market, monetarist policies are the only way to prevent Armageddon.
Has it not sunk in yet, we're in this predicament because the banks followed your free-market policies to the nth degree, and when it all went wrong came running to tomorrow's taxpayer for help?
Free-market muppets, Georges Bush and Osbourne, now is not a good time to spout your discredited views on the world economy and on the value of currencies etc.
At least have the decency to wait until the taxpayer has finished bailing you out, before you tell us again how great monetarism and the free market are.
In the meantime, a bit of humility from all you free-market bloggers wouldn't be a bad thing.
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nummber 41 has a short memory.
The debt figures are pure Labour spin and exclude the PFI and now bloated Public Sector. Factor them in and its a different picture altogether. Also, even if you use those spin figures you can see a cycle emerge. Didn't Gordon Clown say he had solved the cyclical issue? Hmmm...
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Peston - very economical with the truth. The G20 communique re "fiscal measures" was couched with many qualifiers. And indeed, 18 of the 20 countries have already used fiscal measures (including the USA) to help - with little effect.
Indeed, much of it could be read as a slap on the wrist for Brown
http://online.wsj.com/article/SB122677642316131071.html
You might as well be a New Labour spin doctor
Shocking.
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Munich guy - all the devices for said leverage were invented in the City, thanks to utterly lax regulation. Brown is VERY much to blame.
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Meanwhile in the real, non government owned press....
http://blogs.ft.com/maverecon/2008/11/how-likely-is-a-sterling-crisis-or-is-london-really-reykjavik-on-thames/
Note this graph and when the crossover happens:
http://blogs.ft.com/maverecon/files/2008/11/uknfip.gif
http://www.independent.co.uk/opinion/commentators/simon-carr/simon-carr-mr-keynes-funny-farm-a-bullock-outfoxes-the-fox-1023102.html
http://blogs.ft.com/westminster/2008/11/gordon-brown-blames-it-on-the-us-of-a/
http://www.dailymail.co.uk/news/article-1086334/PETER-MCKAY-A-vampire-feeding-misery.html
http://www.economist.com/markets/indicators/displaystory.cfm?story_id=12566810
Note the goverment balance as a proportion of GDP and who is worse than the UK:
http://www.economist.com/markets/indicators/displaystory.cfm?story_id=12566810
http://online.wsj.com/article/SB122662346962726733.html
http://www.telegraph.co.uk/finance/comment/jeffrandall/3454763/Gordon-Browns-fingerprints-are-all-over-a-disaster-made-in-Britain.html
pretty much only the guardian, presumably to appease it's three readers, is following the "It's not Gordon's fault"
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Reading the G20 statement, Actions taken:
Address regulatory deficiencies.
Unfreeze credit markets.
Working to ensure international financial institutions can support global economy.
Yes, well the UK has done all these things. :(
We (all?) agreed to:
A broad macroeconomic response.
Stress importance and support of IMF. (Who have asked international community for additional 100bn)
And
Strengthen transparency
Strengthen regulation
Review compensation for risk taking (bonuses)
Mitigate against pro-cyclicity
Yes well, the UK is undertaking all these things :(
I see none of the G20 communique commented on anywhere in the press, and I have waited patiently for a government minister from either side of the commons to step forward and make a statement.
So what really went on? I watched the body language of GB.. nothing good there.
I watched the body language of GWB, posturing and toothless.
I watched the body language of the sheiks and the eastern oriental premiers - inscrutable? no, radiating confidence, yes.
is a depression coming? yes well it arrived in my house, I feel depressed. by the lack of dynamism, direction and enthusiasm from ALL the UK political parties.
The best I can describe for them all is plodding jobsworths. God save the Queen
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http://www.youtube.com/watch?v=aCQREoAmsu0
and i thought it was just an end to "Tory boom and bust"
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227.
The securitization of mortgages, credit-card debts etc was invented in the early eighties in New York Investment banks. Was Brown behind it all along? I think we should be told.
