The rising taxpayer burden
For me, the most interesting story of the past 24 hours is that VW, the stressed German carmaker, is trying to raise €2.8bn (£2.2bn) from the European Central Bank.
It plans to raise cash from the ECB in exchange for €2.8bn of securities backed by car loans.
In effect, the ECB - and ultimately taxpayers in the eurozone - would be financing purchases of automobiles.
Crikey, is all that comes to mind.
What next?
Perhaps Marks & Spencer will be able to dump its unsold jumpers and knickers on the Bank of England, in exchange for a bit of useful short-term credit (the contraction in retail sales for October reported today by the British Retail Consortium is the first fall that the trade body has ever reported that wasn't caused by special factors, such as the timing of public holidays).
Or perhaps the Bank of England will allow Taylor Wimpey - which reported pretty dire results again today - to swap its unsold houses and land for some Treasury bills via a re-worked special liquidity scheme.
If only the Bank of England and taxpayers would refinance Taylor Wimpey's £1.9bn of net debt, the battered housebuilder wouldn't have to make veiled threats to its banks and bondholders that administration under insolvency procedures is an option, if the lenders don't agree to make the terms of their loans less onerous.
I don't expect the Bank to become so liberal in the provision of loans and liquidity, but I am not being wholly flippant - since a great deal of the dire economic straits we find ourselves in stems from the contraction of credit from normal commercial sources.
And, because of that, expectations are rising by the day about what we as taxpayers can provide in incremental loans to limit the pain.
As you'll recall, around the world taxpayers have provided a staggering £5,000bn of support for ailing banks. And I haven't included in that the astonishing funding provided by the US authorities, the US Treasury and the Federal Reserve, to AIG, Fannie Mae and Freddie Mac.
There's literally no point in sharing with you the losses announced yesterday by AIG, the radioactive insurer, and Fannie Mae, the mortgage provider. Those losses run to so many billions of dollars that they defy comprehension.
In a way, therefore, I see the UK's "whose-tax-cuts-will-be-biggest?" competition between the political parties as a bit of a sideshow.
Doling out a few extra pounds to most of us would probably be no bad thing, if we were to spend it (hoarding it would do the economy little immediate good - but there is quite a risk that we would hoard it).
But it's a bit like a blood transfusion for an ailing patient. It'll provide a bit of extra energy, but it doesn't deal with the underlying cause of the disease - which in this case is a global contraction of lending.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~53~RS~)
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The transfer of risk from banks and corporations to the taxpayer means that the next leg of the debt crisis will hit governments, who will have trouble financing their huge budget deficits and refinancing existing loans. Current bailouts may cause the biggest crash of all - state insolvency.
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Securitising every kind of assets however nebulous they were was a major factor in the credit crunch.Is 2.8 bn.their total car loan book or just the toxic ones?Hope Trichet kicks it into touch!
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I thought the taxpayer lending to banks was supposed to enable banks to then lend to the widereconomy? If the taxpayer is supporting the wiser economy too, then there isn't really an economy, outside state controlled funding?
I don't want to be in the position of paying for my shopping twice, through tax and my spending!?
We have reached a point where, whatever the pain, the weakest in any industry must be allowed to fail.
And yes, tax cuts are a sideshow. Giving us less back than the effective rate of inflation and encouraging us to spend more is ridiculous! We would be worse off -
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Dear Robert
This Government and the countries politicians, had better start getting this crisis sorted, it is already in a spiral down wards, and it is going to be worse than the great depression of 1929,
This is going to end in Tears,
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Robert, you know full well that the Government will pump and buy anything it needs to to prevent any major corporation going bust.
Too big to fail? It would be like one of those fireworks that expolses in all directions if even one of the corporations fold.
Only problem is we are getting very close to a corporation that they will have no choice other than to let go
Implotion Day
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Yes, Robert, the announcements to come (over the next 12 - 36 months perhaps?) from a whole range of players are going to make a very long list indeed.
The numbers coming out of AIG are truly shocking, with a second 'tranche' of losses just having been admitted. However, that is how bad news normally comes out - in stages, as the executives in charge cannot bear to admit how awful it is, and feel they need the cover of others announcing similar bad news, before they can tell the whole story. What guesses for the number of further instalments from AIG? And the cumulative total, before it is finished?......
In respect of central banks starting to support companies directly.... I imagine this is the point where the market will really punish a government..... if it starts trying to channel direct support to companies.... in terms of the cost of its debt.
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What you're commenting here and previous blog RP on is the wind-down of all the Western economies and the shift of wealth and influence to China.
The longer Brown kids himself he can fix anything now the worse it's gonna be. At this rate we'll all end up living in state housing on state handouts. It's going to be like Stalinist Russia.
Panic bailout of banks. Panic reduction of interest rates. Sudden realisation that the 'real economy' is going down the plughole and - panic again - all running round like the White Rabbit in Alice in Wonderland. Tax cuts, more borrowing etc.
None of this will work, the forces arraigned against them are too powerful now.
GC
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Easy folks,
It's just a ploy to suck more hedge funds into a trap :o)
Didn't I read in the last 2 weeks how VW said they were bucking the trend and selling more cars than ever? Was that true, and if it was, were they toxic sales?
The trouble with roller coaster rides is that they are too fast - you don't have time to savour the moments, come to terms with one twist before you are into the next. Hmmm, can't seem to find the emergency stop button on this one. Hey ho!
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The Spanish tax payer will be happy with Santander when they start repatriating their record profits, helped by the juicy bits from Bradford and Bingley and Alliance and Leicester.
Got on the cheap from us and our Pension Funds !
Of course they have just had to go cap in hand to their SHareholders........
And then the European Central Bank.......
So which Gov't will admit to be at the Printing presses first ?
Inflation over ten percent likely to go much higher.
Standards of living on a long term decline...
And Pension Funds being read the last rites...
It is humbling to think how many people have died so that we can live like this.
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Is it time to buy Santander shares yet ?
Or will they fall further ?
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Politicians are the Master animals of avoiding pain, particularly political pain where they are forced to take the blame.
Brown only has the goal of re-election in time, to give him the legitimacy of being an elected Prime Minister.
Policies of fiscal control, prudent borrowing, long term macro economic planning, have all been thrown to the wind.
Society is taling now in Billions and Trillions here and there, as this financial and economic tsunami grinds relentlessy on.
Western standards of living reached their peak in 2008 and will now deteriorate, year on your for the majority within these so called democracies. Politicians do not have either the courage or the language to bring these truths to the Public Domain. We all know that the debt party is well and truly over and life will not be the same again. However, this truth is the 5 ton elephant standing in the corner, we see it, but so long as it does not roar or trumpet, we can ingore it for a bit longer
Maybe until after Christmas when Obamo takes the reigns in the USA?
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RE My #3
"Wiser economy" - if only! I meant wider, obviously!
I'm quite proud of "widereconomy" though, I might copywrite that!
Have you ever noticed how everyone's grammar is worse in the first few posts as we all scramble to be first on the board... lol!
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I think the wait is almost over.
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So now we know Gordon Brown is going to cut taxes. He has been in charge since 1997 and every year he has found a new way to tax us more than the year before and now he is going to do an about face and start cutting. Wow!
David C and Cleggy are up for it as well, whatever next.
The trouble is they will not do it properly. Gordon will give it away to everyone who might vote for him and it will just get wasted.
David C will give it to companies and business. Cuts in corporation tax are no good if you are loosing shed loads of money.Mind you it might stop some of them relocating.
Cleggy will take from the rich and give to the poor. The snag is the rich will leave.
Of course tax cuts are necessary but they have to have an objective.It is no good cutting taxes if all it does is send everyone off to Bluewater for a spend up.
We need to do two things.
1)Encourage saving.
2)Invest in usefull and revenue producing projects.
The first can be achieved by producing, easy to invest, tax free,inflation beating savings products for the man in the street.Do not lock him in past his visual horizon. Give the option of withdrawal any time after a year. Let the public help produce the loans that we need to survive.
The second should be directed at the most obvious target there is, fossil energy replacement.Give EVERYONE the incentive to invest in renewable technology to allow us to replace as much fossil fuel as possible.
This will mean that the uptake will be quick, tax breaks for solar panels,feed in tarrifs for heat and power,easy to access capital grants for infrastructure.Currently you need a degree in accounting to fill in the forms. HMG do not really want you to have the money, they just want to be able to say it is there.
Do this and you will create a crusade that everyone can get behind and be part of.Give money to large corporations and you will just be giving a present to overseas shareholders and cause resentment at home.
Manufacturing for these products will be encouraged,fossil fuel imports will be reduced and tax benefits will feed into the economy.
You will make the environmentalists happy, the individuals happy,the bankers happy and you will reduce your dependence on dubious overseas institutions. What more do you want!
Remember that a billion grains of sand make a sand dune.Blow on it gently and you can move mountains.
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We should have let the banks go to the wall.
No bank = no one to pay the mortgage back to = no debt
That would have saved the country Billions which we could have used to get the poor bankers into some real work at starbucks
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It is all about trust. With no trust there is no business. The government(s) and the banks have destroyed trust and it will not come back quickly. Big ticket items with their big commitments will not sell well. There is a limit to what taxpayer money can be made available and therefore where it should go.
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It's time the government set up a new co-op bank to lend our money back to us at sensible rates and terms and in competition with existing banks. The money would get back into circulation and do some good rather than being used to repair bankrupt bank's balance sheets.
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"...The underlying cause of the disease - which in this case is a global contraction of lending". I'm afraid I have to disagree with that. The underlying causes are the huge growth in the gap between rich and poor and the offshoring of most of our real wealth creation to the Far East. These in turn have lead to the excessive debts that has built up in this country and others.
The lowest 40% of the UK population is apparently earning less that they are spending, and thus getting more and more in debt. It's easy to accuse them of being profligate, but real disposable incomes for most are actually lower in real terms than they were decades ago. In the US the situation is even worse with real absolute incomes lower than in the Seventies.
The answer is not to get the banks lending again as before. The answer is to immediately reverse the long-term transfer of wealth and income from poor to rich that started under Thatcher and has continued under the current government.
The problem is to transfer money from the rich (who just save it and cause asset bubbles) to those on low/middle incomes who are much more likely to spend it and keep the economy afloat. Lending at interest fixes up the problem short-term but makes it worse long term as debts build up. Permanent transfer of wealth and income is the only way to fix it long-term.
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Deadly precedent, where do you stop with the provision of cheaper credit to companies struggling with debt restructuring. I'm sure that 1000s of small businesses would give their right arm for access to reasonable credit right now.
This cannot be allowed to happen, Rover needed a fraction of this to keep it afloat. If VW need this bailout then if they cannot be allowed to go into administration for reasons of national interest then the German governement needs to make the decision on whether they want to part or fully nationalise the company.
The ECB should look at this and review it's monetary policy, 0.5% cut in this climate looks quite a bit of an undershoot of monetary loosening. The ECB are definately behind the curve on this one, just as we were way behind the curve on the US and their very agressive monetary policy. They got the cuts in early and just look at the performance of their currency. We dithered and procrastinated and took a long summer holiday, ignored all the warning indicators and are now panicking and making the decisions that should have been taken at least a year ago.
Lets hope that the eventual slash of the ECB rate that will inevitiably happen will give the required boost to the pound, hopefully just in time for our summer hols for those who will be able to afford a holiday next year!
As an aside, to help the UK economy we should all be looking to buy British made or grown products. For example there is no need for anyone in the UK to not buy a British manufactured car. Here are some of your choices with UK manufactured cars, Mini, Land Rover, Nissan, Toyota, Honda, Rolls Royce, Ford, Bentley, Vaxhaul, Aston Martin, TVR, Lotus, Morgan, Bristol, MG Roadster, Ford, Jaguar. You would need to check to see which models are made in the UK, but most needs should be covered by UK supply. Coupled with a low value pound could manufacturing eventually pull us out of recession, now there's a thought.
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I think a lot of the doom-mongers on this blog could do their bit for the economy by getting out more!
Go see a movie -
I've heard Oliver Stone's "W." is very good - Two birds, one stone (sorry, no pun intended).
Get out there and spend in the cinema. It will cheer you up and stimulate our ailing economy!
Also, I have a couple of items available on ebay, so feel free to bid -
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the more they scramble and scrabble to stop the inexorable slide downwards, the more the crucial facts are hidden!
More swirling smoke and mirrors puntuated by a cry of despair in the fog.
Just force the transparency-declare all the nasty details. Everything will crash to the bottom, then we can see what we're truly dealing with and maybe, just maybe a coherent recovery plan can be produced and implemented.
World wide crash is not over - all this waffle does is hide the facts. Debt addiction at all levels has to stop!
I had a phone call from a young relative who wanted me to lend them £800 to go on holiday! I said no, and was speechless at their cheek! It's just typical of the ethos which has caused all this!
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#11
In the UK we have never elected our PM, so in this respect Brown is as elected as any former PM.
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Firstly, I have to take exception to the falling standards of the BBC !!
"scope for "significant cost savings" from ***combing*** the branches and back offices of the two organisations."
This snippet came from a BBC news article and shows a serious lack of care in the proofreading.
Should that not be *combining* rather than *combing* ?? Relying on spellcheckers is not the best way to check grammar and context.
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It's an old fashioned morality tale.
Don't lend things (money/credit/finance) which don't exist in the tangible world.
Admit your mistake/stupidity/evil* when caught out.
Start again.
Try to do better next time.
* delete as appropriate
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My real worry is that this is all about ensuring the banks and other financial institutions return to a pre-crunch situation as fast as possible. There is no talk coming through from this Govt about rebalancing the economy.
In fact the anti-protectionist chatter is very obviously aimed at ensuring our borders remain open to imports to ensure the whole credit/retail thing takes off again and the only beneficiaries of that are the banks and their buddies.
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#12 Then there is also the uncontrollable twitches of the fingers on keyboard before the caffeine hits the right spots !!
What we need now is *instant* instant coffee !!
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Robert, every time I read your blog I can't help thinking of Rory Bremner's impersonation on Silly Money (7PM on Sunday, Channel 4), I start laughing, and I can't take you seriously any more.
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Sasha
New Labour brought in new legislation to recover the proceeds of crime,talk about being hoist by your own petard?
YES WE CAN HAVE CHANGE!
YES WE WILL!
Mr Brown
Ive given our warehouse staff a 500 pound winter fuel payment paid in two parts tax paid.
So what will you do?
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#19 If you can afford a Rolls Royce, Bentley or a Bristol, you are not exactly short a few bob, now, are you ?? Are you, by any chance, a banker, then ??
My nice 4 year old mid-range Honda is still quite serviceable, thank you !!
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I have a small business, if it fails it is down to me to sort it out .
If my business closes no one will bail me out, I will still have to pay my overdraft ect.
I can not understand why if when the banks fail they are bailed out, a bank that is run well will still be there when the rest are gone.
If anyone should have been bailed out it should have been the savers in the banks.
There are too many banks now, some will still have to go if they are not doing business.
My local bank staff are worried about their jobs because there are so few people comming through their doors, they are doing so little business of any sort.
The banks are sitting on the money and refuse to part with it.
They want to hoard the money, and are stiffling any future growth in the economy.
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So the Europe and the States have been bailing out trillions to some institutions UNDER THE COUNTER over the last year and now doing the same with corporations OTC . This is on top of the 'authorised' bailout in the States and Europe to (the same?) institutions and corps
.
They cry transparency, but claim privacy to "prevent runs" on institutuions. Runs on what? there deposits or their share price, or both?
They cannot afford a major car producer to fall because of lack of credit.
We need to know what institutions have been bailed out privately and to what tune, ALL OF THEM? I thought the Enron saga changed the rules about reporting methods?
When will these capitalist bigots admit that their model is crumbling and by what ever method they hide it, the world is having to re-nationalise again.
It would be so much cheaper to allow them to go bust and nationalise the peices rather than this 'creative' way of making sure the bankers are paid off as much as they can first
Its daylight robbery and it looks like we are just going to sit there and let it happen
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#27
That rather says more about you than it does RP!
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"a great deal of the dire economic straits we find ourselves in stems from the contraction of credit from normal commercial sources."
Yes, but you never seem to address the question of whether or not the contraction of credit, and the downturn in economic activity that it brings about, is a necessary retrenchment from what had become unsustainable.
Your every article seems to be written from the premise that the pre-crunch situation was the summit of human development from which continued upward progess would have been assured if only a few "baddies" hadn't got things wrong. And that therefore when we've dealt with the baddies, and the results of their mistakes, everything will be OK again.
What if you're wrong? What if the "baddies" did nothing other than what any other rational human would have done in their position? What if the responsibility for our predicament is not that a few people have behaved abnormally, but that we have refused to appreciate that normal behaviour is self-interested, not pro-social?
Could it be that pre-crunch was in fact a position from which no progress can be made without radical re-structure and a sea-change in understanding?
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#15, actually no bank = no deposits. Someone could buy the assets and you still have to pay.
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Revival of credit unions is essential. In the past CU loans were made to its membership. This promoted saving and prevented property loss. The membership through delegated responsibility approved advances. However this will be a sharp lesson for the generation brought up on instant gratification. The CU system will eliminate the buyer with no assets. A hard lesson to learn. But it was a movement that ran successfully before the de-mutualisation asset strippers bore sway leading to much of the present chaos.
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Regarding VWs utter cheek,
After the ECB stop laughing, surely they'll refer VW to that new chimera hedge fund called Porsche.
Or are VW trying to unload crappy debt for a war chest to fend off a Porsche takeover?
Can't see that flying either.
