Another Black Friday
There's a great deal of grim news around this morning.
I'm hearing very bleak reports about prospects for Entertainment UK, the wholesaler of music, electronic games, DVDs and books, that's owned by troubled Woolies.
A significant slimming down of Entertainment UK now looks likely, I am told - which would be bleak indeed for its employees, who number well over 1000.
Also, HBOS - owner of the Halifax - has reported a significant increase in the charges it takes for bad debts.
If you add together HBOS's investment losses and securities losses with an incremental impairment charges on mortgages, personal loans and corporate loans, there has been a £3bn rise over just the last two months in all these categories of loss.
So that's £3bn of additional loss incurred by HBOS, owner of the Halifax, since 30 September.
Not nice.
The most horrible trend is in lending to big companies. For the first 11 months of the year, the impairment charge on corporate loans is £3.3bn, an increase of 560% since 30 June.
That says a great deal about how the economy has deteriorated since the summer. But it also implies that HBOS's corporate lending department was taking excessive risks.
For the year as a whole, HBOS is also going to suffer a loss on unsecured lending to consumers in excess of £1bn.
As for the impairment charge on mortgages, that's £700m for the first 11 months of 2008 - but rising very fast indeed.
Finally, there's the rejection by the US Senate of the proposed $14bn bail-out of the giant American car manufacturers.
That's causing massive anxiety in the British car industry - and is particularly alarming for Vauxhall, the British subsidiary of General Motors.
Vauxhall employs 5,000 directly and countless others indirectly at suppliers and distributors.
My understanding is that the Business Department views Vauxhall as "viable" - which is its test for whether it should receive state support, if the worst were to come to the worst and General Motors itself were to collapse.
So the moment when we as taxpayers start providing financial help to individual motor manufacturers, to keep them alive through the acute phase of our economic contraction, is fast approaching.
UPDATE 1300 GMT:: The administrators to Entertainment UK have announced that they are "scaling down" efforts to find a buyer for the wholesaler and are making 750 employees redundant. It looks very unlikely that this supplier to the big supermarkets will survive.
There will be pain for book publishers, electronic games creators, DVD publishers and music businesses. And there will also be disruption to retailers, notably Zavvi, the chain of music stores.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~48~RS~)
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Don't worry the stock markets will rise again.
I say this because it is now apparent that the Government is commitment beyond the point of no return.
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A package for the US car makers will get approval before Christmas. It would be a very surprising outcome if the car makers are let to fail.
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I think it would be a salutory lesson to us all if the American motor industry was allowed to go bust. They need a reality check. The corporate jets are just the most obvious form of pampering. They have not come forward with a offer of massive salary and benefit cuts and redundancies so the industry can wind down gracefully. The also produce gas guzzling cars that noone wants any more. Call their bluff. The taxpayer cannot protect everybody and should not do so because of blackmail. Fortunately I do not live in Detroit.
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Not sure about the Senate decision. No doubt the Democrats will try again in January with an enhanced majority and a "dynamic new president". I wonder how hard they tried on Bush's watch.
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Forget Black Friday...It`s Black 2009 I'm worrying about.
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So the news continues to be bad from business. Fortunately the news from the political arena is better. A debate has started about how best to deal with the economy. The first, encouraging sign that future decisions will be based on winning an argument rather than blind panic and herd mentality. Germany has broken ranks with the prevailing keynesian approach, the Senate has chucked out the auto-industry's pleas for subsidy. Out of argument will rise better solutions, although not painless ones.
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I see so much contradiction that my confidence in the Government is totally shot. There just does not seem to be a coherent plan of action yet they continue to hose our money at the problem.
As asset prices are inextricably linked to this problem, and considering the Government have bought the banks; I believe the Government need to state their aspiration for mortgage lending in 12 months time in terms of Loan-To-Value (LTV) ratio, multiples of annual income, and loan duration. If you agree please sign this petition:
http://petitions.number10.gov.uk/LendingReform/
We’re either looking at a real crash in house prices (not just flats and apartments) or a return to irresponsible and risky lending. This begs the question; do we believe that the Government has a real commitment to lending regulation and reform?
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The more losses the banks reveal, the clearer it become just how unsustainable their whole business model was. The problem is that all the years of cheap, easy credit made it all too easy for poor performing firms to ignore their problems and now we see them going to the wall.
Vauxhall and Opel (GM Europe) are both viable concerns after years of investment and restructuring by GM. Unfortunately the last assessment of the German government suggested that Opel (and by implication Vauxhall as well) would not survive outside the umbrella of another major manufacturer.
The Opel bosses also went to the German goverment for potential aid and were "shocked" when the Gertman government suggested that Opel provide something in return, or even be nationalised.
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I'm going back to bed Robert......
Someone wake me in April please.....
April 2011!
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Is it not time we started to subsidise farmers to grow as much food as possible, after all we do not need to replace the car, but food tends to go off, assuming we don’t eat it?
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And here I was sat at my PC thinking Crash Gordon had saved the world...oh well.
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I've got it - let's nationalise the UK motor industry! That would safeguard all the...hang on, I think we tried that before once. Remind me what happened then.
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FromRP:
"So the moment when we as taxpayers start providing financial help to individual motor manufacturers, to keep them alive through the acute phase of our economic contraction, is fast approaching."
All on the whim of a discredited prime minister and his bungling chancellor.How can anyone trust these people to manage even a whelk-stall?
Answer:Because the state organ has been irresponsibly telling the sheeple whatever Brown wants them to hear instead of providing the public with unbiased commentary.
The government response to the German politicians deriding the governments plans was a joy to behold :)
It must have stuck in the BBC`s craw to have had to report such delightful comments from the no-nonsense Germans :) :)
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The American government won't let GM and Chrysler fail, expect to see some 'emergency' legislation to bypass the Senate.
Or a change in the rules to allow GMAC and Chrysler's financing divsion to become Holding Banks and therefore eligible to dip their snouts into the trough of the banking bailout funds.
I'm not sure why the numbers from HBOS are seen as terrible, after all I thought the market had already priced in the worst case scenarios and this bad loans stuff is old news surely?
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I'm afraid that we still haven't got anywhere near into the depths yet. Yes, the availability of credit probably can't get much worse and that's a factor, but I believe it to be the symptom of a deeper malaise;
* our wealth creating activity is, on the whole, pretty much rumbled.
* our public sector operates to rules unimaginable to real commercial organisations.
These two factors present almost insurmountable obstancles to recovery. How DO we tackle a £1tn (£1000bn) unfunded public sector pension liability that isn't even on the (awful) books? There will be civil disorder if we try, but try we must.
How do we get the somnambulent British population to wake up to the fact that they have to work and scrap for a living? We have generations trained to believe it's all there by rights; can they change without the spur of horrible poverty?
How do we address the horrible fact that British industry is at a monstrous disadvantage in making things; on the one hand we have highly developed, advanced such as in Germany that we can't beat, and on the other hand miniscule wage economies. Then we get the low wage economies becoming high tech and highly educated at the same time, and we're completely screwed!
I fear there is no way forward without a gigantic step backward. We will, I believe, probably lose much of what we call the NHS and have to make do with a less ambitious aim in terms of our life expectancy and health, probably concentrating on prevention and cure of the economically curable. We will have to look to family to provide care and safety nets rather than the state.
There is much more, but the point is made.
There is 40+ years of erosion of wealth creation to make up for and it won't be put right quickly. I think we're headed for Margaret Thatchers revolution, to the power of three. But where is the figure to lead us through this?
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The news can be summarised that "Big is no longer beautiful" where corporate life is concerned.
Small firms not only maintain their feet on the ground, instead of issuing disctates from their corporate ivory towers, but have the flexibility to adjust to changing times.
Its about time small company bosses were given the credit for the stability large firms appear incapable of delivering.
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We are seeing a lot of Government support for 'viable' businesses which is essential to prevent a landlside of unemployment.
We are seeing very little to help those already unemployed by this crisis - well nothing outside the usual 'social payments' and mortgage assistance.
Where is the training help? Up/reskilling is critical to retaining jobs in the UK, especially in those areas that continue to have skills shortages even in hard times.
If you are unemployed where do you find the money to go on these courses - out of your jobseekers allowance hah hah. Technical training can cost up to 1000 pounds for a week. In Denmark this would be provided in order to keep their workforce viable and paying taxes.
Oh, and by the way whilst I seek a job I've looked at the salaries being offered in the Financial Services - if anything they've gone up.
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Dont worry robert......
The goverment as got everthing under control. The economy is booming plans are going ahead for a second runway to be built at stansted airport, for the extra holidays and business trips, and all the single mothers are being made to go to work because theres so much work out there the country cant manage, and things are that good they are even putting ciggarettes under the counter as we now lead a much less stressful life style. things have never looked so good.
FINACIAL CRISES........ WHAT FINANCIAL CRISES
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As far as unemployment is concerned we ain't seen nothing yet and people know it, which is why interest rate cuts and tax cuts won't get them spending, nor will sticking plaster on old jobs solve the problem. New jobs on infrastructure projects that might underpin businesses and enable them to make more profit when the upturn comes amd so pay more tax to pay back government borrowing might and plans in place might make people fell secure enough to startspending which might save some of the old jobs.
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"...the Business Department views Vauxhall as "viable" - which is its test for whether it should receive state support"
Translated into real English: "Vauxhall factories are located in or near a lot of Labour marginals"
Robert,
I know that your job as Business Editor requires you to attend lots of social functions, as you've acknowledged previously. And I accept this leaves you little time to do any research. So I'll give you a few bits to cover the gaps in your knowledge.
The global car industry was producing too many cars even in the boom years. With a 20-30% drop in sales, there is now vast over-capacity. In the US, the least efficient (highest cost) producers are the domestic Big Three who, to compond things, don't produce many vehicle-types that consumers actually want. The UK's car plants were, on the whole, built in the 1980s, when Britain was the lowest labour cost location in the UK. There are now much lower cost locations than the UK. Consequently our car plants are relatively costly, and new plants over the last 10 years have been built in eastern Europe. They are thus more efficient as well as lower cost.