I suppose Brown forced the poor old banks (including those well-known commies at UBS and Citi) to parcel 'em up and sell 'em on at an exponential rate. I'm sure he also forced other muppet banks to buy them- or serve time in his Siberian Labour Camp, I suppose.
I suppose Brown also forced the (New York-based) rating agencies to rate these securities at AAA.
I suppose Brown also forced banks to relax their lending criteria in order to produce ever more such securities for muppets to buy.
Monetarists, now is a bit late to call for more regulation...
Every bit of regulation Brown (and anyone else) tried to bring in was resisted, and called 'red-tape' by you.
Free-market gurus, it would be nice if you could heal thyselves. As you can't, nanny state will have to administer some nasty medicine.
In the meantime, I advise you free-market gurus to maintain a low profile, for 'twas the application of your own philosophy which brought Western Capitalism to its knees. If your current predictions do prove correct and we really do face anarchy in the UK, it will be you whom the 50 million hungry British proles will rightly blame, and your larders which are plundered with most gusto...
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#224, how about cutting ID cards?
How about getting rid of tax credits and simply not taxing them in the first place? Or the splurge of money spent on the public sector in the last 8 years?
All the major banks in the world? Weird that the large banks needing the biggest bailouts are the ones most exposed to the UK property market.( PS Citibank and UBS aren't the "worst" culprits but hey who cares about reality ).
Free-markets? All of these structures are about exactly one thing - regulation. Without idiotic poorly thought out regulation to game the structured product market wouldn't exist.
Oh and PS Credit derivatives and CDOs were invented in London.
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There's talk of GB increasing tax credits. This is not a tax cut, it's additional spend on benefits. It will all go to Tesco, not to the parts of the economy that need stimulus. He needs to cut taxes on housing to get the economy moving again. A one year scrapping of stamp duty would do this.
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#231, there is no problem with securitised mortgages. They have performed as expected, the underperforming products are CDOs which is a different but related product set.
The boom in demand for CDOs was driven by near zero and below zero real interest rates as investors searched for yield. Most investors have limitations on the paper they can buy and CDOs turn credit risk into interest rate risk. The credit agencies were perfectly right to rate these CDOs as AAA as they are not defaulting they are paying reduced coupons - as per their declared formula. He systematically targeted every other type of investment - fancy investing in fixed income products, bang inflationary interest rates; fancy investing in yield stocks, bang repeal of ACT; fancy investing in growth stocks, bang messing around with CGT. Oh and in case anyone missed the point about never ever touching the property bubble he changed the measure of inflation so mortgage payments weren't included giving another two years of unrealistically low interest rates.
Brown has done exactly that - forced banks to lend at a rate of growth equivalent to the top of the bubble. He has forced the banks to offer negative real interest rates to customers.
And he also spent like crazy to ensure that when time came the purse was empty.
As for the regulation you seem to magically claim would have fixed this - name one regulation that would have done so. I can think of exactly one - having a centralised clearing house for OTC derivatives and even that would have been gamed.
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Munichmadrid7980
Just to get my point across I will accept that Brown could not do anything about the banks.
However he cannot be forgiven for not recognising the banks excesses.
Had he recognised the excesses and being such an intelligent man he should have known that it could not go on forever. If he thought that it could go on forever (ie 10% a year increase in house prices etc) I'm wasting my time.
Armed with this knowledge he should have known that when the downturn came that his tax revenues would fall dramatically.(They are falling dramatically now and are set to fall even further).
If tax revenues are expected to fall in the future then you start saving some of the current inflated tax revenues. He did not do this. In fact he did the reverse and as tax revenues increased he borrowed more.
This is what leaves our nation in a very precarious position at the moment.
Can you really say that all the public spending over the last 5 years has been absolutely necessary and done at the most economic price.