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The reason all "Parties" need to cut tax is because Brown has taxed the UK into oblivion.
Just wait until his REAL borrowing is revield ? The stamp duty and VAT he collected from inflated house prices paid for by individual borrowing.
Wait until his "Advance" tax to individuals now becomes a rebate.
Catastrophic unemployment will take further billions out of his purse.
He hasn`t just Bust Britain he has nuked us.
Call me Dave wants to pay a couple of grand to get companies to take on staff ? Its CUSTOMERS companies need. Has the guy ANY life experience.
STOP the waste BIG TIME and NOW. Even today we read another mad cap scheme to spend 35m (MILLION) on getting kids to walk ? What planet are these people from ?
Probably the same that wants ID cards and NHS data bases.
BROWN and his puppet MP's have to go.
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RE VW
Ive always wanted a car company,considered Rover but it was too HOT TO HANDLE.
This one could be good though?
We could make the armoured vehicles to protect our lads that Messrs Brown & gang have been so slow to get....
CASH UP FRONT THOUGH CREDIT NO GOOD!
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This comment was removed because the moderators found it broke the House Rules.
All of the world's taxpayers are now propping up the world economy. Therefore, we need to take a stand.
As an accountancy trainee in the mid 70s, the tax lecturer said that only 2 "people" pay tax, you and the rest of the world. This means that if the rest of the world doesn't pay its fair share you pay too much. Sounds familiar doesn't it.
So - all tax havens must immediately be forced out of business; that means no more Lichtenstein trusts, no more incorporated in the Cayman Islands etc. All the fiscal authorities must get together and share information.
If you want a British passport you pay tax on your worldwide income. The penalties for tax evasion (that's theft in normal speak) must be draconian.
I don't object to paying my fair share but so should everybody else, individuals, trusts, companies etc
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I went to see a bank a few weeks ago about depositing 15 million.
They thought they had the right to interview me,what CHEEK.
I was there to eyeball them,lesson not learnt YET.
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31
Well, the small shareholders, the pension funds, the insurance policies have all been taken to the cleaners.
The biggest bank heist in history.
Just have to wonder where the profits ended up (from shortselling, with drawing bonds, etc).
Follow the money, find out who benefits and you'll probably find the criminals or their friends......
And, of course the Tax payer has lost out, and with Inflation growing, every depositor, will also find their wealth extracted abroad.....
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Falling exchange rates will make whats left of the deposit wealth worthless.
Years ago I heard someone talk about the futility of wealth, I laughed at the time, can't quite place the persons name.
He would probably be laughing his head off now.
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14 - er, actually no we don't want to encourage saving - we want to encourage spending.
Tax cuts for the wealthy tend to make them either save more - ie not consume - or invest in that delightful little bijou flat in Antibes or some new US built superyacht moored in Dubai.
The less well off will spend it - which is the point. And if they spend it - as per the list of automobiles built in the UK provided by poster 19 - then all the better.
Pace poster 18, tax cuts and fillips for the wealthy have produced nothing but trickle-up: driving house prices etc up. I've said before that - given the multiplier effect - its better for the economy if 10 families can each afford a family car like a Toyota Avensis (built in Burnaston, I believe) than one Master of the Universe takes home a top of the range Beemer.
Oh and poster 17, there is a co-op bank with boringly safe banking practices and policies: it's the Co-operative Bank.
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Her's a thought for the day.
A relative, concerned about the fall in his house value and the bad news he had on value of an investment bond asked me where all the money had gone to.
The best reply I could give was that it has gone back to where the increases in value came from during the past ten years.
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To the poster who said i didnt understand economics.
I wish you good day.
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Robert...What I find amusing most of all about the current recession is the fact that not one of the highly paid bankers, chief executives, politicians of any persuasion put any cash reserves aside for the proverbial rainy day. And now they go bleating to the state to bail them out. Funny how none of these guys like state intervention or regulation until they need bailing out by that same state.
The second most notable feature of the current malaise affecting the global system is the fact that not one of the above highly paid, supposedly highly intelligent people saw even a glimmer of the current crisis coming, yet we are supposed to believe that these geniuses who did not spot what was going wrong are the very people we should trust to repair it !
My dear old mum taught me to live within my means, never borrow more than I could pay back and put a few quid aside for the inevitable rainy days that come along. Of course my mum was not classed as highly intelligent by those in power, nor ever well paid by those same people but she managed to raise a family of three on a low income and teach us all sound business sense at the same time. All three of us have successful businesses that have not borrowed more than we can pay back, live within our means and have put aside cash for the rainy day. Of course my mums no Gordon Brown, be she did I suggest, offer better advice to her kids than any amount of the gentlemen above did to their shareholders.
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Re post 40
I pay tax where i make the money so thats China,Czech Republic,Poland & the UK.
Sorry but not prepared to pay double bubble!
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@34
But who would buy the so called assets?
For a start no institution has the funds to do so, add to that the fact that they all think that everyone elses asset is toxic
If the local engineering firm goes bust cos the local council is late paying their debt do you think that the council eventually pays up to thin air, to a company that no longer exists?
If you look at what happened to B and B the "assets" were taken into government control. the government could have chosen at that point to write that debt off and it will cost them significantly less to do it this way rather than bail out the banks giving them cash that they are sitting on.
The correct model to recover the economy is to let the banks go to the wall, have the tax payer buy the debt and write off the UK liability of that debt and reclaim the foriegn element of the debt.
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Hmmm, so there is likely to be some sort of tax cut in the near future is there? Well gosh darn it, I think I'll go out and buy a new house, a new car and a flat screen tv to celebrate.
What are the politicians drinking these days? Joe Public (or Plumber if you prefer) is scared stiff. He is not going to rush out and buy a bunch of expensive stuff on the high street just because Crash Gordon tells him it's good for the economy. No, Joe P is going to save every penny he can at the moment, (if he can find a bank that looks stable enough to hold it), and that means no holidays, no new cars, no electrical goods and no moving house - and a bigger recession ahead.
And looking at it from another angle, tax revenues have GOT to be dropping, and fast - so cutting more taxes is going to leave government finances in even more trouble, and they'll have to borrow more and more and more....
...but hang on, wasn't it reckless borrowing and lending that got us into this problem in the first place?
Oh, and ask yourself this - if you had shares in a previously profitable company and the chief executive drove it virtually into bankruptcy and racked up huge debts and losses, wouldn't you as a shareholder want him unceremoniously sacked?
Well, as a citizen of Great Britain, you are a shareholder in this country, and Crash Gordon is the chief exec busily blaming everyone else in sight for his own shortcomings as Chancellor and PM.
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#22 Boilerplated wrote:
"In the UK we have never elected our PM, so in this respect Brown is as elected as any former PM."
Sorry, but we DO elect our PM in this country because we vote for a particular party!
The confusion often arises because of the way the political system is supposed to work. In theory we vote for a local MP who then represents their constituents in the Common. However, if you genuinely believe that this is what actually happens, then I have some bank shares I can sell you! ;-)
What actually, happens is the PM uses the party whips to tell the MPs how to vote. Therefore, it is the PM that calls the shots and makes all the decisions. MPs will ignore their constituents and do what the party whips tell them.
Therefore, when you vote for a local MP, all you are effectively voting for it the party leader that will tell them what to do, which is effectively voting for the PM.
(Furthermore, my MP, Claire Ward, said that she could not sign an Early Day Motion because she is herself a party whip - it is like we only get half an MP here in Watford!)
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#29
Was your Honda British made, do you know or do you care?
If people want change and want to address the fundamental problems of our economic woes they need to change the way they operate as well. People should lead government not government leading people.
Because of the downturn I am having to sell one of my Bentleys at the moment, we are all having to make some sacrifices.
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Sat here in my little office worried to hell if I will have a job next month.
Been reading, watching and learning still I cannot get an angle on what?s going on I doubt I am the only one.
Even brown is showing signs its not going the way he wanted
Flash Gordon save the worlds economy headlines a month back - so why are we needing a second stimulus (excluding interest rate cuts) is it really flash Gordon or is it Duck Dodgers.
Second stimulus, a third, a forth and a fifth how much more can Gordon brown borrow on our behalf?
Un funded tax cuts is it me or is this strategy a kin to hitting the big red button marked panic.
Before you think I standing up for the Tories their strategy looks the same just in a different guise.
All I can see is a dept that we will all have to pay back in the coming years and it will hurt a lot, if Gordon and Cameron continues down this path and ppl slavishly follow them.
Spain?s looking mighty comfortable, nice sun nice banks, nice wo eerrr well you get my drift nice place to hord my money, tax cuts wont make me spend with such a uncertain and potentially expensive future ahead.
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#33, amen.
The point is that the banks overlent and we have a wildly overvalued bubble in property.
The country NEEDS to have a period of retrenchment, banks need to repair their balance sheet and people need to realise there are consequences to reckless borrowing.
Oh and bankers weren't such "baddies" when they were lending to people and when Brown's "economic miracle" was p*ssing away billions on various pet projects or when they were contributing over a quarter of corporation tax returns.
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#49, lots of people would buy their assets. It is a question of price.
There are plenty of funds with large war chests.
B&B had particular bad selection of assets. Buy to let was always a scam. Witness the whinner they had here that was earning 20k a year and bought 5 properties for the price of 4 - apparently he thought this was a 25%(!!) discount - and got screwed. But even then at some price point somebody will buy, especially if the government underwrites you.
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What is amazing to the common person is to find out that ALL the large companies have been wallowing with large amounts of debt (used to finance! the business) and all they have done during the good years is to service i.e. pay the intereston the debt - not repay the loans, and issue dividends.
Well now the banks want their money back - and the companies find they haven't the liquidity to do so.
Expect substantial bankruptcies and fire-sales in the coming months. In a capitalist world let those profligates go to the wall and the prudent survive.
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Did anyone else see the Panorama programme 'Can't pay, won't pay' on BBC1 at 8:30 last night?
It detailed how the banks will utilise any means to make people repay their loans. They will even instruct debt collection litigation agencies to force home sales to recover even unsecured loans/debts.
One woman who became unemployed, through no fault of her own, was nearly forced to sell her home over repayments for a 1400 quid settee. Another guy who had been sectioned under the mental health act (and is currently in hospital) was being pursued for repayment on a 12000 quid debt through his daughter.
The programme might as well have been a bank/government sponsored propaganda scare movie. In essence, it just summarised what will happen if you don't pay your debts to banks. How pathetic of the BBC to be party to such a blatent act of scaremongering that even Goebbels would have been proud to have produced.
Nearly all programmes to date that have attempted to explain the causes and blame for the economic catastrophe have been tucked away at obscure times on BBC 2 (and they have not been very good either).....however, the BBC saw fit to put this programme on a prime time slot on BBC 1.
I predict there will be civil unrest in the year ahead if this kind of pariah activity is not reigned in by the banks, especially after all that has happened following the bank bailouts and their greedy actions that are now bringing the economy to its knees.
We continue to have to lick their backsides it would seem.
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#44, no we want to encourage savings. We want people to not be geared that whenever there is a slight foot on the brakes the economy collapses.
Not to have people depending on insolvent pensions or moving from credit card to credit card.
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Is it just me, or is this verging on madness?
Your story sends a message - to me, anyway. The powers that be" (presumably an unhealthy mix of politicians, bankers, regulators and CEOs) are running away with this. They're panicking. Animals that panic are generally out of control.
This whole situation is beginning to look like a system going into positive feedback, with each reckless decision feeding the next one and making the problem much bigger and much worse, and so on. Bit like compound interest really.
The end result of all this will not be just economic disorder (we're well on the way to that, if it's not arrived already), but social disorder too as the impact of countries, banks, businesses and, eventually, citizens running out of cash blows up in our faces.
Can somebody tell me where this ends please?
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have these companies ever heard of sales.
reduce the purchase price to consumers.
reducing output could also save money but to try and get ecb loans in this way is an insult to the system.
rampent capitolism in times of ecconomic downturn is foolish at least bonkers to be sure.
may be there is something in this communism after all.
but what the world needs is a good mix of both but thats a mad idea.
but i do wonder if i collect all the buttons around the house i could get a loan from the old lady of thread needle street.
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This comment was removed because the moderators found it broke the House Rules.
You could say that the reduction in bank lending is a manifestation of UK Ltd beng overvalued. There therefore has to be a significant pairing back in property prices and retail spending to create a downsized economy which the banks then can address in a balanced way. Government spending - through borrowing (especially on the back of reduced revenues) is just going to make the situation worse. Particularly inflation will not fall as far and as fast as the authorities wish - and inflation could even worsen if Sterling continues to fall. The UK will just have to get used to a 5% or even 10% reduction in the standard of living. Not so bad as living standards have risen about 25% since Labour came in in 1997.
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Re post 48
So you've never heard of double taxation agreements. I doubt that very much.
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This has all the signs of a gradually unfolding Greek tragedy. It seems that whatever Governments do, there will be those short-sighted folk who will continue to enrich themselves by manipulating the markets, and banks who will not see that failure to pass on the funds they have collected from Governments will create longer term difficulties which may be insuperable. Businesses will fail and unemployment will grow commensurately. The trouble is that "The devil finds work for idle hands", which is to say that the structures needed to maintain civilisation may very well collapse under pressure from indisciplined behaviour. This will certainly not benefit those in the business of self enrichment, who will be caught up in the ensuing anarchy the same as everyone else. There are enough archaeological sites around the world to show that civilisations really do collapse.
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Several posters have commented on the lack of ability on people high up to see what was coming.
Maybe some of them did.
Maybe some of them saw this crisis on its way and viewed it as an opportunity to settle scores with there rivals, and make a few bucks on the way.
Of course, it could all be a planned redistribution of wealth from the middleclasses to a new aristocratic class, (probably based abroad).
This might sound quite absurd, except the impact of this crisis is nearly entirely being felt by the Middleclasses.
Pension Funds wiped out, small shareholders wiped out, Householders equity wiped out.
Find out who benefits, and you might find the culprits (if any).
Of course, the bigger the crisis, the more radical the solutions can be.
Very unpopular legislation that would never get public support under ordinary circumstances, can in a National emergency, be introduced quite easily.
I wonder what the powers that be see as the Next Step in their New Management Strategy !
Or should it be New World Management Strategy..............
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RE post 57.
I didnt see the program was listening to the one about the 2.65million on incapacity benefit.....
You are right Debt Collection is very nasty.
Anyone subject to the type of behaviour you describe MUST complain to the Police and insist they take action.
The problem is that the poorest members of our Society are least able to deal with this type of harassment & bully boy tactics.
As we have a PM who brags about his FISTS theres no surprise re the thug stuff
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Re post 63
If you are honest & pay you will be surprised how much trouble HMG cause re tax.
Our lot would try and get three times their due,whilst many other pay NOWT.
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The current round of political "solutions" all smack of a class politic, and media, that is divorced from reality. Rational people understand that the massive borrowing already in place, and the bolt on borrowing being proposed, must all be paid back, and will be paid back in tax rises and probably big interest hikes in the future. Where is the long term thinking? Who can blame anyone thinking of investing in a house for wondering how they will manage when the temporary sticking plasters fall off.
I run a small company, trying to keep afloat, and to keep our team intact, in a storm not of our making. And no, we are not greedy, grasping despots looking for any opportunity to rip off our employees - all we want is a stable and secure future that rewards all of us for the hard work we put in. All my staff are more than capable of understanding how their finances work, and of making rational and quality decisions about their futures. It is obvious that we all have a better grasp of reality than most of our elected representatives.
What do we want? We want the people in power to end a system of control that takes all decision making out of the hands of the people who know best - us! We want the politicans to un-hitch our country from remote decisions made either in unelected quangos or in Brussels - and return acountable democracy to our own parliament. We want empowerment and accountability to return to local democracy, and to the individual - where we know we can make a difference - instead of waiting for an unknown and unelected entity to impose their own politically motivated and rotten agenda.
Once that is in place - and the huge, suffocating, bureaucratic mammoth is dismantled - then we can have our money back where it belongs - where it can do most good - in our own homes and communities. Then - we may all be better off - and not just in monetary terms. All it needs is less political games, more political will.
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Hi 44
Of course we want people to spend but not on booze and fags. We want to spend on something that will give a positive return in the future.
Those that cannot do this should be given a good incentive to save, and this money can then be lent to those who can spend on the desired projects.
Simple really
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What on earth is wrong with some people? Seriously, we need to get out more and enjoy ourselves. Why all the doom and gloom? The dramas of the last few months have only gone to prove that nobody can truly predict what is going to happen next. I really can't help but become irritated by Peston's constant attempts to destablise people's confidence when there are possible glimmers of optimism beginning to filter through the system. And then we have pathetic comments like this from people brainwashed by Peston's rubbish:
"This Government and the countries politicians, had better start getting this crisis sorted, it is already in a spiral down wards, and it is going to be worse than the great depression of 1929,
This is going to end in Tears, "
I just don't understand on what basis people are making these predictions. Haven't we learned that most people's predictions have been quickly dashed by reality? Peston was pretty adamant last Thursday that the banks would not pass on the full 1.5% BOE interest rate cut (his estimate between 0.5 and 1%). Within 24 hours he had been proved wrong just like he has been on nearly every other prediction he has made.
Is it not time we just allowed the global economy to run its own natural course? Why predict such things as continued falls in house prices? In such cases, predictions can lead to negativity which in turn provide a catalyst to morph them into reality. Do we really wish to talk ourselves into a depression if it could otherwise be avoided?
Honestly, get out more. Play some sport. Learn a musical instrument. Enjoy your life and stop wallowing in your own pessimissm. All this doom and gloom can only make things worse. Is that what you want?