So, a number of European car plants need to close. Some of the most costly are in the UK, so these are the ones that should go. It's regrettable, it will cause hardship, it may even cost GB his job. However, pouring money into organisations to make things nobody wnats to buy is simply a waste of scarce resources. It diverts those resources from other economic activities with a better chance of unaided survival.
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There will be Black Fridays like this from here until long into the future, as more and more crazy financial situations are revealed - like these two extraordinary stories which might be funny if they were not so serious.
We have spent the boom years relaxing all sense of financial discipline and the unravelling will be anything but fun.
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On the subject of EUK, it's in a dying industry. The retailing of music, games, DVDs has moved into the virtual world. Increasingly they're downloaded direct to people's personal electronic devices (iPod, PC, XBox etc). There's simply no need for physical products. Hands up anyone who has bought a physical music CD in the last 5 years, certainly 2 years? Why do you think iTunes isn't going into bankruptcy protection?
Stop linking death by natural causes to the current economic crisis.
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I'm wondering what the hidden agenda is behind yet another doom laden blog. Find three pretty unrelated (apart from the fact it's all about the global economy) big bad news stories and lash them into a blog.
Key phrases: "bleak indeed"... "horrible trend"...."massive anxiety"...."particularly alarming"
Please try and do something useful with the tax payers money that pays your salary. This "blog" just reads like three cut and paste stories from the Daily Mail.
As far as the tax payer bailing out car manufacturers, I really hope we don't go there.......
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In this recession we have an ideal opportunity to focus on proper investment for the future: invest in infrastructure, energy and the environment to develop what our UK society really needs. Saving the car manufacturers may help short term - but if they are aided ensure they develop eco-friendly vehicles. Do we still need aircraft carriers - invest instead in local infrastructure - build up our communities.
Also, politically get rid of the idea of building 2 million new homes - for what? Finally, we need to address the population question - forecast poulation growth in the UK to 75 million by 2050 - why? We need to cut our cloth accordingly, now and rebuild a healthy and sustainable world.
Please, politicians start looking long term.
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"So the moment when we as taxpayers start providing financial help to individual motor manufacturers, to keep them alive through the acute phase of our economic contraction, is fast approaching."
This country has no home grown motor manufacturers. Why do we have to support companies who export their profits but don't repatriate their losses?
Halifax used to have the reputation of being the first to repossess, but our government seems to find the lesson of having the mat pulled from under it not worth instructing.
I think it sad that no-one will buy either Woolies or the Entertainment division until it has gone bust, but I can understand why no one would wish to take on the liabilities caused by this governments reckless pension policies.
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And two German politician Steffan Kampeter and Peer Steinbruck have openly criticised Gordon brown.
I wonder how many more are out there lurking behind diplomatic protocol.
At the moment it shows divides have started to come to the surface in one of the key member states of the EU.
If Angela Merkel finds growing hostility within the German government, she will drop support of brown like a hot potato.
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"...it also implies that HBOS's corporate lending department was taking excessive risks"
Have you only just realised this? Or are you still being asked to justify the Lloyds/HBOS marriage? I thought that one had run its course.
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Its ok Superman is in Brussels now telling them how to spend more money we havent got.
The pound falling to parity with the euro is a given now..........in the next few months it will be on a par with the dollar at current rates of fall....
Brown is quite true when he said he had personally put an end to boom and bust with his policies.There has been nothing like this since the 30's.He can be rightly proud to have presided over a catastrophe of biblical proportions and his policies will be studied for decades to come....under the title "up to your neck in the Brown stuff and still digging"
Soon many countries will start distancing themselves from our leader the Germans have set the ball rolling there is no public confidence worldwide in him or his ministers or his policies.
If one of the big 3 go in America be ready for a wall street crash.
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Did anyone else cough and splutter at David Milliband's comments on the Today show this morning?
"Labour has delivered
- high employment
- low inflation
- stable growth
over the last 10 years"
This statement is breathtaking in its naivety - John Humphries should have really picked him up on it.
Stunning!
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According to the London Gazette, Entertainment UK filed for administration on December 3, so it's no wonder you're hearing they're in trouble now, nine days later.
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According to the London Gazette, Entertainment UK filed for administration on December 3, so it's no wonder you're hearing they're in trouble now, nine days later.
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According to the London Gazette, Entertainment UK filed for administration on December 3, so it's no wonder you're hearing they're in trouble now, nine days later.
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He cries oh, girl you must be mad,
What happened to the sweet love you and me had?
Against the door he leans and starts a scene,
And his tears fall and burn the garden green
And so castles made of sand fall in the sea, eventually
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An interesting moral dilemma,
As the bank of England continues to make huge cuts in interest rates without any real evidence that this will stimulate our flagging economy. What will happen when interest rates reach 0% as is predicted? One must remember that savers outnumber debtors by a ratio of 7 to 1 so in theory seven people will be worse off for every one who gains. This then removes far more spending power from the economy than is in reality put in. One could argue that the debtors on average gain more than a lot of the savers lose but I would imagine that most debtors spurred by their own risky situation will use any relief that interest rate reductions give to their finances to reduce their present exposure. Whereas those with savings who have used their interest as a form of income will have a greatly reduced spending power. On balance then one could reasonably argue that such a scenario would shrink rather than stimulate the economy.
Faced with this cut in income it is unlikely that savers who rely on this money will leave it in the banks and will no doubt look for alternative ways to invest thereby reducing even further the banks ability to make loans, for their depositors base will have shrunk considerably. I for one would rather have money in a safety deposit box at 0% than have it at 0% in banks that under such circumstances would all be vulnerable and I fear many would do likewise.
If or perhaps more likely when we arrive at this point in the economic downward spiral there is plenty of evidence to suggest that house prices will have slumped an unimaginable amount. However banks will be in no position to lend for mortgages to any who do not have an excellent financial history plus a very large cash deposit. At this point those savers earning 0% on their savings will snap up cheap properties without mortgage to rent for a sustainable income and who could blame them for doing it.
The government seems to overlook the simple fact that those who have considerable financial commitments are hardly likely to take on more debt and those who are solvent are not in need of sudden purchases for they are in a position to have purchased whatever they want when they wanted it without the need for credit.
We are in interesting times, how will it be resolved that is the issue?
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Dear Robert,
So HBOS is starting to reveal its true losses. And in the future, when its true losses are known, its solvency now will be able to be judged by all and sundry.
Will you therefore please stop presenting current lending to banks as a possible no-cost taxpayer investment which may be repaid, and instead report it for what it really seems to be......
UK taxpayers giving massive amounts of our scarce free money to (many foreign but some UK pension) bank bond-holders and other bank investment holders, in return for their probably worthless bank investments.
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According to the London Gazette, Entertainment UK went into administration on December 3. No wonder you're hearing grim news about them.
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So HBOS alone have lost over £3 BILLION on corporate loans in less than a year.
And Gordon Brown's solution is for the taxpayer to underwrite corporate loans, thereby meaning we'd shoulder the loss?
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The whole tone of this report is decision done and dusted. So is this soft messaging to prepare the public or is it opinion. This is a completely different level of activity to loaning money to a bank(s) with a cashflow problem with 12% return. This is moving into the wider private sector to subsidise inherently declining multinational businesses which have difficulty selling their products, and the two should not be confused. Just how many large businesses are forming a queue to see Mandelson. Just how long is this subsidy going to last and where are these businesses going. Just why should the taxpayer want to get involved with a declining business.
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As i understand it it was the Unions refusal to budge on a pay reduction that scuppered this.
Thats the trouble with Unionised US of A. They never had Thatch and the unions are still too powerful.
The Unions in Corus set the example saying a 10% reduction is more acceptable than no job.
In the US car makers the Unions have gone for the "No Job" option.
"So long, farewell, Auf wiedersehn, Adeiu." To quote the sound of music.
Let them fall
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I’m afraid the gloom will continue for the real economy throughout 2009 and Nu Labours 2.5% VAT cut will make no difference as people fear for their jobs and sit on their cash.
Unemployment will also hit the public sector. My local authority is already reporting a significant drop in revenue from land searches and planning fees as property transactions have dried up.
Property prices have further to fall in the US, UK and Spain before a healthy relationship between incomes and borrowings can be restored.
The senate decision was correct. The US auto industry is simply making the wrong type of cars with the trend away from gas guzzlers.
On a brighter note the US will be the first to emerge from recession later in 2009 with the UK and Euroland following later.
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Shouldn't a BBC blog mention that Entertainment UK is half owned by the BBC? Or does Woolies have two DVD distribution ventures?
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I would buy Vauxhall/Opel for 10 pounds
I missed out on MG/ROVER.
NO STATE SUPPORT REQUIRED OR WANTED.
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Drink beer & wine, it works for me. Depression is a state of mind :)
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Robert - why are you totally ignoring the biggest economic issue of this week, month and year - the devaluation of the pound.
If devaluing our currency made us richer then Zimbabwe would be the richest country in the world.
The pound is devaluing because of the total failures of Gordon Brown's government.
Anyone remember Jilted John's song - Gordon is a ...
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Back on HBOS.
I got to the BRINK on Serving A Winding Up
Petition on HALIFAX PLC.
In my view HBOS has had solvency issues
for 6 plus years.
I still feel Administration and closure is
the correct path,cheaper for the taxpayer in
the long run.
So GORDY/MANDY?????
I would buy the Branch Network at a low
price and start a new bank.
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@44 jilted
I agree with your name.
I wonder who his julie is? Harriet or Jackboots
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Re HBOS write downs.
From my knowledge of HBOS accounting
these write down will be understated.
This is just the BEGINING.
If the DIRECTORS OF A BUSINESS IGNORE
A STATUTORY DEMAND they PROVE they
ARE UNFIT to HOLD OFFICE/TRADE.
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David Cameron must rue the day he said that 1980s solutions would no longer work. With the 1970s returning at an accelarating pace, 1980s solutions may be exactly whatr UK needs
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Silly little MILLY doesnt THINK the value of
STERLING IS AN ISSUE.
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Re 12
Corporate memory cannot think back more than 10 years. So.. nationalising Vauxhaul is *not* excluded.
We can't choose the colour, but let's choose the name. 'British Motors' has a nice ring to it. Some people may even think that the 'British Motor Company' sounds better and more prestigious. You can't copyright an abbreviation.