You want to see how much over the odds the NHS pays to its suppliers (not its staff, its suppliers). Its eyewatering!!!
When individuals spend money which is not their own it is very rarely spent well.
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Black sheep,
Think the biggest institutional bail-outs so far have been for Fannie Mae, Freddie Mac and AIG- the latter surely destined to become still bigger. Exposed to the UK property market in the sense that they exist on the same planet I suppose.
UBS has among the biggest write-offs, and Citi the biggest lay-offs.
Still waiting to hear how our Scottish friend forced all these financial gurus into producing, and trading all these wacky products.
Sorry for the pun, but are you now among those bleating for more regulation of our glorious free market?
Cancelling ID cards, sure that's going to make it all go away. Next time we get a terrorist attack, sure you won't be among those who wanted more 'regulation' of personal freedom all along...
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A more useful comparison of public sector debt would also take into account the amount of the US social security trust fund which runs to trillions of dollars. The UK has no such fund for future state and many public sector pensions. Also the fact that GB has pushed taxes over the years to levels probably well beyond the limit where the economy is constrained leaves little flexibilty. Taking this and the other billions of off balance sheet UK debt leaves the UK in a much less favourable light than appears from the article.
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235.
In answer to your question, no I am not sure that all the public spending over the last 5 years has been absolutely necessary and at the most economic price- I can't really say that for my own personal spending either, and I'm very tight, though not Scottish.
What I can say is that when Labour had just got in in '97 my wife needed a back operation. She was quoted 9 months by her GP for an appointment at an NHS hospital, and another 9 months for a scan. As, at the time, she was in agony and we were lucky enough to have the £6K, we went private.
The money spent, recklessly or not, by Brown etc., now means that my mum, who needs a hip replacement, is to get this operation on the NHS within 18 weeks. It's not all been wasted, this public spending.
I'm sure that all of this is of little interest to those like the Osbournes and Camerons, who, like their hedge-fund chums, have never heard of waiting lists- sure they even got into St Paul's and Eton without being on one.
Don't bleat to us humble taxpayers that the NHS 'overspends' on equipment when, under monetarist free-market rule, it was a total shambles for 18 years.
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Regarding #14 wasn't it Brown that took away the tax credit on dividends and at a stroke made investment in pensions some 5 billion pounds less. Then he wondered why there was a big hole in the pension funds and demanded that the companies fill that which he had created in the first place.
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236: Please do not go down that hoary old route of id cards preventing terrorism. Apart from being *slightly* off topic. May I be as bold as to suggest they will prevent absolutely nothing in terms of attacks unless of course we have police on every street corner checking your "papers".
Also I can just see a terrorist quaking in his boots in case he is caught not in possession of a valid ID card whilst he has a fair few pounds of semtex strapped to his chest!
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I must say that I find attempts to whitewash Brown and co very far from convincing. After all, this man has been in charge of UK economic and fiscal policy for more than eleven years, so claiming that he has little or no culpability for what has gone wrong verges on the laughable. His record necessarily contains both good and bad, but bad policies and bad judgment overwhelmingly predominate.
The basic problems have been bureaucracy; benefits; and borrowing. Labour has always had a love-affair with bureaucracy, and the number of pen-pushers employed by both national and local government has escalated since 1997 even though, logically, IT should have meant huge savings in admin costs.
This explosion of bureaucracy has had a huge cost to the economy, not just financially but in terms of the onerous regulation and meddling imposed on individuals and businesses as these pen-pushers try to justify their existence.
The second problem is the Labour commitment to redistribution, which in practice means taking money away from working people on low and middle incomes and using it to fund welfare. The 10p tax fiasco was typical of a total disregard for working people.
Because the culture of bureaucracy and benefits has been hugely expensive, borrowing has escalated. In addition to known and disclosed government debt, we have insidious, off-balance-sheet borrowing, in the form of PFI and unfunded public sector pensions.