Some people seem to be getting high on the possibility of a depression. For God's sake, get a life.
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#51
Sorry but you are wrong, in the UK we elect a local MP to represent us in Parliament, we don't even (technically) vote for a party - nothing more and noting less. No PM appearers on the ballot paper so how can anyone vote for the PM?!
Even the Leaders of the political parties are elected (or not) as ordinary members of Parliament, who leads a political party is a party matter.
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RE POST 68
Wearyworld
You make many valid points.
Regretfully most of the gang are into megalomania & other anti social activities. .
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#41
Was Harry Enfield's Loadsamoney character based on you? It just seems barely a day goes by without you trying to wow us with stories of how much money you have on deposit, how many people you employ, etc.
It's quite sad really.
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Robert and all
Let me ask you an important stretegic question. What does Britain have to offer to the world economy now?
People are used to live a good comfortable life and earn high salaries relative to many countries in the world. Many skills and industries (a lot of manufacturing, automobiles, engineering, etc) have deminished or partly lost. Financial and housing sectors were booming and paying a lot of taxes to the Goverment in the last years. These sectors now are in deep troubles. What will pull us out of the recession into prosperity?? What do we have to offer / sell to the world?? In 10-20 years would UK be still in G8 leading world economies??
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Many here talk about transparency and 'getting things out into the open' (e.g. #24)
How about all the bloggers divulge their real identity and allegiances ;-)
PS. You first is not an acceptable answer!
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Pointless offereing tax breaks without ensuring the lost revenue to government is actually injected into the economy.
Personally a tax break would not get me spending any more than I currently do.
However, offer me a tax break of a couple of percent in the form of vouchers which have to be spent within 60 days of issue and I could see that being more successful.
It its a use it or lose it style of tax break I could see lots of people re-embracing consumerism (within limits)
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# 68 wearyworld
On the button! Hear, hear!!
Our political class and their systems are now so far out of kilter with the workings of ordinary people, their businesses and communities that one wonders how long it will be before the whole rotten edifice collapses?
With each passing year I become more frustrated at the arrogance, incompetence and deceit exhibited by our politicians who seem to enter politics for what they can get, rather than what they can and should be doing for their electorates.
The system has been corrupted by the so-called professionalisation of politics and we're all the worse for it.
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It is obvious that the monetary system is broken. Instead of bailing out the bankers who were reckless with taxpayers money a revolution in how we manage the worlds economy is required. We can no longer afford a system that rewards greed and creates ultra rich oligarchs that use people as disposable assets and despots who hide their money in Swiss banks while people starve. This system has led to industrial jobs being transported around the world to countries with lots of cheap, pliable labor leaving the deserted countries unable to pay their way.
How the next British Government can repair the damage, let alone jump start the economy is hard to see given that the chickens have come home to roost with China's capacity for growth outstripping the rest of the worlds ability to pay for goods. The one good thing about this crisis is that it leaves room for change, a single world currency with 1 unit in the USA being the same as 1 unit in China, as one unit in Africa.
We have to create work that will allow each country to be self sufficient in employment while sharing the planets raw materials; and increasing use of natural renewable sources of energy to try and end the stop go energy of oil production.
Have we a political party brave enough?
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VitaliG post 74
BANANA REPUBLIC,without the BANANAS springs to mind,guess we will still have politicians that are BANANAS though.
All a bit sad.
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Is it then a question of which industries are next in the queue to be (re)nationalised? The financial sector first (tick), now flagship industries, major brands, national carriers?
There are precedents in Europe now. Can one imagine Gordon Brown re-gaining grassroots affection by thinking the politically unthinkable? If he needed to?
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15% VAT asp....job done!
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Last Friday afternoon after landing at Birmingham Airport I drove down to Bristol. I was shattered at finding so little traffic on the M5, a main artery for Britain. There were so few trucks. Few trucks means few goods moved, means few good being bought and sold. THIS to me is THE bad sign to have. The rest is just windbags hot air or the writings of poets of finance.
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Re post 73 sjpepper
Whats sad is the state UK PLC is in,i am as frustrated as hell.
So many of the things we all need to have trust in are broken.
No i am no Mr Enfield,Ive worked my guts out to make a decent life ,if you dont like it i apologise.
I want to see prosperity all round not the MISERY which is about to be unleashed re unemployment,people getting chucked out of their houses etc etc
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Wearyworld on 68 try reading Freedom or Equality on Type Pad
http://johns-blog.typepad.com/johns_weblog/page/2/
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It seems that we - meaning government as well as individuals - still haven't learned the core lesson of the credit crunch - you cannot go on forever spending more than your income, and borrowing the difference on the assumption that the debt will never have to be repaid.
Applying this thought to government implies that tax cuts should not be funded out of increased borrowing. Those who describe this policy as 'Keynesian' are profoundly mistaken, as Keynes believed in neutrality through the cycle - accumulating surpluses in the good times and using the accumulated savings to pump-prime the economy during downturns.
We've been running a fiscal deficit at all stages of the economic cycle - that is to say, living beyond our means. Irresponsible government, in a nutshell.
Higher borrowing is inevitable in the near term, but government needs to reassure markets by showing how the debt will be repaid if/when the economy recovers. There needs to be plans to increase taxes, and/or cut government spending, should the economy recover.
Likewise, we should be committed to raising interest rates at the first sight of return of the asset pricing bubble. The BoE's mandate should be extended to include raising rates to choke off house price surges in the future.
I fear that these lessons are just too inconvenient. The government's call for banks to lend 'at 2007 levels' shows a complete divorce from reality. If we get out of this mess, we should make sure that the costly lessons of irresponsibility do not need to be re-learned yet again in the future.
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#62 EdmundHusserl
"You could say that the reduction in bank lending is a manifestation of UK Ltd beng overvalued. There therefore has to be a significant pairing back in property prices and retail spending to create a downsized economy which the banks then can address in a balanced way. Government spending - through borrowing (especially on the back of reduced revenues) is just going to make the situation worse. Particularly inflation will not fall as far and as fast as the authorities wish - and inflation could even worsen if Sterling continues to fall. The UK will just have to get used to a 5% or even 10% reduction in the standard of living. Not so bad as living standards have risen about 25% since Labour came in in 1997."
Yes. I'm not sure abouit the 5% or 10% - it may have to be more than this - but the central point is valid; our standard of living is above the level sustainable by the economic value of what we produce. Whatever the wishful thinking of the mainstream, as reflected in the outpourings of politicians and media, there is NO short-term way of increasing the economic value of our output, and so we are left with the alternative of:-
1. Continuing to borrow to fund the excess of consumption over output - IF we can find anyone who is prepared to lend to us.
or
2. Paring back our consumption until it is more in line with the economic value of our output.
Longer term, of course, we can make strides to accelerate the rate of growth of output value. But I fear that the culture change required will be dramatic and brutal. Economic value is not created by gambling on outcomes, shuffling bits of paper round a desk, or buying property in the belief that "the government" will always ensure that it goes up in price year-on-year.
There was a good article by Phil Mullan in Spiked, on Monday last week.
http://www.spiked-online.com/index.php?/site/article/5884/
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#70
Peston does seem to err on the side of doom and gloom, if one was cynical one may suggest the reason for this is that he does not own a house and therefore has a self interest in undermining the economy to further reduce house prices to enable him to get on the ladder. I am not that cynical and would therefore not suggest such skulduggery.
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@75
I am the rt hon Tony Benn Labour
I right tory biased posts though as I like to demonstrate my intelect
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#78 - You have seriously got the wrong end of the stick.
A world currency is the last thing that is needed. Why don´t you take a look at Ecuador in 2000 when they abolished the sucre and replaced it with the US$? Poverty levels doubled virtually overnight and immediate massive emigration, and you want to bring that experience to the rest of the world?
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We are now getting to see the full measure as to how much of the economic growth over the past five or so years was real growth and how much was just leveraged debt.
Sadly, a lot was just leveraged debt.
I find it a tad strange that having seen HMG bail out the banks, that the banks seem unprepared to bail out the rest of the economy. Perhaps we should have let the banks fail, because if they had so would have everything else. Now it would seem the banks are prepared to let everything else go whilst they remain as safe as, um, not-houses.
The financial sector needs to wake up to the reality that it needs to serve its customer base. This means providing finance.
The time is fast approaching when the economy finally hits the deck, allowing us then to get on with the slump.
Continued poor performance from the political and financial class might cause us peasants to kick the door in and start replacing certain personalities with people who know what needs to be done. This is too big for the careerist and the opportunist, it is time for real folk from the real economy to be allowed to step up to the plate.
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mr peston
the underlying cause of the disease is not a contraction in lending which is another symptom. it is a collapse of asset values meaning nobody will lend to anybody as the assets used as collateral are worthless.
it is an isolvency issue not a liquidity issue.
the media and politicians refuse to accept this.interest rate cuts and tax cuts will make little difference.
we have to remove the toxic, worthless 'assets' (liabilities more like) before they pollute our currencies.
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#71 Boilerplated:
"Sorry but you are wrong, in the UK we elect a local MP to represent us in Parliament, we don't even (technically) vote for a party - nothing more and noting less. No PM appearers on the ballot paper so how can anyone vote for the PM?!"
The key to your argument is "technically". Personally, I do not care what is supposed to happen in theory. What I care about is what happens in practise.
1) Your local MP does not represent you in parliament - they vote at the party whips tell them, and who controls the whips.
2) The party name does appear on the ballot. (I would bet money that if the party name did not appear, most voters would not know which parties the candidates stood for.) By voting for a candidate, you vote for a party (unless you vote for an independent) which is effectively voting for a the leader of the party because of point 1.
The party whip system is basically a perversion of democracy. It allows some one like Brown to barge in and control the Commons without a single member of the public endorsing it at the ballot box. In a lot of cases you local MP may as well be just a glove puppet!
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I know some areas where debt-collectors daren't go now, none dares set foot anywhere in the Estates around one South Welsh town, not least because a decent number of twenty-year-olds are either on their way to Afghanistan or have recently returned from Afghanistan, and are getting themselves organised in a way that has everything to doo with grass-roots politics and nothing whatsoever to do with political parties. That puts a somewhat different complexion on Armistice Day, I feel.
The cops won't act either, not least because they've been repeatedly discredited themselves, particularly after a rather nasty headline-making murder case they were up to their necks in a few years back. Day-to-day credit comes from a local credit union, and the banks are closing fast - where there were once four and a Post Office, there's now just one and the PO's about to close.
Sociologically, these are the roots of rebellion, not unlike the roots of the original Labour Party. Us and them, alienation from politics, a twenty shillings-ought-and-sixpence price increase, result not merely misery but resentment at the system. They're not concerned with debates such as these, all they see is the outcome, in Maslowian terms. They know they're sitting on coal, but nobody will let them cut it for themselves. I give it about a year before they start cutting anyway.
Multiply this by a thousand, whether in Oldham, Peckham, or Jesmond, and the next election may become rather immaterial in the frameworks we're discussing here.
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You've heard they're simplifying the Tax return?
How much do you earn? Send it.
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#73, of course he isn't.... Loadsamoney was fictional character talking about non-existent money he had made. Completely different ;-)
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#70 -
I don't appreciate that 'jolly good talking to', no ho, not one bit.
You're not Hazel 'smiling' Blears are you?
GC
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#69 What´s wrong with spending on "booze and fags"?
There´s a lot of direct employment in booze and fags factories, more employment in the retail, advertising and PR sectors, and indirect employment in the health service. With specific regard to booze there is even more indirect employment in the police, bouncers, street cleaning, taxi driving and lots of jobs in repairing damage to all kinds of things destroyed by wanton vandalism.
Booze also leads to family breakups which provides jobs for solicitors, courts, and child welfare services. Family breakup increases the demand for housing which in turn increases the demand for furniture, light and heat.
As poster #70 implores - get a life, get out on the beer and think of all those jobs you are helping to create. Mine´s a large one...
You should do this quickly because if you wait until you are a pensioner you may find that you have insufficient money to stand your round. Even if retirement is some way off you still need to act quickly as the British Govt. are planning to run out of electricity in the next few years and drinking in the dark may not be so much fun.
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The global economic crisis has presented Gordon Brown with the opportunity to achieve his ideological principals for the state to control peoples lives. Slowly slowly there are government takeovers of institutions followed by regulatory services all effectively leading to one thing. State Control.
The taxpayers are used as means to achieve this objective.
It defies belief that such a prudent ex chancellor and now Prime Minister has followed the herd of countries who allowed their economies to be ruined.
I suppose the theory now goes the taxpayers are the ones who suffer from this crisis so it is the taxpayers who should help to resolve the problem so that normality can be retrieved.
Off course there would be no admission of liability for the present crisis by the governing head of the taxpayers the Prime Minister. State control through the back door.
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Big surprise.
The taxpayer bailout of the banking system will inspire more chav corporate scum, and hoodie bankers to come out with their begging bowls, to bludge off the state.
Why can't these lazy rich idiots work for a living instead of poncing off the rest of us all the time?
They're only going to blow the money on pinstriped track suits, Gucci trainers, yachts and second homes in tax havens, whilst binge drinking on champagne, cocaine and cigars.
The corporate welfare state. Don't you just love it?
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Post 95. Loadsmoney may have been fictional but he was an amalgamation of real people at that time.
Harry Enfield, Paul Whitehouse & Charlie Higson lived in Hackney and saw at first hand, as did I living in Bow the dual behemoths of Yuppie excess and labouring lolly in the late 1980's. I remember 2 day drinking sessions after Nigel Lawson reduced the top rate of income tax from 60% to 40%.
With a property boom in the late 80's builders, plasterers and many others working in the construction industry made an absolute fortune during the week and spent much of it on Friday and Saturday nights. Builders and plasterers made a huge amount as developers tried to turn round flat and house conversions as quickly as they could.
Who do you think bought all the Ford XR3is and Sierra Cosworths sold at the time?
Loadsamoney was based on a large number of very similar people who did exist.
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Car loans are unsecured and the vast majority of people buying new cars in recent years did so on the back of their bubble house price rather than from savings made from income. I wouldn't advance more than a fraction of the face value of this kind of toxic garbage. Let them go bust. We clearly need less new cars and more public transport.
How about selling bonds to the public to build new railways or improve the pathetic London Underground. I for one would invest. This is better use of public money than building millions of cars no one needs or wants unless given away on shonky credit deals to people incapable of separating owning things to being happy.
The governments all appear like balls in a pinball machine; bouncing around from crisis to crisis, each set of decisions made on an adhoc basis, almost at random, with no possible idea what the outcome will be, except that things are going to get so much worse. Prime Minister stop doing irrelevent things and start thinking.
The next few years will see the loss of thousands of companies and millions of jobs. No matter what.
No one knows how bad things will get or how long things will be bad for. Its just human nature to experience hubris then blind panic. Most things are not so good or so bad.
What we need is real leaders.
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97
Nothing at all, it is just that I am trying to be serious and you are being frivolous. No harm in that though
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#98
is it the 'revenge of Gifted Gordon' then?
Is it because his parents didn't love him enough (cue: Private Pyle) or because David Cameron larfed at him in the Commons on his first days as PM or because he couldn't be a footballer?
Crikey!
GC
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I will ask the question again;
Why are the governments of the world first bailing out banks and then bailing out large corporations so that they, wait for it, can pay back the banks instead of bankruptcy?
Nationalisation is much cheaper on the taxpayer if you cut out the middleman and let them go bust first.
Whats the common theme in all this
BANKS BANKS BANKS
Who is pulling whos strings here?
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Porsche who now own a good part of VW made a killing at the expense of UK hedge funds and could probably afford to bail out VW. VW?s problems though really stem from the collapse in sales in the US and having to compete with US manufacturers who are likely to receive a massive bail out.
The question for the UK is rather moot though, because investors are already voting. Investors have pulled their money out of UK fixed income instruments and are effectively saying the government?s credit line has been cut. This government will be judged on whether they balance the knife edge of sensible fiscal policy and all indicators are that they are misjudging the bond markets.
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93
A major social upheaval would allow some pretty radical legislation to be enacted as emergency measures.
It is rather difficult to see (as a relatively sane person) what benefit would acrue to the Political class in creating a more dystopian legal framework.
Really, this country is quite dystopian already.
If you have money, you live in a completely different world from those without.
Those people talking of opportunity for all, really are not speaking the truth.
The truth is your life chances are almost entirely defined by your birth parents.
Born wealthy, go to the right school, university etc, and you get the best jobs and best chances.
If you are born poor and can afford university, you still won't go to the Right university and you won't have the family contacts to get in the best careers etc.
Our Public sector used to lead the way in overcoming part of that problem, however it is now no different from the private sector.
Violent insurrection is very unlikely.
Divide and conquer ha always been the way here.
Anyone capable of leading an insurrection will end up subverted or 'diverted'.
And what Gov't has genuinely cared what happens in the sink estates?
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Has anyone any idea why the DAILY POLITICS
blog page has not been updated since last Friday ?
USA jet lag, i assume !
Just not good enough BBC get your act together !
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Re 103 ......Guy ,....is this a better site to post than DAILY POLITICS ....which has been like watching paint dry ...the blog that is not Andrew and the lovely Anita !
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31,
That?s exactly whats happening, everything will be re-nationalised. As for America, I reckon they are in bigger trouble as they find this concept goes against everything they ?stand for?.
I bet the Russians end up with a massive grin on their collective faces!
I agree that the quicker we move to nationalise any industry / corporation that is of national interest is performed with expediency.