Let's see CBM? No, that sounds like a medal for the Chairman. BMC - that sounds nice, almost like BMW. What about 'British Motors Wrexham' - noone would abbreviate that to BMW would they?
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Can we afford to bail out the car manufacturers?
Before scattering money at all and sundry and asking us the tax payers to finance it, could the government please issue its detailed calculations of how much we are spending, how we are going to pay it back and how long it will take us to pay it back?
This would make sense because it would mean that we have some kind of understanding of and control over the national funds. I appreciate that most people in the UK are against planning and keeping books but we could get someone from Germany to do the calculations for us? I know the Germans can be strict at times but I am sure they would be happy to help.
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Re 44
But there are lots of millionaires in Zimbawe-Rhodesia.
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Silly me - of course the corporate colour for the new nationalised Vauxhaul - brown!
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The decision by the Senate to oppose the Motor Industry Bailout is a step in the right direction (although as pointed out it will probably be overturned by the new President who must be seen to save the jobs of an electorate who backed him)
Nationalisation of failing companies is an extremely damgerous precident to set. These firms are only 6 months into a downturn that will probably last at leat another 12 months, and already their foundations are cracking. This is because they have been poorly run and relied on heavy borrowing to make their Business Models succeed. They are operated on such a short termist attitude that nothing is saved to help them through periods of slowdown. What happens to their profits from the good years? A small percentage may be invested, but the vast majority ends up in the pockets of shareholders and investors, so is not in the Companies hands when it needs it most.
We cannot start bailing companies out, while others are allowed to fail, this cannot work. Survival of the fittest has to be allowed to prevail, otherwise we will be in a malaise for decades rather than years.
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47. At 10:24am on 12 Dec 2008, alexandercurzon wrote:
"If the DIRECTORS OF A BUSINESS IGNORE A STATUTORY DEMAND they PROVE they ARE UNFIT to HOLD OFFICE/TRADE."
At last someone has written what should happen immediately - ALL of these Directors of these failed companies should not be asked to resign - they should be sacked for gross negligence immediately !!
HBOS is having an extraordinary meeting in Birmingham not to kick out these failed directors, while they continue to receive their over the top salaries, but to vote to allow them to hand over the HBOS keys to Lloyds TSB and get their exit packages sorted for the wonderful job they have done steering the HBOS Titanic !!
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Hi everyone. I am an avid reader of these blogs but have never commented before, largely down to my ignorance in economics. I am beginning to get a better understanding of the core reasons behind the downturn, I have started to read up on Keynes etc and get an understanding of fractional reserve banking but am still very much a novice!
I wanted to ask everyone's opinion on to what extent this has been a self fulfilling prophecy? I'm probably being naive but do you think this has had an effect? Everyone I speak to seems to be able to buy a car/tv etc but is CHOOSING not to. This is true of myself. I have been looking at cars recently, I have a good credit rating but seem to be opting to not consume for the sake of consuming. I have a large amount of student debt to pay off too!
Any response would be appreciated, please excuse my naivety, but I am making an effort at least!
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The global consumption of grain exceeded production of grain last year whilst we have hundreds of thousands of excess cars. Peak oil is behind us and two totalitarian states (China and Russia) are teetering on the brink of a catastrophe as western economies retrench into isolationism.
World War 3 anyone?
Only kidding. But it really is time to stop talking about where best to put money, looking at futures and talking about when things get back to normal. In case anyone has failed to spot it:
The paradigm has shifted!
All the accumulated knowledge and skill of the old paradigm is useless. We have all been set back to a zero position. Once again, the very cleverest among us will quickly understand the new paradigm and the opportunity it presents for them to exploit the rest of us and become the ruling elite again. To paraphrase Henry Ford, if you ask ten capitalist economists what they'd like to replace captalism, they'd all answer better capitalism.
The Model T was better than a better horse all those years ago, but who is offering the analogous alternative to Obama and Brown's "better capitalism"?
Politicians are like mayflies in the great flow of history. We should bypass their rhetoric and work out what we really need to live meaningful lives, raise children well and die peacefully. Buying new things to please ourselves is childish and unnecessary. Been there, done that. Let's move on.
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Robert
If we start from the position that HBOS is bankrupt and that is why it is being taken over in a shot-gun wedding by Lloyds/TSB this news is no more than expected.
It is only news to those who have attempted to argue that HBOS has a good book of business and a future. They have not and do not. They have £240bn in CDO's which needs to be refinanced over the next 2 years from non existant money markets. No one anywhere wants a slice of our mortgage market. We have some of the most over priced property on earth owned by the most personally indebted population in the history of earth, at a time when we are entering the worst recession in living memory. You do the maths.
The US situation is no better. Watch the dollar collapse as Obama tries some 'quantatitive easing' and turns on the money press to full speed. Well its that or admit American society is very ill and continuing to pay people to make the wrong things in an inefficient way funded by a overgrowing national debt is not sustainable and that perhaps being an obese selfish greedy gun toting society must end.
Watch what China does with its dollars. They will quickly see that a low dollar will mean low prices for the oil and other raw materials that they still need. They have quickly grasted how simple our capitalist model is to copy and learnt how to make things cheaper than us. They understand that there is no absolute freedom and they are willing to pay this price together collectively.
The time for action has been and gone.
We lied to ourselves and empowered empty politicians with fluffy messages instead of looking for leaders who dared to speak the truth. We grew fat, we became obsessed with celebrity and a world in which each saturday night we would elect another pointless nobody dressed like a clown to "King or Queen for a day".
Even now as Woolworths convulses in its final moments we rush down on mass for one last vulgar blowout on cheap tat, made in China, that we absolutely do not need, just because it is cheaper and its christmas; when what christmas really means has been completely forgotten by most.
The new world order is beginning. Our lives are going to change and it will be better after the pain.
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Who said this:
'A weak currency comes from a weak economy which is in turn the result of a weak Government'.
Gosh, it could not have been the saviour of the world aka Gordon Brown, could it?
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How long does this charade have to continue before the Puppet Labour MPs get Brown and his policy OUT
However, we cannot blame Government for the situation lots of companies (Wollies being one) are now in, they have been raped of their assets by buyouts, mergers and Vulture Capatilists. They are saddled with massive rents and huge debts. Not only in retail either, pub co's have paid billions over the years almost valuing every pub over £1million. Many of those pubs are being sold for less than £200k
Brown enjoyed his BOOM on false profits.
Months ago we predicted massive job losses here on Roberts blogs but in Government it was ignored.
A bad 2009 and beyond I fear.
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Robert Peston,
You are becoming quite the doomsayer of late. Why not do a piece on companies that don't appear to be being affected by the crunch, and look at how or why they have avoided it.
I know news of failure gets people reading, but surely some balance is needed.
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A scintilla of good news in your last paragraph, Robert. Our economic contraction is to become 'acute' rather than 'chronic'.
Good news, indeed!
Acute conditions are severe and sudden in onset. This could describe anything from a broken bone to an asthma attack. A chronic condition, by contrast is a long-developing syndrome, such as osteoporosis or asthma.
Or is your command of English just poor?
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The king is gone but he's not forgotten
This is a story of a Johnny Rotten
It's better to burn out than it is to rust
The king is gone but he's not forgotten
Hey hey, my my
Rock and roll can never die
There's more to the picture, than meets the eye
Hey hey, my my
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"...it also implies that HBOS's corporate lending department was taking excessive risks"
Why is Sir James Crosby, ceo of HBOS 'til 2006 still allowed to be at the helm of the FSA?
Why is the government taking his advice?
From the FT on Tuesday: "Sir James Crosby, former HBOS chief executive, has advised the government to support a resumption of the mortgage-backed securitisation market through a guarantee scheme. That market has been closed since August last year."
MAD!
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"...it also implies that HBOS's corporate lending department was taking excessive risks"
Why is Sir James Crosby, ceo of HBOS 'til 2006 still allowed to be at the helm of the FSA?
Why is the government taking his advice?
From the FT on Tuesday: "Sir James Crosby, former HBOS chief executive, has advised the government to support a resumption of the mortgage-backed securitisation market through a guarantee scheme. That market has been closed since August last year."
MAD!
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Although it's obviously bad news for the employees if a big company goes bust, I don't think we should be regarding it as the terrible news that seems to be the mainstream opinion.
Many big companies are shockingly badly run. I run a small business, and if I treated my customers the way I am treated by, say, my phone company or my bank, I would be out of business in no time at all, and it wouldn't be considered a news story in the slightest.
There seems to be some idea that big companies shouldn't fail. I absolutely disagree. Some big companies deserve to fail, and when they do, it's simply a bit of economic Darwinism in action. Although I have every sympathy with those who are losing their jobs now because of the poor decisions of their senior management, in the long run, I think a bit of natural selection will be very healthy for all of us.
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Re 60
Did you mean 'false profits'or 'false prophets'?
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Is it only 12 months since I was trying to remember if a Billion was a Thousand Million or a Million Million
Now my 3 year old knows what a Billion is!
I thought it only right to tell her as it's likely to be her problem!
I for one, as hard as it will be, would rather take the bad now and not pass it on to the next generation......
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My dad thinks I’m a pessimist however, a few months on this blog has taught me I’m actually an optimist.
Well done Mr Peston!
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56. At 10:35am on 12 Dec 2008, lawyer4justice wrote:
"I have been looking at cars recently"
How about go and buy a second hand Rolls Royce, then drive around like a millionaire just like these bankers and financiers. It may be false but at least you will feel wonderful for a while until the crunch really hits you.
Then when you cannot afford to pay the repair bills or your student loan, declare yourself bankrupt and you will have a clean slate to carry on - why burden yourself with a student loan for years in to the future ??- the tax payer will pick up the tab !!
- isn't that what these firms have been doing and now they want the tax payers to bail them out !!
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Maybe the citizens of the UK are as prone to brainwashing as the citizens of the DPRK.
A few weeks ago the taxpayer stepped in to support a bunch of banks, and to effectively guarantee all retail depositors, yesterday there was discussion of propping up the steel industry, today there is talk of propping up US car manufacturing subsidiaries. Tomorrow? Who knows...