As if borrowing from the taxpayers of the future was not bad enough, Brown has borrowed from the pensioners of the future as well, pinching over GBP 200 bn from pension funds since 1997.
Of course, one could cite numerous individual pieces of idiocy - setting an inflation/interest rate policy that ignored asset escalation; selling off gold reserves at the bottom of the market; selling off our nuclear technology, and so on.
But the biggest and most important example of idiocy is the idea that further borrowing is the best way to get out of a problem caused in the first place by irresponsible borrowing.
Are foreigners likely to lend HMG tens of billions? If I were a foreign investor, I would look at the leadership, the strategy and the balance sheet, and walk away.
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The myth of record debt!!!
http://news.bbc.co.uk/1/hi/magazine/7733794.stm
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#187 SallyCyork
"The NY Journal has a piece today - not fating Brown but comparing us to Iceland."
They have some nerve. What abot Lehman going bust and GM,Ford and Chrysler in it up to their bottom lips (don't make a splash!).
Check out post #111 for US Fiscal Debt
Pot and Kettle come to mind.
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Let's be honest.
A fiscal stimulus now (tax cuts/increased spending) means that the UK taxpayer will have to pay later from either reduced Govt. spending or through higher tax rates. This is undeniable
However the alternative is that the UK economy may go into freefall. This scenario would mean that the Govt. (and taxpayer) would have to pay more later anyway.
A smaller national debt is no consolation if we go into a 1930's type depression.
The prospect of a Govt actually prepared to act is refreshing to see. The tories would sit on their hands and let the market see to itself. That leads to the Thatcher economic miracle of 3m on the dole queue.
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#236, UBS's writeoffs were single percentage figures of it's assets under management. The job cuts at citigroup are mostly natural wasteage and divestment of it's operations.
In terms of the size of their operations, the bailouts of Fannie Mae and Freddie Mac are tiny, certainly when compared to how much is being needed to prop up UK banks. Oh and AIG.... where do you think it's CDS arm was based?
As for "wanting more regulation" and "waiting to hear", you should maybe come back when you can read and then read what i just wrote.
And as for ID cards, someone has had a hard on for them since the 80s, there is always some pathetic excuse for them. Benefit fraud, immigration, rights management, terrorism, crime....
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#238, so according to official government figures - which never lie - hundreds of billions of pounds cut a waiting list from 9 months to 4.5. Genius. I had an ex who got a completely unnecessary nose job in under two weeks. Guess we know where the NHS's priorities lie.
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One also has to point out that Brown had ZERO problem taking credit for EVERYTHING before, bit weird he is shy about it now.
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#243, what about LEH? It went bankrupt, the assets were disposed and the CDS auctions went smoothly.
Of course we can't compare GM and Ford to the UK - the last british car firm went belly in the middle of a boom, unlike the recession now.
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224: Just wanted to make a quick point about Hip Replacements. You do still wait 2 years for one (as my poor old dad has), they just won't put you on the waiting list until there's an appointment available within 6 weeks. Until then, they just send you for x-ray after x-ray, consultation after consultation, then they make bad excuses as to why the operation can't yet be done. All this wastes more cash than just putting you on the waiting list in the first place!
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One reason the Guardian is so cravenly toeing the New Labour line is that the only thing that keeps them afloat are the Public Sector jobs ads, all sent their way by NL. Conservatives rightly believe this should all be done online (and to those who say - not everyone has the internet, well, not everyone reads the guardian); this done, the Guardian will suffer a fatal revenue drop and be stuffed.
No bad thing. And I say this as one brought up on the Manchester Guardian, as a font of independent and clear-sighted journalism. Rusbridger has a lot to answer for.
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238 Munichmadrid7980
I am a very humble taxpayer by the way.
I don't even know what a monetarist is.
My fundamental philosophy is that you should live to your means with certain obvious adjustments.
I am genuinely glad that your experience of the NHS has been good recently and that you have seen it as an improvement since 1997.