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Robert is that 2.2 billion pounds for 1 VW Golf.......tell the EURO BANK lot my local VW dealer is doing 2 for1 for 15 thousand ...will save them a shed-load of money !
ps my commission is only 10%
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Does anyone know who was that ghastly (Labour) MP on Ch4 News last night in the suit 'n tie who pompously told the anchorman that all the people who got their houses repossessed would then live in state housing?
I can't believe I'm hearing things like that.
Some kind of Brown 'Vision for Britain' that is.
A moratorium on liquidations and repossessions and court orders NOW!
GC
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#101 "What we need is real leaders."
Aren't you being a bit greedy ?? Diogenes was only looking for *ONE* honest man !! And where do you think these "real leaders" are going to come from ??
Just do a Google(tm) on the current bunch !!
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POST 100 Ian the Chopper
I m old enough for the Yuppie stuff but never a plasterer.
I was fixing cars in south east london then having worked in the city at Lloyds.
My distrust in city institutions was established back in 1984/5.
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It defies belief that the current prime minister who is governing through inheritance rather than a mandate is allowed to handle and attempt to resolve the present economic crisis.
Surely an economic crisis of this magnitude that affects every single legitimate citizen of this country should be handled by a prime minister who has been endorsed by the same people whose lives are affected by the crisis.
Are the human rights of the people presently compromised? The answer must be in the affirmative. Furthermore what kind of democracy does this country have when not even a referendum is carried out to allow the people to state their views on the Prime Minister whose policies and actions will affect their lives.
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@88
And your intellect indicates that you are such a masterful genius that you don't need to turn on your spellchecker.
Keep up the good wurck!
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I think this latest Vw move proves the point that politicians should leave the market to get on with it, irrespective of what they think the consequences will be. Politicians have no understanding of real life or business, they wouldn`t be a politician if they did, why do you beleive them (or bankers ) when they predict disaster unless they act, of course they would say that wouldn`t they.
By interfereing with the free market they have justified their existance for years to come ,while real people and businesses sort out the problem (I exclude Banks) as they will undoubtedly make things worse!!!
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Blog 47 is absolutely spot on.
It actually makes me laugh - thinking about all the bankers 'lording' it around for the past ten years as if they were better than everybody else...and to think they have been the main cause of the entire economic downturn, how ironic!!!
I say sack the lot of them and put the mother of blog 47 and my own in charge - clearly they have been able to pass on sound business advice which the 'lords' at the bank cannot quite figure out!!
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#114 "Furthermore what kind of democracy does this country have when not even a referendum is carried out to allow the people to state their views on the Prime Minister whose policies and actions will affect their lives."
The kind that point fingers at other nations in an attempt to divert attention from their own shortcomings !! They used to start wars of conquests to do this in the old days but it's a trifle more difficult now !! Good ol' GW Bush found this out to his dismay !!
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#104 : PetersKitchen
"I will ask the question again;
Why are the governments of the world first bailing out banks and then bailing out large corporations so that they, wait for it, can pay back the banks instead of bankruptcy?
I think the answer to this is that sane administrators, although maybe not all politicians, recognise that it is cloud-cuckoo-land to think that the economic activity of a country is best run by the State.
I think also that these administrators recognise that the over-riding cause of the economic crisis, and the woes of banks and businesses, is the tomfoolery of politicians who have insisted that the structures they wish to put in place cannot ever be considered responsible in any way for a subsequent collapse of the financial system. While, of course, being almost totally instrumental in the health of the system during the good times.
Don't blame the politicians, either. Blame the people who insisted that world affairs are dealt with from a mindset that closely resembles that of a group of over-excited 8 year olds. The general public.
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I notice with interest that you haven't been as prominent on the news for the past few days Robert........could this be because you're too good at frightening the horses?
I'm also missing a few of our regulars on this blog....where are John from Hendon and Yummiecarolkirkwood for instance?
As for the subject of tax rebates surely the best thing anyone could do with it if it should arrive in the form of a cheque (as in the USA) is to use it to pay off some debt. Boring but necessary in most cases I fear.
The same for any businesses which get help..get yourself a cushion of cash in the bank. I bet most of the businesses in trouble are guilty of too much borrowing and at the risk of being accused of racism I bet not many of the companies in trouble are run by Asians/Chinese/Poles etc. We have become far too complacent in the UK and have massively over-reached ourselves We are being destroyed because of our collective delusions. Those in the real world work steadily and save for a rainy day, businesses and individuals alike. They don't waste their cash either.
What a shame politicians are unable to realise these simple truths. Having a nice fat salary cheque every month leads them to lose their grip on reality. A dose of reality living on a poor estate on benefit or a very low wage for at least a year would do them good and might shut them up. Some hope!
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What with the 'its all GB fault?'
He's just a spot of dust in the hoover bag of greed and corruption called capitalism.
New Old Labour and the 1st way will be launched soon which will help the us get back on the traditional socialist route again.
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"Chinese trade surplus hits record" - BBC headline
So how can China's trade surplus increase to a record while its growth slowed to a "mere" 9% ??
I believe it has been because 67,000 businesses that were reported as going bust were low-tech, low-cost sweatshops and that what replaced them are much higher tech, higher ticket manufacturers !! How will Western manufacturing compete with their higher tech but still lower labour cost manufacturing ??
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119 of course the State are not capable
But why, if the effect is still nationalisation by bailing them out anyway, pay the banks first?
If I go to an auction to buy that classic motor from the guy thats lost his job I dont offer to pay back the loan first!
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#121 "New Old Labour and the 1st way will be launched soon which will help the us get back on the traditional socialist route again."
FYI, we *ARE* already on the traditional socialist route - unrestrained government borrowings, bankrupt country, manufacturing output at its lowest, the entire cabinet blathering on and on but doing nothing constructive, etc. !! Shades of the '70s !!
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I think someone at AIG must have a sense of humour.
I was visiting Hong Kong very recently the AIG building there has a very large computer display set at the top of its large shiny office block. Watching the display the outline of the AIG symbol suddenly sparked up and began burning like a lit fuse. Seemed to be an apt comment on their future prospects.
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@115
Thur iZ A reesan I yam calld potkettle u no
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If we want a tax cuts that stimulates spending, surely the obvious answer is to cut VAT
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This comment was removed because the moderators found it broke the House Rules.
Post 127. If we are going to cut VAT the best place to do it would be to make heating & electricity VAT free as a critical and essential need.
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#119, they are "bailing" out banks because the growth of the last 7 years is basically fake. They need the banks to go back to the reckless lending to encourage the reckless spending so that the pain can go away for another few months - just enough to get elected again then who cares....
After all THEIR pensions are inflated-linked final salaries.....
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Scrap VAT completely for 6 months. That will cause people to spend their savings; and boost the economy.
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#123, then you would be pretty upset when the bank who loaned him the money took your new second hand car away.....
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For me the best laugh of the weekend was the sound of two Scottish bankers,who got their knighhoods for being considered the absolute financial gurus, but infact breaking two of Scotland prestigious banks,bleating on about how they could do a better job than Lloyds if HBOS stayed independant and was run by them.
I wouldn't trust those two with a kiddies "piggy bank" never mind a high street bank.
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132 Foolish thing to do as it would be the banks agents auctioning the vehicle to get a % of their money back in the first place
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#96 - guycroft
Terribly sorry to upset you. My intention wasn't to give everyone a good talking to as such. I just feel that we need to get some perspective and reign in some of the doom and gloom. There are far too many people on this blog with no education whatsoever in economic matters and yet they write in a way that tends to imply knowledge. I certainly don't have the education to make predictions on what is going to happen because, if I were to make up stuff like 90% of the people here do, it would only serve to alarm the ignorant majority (including me) who are swayed by what we read. As I said before, it is almost as though people want the whole thing to come crashing down. We need to rebuild the confidence of people on the street and constantly talking down the chances of getting out of this recession with minimal damage is not a very sensible way to achieve that. If everyone were experts then fair enough, but most people here cannot back up their pessimissm with solid data.
I was meaning only to emphasise the fact that there are more important things to do in life than fool yourself into believing you can predict what is going to happen in the future. If predictions did not have any impact on confidence, and thus directly the potential severity of the looming recession, then I wouldn't care. But surely, given the effect negative media can have on us, we have a responsibility to do all we can to ensure the ride is no more bumpy than it need be?
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Surely the point is that we have too many car manufacturers in europe and that the weakest have only been able to stay in business often by using very low (if not zero) APR loans to keep their sales going. The rest of the manufacturers then have to follow with low cost loan to match the other weaker players' offerings.
Only in the UK have we let a non niche car maker (Rover) go to the wall.
It is about time that this was allowed to happen in other countires too, what we don't need at the moment is more state bail outs of companies without a viable longterm future on the scale of AlItalia over the last decades.
I don't regard VW as one of the weaker companies either - they are just getting in there first while there is still some money to swap "assets" for.
The big 3 US manuafacturers (including numberous european subsidiaries) are in a far worse state and then there are some French and Italian car makers whose cars come at the bottom of the customer satisfaction surveys or whose models fail to sell in the expected volumes or without large discounts.
In many ways the car market is similar to the mortgage until recently, namely too many players fighting for a limited number of customers using unsustainable pricing structures and only able to do so because of the amount of easily available cash.
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if VW need 2.5 billion why not just ask their largest shareholder, porsche, who apparently made 6.5 billion just last week in share dealings!
I see Gordon Brown has just said he supports the US bailout programme.....i bet that makes them feel a lot better.
For god's sake when will the powers that be wake up and realise that cutting interest rates will never boost spending as in the UK there are more savers,than borrowers.
(how many mortgage holders will actually see a reduction anyway as it was not long ago Gordon was encouraging everyone to take out fixed interest loans!)
Am i the only one whose ribs ache with laughing at the sight of Gordon parading on the worlds stage trying to look important? If he really was an economic expert we wouldn't be in this mess in the first place.
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Credit Crunch from C to shining C segnoritas
Where the roller coaster victims of pyramid selling watch their mummys receiving a smooth send up after making complete tuts out of themselves in the silly con valley of the[ ban]kings in deniale that the good chip lolly pop had suckerred the titanic economy and sunk id off Iceland leaving the bear mperros to kick the MidAAA's touch and redigitalise the 666 of the beast jokerr cards before they say "im free o%interest on balllance transferrs"
Its just sobvious it would bring a tier to your aaayes
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The biggest economic crisis to face this country since the great depression and who is at wheel attempting to solve the crisis. Gordon Brown who is governing without a mandate from the people whose lives are affected by this economic crisis.
I am very surprise that the people are allowing this situation to prevail.
In a truly democracy a prime minister who is not elected by mandate does not have the right to decide and introduce policies that affect the very people who form the mandate.
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135.
People educated in economics. Right.
You must mean the economic experts who work in the city. The ones who claimed they didn't know the biggest credit bubble in history was going to burst when it was blindingly obvious it was, even to the man on the street. You know, the economic experts with vested interests, gold plated jobs, and bonuses to consider.
Or the economic experts who worked for the government who claimed house prices were going to rise for another 20 years, conning millions of suckers into buying property they couldn't afford and would never be able to hold on to when things went bad.
A bit of advice for you. If an economic expert tells you something, especially one who works for the government, or the government's master, The City, chances are he is lying, and trying to con you out of something. You house. Your pension. Your future. That's what he is paid for.
If he tells you things are going to be okay, then you should be very afraid indeed.
This recession has nothing to do with public confidence and rather a lot to do with banks not lending.
This recession, depression, whatever, will only end when the banks start to lend again, not when the public start to feel a bit better about things.
They will only lend when their battered balance sheets are repaired. As they still haven't revealed the full extent of the damage, especially to their off balance investment vehicles etc, I'm going to predict that the damage is very very deep and this process will take a considerable amount of time.
This ride is going to be very bumpy, regardless of the news stories, regardless of the press, regardless of public opinion, you better get used to the idea.
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#121, GB is the guy who spent like crazy. Who systematically targeted every other type of investment, who forced the bank of england to keep interest rates far, far too low and when they didn't get the point changed their target to strip out housing costs - which would have caused them to raise interest rates far earlier - and who is trying turn a crunch into a collapse by forcing banks to lend even more recklessly. Whilst blaming it on "global recession" - only the UK is in recession at the moment - "crisis that started in the US..." and the classic "Interest rates were 15% under the Tories..." - yeah when they decisive killed their asset bubble and ensured the banks were solvent.
I always wondered who was dumb enough to buy GB's excuses, I guess i have finally met one.
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135.
ps. You want an education in how economics really works?
Check out the Austrian School of Economics, or go to the Mises Institute website and download a couple of their free books. What Has Government Done to Our Money? By Murray N. Rothbard is a very good place to start.
They predicted this a very long time ago.
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Post 139 - just a short point but on the legitimacy issue, I'd just point out that the first time Winston Churchill actually faced the electorate as PM was in 1945 - and he lost.
The Conservatives finally won with him at the helm only in 1951 and, as any fule knose, that election saw Labour get their largest vote ever and also the largest share of the popular vote by 1.3 million. In fact I don't think it's ever been beaten - though I stand to be corrected.
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28#
The government energy payments have been paid for a good few years now,how long have you been making these payments yo your warehouse staff?
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#140, I think you'll find a large number of people from the city who were warning about the asset bubble, unsustainable public expenditure, fake growth and inflation.
GB in his infinite wisdom belittled and ignored them. As did the people who rushed out and borrowed like crazy who are now complaining that they somehow are the victims.
Your pension was screwed repeatedly by GB's regulations virtually forcing it to be invested in junk. Your house? Someone hold a gun to your head when you bought something that was inflating at such a rate?
Banks are lending to you because you aren't creditworthy and the government won't let them lend at a rate that justifies the risk they take on you.
If you are so overextended that a cut-off of new credit is going to push you over the edge you have exactly one person to blame..... You.
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#121 "New Old Labour"
Will that not really be the Old,Old Labour?
1st Way? Everbody has tried lots of different ways already.
"Traditional Socialist route" - like Tony Bliar?, Hitler?, Stalin?
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'Emperor - a little boy has looked closely at your non existent braces and as a result your trousers have fallen down'
'So what are you going to do about it finance minister?'
'If you give me lots more money I can go and buy lots more of that material your braces werent made out of and make some more'
'Gosh that sounds clever - here you are, go and spend spend spend!'
Repeat every three or four weeks until there is no real money left in the hands of those that could spend it sensibly.
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No bank = no one to pay the mortgage back to = no debt
Wrong!!!
Failed bank =administration=liquidation of all assets= your house being taken off you!!!
or
failed bank=adminstration=liquidation of assets=mortgage book sold to another bank
EITHER WAY YOU DEFINATELY WON'T WIN AND PROBABLY WILL LOSE!!!
The world is never as simple as you would like to think......
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#140
No need to get aggressive, you come across rather bitter! You seem to imply that I trust the decisions made by businesses and the government over the last ten years of phoney boom. I don't and have never claimed them to be experts. But then, there are few experts here either. Again, I point out that I don't want to hear predictions based on just somebody's opinion. You don't know the extent of the problems so don't pretend you do by saying things like:
"I'm going to predict that the damage is very very deep."
What's the point in saying that? Notice that I've never said that things will be okay, because that would also be blind opinion. I've never denied that the recession/depression would be a bumpy ride and agree with you that it is not going to be easy; I've already got used to that idea, thanks.
However, you simply cannot deny that with 24 hour news, negativity is spreading like a very contagious virus. Yes, the lack of lending (which, incidentally, is showing very early signs of improvement) is a very real threat to the economy, one of the main reasons in fact, but consumer confidence is still a factor here.
To say that confidence has nothing to do with it shows you are a little too narrow minded in your judgement.
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Gordon Brown was the architect of this credit crisis in this country. He created the conditions for people to borrow whether it be for mortgage, credit cards, personal loans. By allowing people to spend what they borrow he felt he will get the credit for the subsequent economic growth and then able to demonstrate economic prosperity under his leadership. Now that the bubble has burst it is his turn to spend the taxation he received from the very same people who borrowed to spend in the first place in order to show that he helped rectify the crisis. Sound economics?
A con of the highest order from a person who is governing without a mandate.
I am afraid we are all going to suffer for allowing this to happen.
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Robert
I see that Mandleson is talking about maybe promoting post offices in the face of high street bank problems.
If you get to talk to him (mandleson) could you ask him about his recent admission that he did discuss EU tariffs with Oleg.
He says it wasn't in Corfu (so your mates might not know of it) - but you will follow it up wont you?
Then again maybe one of you mates does know more?
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140-laughingblacksheep
Hey. I never said I was over extended, or had bought a ridiculously priced house. You're right about one thing, you would have needed to hold a gun to my head to make me.
As for me wanting a loan from a bank, no thanks, I don't need a credit rating, don't require a credit card, you can stick it.
If I want something, I save for it. Just like in the good old days.
I'm not complaining, I'm warning people who still believe your lies.
Its another good but not subtle diversion from you Laughingblacksheep.
As an ex-banker you have to blame the people you conned. If my memory serves me correctly you were boasting on an earlier blog that you had retired in your thirties and had moved abroad. See what I was saying about vested interests? Make the money and run.
Not me though. I'm fine. I haven't any debts and I never got conned. I was one of the lucky ones. I saw right through your pyramid scheme four, five years ago.
I suspect you did too. I believe that's why you said you got out. Guilty conscience?
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141#
I think 121# could say'Gotcha' as he is just having a bit of fun.
Yours" the UK is the only one in recession",
what about Ireland,New Zealand,Spain,
Germany,US et al?
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When does someone (anyone!), with the leadership qualities (that are clearly lacking at the moment) enters stage right and says THE BUCK STOPS HERE!