The UK taxpayer is not the mythical Hercules. People, can you not see this is an impossible dream that if pursued can lead only to wailing and the gnashing of teeth quickly followed by the smash of glass and the rumble of boots.
I foresee blood on the streets.
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To repeat with boring monotony:
PROSECUTE PROSECUTE PROSECUTE!
Senior Bank Directors must be subject to
THE LAW OF THE LAND.
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#56 Try J K Galbraith "a short history of Financial Euphoria" available from a well known online bookseller. Very entertaining; about two hours to read.
His "The Great Crash of 1929" is very good too - in fact, all his stuff. JK was a Harvard economist who was part of FDR's New Deal administration. Broadly speaking he was a Keynesian, but not an ideologist. (Nor indeed was Keynes.)
Economic problems over the last century or so have usually arisen when belief systems have overridden the facts.
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We need to do rational things: stop all non-essential government spending immediately. Non-essential spending includes all overseas wars, all new IT systems all marketing and promotion done by government or local government, all civil service and quango bonuses, oh and the 2012 Olympics!
The things we need to concentrate on are making sure the British people are kept warm and fed adequately.
What we are doing is keeping the bosses of private companies in the style they have become accustomed to whilst they sack millions of workers - this is unsustainable and will cause social unrest.
Ford, GM and Chrysler need to go bust an be restructured as the companies have refused to evolve and like the dinosaurs of old are bound for destruction - the Republicans have at last caused the US administration to think things through. The 14Bn was only the first small part of a far larger (un-repayable) loan from the American taxpayer.
The aim should be to get the country back to the position where money has a proper value - borrowers pay a reasonable sots and savers get a reasonable return.
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Re 68
(which oddly appears out of sequence)
Billion is £1,000,000,000,000 here in Britain and £1,000,000,000 in America. If only our assets were expressed in 'billions', we could pay off our liabilities, in small chunks at a time.
Worth a try?
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There is something alarmingly 'Stalinesque' about the way Brown's govt are running this country, that is insofar as they are 'running' it at all.
Statements of intent, assertions of correctness, grand strategies that amount to nothing in the end, denial of any kind of irresponsibility, reassurances that mean nothing, the whole infrastructure creaking under the strain but still the gloss that everything's fine and always will be when everyone knows it's not, nothing gets done and still yet the govt plodding blindly along each day rolling out legislation and 'measures' that mean nothing and achieve less, no-one can get near them nor counter them...
Brown will take us back to the stone age the way things are going. He's some kind of megalomaniac this one. Quite untouched by all the redundancies and personal misery.
Those on this blog who own their own firms - are you as confused about the future as I am?
Where is this all going apart from some ghastly survival/end game? I find myself quite unable to look ahead more than one day at a time.
I'd like to know if anyone feels the same.
GC
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@ 70. I'm not sure if you actually read my post. I was just giving an example of how our mindset appears to have changed. I did look at cars but opted against it, I don't really know why. I could afford it but just chose not to and I am not alone in this. I was merely asking if anyone thought that this change in attitude has deepened the problem as I am a novice in this area.
P.s I cannot declare myself bankrupt as it would prevent me from working in the profession I have worked very hard to get into!
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It appears to me that the government is soon going to have a serious look at the UK joining the Euro.
For despite the major devaluation of Sterling, manufacturing exports are not picking up and the banks are continuing to haemerage cash out of the UK Money supply system.
For Gordon Browns/Alistair Darling's plan to work, the government has to avoid an inflationary devaluation of sterling and given the size of the governments borrowing plans (combined with the rescue packages it has also got to fund), it needs to fix sterlings value to the euro as a precurser of us joining the Euro club. In order that our borrowing plan is shared by the whole of Europe and not just the UK.
This is because for an economic recovery plan to take place, the banks need to become profitable and thus be able to inject money into the UK economy on top of a buyback of their goverment backed preference shares.
Until this happens, the overall money supply in the UK will continue to shrink and International asset values fall. For only when there is sufficient natural money in the economy to finance the UK's current level of economic activity, can the government hope to get the country out of this mess.
So how can the goverment achieve this without watching a major implosion take place in the UK Economy? - Join the Euro and let europe share the burden.
It really is a Non-brainer.
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Re 62
In case you haven't traced the remainder of the quote:
Acute conditions, such as a first asthma attack, may lead to a chronic syndrome if untreated (or mistreated).
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Surely the real economic story for this black Friday is once again the pound with yet more record lows as the markets share the German views on our economic management. The rational response to such a run on the pound would be to increase interest rates, particularly when the country as a whole and the Government in particular are totally dependent on foreign borrowing to fund the next 18 months.
That would be too humiliating for crash Gordon to consider but we cannot go on like this. The Government has pitiful reserves and too much debt to intervene credibly in the market place. Maybe some of our nationalised banks can be "encouraged" to support sterling. Crash's response seems to be to put his hands over his ears and say he can't hear anything. We face a risk of a major withdrawal of foreign capital forcing the sale of assets such as stocks and bonds at basement levels throwing the country and our finances into chaos. For God's sake Brown wake up!!
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#34.
Didnt the japanese economy run at 0% for years without any serious detriment to the economy?
What that caused was the economy to stabalise.
In this country, we have been brainwashed over the years tothink that becoming a homeowner was the be all and end all of our life. Yet if there was more building of "council houses" rented out to the population at a sensible rent,say max £100 per week, then there would be less pressure on savers to offset borrowers, the building trade would flourish, interest rates would be at a sensible 4-5% to allow those that wanted to own their own homes to do so without being beaten up about morgage rates.
Also, why dont the banks allow longer "family morgages" over 40-50 yrs as they do in Germany, and maybe even have it at a fixed rate for that term. This would give the benefit of stability to the market and there would be more money available to spend in the shops, thereby stimulating the economy.
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Someone who saw it coming and has a theory to explain it:
http://home.earthlink.net/~lrgoldner/imperialism.html
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"the Business Department has deemed Vauxhall to be viable"
What expertise and information do you suppose the Business Department has to enable it to make an accurate diagnosis? Forensic accountants? Market experts? Detailed information about costs, funding, profitability, investment plans?
None of these. This is an organisation that gave more money to the lawyers on the coal compensation scheme than it did to the compensation seekers. They have to rely on what Vauxhall tell them, which will be managed information to present the case Vauxhall want.
On top of that, vauxhall assembles cars from parts largely made in Europe, which have got 30% more expensive in the last few weeks, thanks to the exchange rate.
And finally, why would we give any money to them while the outcome of US decisions is still up in the air, pending the new administration's arrival in Jan / Feb.
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i agree that vauxhall is viable. now that financial services is dead, the related dutch disease - inflationary pressures in southeast, excessively high interest rates, overvalued currency - will cease as well, making manufacturing in the uk viable again. having said that, it is clear that 1/3 of auto industry capacity worldwide needs to go. my prediction is japan will be hit the hardest, though gm failure will do a lot to alleviate the problem.
btw robert, i just moved my savings into euros. so feel free to start talking up the risk of a sterling collapse.
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Here's something GB could usefully get involved with. I think this report on Bloomberg is truly shocking, and indicates an area where use of economic assistance would be both justified and make a difference. The link is:
http://www.bloomberg.com/news/exclusive/
Click on the story: "Wasting Enough Rice to Feed 184 Million Is Worldwide Habit Only Rats Love"
A few points stand out in the story. Firstly:
"The world is wasting enough rice this year to feed 184 million people, about a fifth of those who are undernourished, based on estimates from the Food and Agriculture Organization of the United Nations in Rome. The amount lost between harvest and consumers globally totals at least 48 million tons, says Concepcion Calpe, a senior economist with the FAO."
Secondly:
"The lack of investment in shoring up the grain- delivery chain was among man-made causes of the food crisis of 2008. Other ingredients in this recipe for famine included trade policies that pushed developing nations into global markets and speculators who drove prices higher by doubling bets on grain"
Finally:
"the UN estimates that at least 15 percent of all staple crops, including rice, corn and soybeans, will be consumed by pests, spoiled by water leaks or otherwise go to waste after harvest this year"
I strongly recommend checking the full article. There's an informative graphics tab that shows the causes of increased hunger in 2008, starting with the statement:
"The 2008 food crisis was man-made"
The article puts our problems into pretty stark perspective.
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#56. lawyer4justice wrote:
"Everyone I speak to seems to be able to buy a car/tv etc but is CHOOSING not to"
I think you may find that unless they have the spare cash the 'CHOICE' is being made by the lack of availability of loan finance for car buyers.
Also the student debt 'scam' that you suffer from will as you imply act to further depress the economy for decades to come. Any half witted economist must have realised this as soon as the scheme was advanced but they all kept their mouths shut!
When I was at university we had grants and some people even managed to save money as a student! (Of course under 3% or so went to University!) You have my sympathy, but you have been 'had' by the state as have all of you fellow students - you should have moved to Scotland! The problem for all of us is that there are now a large number of severely indebted younger people who are not as economically active as we might hope - but isn't that the result of us all voting for the government who advocated the policy - problem is all of the major parties wanted to do the same thing (I recall)! - so much for democracy!
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#74 correction of typo
reasonable sots = reasonable costs -oops
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#56
My strong advice is forget Keynsian nonsense and all other economic dogma. Those things are dreamed up by academics with their nose in a book and their hand on a slide rule and work on paper and nowhere else. If you want a joined up thriving country there is only one way to do it:
Use and develop as much home-produced material as you possibly can. Give every encouragement to British-owned firms who get out into the world with their products and bring money into the UK on the back of the excellence of their products.**
Now of course China successfully developed this logical approach (excepting that their products were complete junk from top to bottom), - successful because plenty of undiscerning get-rich-quick types in the West lapped it up for the sake of fat profit, setting aside the quality ethic that should underpin any manufacturing. China is rich, we are poor. QED.
** Unfortunately that means putting the country almost on a war footing and I will no doubt be deeply unpopular for saying so.
GC
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If GM goes into bankrupty and GM Europe (aka Vauxhall/ Opel) is viable, then GM Europe will end up getting sold by the parent company, and will carry on either independent or as part of another manufacturer. If GM Europe isn't viable, then why on earth would we want to spend taxpayers' money subsidising it?