My own personal experience of the NHS has been good recently when needed.
My gripe is that this government has just thrown money at the NHS over recent years. Money that was more than the nation could afford and very soon we are going to be asked to repay the money that the government has borrowed in order to achieve this.
This money has helped the NHS but it should not have cost anywhere near as much as it has due to lack of care taken with its spending.
When I refer to over spending on equipment, I mean paying well over the odds for something which could have been vastly reduced with a little bargaining. I dont say the equipment should not have been bought, I say the NHS should not have paid so much.
Quite frankly with the buying power of the NHS it should pay less than anybody else for everything it buys, but it doesn't.
In the end its us poor tax payers who pay, we haven't paid yet but by god we're going to.
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Black sheep,
''Come back when you can read''
Ouch, that hurts so much.
What about ''it's assets'' then ?
Yeah of course Citi's mass redundancies are 'natural wastage', UBS' write-offs are a 'single-figure percentage' of their assets, and Fannie and Freddie's nationalisation was just small beer beside the mighty Northern Rock and colossal B&B. And it was the nasty London-based employees of AIG who screwed up, not the US head office. That would make it all Gordon's fault and not the greedy incompetents who run the banks then?
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246.
It's not 'according to figures', it is the reality I experienced.
The wait was 9 months for an appointment, then 9 more for a scan, so around 2 yrs for the op. It's only when you have witnessed a relative in agony being told this kind of stuff that it brings it home how far we've come with the NHS since then.
251.
Yes, of course efficiencies could be made, but if the NHS employed more external consultants to do this kind of work they'd only go and mess it up like the computer system. You'd also get Daily Mail types on here moaning about 'pen-pushers'.
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Re: #207 laughingblacksheep
#198, the general consensus is that usually a country will not default on debts in it's own currency as it can simply print more money and inflate those debts. One seems to forget in all the excitement that credit agencies measure just one risk and that is default risk, if for example Zimbabwe inflates the currency to worthless then it hasn't defaulted but your investments are worth less.
I didn't mention anything about defaults in post #198, but while you're on the subject, if it came to a choice I thinks the odds are firmly in favour of the US defaulting on the enormous amount of debt that China holds, rather than subjecting Americans to the extreme pain of inflation that would be necessary to get the country out of its hole.
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Re: #224 MunichMadrid7980
So, monetarist gurus of finance, can you please answer:
Do you hold the UK Govt. responsible for the overleveraged actions of every major bank in the developed world over the last 5 years, including UBS and Citibank, two of the worst culprits?
Of course not. But we do blame the UK Govt. for allowing UK banks to participate in the madness. And for massively reducing the role of the BofE in controlling the UK banking sector.
How exactly was the UK Govt. expected to burst the global credit bubble without destroying the City's pre-eminence as a financial centre, at great cost?
Again, the UK Government could have severely limited the participation of the UK banks. But then it all comes down to whether your priorities are short term or long term.
Every time Brown tried to increase taxation, by tiny amounts, during the 'boom' years, why did every free-market punter yell 'stealth tax' at him, when they all now bleat that he should have taxed us all far more?
Because all of his tax increases WERE by stealth, rather than honestly and overtly. And I don't recall anybody claiming he should have taxed us more (could he have???); rather, he should have SPENT LESS.
Which public services should Brown cut in order to fund tax cuts to help those on the lowest incomes stay warm this winter?
You seriously can't see truly MASSIVE amounts of fat that can be cut from the public sector? Even when it comes to productive members of the public sector, we get pretty poor value for money. For a start, I don't think a single GP should be paid above £80K pa.
Perhaps the NHS? Most monetarists wouldn't be seen dead being treated in the same hospitals as the proles, so who cares if we have to go back to the days of 2 year waiting lists for hip replacements?
Yep, ENORMOUS amounts of fat that could be trimmed in the NHS.