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Robert is spot on here.
It is increasingly pointless now listening to any of our political masters who have shown themselves to be completely off their heads. Rather than admit that there is nothing they can do to stop the inevitable depression, they are instead proposing pouring water over hot oil, i.e. tax cuts.
Ok so let's run this one through. Brown cuts taxes funded through more borrowing upon more borrowing. This enables some to spend and others to save. So what happens next, i.e. after the spenders have spent? More tax cuts to get them to spend even more? This is moronic. It doesn't address the cause - i.e. the collapse of the economic mirage based on consumerism - and only tackles a symptom.
And as for Cameron's even more stupid idea, i.e. to give employers a minor tax incentive to take on an employee, businesses across the board are facing closure and the last thing they will consider is employing more staff. Indeed, like many supermarket buy-one-get-one free deals they are only a bargain if you want one in the first place.
There simply is no escape pod this time round. We are following Japan's lead and heading into many years of economic stagnation, but here's a frightening thought - Japan has still not recovered after nearly 2 decades, and that is with the likes of Honda, Toyota, Mitsubishi and Sony. So what the hell is the UK, a nation of hairdressers, in for?!!!
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149. andreweaster
Consumer confidence does not pump extra money into the economy.
The banks do that via credit. Right now they are not pumping money into the economy and the money supply is contracting. This is causing the recession.
Please understand this. Public confidence has little to do with it. When the banks fix their balance sheets and start lending, the recession will end. Not a second before.
The fact that the banks are not even revealing the extent of the damage leads me to believe that they're doing that for one simple reason: if people knew how bad the damage really was, and occasionally we do get hints, the public would withdraw every single penny they had from this rotten and corrupt system and the lot would come crashing down.
And like I said to another poster earlier, I am not bitter either. I haven't lost anything. Though I know plenty who have and will.
I educated myself on this a number years ago and saw this coming.
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If you want to know why it is not going to be sorted out fairly, look at the CV of Hector Sants, he of the FSA. Previous job, Chairman CSFB Europe, on the payroll of CSFB (via LTIP) for four years while at FSA, owns eleven houses.
Look no further for why he will be rescuing the banks.
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Brown says he won't wear a white tie on principal to the Lord Mayors dinner then does, will be prudent then isn't and now taxes us up to our eyesballs for 10 years then suggests and spins he is a tax cutter.
He has brought the art of politics to a new low and will tip the UK over the edge to save his neck.
He is no Mr Bean just a latter day Stalin.
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I am tired of hearing that the present problems are all due to banks' irresponsible lending.
What about blaming some of the problem on the equally irresponsible borrowing of millions of people whose "want it and want it now" attitude has finally caught up with them?
As a responsible saver when I want something, I object to now getting low interest rates because others were greedy.
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#92
Nice rant...
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148. #icantmakeupnames
If my bank went bust, I'd happily buy my mortgage off them at (say) 70p in the pound...
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#153, US isn't in recession yet. As far as i am aware neither is Germany. I will check
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How much is total unsecured consumer debt?
GBP 1 trillion.
Again I ask how much of this will go sour over the next 2-3 years?
This is where the next downward pressure will come from.
The Government could do one of two things
Get the banks to write off all consumer debt and start again- rather unfair for those who have been prudent,
or
Cut taxes sufficiently and force reductions on variable interest consumer debt to allow those who are over indebted to pay the debts off rather than becoming stressed and those who were prudent to enjoy spending the additional money at a time when money needs to be spent. Remember there are six times as many savers as borrowers.
Boldness is required.
Time for a massive tax cut on all personal income and tax breaks for businesses particularly on VAT.
Personally I would raise personal allowances to 10k immediately, reduce tax rate to 10% and reduce VAT to 10%
The 310 principle.
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#124
No, that is were we are after all but 30 years of Tory and Nu-Labour rule, the last time a socialist government was in power the UK still had it's own manufacturing industrial base...
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Re poster 59.
If you want to know how it all ends either go to www.cynicuseconomicus.blogspot.com or visit www.share-international.org the result is the same but one may be more bearable than the other.
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141 I was being ironic, doh!
The writing is on the wall but the government is treating this like a piece of graffiti
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Good lord, you could read all this and run screaming from your computer.
I run a small UK business, and am worried about the future like everyone else. I absolutely agree that some of what's going on is unprecedented. I know that what you are reporting on regarding VW today marks a challenging step forward. But what is the alternative?
No solutions in your blog post Robert, only dire warnings about "ailing patients" and "diseases" - where's the reporting on the cure? (or even the possible cures?)
As an employer of 40 people, I can cut jobs now to try to weather the recession (or has it become a implosion now?) or I can keep the faith. Sales haven't fallen off a cliff yet, and we're working our socks off to stop it happening, but it's always possible.
But I read this blog, fear recession, cut costs and jobs, cause recession. Ooops...
As one of Britain's most influential bloggers and journalists, don't you shoulder a bit more responsibilty than this? What should I do - shut up shop?
Talking ourselves into an abyss can't be sensible. All we are doing is making the possible a foregone conclusion. It would of course be naive simply to focus on the "good bits", few and far between thought they may be - but you should surely should include a chink of light now and then.
Come on Robert, don't short sell Britain!
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#154
"When does someone (anyone!), with the leadership qualities (that are clearly lacking at the moment) enters stage right and says THE BUCK STOPS HERE!"
Maggie Thatcher doesn't do public speeches anymore...
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162 laughingblacksheep
and your definition of a hurricane is flattened land?
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# 112 ishkandar
So we have a real life modern day cynic amongst us.
For what its worth i always prefered Socrates to Diogenes. I remain a little uncomfortable about that masterbation and urinating business in the town square. However, point taken.
I have no idea where the real leaders will come from. The first step is forums like this where we can all agree that our current ones are no good. Then we have to wait for a meteoric rise from nowhere by someone special with the courage to show us something better. On the other hand maybe there is no such thing.
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RP: "Doling out a few extra pounds to most of us would probably be no bad thing, if we were to spend it "
I think that the crisis will be over by Christmas. The usual, last-minute, spending frenzy will, for once, have a point.
HMG could encourage this by giving its taxpaying stalwarts a Christmas rebate.
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159. selocs: -I am tired of hearing that the present problems are all due to banks' irresponsible lending-
Well for one. If the banks didn't really have it, or bother to check who was getting it, or what the money was for, they shouldn't have been lending it. But they did.
As for the people who were conned into borrowing huge amounts, (by Government and the City's advice that house prices would keep rising for the next 20 years. By the Media's endless stream of propaganda that backed this assertion. Society was bombarded by shows like Location Location Location etc for years), these ordinary people will be made homeless or bankrupt and have their assets seized.
Life will be pretty crap for them. Suicide rates will soar.
The banks and the bankers won't suffer. Instead it is looking more and more likely that they will be allowed to walk off into the sunset with their fraudulently gained bonuses.
I'm a saver too, and was lucky to avoid this scam, but we should never forget this, and blame should be apportioned fairly.
Look at the overall picture, who looks more like the criminal, the man who got evicted and made homeless because he couldn't make his monthly repayments? Or the top banker who retires early with a knighthood and his loot?
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"the underlying cause of the disease - which in this case is a global contraction of lending." - Robert Peston
That is a symptom, actually.
You have pointed out the underlying cause of the disease in a number of past blog entries, it is the consequence of running 33:1 leverage while writing loans against inflated asset values where the collateral is not worth the loan amount from the outset, and hoping to sell the risk at a profit before the introductory deal expires.
Surely you do not mean to relegate those explanations to obsolescence in favour of soundbite journalism?
The underlying cause of the global contraction of lending is a symptom of the insolvency of the lenders, the inability of borrowers to repay enough to make the lenders solvent, and the denial among borrowers who believe they can if only they got access to more credit.
The real disease is the saturation of consumer and corporate debt markets to capacity and the quest for ever higher leverage and looser valuation of risk to compensate. This cycle has entered its final lap with the throwing of sovereign balance sheets into the pot. VW car keys, how apt.
What backs the ECB anyway, a printing press?
Perhaps the subject of your next blog could be how one would recapitalise the Treasury complex if a money center went under. It is time we had that discussion.
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#153, Germany is still growing. down to 1.7% then 1.1% for next year. US is 0.5% and Britain is -0.2%. Japan 1%.
So much for "global recession"... afraid you've been had, i know GB lying about economic data, unthinkable....
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#159
"I am tired of hearing that the present problems are all due to banks' irresponsible lending.
What about blaming some of the problem on the equally irresponsible borrowing of millions of people whose "want it and want it now" attitude has finally caught up with them?"
But had the banks not been stupid and lent the money. Yes 'Joe the Plumber' might have been stupid for seeking a bank loan, the bank could have said No way Ho-say, you are a bad risk!, instead they just kept saying Oh sure, how much do you want?"...
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@106, the world's not dystopian as far as I can see. My grandfather was a stoker at Jutland, my father worked his way from a tram-shed apprentice with Portsmouth Corporation (where he also knew Jim Callaghan) to become a senior member of his profession's governing body, I went another route on the strength of my own skills through a UK Corporate Treasury before moving into the International Civil Service as a big gun's sherpa, where I've stabilised nations, and my children's peers in the sherpas' school are the offspring both of princes and the unemployed. It depends on determination to work effectively, to learn continuously and to act bravely, and those are things noticably missing from HMG at the moment.
The world's not dystopian as far as the South Wales town my wife's from is concerned either. Her father was a fitter foreman, she ran Europe's negociations for a good while. Her mother's three brothers produced two senior executives and a security guard, their neighbours a Cambridge economics don. Both grandparents were miners. The determinant is a brain, and a will to use it, which means you don't follow the herd.
And that, in a way, is what makes the difference between a town on the edge of breaking away from the suffering masses, having enough real leaders with the courage to lead in the commmunity. Such people have too long been put down, the tile eventually comes when they stop being sheep and start being men.
If that means refusing to be bullied by the first politician or civil servant to come along, then great.
Part of it starts here, having the courage to speak out and discuss in a thinking environment. The South Wales valleys are pretty expert by now at reinventing themselves, and that generally means doing it yourself from the bottom up: governmental guidance isn't too much practical help. Reinvent your bit of the UK and the deadwood will fall away. You don't need Chinese toys whose sole edge is enriching the fat cats: you need toys from the toymaker down the road. It's called social solidarity and it's the first step in rebuilding a socialist ethic, hang together so they can't hang you separately.
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#166, oops, sorry....
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As a US citizen who implored every Senator and House Member I could find to vote against The Bailout, I warned against the horrible 'slippery slope' that was being constructed.
They allowed themselves to be stampeded, anyway, setting a horrible example for the rest of the world.
And now....!!!
Thanks due to Mr. Peston for his wry insights.
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#169, recession is negative growth for two quarters one after the other. Britain will have this this quarter, the others won't.
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As of last week the average disposable income was 32.6% (after tax, NI, mortgage or rent)
The average family have 838 per month to dispose of as they want to
Sat tv
Contents ins
TV license
Poll Tax (sorry community charge)
car ins
Elect
gas
Water fresh
Water fresh
prescriptions
Haircuts
Shopping
pension
savings
holiday
travel
petrol
emergency
phone
clothing
service
broadband
car tax
MOT
CREDIT
As they say in come dancing, in no particular order, but fill in the blanks with the family averages and it doesnt take long to see that there is a disconnect.
The average household will not be able to fill in their pieces and go down to M&S for a spend up = mild recession
The average household will not be able to fill in their pieces and go down to Asda = prolonged recession
The average household will not be able to fill in their pieces whatsoever = January 2009 Depression
And that is people left with jobs
The Governments household budget is in a worse position, but unlike them, we can't go down to the garden shed and print off another 500 billion 50 pound notes
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why is the ecb being involved? Could use porsches profits.
I hope this is not the start of more large european companies having to come to terms with large amounts of hidden debt.
The ironies of this situation are limitless.
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re 170 Johnboy
Try www.share-international.org
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#152, it's called quitting whilst you are ahead. As for feeling guilty, to quote Rainier Wolfcastle when asked how he sleeps at night - "On a large pile of money with many beautiful ladies".....
http://www.youtube.com/watch?v=rIlpYLIiZLE&feature=related
well as a saver in the UK you are going to get well and truly screwed to bail out people who were reckless. Put your money in National savings and get some inflation protection, thanks to the recent cut you are getting -2% real return at best.
Feel free to blame the bankers, we are an easy target just like after the dot.com bubble. After all who could possibly know Pets.com wasn't worth 400bn USD?
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#172, how about the guy on 20k a year who bought 5 properties to let?
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Reality check - why do people think they need bigger and bigger houses, why do they need to buy a car every 2/3 years, my 10 year old Polo goes fine. Over production of everything because people were able to borrow, borrow, borrow. Had to come to an end and now it has
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The Browk nights on their Rocking trojan horses will soon be on the receiving end of everything ,that the fans of their flip side hit {things can only get better]throw their way out way
Merder most foul ,it will stick even to their teflon pans as they flip their nautern wok caaakes to infinity and beyond before taking the final bite out of their piethinesque in the sky economy
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# 172 Well said! I agree with all of this. People in my circle have been fearing a crash - and its consequences - for years.
Some of the top people in the city have been guilty of the kind of negligence which should be deemed criminal. They are "expletive deleted"ing illegitimates! The question is, is there anyone in high places both knowledgeable and untainted enough to judge? How do ordinary people and honest businessmen get recompense? Ideally, there should be some kind of retribution. The assets of the guilty should be used to help finance a recovery.
Oh dear - it won't happen, I'm just getting excited for no reason. I'd better take a tablet and lie down :-(
ILLEGITIMATES!!!! - sigh.
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179. At 6:06pm on 11 Nov 2008, laughingblacksheep wrote:
#169, recession is negative growth for two quarters one after the other. Britain will have this this quarter, the others won't.
Hmmm, It astounds me when I read people, even learned people only accept a minus sign as negative!
The same people have receding hairlines and brush their sides over the forehead and pronounce they are not going bald.
China has had 5 years of double digit growth and now has deteriorated to under 9%. Pray tell me, under your simplistic rules, is China entering a recession?
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The above reply was for laughingblacksheep sorry
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#167, actually it isn't unprecedented. In the 90s citibank nearly went to the wall on credit card debt and over 600 US banks went to the wall - compared with 20 so far in 2008.
Practical advice:
Pay down any debt you have that is not a term loan( because term loans front-load the interest and you don't save any interest paying early ). Start with personal secured then personal unsecured then corporate secured then corporate unsecured - this will give you the best return of any excess cash you have after tax.
In personal and corporate terms, try and have 6-12 months cash for your necessary expenses and look to see where you can cut. Try to minimise callable credit lines such as overdrafts, try to negotiate that they will be in existence for at least a year. Aggressively manage your payments receivable, you have the right to charge interest on late payments of base + 8%, if someone is messing you around make it clear you will exercise the right( Can remember the exact name of the Act, something like Late payment of debts act).
As a small company, you probably have a good personal relationship with your customers. Explain in today's environment you have to collect promptly and it is in their interest to have a happy and healthy supplier. With you suppliers try to negotiate a fixed payment period in return for not having to be chased. Look into factoring agreements, not necessarily for now but to have to hand if you need it just like the credit lines. These are the two things you need to negotiate when you don't need them.
Finally see if anyone wants to buy you out.
Best of luck...
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#91 mightypavlovsdog
What you say has a very strong ring of truth.
You are talking of CDO and SIV things, yes?
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VW becomes world's biggest firm
Bizarre stock market activity made Volkswagen briefly the world's biggest company by market value on Tuesday.
VW defies the economic slowdown
Check VW's share price
Volkswagen has resisted the economic slowdown and reported growing three-month profits.
Net profit from July to September rose 28% to 1.2bn euros ($1.6bn; £950m) boosted by sales in emerging markets.
Whats happened in 10 days.
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184. laughingblacksheep: how about the guy on 20k a year who bought 5 properties to let?
My point exactly. What the hell were the banks thinking, giving that man the money. Didn't they think to check how much he might be earning?
Didn't you lot do risk assessments or were you just handing out all that cash like sweets?
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#164 Oh, you mean like British Leyland or Triumph motorcycles ?? Or the shipbuilding and aircraft industries ?? Sunderland, A.V. Roe or Hawker ??
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So Gordon's great social experiment rolls on.
But we don't have a huge country full of natural resources to keep us afloat like the Soviet Russians. All we have is our skills and our workmanship, which are not what they once were.
If we have a government that is going to use taxpayer's money to support anything that is failing, then eventually everyone will be working in the public sector, funded by taxation. How can that work?
Virtually all public sector jobs are completely unproductive. So the money to provide the salaries of the public sector would have to come from taxation of their income and taxation of what they spend their money on. To understand the problem try pulling yourself up by your own bootstraps!
The only way people get a pay rise is through inflation, so it's back to the 1970's - massively inefficient industry, strikes, power cuts, rubbish in the streets, incomes policy and national bankruptcy.
It remains to be seen whether David Cameron is a Margaret Thatcher or an Edward Heath.
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The big snag with Nationalization:
Two snags:
First a company pays taxes, even when it isn't profitable it pays national insurance, VAT, Customs Duties etc.
When profitable it pays Corporation Tax.
Second, if its lossmaking the tax payer foots the bill !
Of course each Nationalization shakes the confidence of Stockmarket Investors.
I know Shareholders aren't popular, but if they take their money away, companies struggle. They are part of the process.
I keep saying this but confiscating the Banks from their Shareholders has created a lot of bad feeling, more bad feeling than if they had been allowed to go bust.