A repeat of the British Leyland fiasco would just about complete Gordon Brown's project to return us to the horrors of the 1970s.
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No 14 response
I agree re the public sector pension defeict.
A brief example Strathclyde Pension Fund (The 5th largest public pension fund in Europe) posted losses (reduction in value) of £270 million in their last financial period ie before the proverbial hit the fan.
They stated in their Annual Report that contributions to the Fund paid the pensions due in that period. They proudly announced that the did not need to dip into their (sic) Capital Reserves.
So the future pensioners of the scheme bear all of the loss.
Robert
Please address this issue in your blog (and elsewhere).
Some pensioners are relatively poor (ie State Pension receipients)
Others are really very comfortable and are well placed to share some of the burden of the necessary adjustments to real life
I worked in the public sector for 16 years and have run my own business for 10yrs.
I am not a public sector basher but they need a reality check
What about the NHS?
I have been involved in it for 30 yrs both inside and out.
Where did all that money go? Really where did it go?
Renegotiate Consultan Salaries
I know from the Negotiators of the GMC that they came out of the first meeting with the government in disblief about the complete level of ignorance on the govt's part of what the medics did for a living. The GMC proceeded to tell them and basically wrote their own contract and remuneration package.
RENEGOTIATE that package now. Where are they going to go?
If they don't accept it hit their pension. Where are they going to go?
It is time for a serious reality check for all of the public sector. Where are they going to go?
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"One must remember that savers outnumber debtors by a ratio of 7 to 1"
Where does this statistic come from?
I am a non-pensioner saver in full time employment and having seen the interest plummet to 2%. As a consequence of this I have started spending less.
If this is multiplied out then the net affect is less spending not more! Unless the rest of my fellow savers are rushing out to spend pounds before they are inflated away to nothing.
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when you are go out to sea
don't swim against the tide
go with the flow and always
stay in reach of the beach
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Miliband says Germans support UK policy.
Mugabe says Cholera oubreak over.
Spot the difference?
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Idle responses and one question
# 6 It's only Keynsianism if you have built up a reserve in the good years. Otherwise, the Germans seem to think, it's just reckless spending.
# 12 & 50 & 51
It is possible to learn from past mistakes - sureley ;-)
And as I've posted before, something must be done to salvage the GM Volt.
(There again we need infinitely harder nosed Gvt. oversight than the jokers who paid doctors more for doing less, and oversaw the Gvt. side of the miner's compensation scheme
http://news.bbc.co.uk/1/hi/england/south_yorkshire/7777957.stm )
# 15
The down to earth leaders with a no-nonsense approach seem to be David Davis for the conservatives, Frank Field for Labour, Vince Cable for the Lib dems.
And, dare I say it, there is one party which has long been saying (among its more silly ideas) what the mainstream parties are only now beginning to cotton on to, about peak oil, food security and the inability of this island to absorb unlimited numbers for ever).
Then there is Barack Obama, who whether we elected him or not will have an influence on what happens throughout the world and, so far, seems to be playing a poor hand quite well.
# 33 & 63
Whenever I see your byname, I jump straight over. I think you're on the wrong blog.
#45 & 47 & 49 & 72
Nice to SEE you AGAIN this MORNING, aLEX.
#84
You are still taking a risk. Whether you are right or not depends on what may be currently hidden problems in the Eurozone. Of course you could always hedge (in the original sense of the word) by holding part in Euros and part in sterling. (And why not the Rupee and Renminbi, come to that).
And finally,
As the nearest thing we have to a Schumacher "Small is beautiful" experiment, does anyone know how the economy of Bhutan is doing in these "interesting" times?
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I think this is a golden opportunity. Our manufacturing base is wholly weak not just in current economic terms but also on its foundation as a viable financial revenue. We are predominantly reliant on niche manufacturers but as a country we have very little global manufacturing and clout which does not translate into large global exports.
With the failed bail out the US car makers surely our Govt with private equity firms should buy Vauxhall, it may not be profitable now but it will be in the future. I know we have been here before with Rover but realistically Vauxhall is a global brand that we can look to produce in the UK and sell in India, China and Europe. Something we can eventually call British. I have no idea as to the costs but I would rather buy out Vauxhall than bail out the banks.
I appreciate that this is all stoic and patriotic stuff but it is clear to me that we cannot be reliant on financial services as our core export (we are second in the world after the USA). We have to strike a balance between all revenue streams.
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@93 Bog
None, I claim my prize.
Actually Mugabe is more likely to be right
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Re 59 - excellentcatblogger
David Cameron quoting Gordon Brown:
"A weak currency arises from a weak economy which is in turn the result of a weak government."
As Labour MPs pointed at the Tory frontbench, Cameron added:
"I don't know why you are pointing at me, that wasn't my honourable friend [the shadow chancellor, George Osborne] this week, that was the prime minister when he was shadow chancellor."
http://www.guardian.co.uk/politics/2008/nov/17/brown-tax-cuts
Quotes like this are as good as it gets, hope it helps.
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#88
It needs fleshing out, but I agree with the thrust of what you're saying.
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Didn't Blair and his crew abandon Manufacturing and Agriculture to make us the Financial Services hub of the EU - whoops
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@ 73. Thankyou, I will definitely buy those books.
@86. I would have had to get credit to purchase the car but was accepted and decided against. It just seemed wrong for some reason. I'd be interested to see how many people are applying for these type of loans and being rejected. Surely people with poor credit ratings or no prosepects of repaying should never have been leant money anyway and therefore should not be effecting the system so drastically. (Naive again I fear!)
My fiance and I both pay around £300 pcm in student loans, that's not to mention our privatedebts. On top of that we purchased a house in Nov 06, probably in negative equity too. That's what you get for trying to get on in this country I suppose.
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"Gordon Brown has said European leaders have agreed to back an "ambitious and co-ordinated" recovery plan to help their economies through the downturn.
The package, negotiated at an EU summit in Brussels, will see 200bn euros of funding - equivalent to 1.5% of the EU total output, poured into economies.
Mr Brown said measures would include "judicious" tax cuts and acceleration of public spending projects.
The agreement "answered" criticism that the EU was not united on the issue.
"
Sorry Gordon this is EU plans using EU money, it doesnt absolve you of being wreckless with your spending of UK borrowing.
If you can't see the difference you should never have been chancellor and you certainly shouldn't be PM. Stand down and let the people decide whether you are right or not.
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This comment was removed because the moderators found it broke the House Rules.
Some very interesting comments on here as to what the way forward should be.
Refreshingly the tone appears to be pragmatic and realistic and devoid of the New Labour apologists that plague Nick Robinsons blog.
Someone posted earlier on that the translation of Vauxhall being "viable" meant that "their plants are in Labour Marginals". Could not agree more. Being born and dragged up in Coventry I know all about that. I remain convinced that this was the only reason Northern Rock was saved.
The American motor manufacturers should be allowed to collapse. They've seen the future coming for years, but figured they were insulated from it and it would never happen to them. Well, guess what, it did.
You would expect a strong chancellor to have access to all the necessary data to make the difficult but appropriate decisions. Unfortunately, Gordon's seem to have been based more on dogma and the wobbly steering hand of Ed Balls rather than what was really needed. Biggest problem of all is that absolutely everything else has taken second place to his monstrous ego and rapacious appetite to be King.
Robert, dont listen to the detractors, just give it to us as it is. Not the sanitised flimflam from your contact in No10, the unvarnished truth, tell it straight. Thats what we need and what our politicians and certainly the BBC's political editor are certainly not giving us.
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USA Car Rescue.
There has been talk of whether UK Subsiduaries would get any of this money.
But, would the US Factories of foreign companies get any money.
BMW, Honda, Mazda and Toyota all have modern well equipped American Factories, efficiently producing desirable cars/minivans/SUV's.
I cannot imagine they would take unfair susidies to Ford/GM/Chrysler with nothing for them lying down. They have made the capital investment in their business, whereas the US big 3 have stagnated over the last 30 years.
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Remember Farepark went bust?
Hundreds of our poorest had to let their kids go without any xmas presents.
Government response : Er, its not our problem, move along nothing to see here….
Meanwhile our banks have all been very naughty indeed, many are now bankrupt (just like UK plc)
Government response : Let the doolies in the street and their children and grand children pay billions in extra tax to help my fat pig rich bankers out!!!
Good old Labour eh ;-)
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Mr. Peston, declare your interest, or at least that of your employers.
BBC owns a decent chunk of Entertainment UK. It is/was a Beeb/Woolies joint venture.
WR.
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#77.
"@ 70. I'm not sure if you actually read my post. "
Of course not! You are confusing readers with writers.
You'll be confusing thinkers with politiicians next.
Then, where will we be?
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Regarding the Lloyds TSB take-over of HBOS, here's what Eric Daniels had to say:
"For Lloyds TSB shareholders, we are acquiring about £30 billion of net assets for £14 billion and for HBOS shareholders, there is also the opportunity to share in the benefits of creating the leading bank and the potential cost synergies we can achieve by combining the two companies."
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#78.
"It appears to me that the government is soon going to have a serious look at the UK joining the Euro."
What you wrote gave me a sudden vision of UK politicians, like soon to be evicted tenants, trashing the premises before being made to hand the keys over.
But won't they need references to secure future accomodation?
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94. At 11:19am on 12 Dec 2008, NoddingHomer wrote:
# 33 & 63
Whenever I see your byname, I jump straight over. I think you're on the wrong blog.
+
sorry didn't realise there was a boffins only rule.
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Re 105
Farepak was marketed as a saving scheme. Its customers were amongst the very poorest in the land, but they were self-reliant enough to put money aside through the year to pay for Christmas. But the Labour government hates savers. If these people had recklessly borrowed money to fund Christmas they would have been bailed out, instead of having to rely on private charity.
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Fundamentally the problem is derivatives.
At one time, an electricity generator might buy coal futures (i.e. agree to buy coal in 5 years' time at a specific price). He would buy these futures from an owner of a coal mine. Each counterparty only committed to a volume limited by the capacity of his mine (and his ability to manage the wages of his workers) or to the capacity of his power station (and his ability to manage the wages of his workers and his market for electricity).