Has it not sunk in yet, we're in this predicament because the banks followed your free-market policies to the nth degree, and when it all went wrong came running to tomorrow's taxpayer for help?
Actually, I'm afraid I have to correct you on this point. On Monday night I read a very enlightening article by William Rees-Mogg in The Times. Let me quote you a bit:
"This Act [US Community Reinvestment Act] was originally passed in 1977, when Jimmy Carter was President; it was inspire by the Democratic Party's belief in liberal interventionism for social purposes... The Act imposed an obligation on the banks to provide sub-prime mortgages for social housing."
That's right. I must confess I was left pretty speechless too. It actually turns out that the banks were forced to create a sub-prime mortgage market through legislation passed by liberal do-gooders. The sub-prime crisis was not, as is the current popular view, the result of a lack of regulation. So, once again, it is interference in genuine free-market economics that is the fundamental root of a major problem. Surprisingly, free markets only work when they are allowed to operate as free markets.
Free-market muppets, Georges Bush and Osbourne, now is not a good time to spout your discredited views on the world economy and on the value of currencies etc.
Yep, refer to previous comment re free-market economics.
At least have the decency to wait until the taxpayer has finished bailing you out, before you tell us again how great monetarism and the free market are.
And again.
In the meantime, a bit of humility from all you free-market bloggers wouldn't be a bad thing.
Hoisted by your own petard, no less.
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It seems that you really believe that an article by William Rees-Mogg is enough to change the basic facts of this mess.
Yeah, sure, it's all Jimmy Carter's fault that the banks, 25 years later, packaged up dross and sold it to each other as AAA, with the connivance of Moody's and S&P. You go on believing that it was the fault of those nasty commie Democrats back when Disco was big, if it makes you happy.
If the markets were allowed to rip now, how long would it be until those Armageddonists on this blog would be proved correct, as every major bank collapsed in turn?
If this happened should the mob really beat down the doors of Jimmy Carter before they move on to Wall St?
Of course, since William Rees-Mogg says it was his fault, in the Times, no less.
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255 YummyCarolKirkwood:
Excellent post, says it all really. Just a couple of additional comments:
First, the big lie perpetuated by Labour et al is that "all government spending goes on essential services", so anyone suggesting cuts is imperilling these services. We all know that this is nonsense; that there is huge waste and bureaucracy; and that massive savings could be made. Public sector unions push the same line, trying to persuade us that all of their members are worthies such as dinner-ladies, refuse collectors and nurses, when the reality is that they represent a lot of bureaucrats as well.
Second, we can now anticipate very big job losses in the private sector, meaning that the cost of the public sector will have to be met by fewer contributors, i.e. a higher unit cost per private sector taxpayer. Given that upwards of 500,000 private sector jobs are likely to be lost, might it be reasonable to suggest, say, a 100,000 cutback in government bureaucratic jobs in the interests of balance? Or does the private sector have to carry the entire cost of this mess?
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257.
'Or does the private sector have to carry the entire cost of this mess?'
That would be the same private sector which is currently being propped up by the governments= future taxpayers of the world.
Unfortunately for all of us, yes we're going to have to pay in the future for the banks' recent party, and some of them, like Barclays, would like to carry on partying.
Yes, that's also going to mean a shrunken public sector bill in the future. I hope that that is achieved largely through lower salaries / higher taxes for those at the top, but that rarely seems to occur in any field. Far easier to economise by eg. contracting out services like hospital cleaning, usually performed in the main by immigrants.
Just be thankful that we've got governments which have begun to take decisive action to support the system wrecked by the greedy suits of Mayfair and Manhattan.
When there's no quick buck to be made, private capital flees as fast as liquidity allows- hence the shorting of UK bank shares from last year as a proxy for shorting UK PLC, and the shorting of sterling now for the same reasons, encouraged in recent days by the hedge-funds' pal, Georgie O.