If the Bank of England had acted as lender of last resort at the Base Rate to the troubled Banks then Jobs, Pension assets etc could have been saved.
Shareholders would still have suffered as their Banks would still have made huge losses, but they would not feel aggrieved by the Govt, the market would be a bit calmer, and the moneymarkets would be closer to reopening properly.
This beggar the Banks attitude has damaged confidence, shell shocked the system, and left the moneymarkets out of action.
The predators have carved up the vulnerable institutions, with major job losses to come, huge damage to Pension Funds, and further instability to the financial system.
The Predators, like Santander, themselves are on shifting sands, as they operate in a desperately difficult market.
Without active moneymarkets, trust and cooperation from Investors, all Banking is going to be on a downward slope.
I don't think the Govt's fully understand what they have done.
Mind you, the merchant Bankers and Investment Bankers who stitched up the Retail Banks, do not seem to have understood the full implications of poisoning their own pool.
Likewise the Shortselllers, who must be realising by now how their profits are likely to become worthless in a high Inflation, low trust environment.
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183. laughingblacksheep
Thanks for the advice.
As for getting screwed to bail out people who were reckless, you're right. We are. We're getting screwed to bail out the banks. But reckless is not the word I'd chose. Criminal is more fitting.
But hey. Enjoy the large pile of money and the beautiful women. You've earned them I'm sure.
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Nice blog Mr RP and a nice set of response posts. Really.
For me, Post 2 sums it up.
If the taxpayer is supporting the wider economy, then there isn't really an economy.
This really bears repeating.
Rahere, nice posts, I respect your viewpoint. I disagree with your projected outcome but wish you well.
Mr Curzon, You gave your warehousemen 500 squid heating allowance.. You dont heat your warehouses? Crikey.
And Sir, you really walked into a bank seeking to drop 15mil. After everything you have read here, and posted here?
It would be gone faster than an unlocked lambo in lewisham.
Invest in a bolivian coop extracting lithium, give the gov 40% and each of 4 local 'counties' 10% and invest 10% in upgrading. The world supply of Lithium will be overtopped by 2015 and you will be very very powerful.
Global warming ignores recessions or depressions and electric car development marches on...
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And Mr C, I was of course being flippant.
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#170 I always thought they were a trifle strange, them ancient Greeks !! The things those Spartans got up to....
As for where another leader will arise - the Germans have their Emperor Barbarossa, the Spanish have their Don Rodrigo de Vivar (El Cid).
Perhaps the Brits will be waiting for King Arthur to pop up out of a lake somewhere !! However, these days, he'd probably pop up riddled with strange diseases due to the extreme pollution in said lake !! *THEN* he'll probably get arrested as an illegal immigrant, given a council home and put on the dole while waiting in the queue to get treatment by the NHS !!
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"130. At 3:00pm on 11 Nov 2008, laughingblacksheep wrote:
#119, they are "bailing" out banks because the growth of the last 7 years is basically fake."
7 years? This has been going on for 300+ years. It really kicked off big time 37 years ago when gold was dropped as backing for currencies internationally.
This allowed banks and government to print as much money and book as much debt as they liked.
Today "growth" means "credit expansion" and "the economy" equals "money supply".
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"187. At 6:32pm on 11 Nov 2008, sashaclarkson wrote:
Some of the top people in the city have been guilty of the kind of negligence which should be deemed criminal. They are "expletive deleted"ing illegitimates! The question is, is there anyone in high places both knowledgeable and untainted enough to judge? How do ordinary people and honest businessmen get recompense? Ideally, there should be some kind of retribution."
Well, how about you STOP GIVING THEM YOUR MONEY then?
You know how Fractional Reserve banking works? You take out £1 as *cash*, it deprives the banks of £30 worth of leverage. So, participate in International Cash Day on the 12th of December.
I don't get it. You're all complaining about just how bad the banks are but then you say, "here have my salary this month, go buy some toxic debt or something".
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Wow !! Keynesian theory at its best !! When the country is short of money, create yet another meaningless expensive quango to oversee the lack of money !!
Panel to monitor business lending - BBC headline
Its remit is to"enter into a "constructive dialogue with individual lenders on the availability, risk and overall cost of lending to small and medium sized businesses"."
Will the "constructive dialogue" be along the lines of "Ve haf vays to make you lend regardless because the great leader said so" ??
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Over the last 3 months I have become strangely addicted to Bloomberg tv, its like CNN during the gulf war, the only specialist channel that offers a 24/7 perspective on a particular crisis.
What I find particularly splendid about Bloomberg are the inexaustible supply of middle aged men in suits wheeled into the studio throughout the day who apparently are unaware that financial mayhem has erupted around them in the last 14 months.
'Here's Dirk Schnuckler from Vastly Leveraged Asset Management Inc to tell us why now is a great time to buy GM common stock'
'We welcome Rocco Polemangler from the Ponzi Alchemists Fund who manages 200 trillion dollars of emerging market fixed income deposits.. Rocco, I understand you love the Zambian Ten Year note right now?'
In 3 months I have heard the bottom of the market called several hundred times and not a single 'sell' recommendation for even the shakiest investment vehicles. Really, I don't know what all the fuss has been about, apparently every day for the last year has represented 'a great time to get back into the market for the astute investor'
Stunning, just..stunning
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#194
More nutty fruit-cake sir? You really don't have a clue as to the real reasons certain UK industries (were allowed to) failed.
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"194. At 6:50pm on 11 Nov 2008, ishkandar wrote:
#164 Oh, you mean like British Leyland or Triumph motorcycles ??"
Triumph Motorcycles are doing fine. They have some really nice bikes. I'd have a Speed Triple in a heartbeat.
It only took 30 years but they finally caught up with the Japanese.
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I wish British Leyland was still here, at least we would have the workforce on the picket line demanding jobs were saved and 15% pay increases.
They held the country to ransom
Its all so stale now, instead we get the Bankers on the governments doorstep demanding bonuses and 15 billion balance sheet increases
They hold the world to ransom
Somehow, the politic has got a bit mixed up
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#195
"The only way people get a pay rise is through inflation, so it's back to the 1970's - massively inefficient industry, strikes, power cuts, rubbish in the streets, incomes policy and national bankruptcy."
...and most of that happened during or as a consequence of a Tory government (under Ted Heath's leadership), in the 1970s, under Heath we had the Three day week, under Thatcher we had 3.5 million plus unemployed and whole swaths of our industrial capacity shutdown. Do we really want to go back to those days or should we look to the 1960, or even the late 1940s when "Britain can make it"...
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Post 199 traducer
Still out here damn cold too.
I wish i could keep it in suitcases it would be safer.
Been busy reorganising production,we are just wondering which retailers will go this side of Christmas. . .
Yes the warehouses are warm . .
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Hey, I just had a thought about "the rising taxpayer burden".
Buying a bailout has got to be a lot like buying a mortgage really, because the money is taken out as a loan, it has to be paid back with interest, repayment depends on security of future income, repayments divert spending from other things and require discipline, and you have to consider the liquidation value of any assets forfeited if we cannot repay, as well as the loss to us if we lose them.
Has someone akin to a loan officer sat down, crunched the numbers and concluded the British, European or American taxpayer qualifies?
I bet the answer is no, and the reality is the government is a sub-prime "we need the money now, we will worry about it later" type of borrower on our behalf.
Who else gets that feeling?
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Three words:
Works. Progress. Administration.
Or if that's too long, two will do:
Paul Krugman.
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Ive listened to Clunking Fisters press charade a few minutes ago from this morning.
All he can do is snipe at the Tories claiming that they change their minds etc.
What does he think hes up to?
Can we have a vote of no confidence please.
Hey there Mandy it could be your MOMENT?
THIS IS NOT A HOMOPHOBIC REMARK
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Post 208
Boilerplated
Things havnt changed that much.
1.7m unemployed
2.65m on incapacity
600k not in education or employment
approx 1.2m unemployed off the system
Factor in some of the poor students doing useless courses say 500k
Looks worse than Thatchers worst to me.
Incaps gone up 1.75m since 1997.
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#188 : PetersKitchen
(writing to laughingblacksheep)
"China has had 5 years of double digit growth and now has deteriorated to under 9%. Pray tell me, under your simplistic rules, is China entering a recession?"
Er, no.
The standard definition of being in a recession is of having had two successive quarters in which output declined from the level in the previous quarter.
So:-
80, 85, 90, 95, 100, 99, 98
the economy is in recession for the final 2 quarters,
whereas
80, 82, 84, 88, 89, 90
it isn't.
Clear?
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192. What happened in 10 days is that VW were counting potential profit from cars sold on finance as actual profit in the bank. Now they've realised that it isn't actuall profit till he credit is paid off and the surplus is in the bank. Really they haven't go any profit. All they've got is loads of IOUsthat aren't actually worth amything until the debt is paid.
Business is suddenly starting to realise that debt is not growth, it is not even potential growth. It is just debt. And in the current climate it can't even be sold on.
Inidentlally just been watching Bloomburg TV on SKY. AIG is currently at just over $2 a share from a high of around $100 not long ago. It needs $61BN now and has admitted that it's still carrying in excess of toxic CDS that will need mmeeting over the next 12 months. And that's just one institution.
There is an awful lot of misery to come yet and governments simply do not have the money to keep bailing out.
Big UK companies are hanging by a thread on the hoope of a good trading Xmas - Woolworths springs to mind straightaway.
The Baltic Dry Exchange - an indicator of the demand for raw materials - is on it's bootstraps. The UN food programmes have got serious funding problems which in turn leads to greater third world instability through starvation and a commom side effect - war.
Things do not look good and what makes it worse is the rubbish that's been talked about Keysian economics. The UK pulled out of the last Great Depression of the 20s and 30s because it broke the link between sterling and gold in 1931. Keynes didn't even publish his work until several years later and only the nazis really tried to implement itand look where it got them. Mind, the RAF did a stirling job of redeveloping their industrial areas. Free of charge as well.
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We somehow need to write off as much as possible of the accumulated debt.
How about legislating that any bank offering a mortgage of more that 3.5 times income should be deemed guilty of improper selling of their mortgage products, and any debt above that limit must be written off? That should bring down the debt mountain nicely. Actually the banks have probably written down most such debt already, but at least this would bring it into the open and provide closure on it.
Of course this shouldn't apply to those with multiple mortgages or those who lied on applications for self-cert mortgages, who should just be allowed to go bankrupt as appropriate.
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VW should borrow the money from its major shareholder PORSCHE - remember they made a vast killing out of hedge funds last week.
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''In a way, therefore, I see the UK's "whose-tax-cuts-will-be-biggest?" competition between the political parties as a bit of a sideshow.''
Have you not defined the incumbent political structure and its 'capitalists' paymasters by the economic crises of overproduction?
The very over production that is the effect and the cause. The Demasiada effect?
At it's basic 3 for 2 in the supermarket thru to borrow 6 times your earnings for your house, the crisis that promised and gave everyone more than they actually needed will surely come back to haunt the political authority, have the asset authority hankering down and leave the door open again for social production and ethos as echoed in some posts above.
Of course, the result will be receiving less for more but waste will be tamed, the Earth will be repaired and we may even have social companies to protect jobs instead of profit again ( GM, if saved, will be for the the 2 million jobs it saves, not for the 1000's of vehicles being made )
State run enterprises with private money with the shareholder being the tax payer
Now thats a thing
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#135
The gloom merchants have been closer to predicting what has happened than those who have constantly underplayed everything.
Those who tried to talk things up (politicians, bankers) have ruined their credibility.
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#208 Bolierplated
I don't try and get involved in the party political mudslinging on here, however I did live through the same times as you.
You have conveniently missed out the 74-79 government who actually *did* bankrupt the nation.
Re unemployment. It is as bad now as any time under Margret Thatcher. i.e. take 'em off the dole and stick the odd 1.8 million extra on incapacity benefit. And that is before the current downturn has really kicked in.
We in this country have consistently had 3 million plus underutilised people since (I would hazard a guess the early 70's). Either in unproductive nationalised industries / make work schemes or on the dole (which really is the worst of all)
This country has been papering over the cracks with respect to our industrial / business competitiveness for a long time now, whilst paying ourselves with funny money. Party political dogma is not going to solve anything, nor any political theory for that matter.
I only fear for this nation in as much that we have become collectively workshy and unable to compete onn the world stage in almost any sphere. It's not an impossible situatiion as the doom mongers make out. Simply a tough place to be.
We need leaders though looking at the ranks of pygmies in our current parliament, I do wonder.....
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#139
Complete red herring, the bankers are running the show and always were.
Elections are a popularity contest largely decided by TV and the tabloid press.
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214 excellencefirst
Maybe peterskitchen meant things wernt as good for china as they have been.
They have one massive bill from the earthquakes this year,that will have a drag effect on their economy,we lost two factories,thank god no one was killed or injured in our places.
The burden of blame/responsibility would have been heavy.
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RP: "....but it doesn't deal with the underlying cause of the disease - which in this case is a global contraction of lending".
No, it's not the cause it's a symptom of the healing process. The disease is over-lending for years and to the tune of trillions.
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ExcellenceFirst wrote
The standard definition of being in a recession is of having had two successive quarters in which output declined from the level in the previous quarter.
So:-
80, 85, 90, 95, 100, 99, 98
the economy is in recession for the final 2 quarters,
whereas
80, 82, 84, 88, 89, 90
it isn't.
Clear?
Chinese economic growth slowed in the second quarter of 2008, constrained by slowing demand for exports, rising prices and the high cost of credit.
The National Bureau of Statistics said the economy grew at an annual rate of 10.1% in the three months to June, down from 10.6% over the previous quarter.
Recent figures showed China's growth reached at annualised rate of 9% in the third quarter - though considerable it marks a slowdown from 10.1% growth in the previous quarter.
China has set out a $586bn economic stimulus plan to counter slower foreign demand by boosting domestic spending.
DOUBLE-DOUBLE-DOUBLE- 10.1%- 9%
Clear?
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@ 81, 127, 129, 131, 163
The government can't cut VAT nor can it make someting VAT liable, VAT exempt. No EU member state is allowed to. All the government can do is increase it or leave it alone.
Part of the rules of the club I'm afraid and being as we're the only ones facing a recession it's hardly likely that our esteemed and honourale fellow members will support us in seekng a cut is it.
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RE 216 random thought
The one that lied on his mortgage application is doing the BIG JOB,so what hope is there.
But then he did resign like a boomerang.
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#213
But the unemployment figure I gave was after 'corrections' (fiddling the figures in other words), so the 3.5 million headline figure then is comparable to the 1.7 million headline figure today - some of which, remember, will be those who had previously claimed incapacity and have been moved back on to unemployment benefit with the aim to get them back into the work place.
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A cause of the current crisis is the lack of confidence which emanated not only from the incompetent handling of the crisis by the BoE but also from the many media reports revelling in the downside.
Unfortunately this continues and although those employed in the media will benefit from selling more papers, raised profiles etc, the vast majority will suffer.
A worthwhile line of journalism for a change would be an investigation of hedge fund managers relationships with the major political parties, including large contributions.
I think there would be a good case for arguing these parasites are allowed to continue their massive concerted short selling etc despite the destruction in value and confidence that ensues because they have greased the palms of political parties and influential individuals, including by appointing former senior civil servants in highly paid status non-exec positions.
Or have the hedge funds also managed to nobble large sections of the media?
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PeterK
Your very incisive yet sometimes confusing.
Having read many commentaries on the current ''news'' within the global economy I felt that I just had to reply to your comment regarding overproduction.
There is no doubt that frugality has been dismissed for production sake. If we do not have an economy built on a comprehensive conveyor belt of consumables provided as we need them then why not over produce or over supply what is needed to provide the illusion of prosperity?
A very cognitive appraisal of the problems in hand and I commend you especially and some of the other correspondents here for airing them
BridgesHF
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I'd much rather give taxpayers money to VW than I would any of the banks.. At least VW does something productive and useful and employs people with real vision.
Here in the UK of course the banks and their chums in the other financial institutions have made quite sure we'll never have a VW... Probably one of the reasons I hate them so much.
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#220
Please go back and re read what I said, I didn't miss the period out, I implied that the period was caused by the miss-government by Heath - had he been less confrontational history would have been very different - or are you trying to imply that Wilson managed to bankrupt the country in two the two years from '74 to '76 when the IMF had to be 'tapped-up' in 1976/77...
As for unemployment, you are surely eating nutty fruit-cake if you think that unemployment is anywhere near as bad as it was in the 1980s, tell me a town were 90% of the people, are unemployed and you might start having a point, you seem to forget that towns like Corby or Consett (never mind all the coal mining towns/villages) had their only source of employment shut-down.
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#228
The media is reporting what is happening, perhaps you think they should not report the fact that shares have fallen again today, that the ECB and IMF are still being tapped-up for loans, that in the US the Fed is likely to have to put more money into bailing out AIG - More nutty fruit-cake sir?...
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#228: "Or have the hedge funds also managed to nobble large sections of the media?"
Publishers and their parent companies run on credit just the same as everyone else. For example NBC is a huge media company of which the 24/7 financial news channel CNBC is a part, and it is owned by GE, reputed to be a solid industrial company. But look at GE's 10% annual dividend on a certain recent batch of preferred stock, its common equity more than halved in 12 months and at 11 year lows, its resort to a specially-created Federal Reserve commercial paper facility and sudden uncharacteristic difficulty achieving planned asset sales, such as a credit card business. That's right, a credit card company and a financial news channel are part of the same group. They do car loans in Europe too. Oh that's a nice link back to the article.
Could their difficulties be the ironic result of unfavourable media coverage?