The city whizz kids noticed that, whilst agreements were often just that, i.e. the price was fair and the agreement was 'neutral', there was scope for setting different '5 year' prices for a ton of coal, like interest rates on treasury bonds, where an agreement for cheap coal in 5 years would be more valuable than one for expensive coal in 5 years.
They could buy and sell these 'futures' and make money. Like being the owner of a casino.
Suddenly futures were being traded with no limit to volume (because noone wanted the 'coal' any more, just the paper).
Unfortunately the calorific value of one sheet of paper is much less than one ton of coal. As we shall soon see.
e
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obviously the hypothesis of the consequences are the consequences of the hypothesis
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Why is anyone surprised at the incompetence of this useless government ? Every Labour administration since the second world war has plunged this nation into debt. reduced the value of our currency , priced our industry out of the market and now has effectively handed governance of the country over to unelected bureacrats in Brussels. Instead of concentrating on getting the finances of Britain right by reducing the obscene amount of government spending, they have borrowed astronomical amounts of money to add to this profligacy. It will take as long for any government that follows them to pay off their debt as it did to service the debts accrued by Attlee after the second world war, 40 years; 40 years of high taxes and frugality . Throwing more and more money at dying unviable businesses is not going to help the situation, it just adds to the problem, and unemployment will rise to a level where borrowing may not be able to keep up with the demand for welfare payments. Yet the government wanders aimlessly around Europe pontificating about saving the world, when all it is attempting to do is to hang on to power in any way and at whatever cost it can.
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It is time for people to wake up and smell the coffee. This is not a recession or anything like the 1990s or 1970s. We are going headlong into another Great Depression and there is nothing that anyone can do to stop it.
Brown can rattle on about 'doing nothing is not an option', but the time for action was decades ago when the neo-liberal agenda was unleashed and created the conditions for the unfolding disaster we have now finally arrived at. And Brown himself was a key architect in accelrating the decline through his sheer recklessness.
Frankly, the chances of any of the so-called 'leaders' getting us out of this mess are laughable. They can't solve the problem because they are the problem - and sadly, Obama is born of the selfsame mindset.
We need new thinking and maybe, just maybe, with the collapse of the economic system we may get it because the alternative doesn't bear thinking about.
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Choosing my language more carefully and avoiding allusion to Daniel Defoe, why do these 'Black Fridays' always occur on Fridays?
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Big companies that have taken on too much debt, returned money to shareholders (....if this action is not 'prima facie' evidence that they do not have a clue as to how to invest in their businesses profitably, I don't know what is), and handed out big dividends based on entirely paper profits.... should be allowed to fail.
Others in the market place - particularly their smaller better run, less indebted cousins - can then pick up the pieces, hire better management and start growing things back up again.
The process of company failure, administration and asset recycling is an absolutely key part of the capitalist model, and as a country we really will be better off the quicker the dud companies are broken up and reassembled.
It may not look like it at the moment but there are people out there that have large holdings of cash, and we need them, as soon as possible, to identify business opportunities and to go out and spend the money. When this happens, the 'floor' that we are all looking for in the market will not be far behind.
The government's role should not be to support duff corporations and allow incompetent managers of 'capital' a second chance for their shareholders - they have had their chances many times over - but should be directed to helping 'labour' (small l, that is the workforce/employees) with temporary payments to hold things together while seeking retraining, new jobs, alternative careers.
I agreed completely with GB's plan to save the banks which were critical to the system, but he now seems to be moving on to 'ordinary' businesses and this is a huge mistake.
Is he reverting to type...... thinking that he is our only hope..... that the only person in Britain that can do anything to help is him....so he must start tweaking, and fiddling, and meddling?!
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#114 - you could have ommitted "the second world war" - Ramsay MacDonald achieved much the same, with a dash of deflation added for extra spice.
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#94
In reply to your reaction to my Blog - In an ideal world you are right. However all economies are effected by the current credit crunch and thus all economies currently do not have enough money to fund their current level of economic activity.
So there is little to actually hedge on because in a climate of Shrinking International Asset values, invested or hedged monetary value gets destroyed.
China may be an exception. As its banking system went through a capital restructuring at the same time as our banks were destrying theirs and thus they may still be able to inject natural money into their massive thrird world assets, as well as their domestic demand.
As for the others - it is doubtfull! So although I am sure that Europe stilll has hidden weakneses in their economy. The chances are that they are still less than those of the United States and thus the eurozone as a whole should be able overcome those said weaknesses.
Also for sterling to join the Euro the Europesan Bank will need to print Euro's to buy up the amount of Sterling financing the UK Economy.
This means that for a time, whilst the UK becmes a a two currency economy, Europe may inadvetantly pump natural money into the UK and thus fully finance it.
If that was to happen then the UK's financial instiutions will strengthen and the UK's economy start to expand once again.
So, in my view, joining the Euro is now the UK's only main chance of avoiding a major economic implosion.
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Every other world news organisation and newspaper is headlining with the economic crisis i.e. the failure of the US car bailout or the plument of the pound against the Euro.
The BBC instead headlines with 'Brown hails the EU recovery package.'
Yet again the BBC buys into Gordon saves the world, please be more biased ...er no I don't think you can.
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#29: Obviously, for the neo-Stalinists "Over the last ten years" means "Jan 1 1998 to Dec 31 2007". 2008 is THIS year, not LAST year.
Time to remember the old East European joke: I predict 2009 will be an average year - worse than 2008, but better than 2010.
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#24. flyingAlex2012 wrote:
"Also, politically get rid of the idea of building 2 million new homes - for what? Finally, we need to address the population question - forecast poulation growth in the UK to 75 million by 2050 - why? We need to cut our cloth accordingly, now and rebuild a healthy and sustainable world.
Please, politicians start looking long term."
I`m not sure the population is`nt already much higher than the dictatorship has admitted to:
http://www.independent.co.uk/news/business/comment/city-eye-facts-on-a-plate-our-population-is-at-least-77-million-395428.html
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The pound is going to be worthless. Raise rates NOW! Screw the borrowers who look out mortgages they can't afford! If you think that's bad, wait til be have 20% inflation!
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Robert
I have been reading your blog now for over a few weeks and generally find it informative if not a bit alarmest.
As a Managing Director of a meduim size business in London we are doing ok, we employ over 600 hundred people and have just taken on another 40 in the last few weeks.
The businesses that are going to the wall generally are poorly run and if people do not require their products they will not buy them. Woolworths is an example, outdated cheap and tacky should of gone years ago.
Lets have some balance to your blog there are many companies doing well out there and will ride out the recession. If we don't have any balance to your stories we might as well all pack up now
StarCarlos
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Woolworths
MFI
HBOS
Entertainment UK
GM
compare and contrast with
Google
Amazon
ASOS
Play.com
The world has moved on boys and girls. You cannot make people buy what they don't want through channels they don't want to.
The economic tsunami is only just breaking on the beach. The weak business models will drown very quickly. How far up the beach it sweeps we do not know. The economic crisis is only accelerating natural selection in a brutal and clinical way. The "new economy" will look very different.
Will we need shop based retailers or banks or garages to continue consume? The structural changes for our towns and cities, the way we live and work, our value systems are all called into debate.
The true market forces of supply and demand have been seriously distorted by the free availability (and nwo lack) of credit. This has distorted house prices, propped up failing retailers and opened up new opportuntiies.
Please can you report on those business that are doing really well, and try and identify why and how. They are not there by accident or coindence, but by foresight, flexibility and providing what customers want when they want it.
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I really don't understand all the criticism of Saviour Gordon and boy wonder Alistair.
Everyone knows if you buy up loads of propertys, build plenty of houses and better still hotels when everyone tries passing by they get whacked for a massive amount of funny money, these two are world class Monopoly players....Banks...Shops...Stations...Utilities...Houses etc etc they will soon hold the lot.
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Years ago I worked for Generous Motors. I was often paid off so in the end I gave up and went on to have a good life. I understand that GM is actually owned by a hedge fund Cerebus who apparently are not too keen on opening their books. So if this is the case small wonder that figures drawn from thin air don't cut much ice.
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Why are we taking so much notice of a couple of German politicians? Just look at the state of the German economy - they already have a higher level of unemployment and a higher rate of debt. Add to that NO strategy with which to combat the coming maelstrom.
The Euro exchange rate looks problematic at the moment but just wait until the end of the first quarter of 2009. Then we will find France, Germany, Italy, Holland threatening to re-take control of their interest rates because their economies are in freefal.
As a strategy, I am all in favour of very close cooperationl with our EU parteners. Probably I would go as far as European protectionism. However, I would not advise adopting the Euro at this time.
I aslo note we have the usual PSD (private sector dinosaurs) who fool themselves into believing that the private sector can exist without the support of the public sector. Thatcher tried to privitise the public sector and only managed to degrade services and ultimately drove up costs!! The vast majority of you are myopic at least ans selfish at best.
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So Robert, HBOS has brought down the Halifax. I think if you look closely at 'The Merger' I think you will find that the Halifax controlled HBOS throughout.
#13 Well said!! How come the nation is so dim as not to see that you are right. When are they all to realise that we have the most spiteful, mendacious and incompetent
Government imaginable. Trust their economic competence? What insanity!!
I was led to believe that The Saviour of the World was born in Bethlehem, and here he came from no further away than Kirkcaldy!! Far from saving the world, over the past 10+ years he has been a major contributor to the mess we are in. How come he lies with such ease given his Christian background? If an example be needed, where is the money as promised to insulate the homes of old age pensioners? The truth is there was none, there is none, and will be none.
I'm still having difficulty with the figures that are being thrown around like confetti. Having heard that this economic mess will cost $trillions, how come the US government is baulking at the expenditure of no more than $14bn (£9.4bn) to save the US car industry?.
RBS managed to drop £12bn ($17.9bn) of shareholders money down a black hole, with hardly a murmur from the press, or demand for a public enquiry. There was even insufficient reason for an apology from the RBS CEO for his part in the debacle.
God save us all from such geniuses.