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Re: #256 MunichMadrid7980
It seems that you really believe that an article by William Rees-Mogg is enough to change the basic facts of this mess.
The legal requirement for the US banks to provide a sub-prime mortgage market as a consequence of the US Community Reinvestment Act IS A BASIC FACT OF THIS MESS. It was not the lack of regulation that created the sub-prime mortgage market - IT WAS REGULATION THAT CREATED IT!!!
Another basic fact of this mess is that central banks in the developed countries slashed interest rates to ARTIFICIALLY LOW LEVELS after the September 11 attacks to prevent the then nascent recession.
And a more recent fact of this mess is that at the beginning of this month the MPC of the BofE slashed Bank Rate to 3%, and the UK mortgage lenders were then forced to reduce their SVRs by a similar amount even though their cost of funds was still considerably higher. The result is that companies are now having to pay for this subsidy to mortgage holders through higher rates for loans and overdrafts.
All of this is interference in free-market economics. It is preceisely this sort of interference that causes the crises, especially the current credit crunch.
Whether you like it or not, neither socialism nor communism is compatible with human nature at its current level of development. Such a "Star Trek" utopia may be achievable in a few centuries' time, but for the forseeable future capitalism is unfortunately the best way for human society to develop.
And finally, I am no apologist for the banks. It is purely their nature to take maximum advantage according to the prevailing rules and regulations. It is do-gooders' constant interference in these rules and regulations that provides the loopholes and artificial conditions for the banks to exploit.
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yummy,
I'm no utopian socialist; however, in this case any attempt to shift the blame for this mess away from the free market behaviour of banks- for short-term greed- is an empty pursuit.
For Rees-Mogg, and plenty of bloggers here, to suggest that anyone else but the banks bears the lion's share of blame is so obviously unsupportable by any reasonable assessment of the evidence, that it must be concluded that he and they are blinded by their own rigid dogma. They've been told that it's either free-market or communism, with little in between, so often that they seem to believe it must be true.
Yes, with hindsight, the Fed cut at least 1% too far after 9/11, but that cannot excuse banks from their profligate, and unsustainable lending practices, 2002-6, eg 125 % mortgages etc.
Neither does Fed policy excuse the banks / rating agencies, for their practices re 'sub-prime' and other packaged assets. Neither Jimmy Carter, nor the Fed, nor Gordon Brown, forced them to sell (and buy) dross as gold.
The motive was greed, pure and simple, and that's why the free-market does require some regulations (nb. not complete control by the govt).
The regulators should have acted on bundled debt and indeed cds, but it has to be said that this regulation needed to be global to work, since any unilateral action by eg the FSA or SEC would have simply led to accusations of 'red-tape' and the flight of financial services from wherever the regulation was brought it.
We should be very thankful that we don't have laissez-faire governments here or even in W's US at the moment. If the free-market gurus were followed now, and major banks were allowed to fall one by one, there'd be plenty of monetarists pleading for government intervention / protection, as the hungry mob bore down on their Hampstead and Surrey palaces.
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Although I agree that numerous institutions seem to be in dire straights I do not see the mertit of this blog - Robert Preston seems to be a man trying to make a name for himself, bit like the other z list 'celebs' currently in the jungle on ITV. This blog along with the one weeks ago has factless sensationalist claims akin to any article appearing everyday in the Daily Mail
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Every analyst on the earth is suggesting not splurging your money at this point of time, when the market condition is certainly gloomy. Suggestions are pouring in from every friends and relatives to be careful in spending hard earned cash. It is not certain that the global economy as well as UK economy is in deep recession. On the contrary, I am throwing in my opinion to go for shopping spree now as this seems to be the best time for the shopaholics. It may be too late two-three months down the line because price will certainly increase because of higher cost of import. Making sense ? No. Please read on at this URL.
http://uk.idlefolks.com
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I think that the G-20 is both good and bad for the United Kingdom...Depending on the item of discussion of the day!
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