Or could they be the result of more than half a trillion dollars of debt, around half of it short term, and investors taking another look at whether their ability to repay matches their AAA rating?
Which do you think it is?
What ever next, as you rightly exclaim.
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#220 RobKirton
In 1974 the outgoing chancellor is reputed to have said to the incoming one "sorry about the state of the books old chap" - the seeds of 1976 were set by the Heath government.
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Think for the moment enough is done; governments has to wait and see.
Government has to change the way it deals with trade, especially with China and India as west cannot afford to pay for these cheap goods unless they loan us the money. Also government has to deal with regulation as it has gone mad, its to expensive to do any thing in EU.
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We are a bit short on optimism tonight.
With a view to a better night's sleep I suggest a read through the article here:
https://news.fidelity.com/news/ArticlePageFragment.jhtml?key=/pf/content/content/economy/obama-fixit.shtml
I found it reasonable and informative, and I think that what goes for the U.S. goes for us all.
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EVERY bubble has to burst; always has, always will.
So ramping up government is another bubble. Ask Iceland.
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Going back to Robert's original point: it really is astounding that VW is going direct to the ECB. Presumably they wouldn't be doing it if someone in the ECB hadn't hinted that there might be a chance of success.
Central banks don't do commercial banking, at least, not any more. The Bank of England phased out its last commercial activities in the forties I believe. Central banks are merely regulator of and lenders to other banks. So is VW applying to become a bank?
The Coop has had a banking arm for a very long time of course, and I know Tesco and Sainsbury have "banking" subsids which are more like financial services companies. Can these companies take deposits and hence manufacture money too? The thought is horrific. No wonder Leahy demanded and got a personal audience with Mervyn King. I don't like Gordy much, but I certainly don't want government by Tesco: they have far too much power round here as it is.
The implication is that any big company will be able to blackmail a taxpayer baleout, wheras the small ones just get squeezed towards the wall. The big ones are "expletive deleted"s when it comes to paying little ones anyway. Perhaps an absolute right to payment within a month should be enshrined in law.
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#236, that article contains too many false premises and contradictions to list to remain on topic here. I see a lot of received wisdom regurgitated in the press, by the BBC too, which is at odds with what has been happening over the years. We need to avoid paying too much notice to analysis that disagrees with the past. It will have nothing useful to say about the future.
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it's all broken, no matter what which way you look at things.
It's no good trying to prop up a way of life which has brought the world to it's knees.
The world needs a whole new and fresh approach, and for it's leaders to completely change their way of governing. Innovative intervention is desperately needed.
Drastic action is needed NOW-there is no place for rhetoric. The world needs clear simple speech and ideas. If any leader can't do that they need to step down immediately.
Inexperienced doesn't necessarily mean inability-it can produce innovative new ways around problems.
Conversely, experience has proved to be disastrous in recent times.
Whatever happens, we need serious solutions, not ad hoc, airy fairy discussions.
And a complete lifestyle shift.
Just like the young relative of mine who had the cheek to ask for me to lend him£800 for holiday in India next year. It's already booked! Guess what I told him?!
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174#
So you agree the UK is not the only country in recession so why did you post it? Germany's 1st Quarter was up 1.5% so they will only have grown .2% in the next 3 quarters! Forecasts for 2009 ranged from 1.6 to 1.9 now you tell me it is now1.1,bet they don't come near this figure. USA's 3rd Quarter showed -0.4% so if their last quarter is also minus they will also technically be in recession.
Neither of these countries being or going into recession is of comfort to anyone and you may not believe it but to the best of my knowledge GB is not their PM.
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Robert,
when will the BBC start reporting the truth? none of the bailouts are going to work in the long run, you cannot spend your way out of debt! and when the goverment say they are going to borrow X amount of billions they never say who from ! that will be from China then! let me think for a second ! just about everything these days is made in China! does this seem possible spending borrowed money on goods produced in the same country that lent you the funds in the first place !
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#188, PetersKitchen - why do you have problems with definitions?
Firstly, a negative number IS a number with a minus sign in front of it, that's kinda the definition of one.
Secondly, +9 isn't a negative number( China isn't growing at 9% but never mind ). +9% is a POSITIVE number - hint +9% isn't less than zero.
Finally, just like "my" definition of a vanilla CDS, "my" definition of recession isn't actually my definition, it is THE definition.
I pity whatever children you have inflicted your "learning" on.
#214, it really it extraordinary that someone feels qualified to pontificate whilst getting even the basics utterly wrong.
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#224, ok that is pathetic.
In the UK the economy is SHRINKING, in China is not growing as fast. Why are these basic concepts so hard for you to grasp.
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#222, no he is simply wrong. Britain IS in recession, China isn't. Full stop, nothing to see, End of Story, QED.
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All this unbridled hostility to bankerrs has to stop.
It should now be clear that bankerrs are Robbin Hood types who shared so much wealth with the poor as a result of a visitation by the ghost of christmas past ,that they now find themselves out of a job ,having emptied their respective banks to a greater degree than either the brinxmat robbers or the government .
Never was so much debt authorised by so few for so many...at the going down of the BOE interest rate we shall remember them...
The daaam busterrs that regularly flew past the FSA quack quack implacements risking their final salary pensions and bonuses, so that Britain would become a land where the bankrupt could hold their heads up high and say fearlessly "i did it my way"and "wheres my bail out"
Each year at the appointed hour we shall have a moments silence for these brave bankerrs ,who thoughtlessly threw themselves on top of dept. bonuses, thus shielding their typing pools from general rampant inflation ,for which they are now receiving psychihatric advice and index linked pensions
We need to open an imperial debt museum so that future generations will know what it was like in the tranches and going into the arena everyday by british rail not knowing if the credit bubble would explode delaying the cheese and wine partys
Letters sent should be lovingly preserved
dearest Cyde,i may not be coming home ...the FSA are asking too many questions about my thermal lance and where i got the aluminium and oxgen bottles from ,take care of the children and tell them the truth ,dont lie that i am in wormwood scrubbs they will find out sooner or later that i am ...a tax exile in Litchtenstein
love Bonnie
ps If the children should ask why i did it, tell them it was the economy stupid ,and change their maths teacherr.
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#197, You can call it whatever makes you feel like the one hard-done by. Want to call it criminal, feel free to bring a civil prosecution - just the tiny matter of showing the actual law broken.
The advice about national savings is a serious one. You can protect yourself against inflation or come back in a couple of years on this blog and whine about how your savings can't buy you anything. Be in no doubt, the UK are about to try and inflate its debts away. Now Brown is beating up on credit cards to start lending "criminally" again.
As for our friend who was earning 20k but decided to have a property empire, I will bet money that the information either by him or the property developers was fraudulent - and i mean actually fraudulent as opposed using the word as an insult - and that the bank - in this case as in others - was the VICTIM not poor Mr "Somebody should regulate against me being a greedy idiot". I'll bet money until it went belly-up he was boasting about it down the pub.
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#246, inflation linked final salary pensions? Think you are confusing us with public sector workers who are pretty much the ONLY people who such like. Of course their pension fund is in the hole for something around 700bn GBP.
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Over production and conspicuous, even ostentatious, consumption are American concepts that have been exported to the rest of the world.
Like the fabled sower in the Bible, some (in the Western countries) fell on fertile ground, took root and grew like weeds. So pervasive is its growth that it even coloured the Western Socialist ideals to the extent that it is OK to carry on consuming conspicuously even if that person is not employed and that the State will pay for that consumption !!
Some fell on hard ground like in the Far East where the tradition of savings had been ground into them by millennia of floods, famines and droughts. Although, to be fair, there is a lot of conspicuous consumption in the Far East too; especially by the younger generations. And there is a disgusting amount of ostentatious spending by the new rich there.
And some fell on stony ground like those third world countries where getting the next meal is the main concern for a large proportion of the people !!
The Americans first practiced this on their own people and when that market was saturated, they spread that outwards in ever increasing circles to keep their factories over-producing.
The Europeans then jumped on the bandwagon and created their own ever increasing circles. This caused interference patterns (basic GCSE physics) and resulted in the creation of NAFTA and the EU as protectionist blocs.
The Japanese, after their difficult post-war years of the '50s and '60s, took this up so enthusiastically that they have now become the greatest proponents of this black art in the world. Anyone who has been in Tokyo will know what I mean. Everything is presented very elaborately and cost far more than the product is really worth.
All this works so long as there are still countries that have natural products that are in demand but have little or no industries of their own.
In the last 20-30 years, great swathes of the world have industrialised and produce their own products, often far cheaper that the "industralised nations" could. This resulted in conflicts and claims and counter-claims before the WTO.
To make matters worse, the ever increasing conspicuous consumption had to be paid for somehow and this led to ever increasing pay demands that priced their ordinary workers out of the market. This resulted in many of the companies in the "industrialised nations" exporting their manufacturing to the cheaper countries whilst encouraging the same or higher levels of consumption at home. This could not be sustained because (real) money flowed like water out of these once rich nations to the NICs (Newly Industrialised Countries).
To counter this trend, however temporarily, the G8 nations began to manufacture "funny money" to pay for the goods and services from abroad. Debt (national and personal) soared to incredible heights. The credit bubble grew and grew and grew !!
Sooner or later the bubble had to pop and it did so last year. Credit was no longer available or available only at very high cost. Demand fell when there was no more money to blow on frivolities !!
The NICs, seeing the fall in demand, began to look for other ways to sustain their way of life. Fortunately for them, they had two safety nets. They had the cash mountains (or hills, in some cases) from the exports that the others so cheerfully grasped at in the "good" times. And they had the fact that, although they had a greatly increased middle class, their infrastructure were still quite primitive.
So they focused their spendings inwards which was beneficial to them because it kept the wealth inwards and increased the quality of life for their citizens. Meanwhile, they still manufactured and exported, albeit at a much reduced level and carried on earning foreign money.
Things are different for the G8 countries. They had lost much of their manufacturing when their workers priced themselves out of the market. They had also lost most of their hard cash and had been relying of debt to finance their good life. And their people had been addicted to that level of spending and the good life.
How will any socialist system pay for their current standard of living while not having any real income in hard cash ?? More borrowings are not an option since they have already borrowed to the hilt !!
The soviet/communist system relied on and depended on all its citizens, with the exception of the lucky few and the Party faithful, to live in the lowest common denominator. Council/sink estates become the norm rather than the exception. Productivity and efficiency falls because the people are disincentivised. Why work hard only to get the same as the lazy sod next door who does nothing ??
If this sounds like more doom and gloom, perhaps it is. Unless everyone is willing to make swinging cuts in their expectations and life styles, the worst case scenario may happen !! A little foresight and "saving for a rainy day" helps enormously, too !!
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#241, there is a huge difference between might be and is. Germany might go into recession. The US probably will go into a short recession - ie a couple of quarters.
Britain **IS** in recession - note the present tense and that it is definitive and not conditional or a matter of belief in the future.
When you look at the lacklustre growth predictions for EU growth that is mostly the UK's fault. Mr Brown is simply lying to you about what is going on in the world and the UK's place in it and it isn't even subtle:
http://1.bp.blogspot.com/_mJmwQtPmusk/SRYHo2QhekI/AAAAAAAADPY/SyA1e0-CZFs/s1600-h/GDP--Brown-Miracle.jpg
PS I assume unlike PK that you are not someone who confuses slowing growth with contraction. One has a negative first derivative and the other a negative second derivative.
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But it's a bit like a blood transfusion for an ailing patient. It'll provide a bit of extra energy, but it doesn't deal with the underlying cause of the disease - which in this case is a global contraction of lending.
The underlying cause of the disease was excessive lending in the first place, against assets and income that did not exist. Slow growth in lending and money supply would have kept the patient healthy.
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#246 FYI, Litchtenstein is no longer a worthwhile tax haven ever since the Germans have been hacking in and rifling their databases almost at will.
They probably have their panzers at the border and their Luftwaffe flying around just in case any tax exile should try to escape !!
Just thought you'd like to know !!
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#252, apparently what is a serious criminal offence for businessmen is perfectly ok for public "servants".
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252 iskandar,if the Germans have any luftwaffe left itll be hovering over wall st ready to show them what a real subprimessist can do when hes been sold a lehmon sub prime mortgage package ,leaving lichtenstein off the hook for awhile ,so if you are planning a visit ,do it now while their panzers are down
I think we ought to cut short this humour which the Germans might not share, preffering to send the last of their doodlebugs which will traumatize my little hampster only just recovering from guy folkes night .
Come to think of it was guy folkes a German ...no .. silly me. im thinking of volkeswagon which has just taken our hedgefunds for 6 billion pounds to build a porch offroader with a 27litre engine and tracks.....to get arround proposed European road pricing they say .
So,... if we see any giant 27 litre porches coming through the channel tunnel with strange swivelling exhausts on top pointing forwards ,we shall just tell them to stop and get off the road or its 3 fixed penalty points.And with a friendly "ich bin ein berlinner"and off road directions to Buckingham palace we can wave them on with a white hanky .
The Queen will know how to deal with Big Friendly Germans over a cup of tea and keep them off the lawn .
Its good that Gordon Brown is moving ahead of the economic agenda tensions emerging between nations [ humourised above] as a result of this financial chrisis and is focusing on the more fundamental ideal of a globalisation which is not to be confused with Americanisation /Romanisation
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@159
I was stood in a shop the other day and while standing in the queue, to younger ladies where in front of me.
One said to the other can you really afford that, Her reply was no not really, but i now realise i could nt aford the 8000 i all ready have on my credit card. and laughed.
We forget to teach them the value of money
This brings me on to the point that GB thinks where in a better position to coupe with this finacial crises......
Well is bugdet deficit may well be in a better state than some countries, but this crises is about debt per head of population. its not just what he as spent but what we all have spent. and as we have twice as much debt as germany and usa. it hits us twice as hard.
As the saying goes....................
YOU AINT SEEN NOTHING YET
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#255, our current budget deficit as a percentage of GDP is currently better than:
India, Malaysia, Pakistan and Egypt.
http://1.bp.blogspot.com/_mJmwQtPmusk/SRmRvrh_poI/AAAAAAAADQI/O24UIc7jHfw/s1600-h/economist+indicators+6-11-08.gif
Afraid GB is not quite telling the truth. I know Gordon Brown lying about economic facts, who would have thunk it....
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Having to work, and then spend all evening reading this blog means I dont have research time.
I notice here that the Fed is issuing commercial paper direct. I understood that Sarkozy also was instituting a French version of this through a separate government department.
Does this bypass of the frozen interbank lending system actually work to extend credit lines to companies or not?
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WASHINGTON ? When the government said it would spend $700 billion to rescue the nation?s financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool. Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.
www.nytimes.com/2008/11/12/business/economy/12lobbying.html
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#257, no the Fed is taking commercial paper as collateral against lending to banks. It's a liquidity measure. Bank A owns some commercial paper, needs some cash, swaps the commercial paper for cash with the fed - with suitable haircut.
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Given Okun?s law, every excess point of unemployment above 5 means a 2% output gap. Right now, we?re at 6.5% unemployment and a 3% output gap ? but those numbers are heading higher fast. ....
So we need a fiscal stimulus big enough to close a 7% output gap.
Remember, if the stimulus is too big, it does much less harm than if it?s too small. What?s the multiplier? Better, we hope, than on the early-2008 package. But you?d be hard pressed to argue for an overall multiplier as high as 2. When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.
http://krugman.blogs.nytimes.com/2008/11/10/stimulus-math-wonkish/#more-1029
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As usual, the problem with money supply is
that it has to be done from a central point,
resulting from overutilization of government
printing presses.
We should move forward to the "socialist" solution
of allowing people to print money at home on
their computers.
At the very least, it would stimulate sales of
computers.
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Whether capital is put into or taken out of circulation is the variable that decides what is a Keynesian stimulus.
http://www.alternet.org/workplace/106410/tax_cuts%3A_th e_b.s._and_the_facts/
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So the G8 are going to tell the G20 how to review their financial situation and manage their economies better, are they ??
Greater hypocrisy hath no man than that they tell others how to be clean while eyeballs deep in the doo-doo !!
They can't even manage their own funds -
"For the first time in 14 years the auditors' opinion on the European Commission's accounts is "unqualified" - in other words, they deem the figures to be reliable. Yet they highlight some serious errors in the underlying transactions."
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229 Thank you
laughingblacksheep keep flying the flag for Bankers if you wish
Quoted from wikipedia:
A recession is a contraction phase of the business cycle, or "a period of reduced economic activity
Please note the 'reduced' not negative part of the definition. Hence China is experiencing recession although still expanding.
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Its amazing but the closet communist who was as a young student so tied to spreading marxism, got into the Labour Party [the natural home of communists who want to get power] that he now has the opportunity of a lifetime to nationalise everything. Its his dreams come true. Bet he cannot believe it!!
This is, as another correspondant says, going to end in tears. These guys simply think we can borrow our way out of this - der....what has caused this in the first place?
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#264, again... Very slowly.
Growth is the rate of increase of economic activity. If economic activity is reduced then the rate of increase is negative ie economic activity has decreased. Hence growth is negative.
Look at a number sequence:
100, 150, 187
The growth is 50% and 25%. Note they are both positive numbers.
100, 100, 100
growth is zero. Note not negative
100, 50, 25
growth is -50% and -50%.
This is primary school arithmetic - at least it was. What the hell are you a teacher of that you managed to be qualified without learning substraction, division and the difference between getting bigger and smaller?
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You know, the very last thing we need is international co-odination.
Everypne now seems to accept that 'boom and bust' is a fundamental part of our way of life.