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Look at GM from an investment opportunity. It isnt good. Low quality cars. No good future with oil running out - they abandoned their future fuel strategy when if they had kept it, it would currently be one of the best. They sold many cars but didnt make enough money to stay afloat. Too many new cars have been bought and we wont need new ones for years, when we really need to move to new fuels. Let them go and pay the money into new fuel companies with a future. Look at Tesla vs GM vs Honda or Toyota and you'll undertand. One is electric only and could give a good solution to our problems if lithium batteries are a good solution, one has lots of cheap cars that are struggling financially, one has high quality cars at the moment and strategy for the future. GM's future looks as bright as British Leylands. VW group and Japan are the future.
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See my comment on todays Daily Politics Blog. Another excellent one from Andrew Neil...
My comment is that I'm beginning to think that anybody who saved over the last 15 years (me included) was STUPID rather than PRUDENT.
The Governent, the Bank of England and the International Community seems to be rewarding all the foolish courses of action at the expense of anybody who was following the (supposedly) sensible ones...
The Government should actually be following the exact opposite policy to the one that is pursuing at the moment. We really do seem to have the Monster Raving Loonies in charge at the moment !
At a time like this, the Government should be rewarding prudence and encouraging people to be more prudent in future, even if big names like GM, Chrysler, Ford, Woolworths and HBOS go to the wall.
Controversial, I agree, but that at least would be a Darwinian policy of Natural selection, survival of the most prudent which actually offers some realistic propsect of hope for the future, instead of the mass economic suicide that we are currently embarked upon. The prudent business, those that don't over-stratch themselves will be the ones that survive this current crisis....
Risk-taking, borrowing and lending is undoubtedly not the way forward at the moment...
It also seems to me, that allowing the big oil-mad motor industries to go to the wall would also create an opportunity for alternative fuels to get off the ground. Would it not ? That's something that lots of people seem to have be saying for decades that we should be activeley pursuing, but the oil-barons have got in the way of progress. Now is our chance.... !
All that's happening at the moment is that the fools who have allowed the economy to get into the state that it currently is, still have power, old habits die hard but are sucking the assets away from those who have been PRUDENT for the last decade or so...
If we allow the current economic lunacy to go unchecked, this will continue until finally the whole country is bankrupt with a few hundred trillion quids worth of debt that we're all enslaved to the Arabs, Russians and Chinese for...
Who was it that said "Capitalism will destroy itself" ?
I can't remember. Was it Marx, no not Groucho, the other one ?
Anyway. Whoever it was, he was absolutely right !
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Does anyone know the odds you can get on the first polititian saying "the green shoots"?
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#125 - whether businesses are 'doing well' is simply NOT the issue. No ho.
Plenty of firms big and small, on and off the High St in any sector you care to name form kitchenware to stationery to building supplies to car parts are doing - as you put it 'well' flogging cheap junk from Chiner and SE Asia generally at rampantly high margins.
Of course I could name names, sure. Check out the provenance of what you buy, the transit boxes stacked up in and outside the shops as they ramp up for Xmas - will tell you.
This of course is great for this or that firm and its happy shareholders relaxing by a log fire in the Home Counties but import on that scale is pricing UK manufacturers of decent stuff out of business both on the home and export front and is the diametric opposite of what is needed. Quite simply it's driving the UK's economy down the plughole.
GC
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125: Keepsmilingeveryone
One business which is going great guns is Greggs the bakers. I remember the day they were Greggs of Gosforth and were only Tyneside based. They don't sell particularly good produce (apart from the famous stottie). However they fit the pocket of the average punter and are a quick turnover mostly cash business.
They and their like are never going to put right our balance of payments !
It is truly sad to say that the UK has largely missed out on the high volume technology industries, whether hardware or software sectors. A chronic lack of skills / investment and foresight for longer than I can recall has put paid to aspirations to such things.
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HBoS and bad debts.
Hardly surprising going by story in last weekends financial press where it turns out that HBoS 'invested' 20 million pounds in Grant Bovey's Imagine Homes group, which has now gone down the proverbial swanee.
But what really caught my eye, was a linkage elsewhere in the press which stated that Boveys wife, Anthea Turner, sucked out over one million pounds from the Imagine group last year in 'consultancy fees'.
Bluntly, HBoS appear to have handed over money more-or-less directly to Bovey/Turner for what exactly?
As somebody who struggled for years to get business funding from HBoS before I moved my accounts, I found this all a bit baffling.
But I suspect that in the Imagine Homes case, that the HBoS managers are/were more than susceptible to large dollops of bull.
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To lawers4justice #56 . If you;ve read any of keynes then you should've come across his term of 'animal spirits' which does suggest that everyone does move in some sort of a herd culture. Hopefully you;ve been watching 'The ascent of money' on Ch4 which gives a good overview of the monetary system.
By the way I think we should just let the bad companies fail! No point in delaying the inevitable. And good article on monday Robert
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68. Now my 3 year old knows what a Billion is!
3 year olds in Zimbabwe know what a quintillion is, and they know how to add it up. LOL
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UK Bankrupcy
Everyone in the Commentary Media seems to be in denial of the very real possibility of the UK being considered bankrupt by the Global Currency Markets
The run on sterling started three months ago and now is accelerating against the Euro.
Sterling is still dropping against a weaker Dollar.
Once the Chancellor goes to the Gilts market for his first tranche of Billion Pounds borrowing and falls short, the run will become a route. Only the IMF is then between us as a so called "Sovereign Country" and bankruptcy. This happened to Iceland so what makes the UK so special?
Robert, what about some real comments and research on the Public Borrowing needs in 2009 by Brown and Darling which will simply "Bust Britain" and sterling becomes a third World currency?
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# 119 stedavwym
I haven't fully grasped your point.
(I'm not the boffin that 110 kindly implies I am).
But that's a key reason for hanging around on this blog. To encounter new ideas.
So I'll return, mull over and try to fully digest.
In the meantime, if my simplified understanding is correct; that you believe there are fewer inherent weaknesses in the Eurozone than the UK, then I'm not so sure given the revelations about rouge trading at Société Générale, and the risky trades leading to massive losses at even "conservative" UBS (though they are Swiss, of course, not Eurozone), and surely even Santander is not as immune as it is portrayed from the Spanish property crash - despite otherwise relatively prudent investment and lending.
I worry about the revelations to come. Remember all those mad cows the French didn't have:
http://tinyurl.com/5ekdvs
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For realistic insight from the George Soros camp click:
http://www.reuters.com/article/newsOne/idUSTRE4BA5CO20081211
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#128
It is not the German economy that will drive the Euro debate. It is Sterlings exchange rate!!!
For whilst sterling continues to trade below 1.20 Euro's the stronger the Pro-Euro Lobby becomes.
It should always be remembered that the UK's Euro ammunition remains dry and that it can fix the value of sterling against the Euro at any time.
So trying to push the pond towards Euro parity is extremely dangerous. For at the end of the day political considerations will outweight economic ones and if it is perceived that the UK will perform better as part of the Eurozone. Euro adotion will be the path that we will follow.
Only a revaluation of Sterling to levels above 1.20 Euro's will, in my view, prevent this.
Always remember that the UK is now not independent of Europe. It is part of it, whether we like it or not.
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#56 - You say you have a good credit rating - the inference being is that you CANT afford a car at the moment - you will have to borrow from your future earnings to buy a 'depreciating' asset. Your best bet would be to lease one!
And that is one of the problems - all the money that has been used as a mortgage from the future has been provided by banks - much was securitised on the assumption that house prices would rise for ever. Now house prices are falling people can't continue on the borrowing curve - this is reducing money supply in the market - thus reducing spending and hence jobs. This is a self-reinforcing contraction in the economy and one way the Government is trying to stem it is by printing more money - the 'dropping from helicopters' phrase of which you may have heard - this will not increase alarmingly until the finance bill in the new parliament is passed. When it is passed get out of the pound.
A second facet is that the banks have bought a lot of stock thatthey thought would result in a good return on investment - however these stocks are turning out to be full of bad debtors - thus banks are losing money - and hence won't lend unless they are sure of making a return.
This lack of lending means that large companies are finding it difficult to refinance their borrowings and are thus in danger of defaulting.
And this brings us to CDS (Credit default swaps) - these have been issued by companies basically as insurance against large companies (or countries) defaulting. The problem is: even though they are de-facto insurance contracts they were dressed up as something different (swaps) to avoid regulation. Amongst other things it meant that the companies that issued these swaps did not have to ensure that they had the resources to pay them should they be called upon - as they thought they never would be. Thus the companies issuing the CDSs may go bankrupt with their liabilities - which means that other companies who issued CDS on those companies which originally issued CDS will be called upon to honour them - bankrupting them, which means that those ..... etc. Hence the term used 'weapons of mass financial destruction'.
Coupled with this, in the UK and US particularly is the balance of trade deficit which has meant that money has been leaving those countries bound for the middle east and japan - thus reducing the supply of money. Alistair Darling's VAT reduction is basically reflating the Chinese economy, not ours.
The attempt to stave of the borrowing crisis by stimulating the economy by reducing interest rates as well as the fiscal stimulus and massive increased government borrowing means that the pound has fallen - raising the cost of imports and hence the inflation rate will pick up once the retailers have finished their Christmas sales, January sales and going out of business sales in February.
At the end of the day the UK economy will have shrunk as the borrowed money is leached out of the system - either by repayment, IVAs or bankruptcy - the latter-two hitting the lenders especially hard. The Government borrowing money means that in a few years whilst there may have been a shorter recession, the economy will still have declined and we will have paid for any temporary relief by storing up tremendous debt for the future - making a default by the government more likely.
So that is the current 'perfect storm'. Banks cannot raise money to lend, Banks wont lend money unless they are sure of a return (OR with penal interest rates e.g. credit cards) as they try and build back their balance sheets. Banks won't pay interest on savings (I had a business account interest reduced from 2.5% to 0.1% overnight) unless they can be sure that the money won't be taken out again (you can get reasonable rates on 3 or 6 month fixed deposits still).
The amount of money that has been borrowed in the UK is about 3 times the GDP - There is no way that that money can be easily repaid - it is not in circulation (until the BOE turns on the presses).
For the average person this means that they have to spend only money they have (reducing demand) - I would urge everyone to buy British when possible. Many retailers and importers will go to the wall, however the manufacturers may survive.