To minimise overall damage, what is really needed is frequent mini-boom and mini-busts - to avoid the need for any massive corrections.
Whereas, if the whole world get their boom/bust cycle in to sync, then we really are doomed.
If we are all in sych, we will taking the first step towards the envitable collapse of everything. But, maybe this is what some people want?
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You must be one of those political bankers, the ones that deflect a challenge to their original statement with another statement baring no relation to the first.
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The 2001 recession, the 1990 recession, the 1980 recession, and the 1973 recession all contained positive quarters
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#135 - thanks for your kind reply! I'm just upset generally as I watch my livelihood evaporate!
#159, 172, 175, 184 - The balme culture is splitting the country down the middle, not good and playing right into Gifted Gordon's sticky fingers. It's important to bear in mind that banks are businesses, their job is same as ours - make money. A businessman's job is to fund his firm adequately and make the best use of that to turn a profit, so the two are identical in principle.
Everything is FINE so long as GB's 'macroeconomics' really are stable. The books balance however 'irresponsible'the lender or borrower may appear to be in hindsight. Take that away and the whole thing crashes. Whether you have a loan of £1000 or £1m is only an issue if you cannot service the debt. The guy who bought to let, for example, had done his sums and it stacked up - until the rug was pulled form under his feet by the complete collapse of the housing market (and everything else).
Whether the man was being dishonest or just dreaming about his precious macroeconomics (I suspect the latter although they amount to the same thing) is immaterial really. A 3 year old could have figured out that the net flow of money was OUT of the UK. Unless we start as a nation bringing it BACK were history.
In terms of the knock-on effect and blame culture what I really have a problem with is that a lender can use the full might of the court to recover his loss and the businessman gets shafted. No fallback position.
There IS something to blame if you really want to point the finger - the legislation that gives the lenders the commanding position when it all goes wrong and the fabulous judiciary that preside over itthe execution of it.
I have persistently lobbied for a MORATORIUM on debt recovery et alia because of this but I seem to be the only one.
A government CANNOT be allowed to wash its hands of blame for a chaotic and frightening situation like this and throw the entire burden on the people and anyone backing them at all needs their head examined. I strongly advocate a revolution in thinking if not in fact in this regard.
Stick together and fight for something decent.
GC
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#268, no i am one of the "mathematical" bankers that can count
Economy contracts so it is x at the beginning of the quarter and y at the end, with y less than x. so y - x is less than 0, hence the growth ( y - x ) / x is less than 0 as x is positive.
So lets tick off some "issues" you are having:
1) Can't tell the difference between positive numbers and negative numbers,
2) Can't tell the difference between the size of something and the rate of change of the size of something
3) Can't tell the difference between a payout of something and a price
4) and apparently can't read or write
If you really are a teacher, I fear for the UK's children.
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#268, no i am one of the mathematical bankers that can count
Economy contracts so it is x at the beginning of the quarter and y at the end, with y is less than x. so y - x is less than 0, hence the growth ( y - x ) / x is less than 0 as x is positive.
So lets tick off some "issues" you are having:
1) Can't tell the difference between positive numbers and negative numbers,
2) Can't tell the difference between the size of something and the rate of change of the size of something
3) Can't tell the difference between a payout of something and a price
4) and apparently can't read or write
If you really are a teacher, I fear for the UK's children.
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#269, there was no 2001 recession.
1974: 1.4% fall aka ***-***1.4%
1975: 0.6% fall aka ***-***0.6%
1980: 2.1% fall aka ***-***2.1%
1981: 1.5% fall aka ***-***1.5%
1991: 1.4% fall aka ***-***1.4%
From the BBC's own website:
"However, technically speaking, the UK economy would slide into recession when it experiences two successive quarters of what is known as "****negative**** growth".
For this to happen, the total amount of goods and services produced by the UK - known as gross domestic product (GDP) - would have to ****contract**** on a quarter by quarter basis for a total period of six months. "
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Laughingblacksheep.
I'm sorry to say that you are banging your head against a brick wall trying to explain recession to peterskitchen. The point you are making is clear to me, however not all people are maybe as numerate as yourself and some of the examples you are using may prove to difficult to grasp.
Recession is the reduction of output, not the reduction of rate of growth of output. The use of the terms 1st and 2nd derivative may be confusing for him.
Therefore growth of 9% on top of 10% growth the year before is still a growing economy
Negative growth of -1% on to of 10% growth the year before is a recession.
Of course you are right about the two quarters rule.
If you applied his definition of recession it would mean that the UK is frequently in recession, though it does feel like it sometimes !!!
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#274, but surely the idea that if take a bigger number away from a smaller number then you get a negative answer is not that hard to grasp. We keep on getting told that having near 100% pass rates at GCSE doesn't mean dumbing down but if a ***teacher*** cannot do basic arithmetic.....
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#249 : ishkandar
This post should be required reading for anyone wishing to make a serious comment on the state of affairs we are in.
Let's really get to the nitty-gritty and ask whether our almost-universal dismissal of this explanation of events is really based on a genuine intellectual rationalisation that shows it to be wrong.
Or is it more that the consequences of it being right are so damaging to our egos that we must adopt a more manicured view of things, no matter that this may not stack up, and no matter how much of a road-block it may be on the road to recovery?
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Comment249 : ishkandar
This post should be required reading for anyone wishing to make a serious comment on the state of affairs we are in.
Let's really get to the nitty-gritty and ask whether our almost-universal dismissal of this explanation of events is really based on a genuine intellectual rationalisation that shows it to be wrong.
Or is it more that the consequences of it being right are so damaging to our egos that we must adopt a more manicured, self-congratulatory view of things, no matter that this may not stack up, and no matter how much of a road-block it may be on the road to recovery?
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Comment264 : PetersKitchen
"Quoted from wikipedia:
A recession is a contraction phase of the business cycle, or "a period of reduced economic activity
Please note the 'reduced' not negative part of the definition. Hence China is experiencing recession although still expanding."
As explained before, you are confusing "level of economic activity" with "rate of growth of economic activity". China, according to your figures, is experiencing a reduced rate of growth of economic activity but its level of economic activity is still increasing. So it is not in recession, by any definition.
The UK on the other hand experienced in Q2 an actual reduction in its level of economic activity. The movement between Q1 and Q2 was negative. It is also confidently expected that Q3 will show a further decline in the level of economic activity, and if this occurs we will have satisfied the commonly held requirements (see below) for being described as being "in recession".
The next paragraph of the wikipedia article contains:-
"Some business & investment glossaries add to the general definition a rule of thumb that recessions are often indicated by two consecutive quarters of negative growth (or contraction) of gross domestic product (GDP)."
This rule of thumb has become the common currency for deciding whether or not economies are in recession.
Maybe you have chosen a different rule of thumb - perhaps your definition is "when the rate of growth of an economy is lower than the previous quarter's rate of growth" - in which case you are talking at cross purposes with laughingblacksheep, and indeed with most other commentators.
However it may just be that you are an extreme version of modern man to whom not admitting being mistaken is far more important than actually developing ones knowledge and understanding.
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Are we witnessing the Systematic Destruction and Appropriation of Corporate UK by the Unholy Trinity comprising the Banks, Hedge Funds and Private Equity?
Basically the process appears to be as follows:
a. BANKS reduce or withdraw funding to Corporate UK
b. HEDGE FUNDS attack and decimate share prices using their short selling strategies
c. PRIVATE EQUITY buys Corporate UK at knock-down prices
d. BANKS finance and support HEDGE FUNDS and PRIVATE EQUITY
e. LOSERS - UK Limited, Employees, Homemakers, Savers, Pension Funds, and Taxpayers.
f. LOSERS - The reputation of Government, FSA and the Bank of England at their apparent refusal to accept that any such Systemic Threat is directed at our economy.
It would be interesting to identify the volume of lending between BANKS and HEDGE FUNDS & PRIVATE EQUITY versus lending to Corporate UK.
Are my concerns reasonable?
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232 and 232
Reporting base case and a balanced view of up and downsides is fine - my point if you are capable of understanding it is that the downside is emphasised seemingly at every opportunity and drives down confidence and therefore can become self-fulfilling.
You may work for hedge funds, which would explain your support for the reporting of the downside - worried about my suggestion for a thorough journalistic investigation of hedge fund political contributions and appointments, are we?
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#278, i feel like the guy arguing with this mule:
http://www.youtube.com/watch?v=Jmrd1MbNkFs
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278
Your 2nd last paragraph says it all and my post have tried to explain this
The US does not define -2Q, as it chooses another way to fix the stats - The UK chooses the 2Q way.
I refer you to the fact that a recession must start from an economic peak. If you follow that logic, and I am not sure your may, then you can still have economic growth and be in recession.
However, perhaps you and laughingblacksheep should contact Michael Donnelly of Merryl Lynch, who will enlighten you both with basic math/economic dynamics
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I think Roberts comment on tax cuts warrants a separate article.
If a government makes tax cuts who will they benefit most and are these likely to be the people most affected by recession?
As Robert states, where is the guarantee that tax cuts will stimulate the economy. In all likelihood the money will either be offset againist debt, hoarded for a rainy day that is certainly coming, or added to the personal stockpile of someone who didn't actually need it in the first place.
Tax cuts are being touted because they could possibly put money in peoples pockets immediately, and the cynics might say, boost popularity for the government before an election.
The question is who will pay for these tax cuts and for how long? It can be assumed that the government is hoping for a short recession followed by economic growth and increased tax revenues, but even if this is the case the country will being paying for these cuts through reduced public expenditure for some time.
Would it therefore not be more prudent to bring forward planned projects using public expenditure over the next 10 years to be accelerated over the next 3 years. These would provide a stimulus using money that we already had planned to spend, for example with our national programme to refurbish or replace all schools over the next 10 years.
Unfortunately maybe the real problem is such a plan would need to have been initiated some time ago and doesn't really fit into a 5 year election cycle!
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#278 Peterskitchen
I can now see why laughingblacksheep has become so exasperated with you. In on erespct you are right - but starting with the wrong premise.
A recession starts with a peak in GDP output, once it falls you are indeed in recession. However it does not begin with a fall in rate of growth. The whole first and second derivative thing is a simple concept passed to me many years ago in 'O' level maths.
Economists were unsure whether or not call a recession here until recently as the rate of growth had slowed to under 1%, eventually going negative last month.
Using your premise we have been in recesssion for a couple of years now as the rate of growth has been falling quarter on quarter.
The truth is once that rate of change has gone negative that a recession is called.
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#282, yes pretty much everybody defines it the same way. Even the posts you have made define it the same way. Of course to someone who doesn't think that negative numbers have minus signs and thinks that small number minus a large number is positive isn't going to be able to understand division.
Walk before you can run....
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Comment 282 : PetersKitchen
You must have learned your communication skills at the same school as Gordon Brown. You know, when cornered with having to admit a mistake, like boasting about ending boom and bust, he denies that this was what he was boasting about. His meaning, he says, was ending Tory boom and bust, an achievement he can still lay claim to, since what we have had under his regime is Labour boom and bust - not Tory boom and bust, geddit?
How can someone who thinks it correct to operate like this have become our Prime Minister?
In your case, you had the opportunity several hours of wasted time ago, to make the point that the 2 quarter rule of thumb, despite being common currency in the UK's discussion of this crisis, is not the only means of arriving at a conclusion that an economy is in recession. But no, not you. You prefer to write critical posts that raise doubts about the accuracy of others, presumably knowing full well that their accuracy was not in doubt - only that they were discussing from a presupposition that isn't written in tablets of stone.
Quite pathetic - go and get a life that doesn't involve exasperating others.
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285 At last, so walking before you run will means less posts, more thought from you I hope. Dont worry about your numbers, It cant be helpful for you relying on calculators and a PC. If you use mental arithmetic more you will surely build upon your IQ
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#286, i refer you to my original answer.... No sorry Kevin Bacon wasn't in footloose.
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250#
I see you do not like to own up when you make a mistake or when you are proved wrong.
I had no quarrel with your statement that"UK is in recession",although technically it is'nt yet because it has at the moment had only one quarter of negative growth,but my point was it was not the "only" country in recession.
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This comment was removed because the moderators found it broke the House Rules.
#289, ok we obviously have a different definition of "proof" just like apparently we have a different definition of negative.
Apparently, the FACT that none of the countries you have mentioned have had ONE negative quarter let alone two means in your definition of "proof" that you actually they have had two.
Apparently, the fact that Q2 is being revised downwards by the ONS - it was initially exactly 0% growth with the sole positive input coming from the public sector - and q3 is solidly negative, that is "proof" that the UK isn't in recession.
Apparently, when you take a small number away from a large number just because the result has a minus sign doesn't make it negative, well I guess I have been using new-fangled calculators and PCs too long. In good old mental arithmetic it is still positive.
I must be out of touch with the common man's idea of "proof". Thanks for pointing out the error of my ways. Maybe you can show me how 1+1 doesn't equal 2 because my calculator keeps on telling it does....
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291#
e.g. New Zealand -0.3% 1st Quarter,-0.296% 2nd Quarter= Recession, buy a new calculator.
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291.....it was initially exactly 0% growth
I dont know whether to laugh at the exactly bit or the 0% Growth
Or whether your replying to another poster thinking its me?
Have I rattled your cage that much?
Sorry, 289, laughing'BS has you mixed up with another poster.
Perhaps I will let you explain to him that math is a pure science and therefore, 0% growth can not exist. :-)
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Robert,
regarding VW, I'm afraid you got it wrong in the detail. VW is a bank, or actually that part that went to the EZB (volkswagenbank).
Many car manufacturers on the continent set up banks, which are formally open to customers to my knowledge, to support their credit business with car clients. There are also banks under the name of Peugeot (Banque PSA Finance S. A.), BMW and others if I remember properly.
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Honestly, kids these days don't know their first derivative from their second. Is it any surprise we are in such trouble?
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#292, OK finally some actual facts... I didn't notice NZ in the list - I also didn't say it wasn't but maybe that all got lost in the argument.
You should add Ireland too, who I believe are in recession too( I may be wrong but if they aren't then they will be next quarter ). But Germany, Japan and the US are not as of today in recession. Some Micky Mouse economies on the edge of the global economy are.
#293, I have decided you must be a troll. No one is actually that thick. You going to pretend that despite all the crap you have written what you really meant to argue about is whether that 0% can be counted as growth or not? Won't be responding to you anymore just like i don't respond to that other genius boiler plated.
#295, would you feel happy being in a car where the driver thinks that distance covered, speed and acceleration are all the same thing? "The car is new gov, look it's only ever done 0 miles an hour but is currently going at a speed of 10,000 miles!!!"
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#292, pity you didn't wait a day....
http://news.bbc.co.uk/2/hi/business/7726162.stm
Now you can make that statement about Germany!
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297#
You can't leave it alone even when you are wrong!
Your 174#" Germany is growing" remember that.
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#298, apparently you have a problem with english.
I posted a link that said yesterday that Germany was formally in recession. The day before yesterday it wasn't.
The reason I said "pity you didn't wait a day..." was because if we had had the same conversation yesterday and not the day before of course you'd have been right and i would have been wrong. Unlike you and your friend, being "right" by any means isn't the point for me. Or would you like me to try and wriggle out and talk about how I was really talking about Q1 and Q2 or the whole year or some crazy crap about what is growth?
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The rising taxipayer burden , is just the name of the bill we intend to send back to the future ,Dont be surprised if ......
Bright and early next morning we get our letter back..... Marked
Return to spender
Adress Unknown
No such number[ numbnut]
No such phone
SWALK [your credit rating is at risk if you do not keep up re payments on your folly ]
Whats the difference between a British and a German recession ?and how would we recognise a British recession or would it pass like a solar eclipse .
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One of the problems suggested with proposed tax cuts is that anybody rich or poor who benefits is likely to sit on the money rather than spend it. Therefore why not cut VAT, that way money has to be spent to save the tax?
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It is madness to think that the ever increasing toxic debt that should be written off can be funded by government bale outs funded on the never never because this thing is so global and is in its relative youth. The best way to sort the situation is not to front up to the economic forces with even more government borrowing but to swim with the flow and let the large non banking business institutuions who are plainly over geared and basket cases such as general moters and taylor wimpy into insolvency with controlled restructuring in mind and for these scaled down business's to be resold if they have any residula value at realistic values. In the meantime call in the banks globally and really get tough offering full state support for 10 years but only if they agree to write offs of toxic debts and full transparency both existing and maturing. Any basket cases like Barclays who shun the newly agreed international rules should be warned that they will sink or swim themselves. Yes lots of unemployment and hardship but you will get to grips with the problem quicker and start the rebuilding process quicker but this must all be done with tighter regulation and prudency. We have to own up to our imprudent borrowing and lending and accept the consequences in terms of reduced standards of living in the short term- to make do across society and accept that deflation will now happen. If we just carry on pussyfooting around as we are we will just prolong the agony and continue to pump valuable recorces into ailing and sick business structures which will slow urgently required restructuring.
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# 296
You're right about Ireland. We went into recession before anyone else. Not sure that's something to boast about, though! Unfortunately, I don't think we'll be the first to emerge on the other side.
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I do not agree that the cause is the contracting of lending by the world banks. Many countries have been living beyond their means. We in britain have been doing that with the help of the banks and the government have been borrowing like there is no tomorrow. The day of reckoning has arrived. The problem is that an infusion of spending whether funded or not with not help us. We have to live within our financial means as a country. With the people stopping spending, the banks reducing lending and the goverments taxes reducing from business and especially bank profits we will have to cut goverment spending urgently or the country will be bankrupt.
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