The only way to survive is to accept a substantially reduced standard of living. I can face up to that - the problem is 'those who matter' can't - they think it is political suicide.
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Good...The sooner all this obvious bad news comes out the sooner the country can start to build up again. It's like throwing up...
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Post 127 you are wrong re Cerberus.
Cerberus own Chrysler having bought it cheap from Daimler earlier this year. They also own a minority share in GMAC (General Motors Auto Credit) who are the GM started finance company that acts as lender to all GM car loans amongst many other things (see below).
For those interested GMAC were one of the prime lenders to Woolworths and it was they and another bank that pushed Woolies into administration.
Cerberus want Chrysler to merge with GM to give Chrysler a chance to survive in some formand they want to use their shareholding in GMAC to boost their share of the merged business.
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From the BBC News page:
"A US hedge fund manager is arrested and charged with securities fraud, in one of the biggest fraud cases yet."
...so not such a 'Black Friday' after all. Bankers next....
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131. At 12:23pm on 12 Dec 2008, TGRWorzel-SirPercy wrote
"At a time like this, the Government should be rewarding prudence and encouraging people to be more prudent in future,"
I rather think "Prudence" is a tainted word - or are you encouraging "Mr Prudence" - the PM - to be rewarded for creating and now leading us in to this battle - Lions led by donkeys !!
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Black Friday?? No worse than several black Mondays?
We need information on how far and how low.
If we get to Pound: Euro temporary parity, FTSE at 2500 and 0.5% interest rates, which I feel are all likely, then we have some news for sure.
Without prediction and planning, however shaky the assumptions maybe, no-one knows which way to turn and business and consumer lockdown ensue.
Lets have some leaderhsip please - anyone??
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# 42 alexandercurzon
ARE YOU HENRY FORD IN DISGUISE?
It would be good to have a new HF; he built Ford from scratch and his huge factories that produced 100,000 cars a day in the 1930s were all the result of investment from cash flow; no credit; HF voluntarily doubled wages in the 20s' but halved them in the 30s'; he believed in thrift and wasn't a particularly nice person but knew how to run a business, unlike the current shower in Detroit
I would also recommend that great Canadian economist Galbraith - his 1950s' books are remarkable for their insight, especially now: The Great Crash 1929 and The Affluent Society; a great shame that none of our so-called captains of industry and great leaders were reading these books 5 to 10 years ago; but no, in their arrogance they said that the mistakes of the 1920s and 30s COULD NOT BE REPEATED
Still time to read them boys; you will identify both our current problems and some of the most workable solutions, though we now also have to take into account climate change, globalisation, peak-oil and industrial over-production.
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Perhaps its just good ol' pessimistic me but I have never known so many strands of society coming to a head at the same time!
We have the financial crisis, the global warming crisis, food resources crisis, upcoming water wars crisis, etc, etc.
Is this your actual Armageddon Mr Peston?
Are we all doooomed no matter what we do?
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GORDY When the IMF come can i buy the UK
for a tenner??
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Surely we are all missing something here. The BIG PICTURE.
The USA which forks out trillions to maintain world order in their backyard, ie Iraq,Afghanistan etc will not lend some chump change to its own brothers to tide them over at Christmas.
Is this some sort of revenge for losing the election???
Passing the buck,or not as is the case, to the new administration.
Or is it to be like the UK car industry which failed miserably due to somebody or other.
Can some guru out there complete the cube for me??
Alan
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#116.
"Choosing my language more carefully and avoiding allusion to Daniel Defoe, why do these 'Black Fridays' always occur on Fridays?"
Because Stormy Monday is pre-booked for some time to come.
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As somebody who works in the entertainment business and having read some of the ill-informed views posted here, let me clarify a few facts:
- Although digitally delivered entertainment increases by the day, CD and DVD sales are still very healthy (400,000 Take That CDs in a week anybody?). Entertainment UK is a well run and profitable company (over £1.6billion turnover in the past financial year) that has been brought to its knees by the demise of Woolworths (its parent company). This company should have been separated and floated sometime ago,in which case jobs would have been saved and a profitable company given the chance to survive.
- Entertainment UK is not a Woolworths/BBC joint venture - contrary to what was posted earlier. The joint venture company is called 2Entertain and is not in administration.
Still, why let the facts get in the way of an opinion.
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139. At 12:34pm on 12 Dec 2008, NoddingHomer wrote:
I haven't fully grasped your point.
(I'm not the boffin that 110 kindly implies I am).
+
I thought you skip my posts
you are a liar liar pants on fire
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So what didn't we know.........
HBoS in trouble; which we knew, surprise, surprise, things are worse than previously revealed - but rescue package in place.
US Gov playing hard-ball with the US car manufacturers - good news. They need huge change, a bail out without a re-structuring plan, including the Unions, would be a disaster. The foreign car manufacturers are expanding in the US.
Entertainment UK in trouble - had been on the cards.
Peston is talking things down again, and again, and again...........
The role of the media in talking the economy up and then down should be investigated.
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#119
You advocate joining the Euro as the UKs only hope.
Why the not encourage the government of the day to hold a referendum on our continued membership of the EU, which costs this country 115million every week to be a member of, when, IMO, this money could be better spent on our own people.
A nation is not a nation unless it can control its own borders, army,police and most importantly, its economy.
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Just a note for the poor hopefuls announcing the death of Capitalism; don't hold your breath.
Capitalism is hard-wired into our DNA; the acquisition of resources is what successful organisms do to reproduce and since we are the result of a few billion years of evolution and all our ancestors going back to some single-celled thing did it better than others, that's what we do. We really can't help ourselves. We try sometimes, but in the end we revert to type.
The death of certain capitalists, well that's fine by me, but you might as easily try to announce the death of human nature as abolish capitalism.
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The big difficulty is that Gov't and companies seem committed to below Inflation pat deals.
These deals undermine the very Consumers they need to purchase their goods.
This so called expansion of the Wealthy class is a sham.
Those few who have money do not spend it in ways that support the rest of the economy.
Small parts of the economy have benefited but most of the economy has seen no benefit.
The decline of UK manufacturing replaced by cheap imports has made our situation more precarious. Without a balanced economy Britain will teeter from one crisis to the next.
Of course, the obvious answer, to use the Public Sector to inject much needed demand back into the economy will be sneered at.
A twenty percent rise for all Public Servants will boost the Private sector businesses that are flagging so badly now.
The Private sector is flagging thro lack of customers. As the Private sector lays off workers their own plight will get worse. A vicious downward spiral.
So forthright and dramatic action is needed now, before it is too late to make a difference.
Believe me things can and will become much worse if this crisis is left to escalate unhindered.
Public Sector pay bills will be the least of anyones worries then.
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When did I become a communist? Before or after the USA tax payer?
Robert, you have said a couple of times that a new economy will rise from the ashes of the old. Now clearly we are not all equal in the west, therfore communism will not work. However, slavery is alive and well here - (Mortgage holding PAYE with wife and 2 kids and a car loan man) - so to me the new pheonix economy will be one where the new slaves now become aware that they are slaves, as the present day illusion of freedom is stripped away.
Hmmmm. Interesting times that we live in.
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Re 115
I agree, except that Brown was more Clueless than Reckless. he is a professional Politician, not a Businessman, still less an Economist. he could not be expected to understand what was really going on.
If more money is shovelled into this economic midden it should be aimed at Industries that will help us earn Food and Fuel from the rest of the world and rebuild our own agriculture and energy production.
Even wind-farms might be a useful stop-gap until we can recreate our nuclear power industry.
Economic reconstruction will mean scrapping a lot of 'Service Industries', public and private, and redeploying human and physical resources to productive enterprise.
It would be encouraging to see some Government policies heading in this direction, the 'quick-fix' people-pleasing rhetoric doesn't fool anyone any more.
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#154.
"I haven't fully grasped your point.
(I'm not the boffin that 110 kindly implies I am).
+
I thought you skip my posts
you are a liar liar pants on fire"
For goodness sake, don't let his flaming pants come anywhere near my brandy soaked Christmas pud!
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@ 82
I looked at the link and this is in someways in line with my thinking.
Nobody can dispute that the banking system is connected worldwide and none more so than in the last ten years. china,s incredable growth as been due to the wests incredable spending spree.
Now for the banks to fail in such away the overall debt in the world as to be atleast 51% higher than the worlds total wealth. so lets say for arguments sake that the total worlds wealth is 500 trillion. then the world debt is roughly 260 trillion. thats just a guess. maybe someone does know the true amount of the worlds wealth.
So the idea that china are going to somehow keep growing as some think at say 6% growth i think is completely wrong. most of there economy as been built on our debt. which then becomes there debt because of banks like HSBC which have invested heaverly in Asia.
everything over many years now as been over priced, cars, furniture, houses and business etc.world wide. And how do we know this because the banks collapsed.
lets take a look at this out of the box, as in not normal thinking. because i think everyone would say that this is not a nornmal situation.
Imagine a tree. And its trunk is made up of banks one of top of the other. And HSBC is at the top of the trunk. blossoming in all its glory. yet when you go to the bottom the tree its suddenly black , and theres northern rock and B&B and all the other world banks etc turning the tree black with all the toxic debt. The debt is then moving out to the big branches wollies on oneside mfi on the otherside .
the smaller branches are the smaller companies and the twigs are our houses and then you have the buds. and when the buds opens into leafs so many thousands of jobs are lost, and all the time slowly but surely the tree is turning blacker as it works it way upto the top. by bailing out banks and companies its just helping to turn the tree blacker by adding more debt.
The thing his how do you stop it getting to the top of the tree? HSBC assets are going to turn into toxic debt, the problem is they dont know it yet.
i know i been eating nutty furitcake again
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#156.
"A nation is not a nation unless it can control its own borders, army,police and most importantly, its economy."
That counts out the UK on just about every point doesn't it?
To make a fresh start, which bit would you like back first?
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156:
Britain does look like a peripheral province of Europe................
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154
Caught me!
I'll admit to reading the ones adressed to me directly.
Thanks for making me laugh.
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Let’s clear up one or two points. Regardless of whether Chrysler and GM are bailed out this will most probably be seen as a credit event triggering Credit Default Swaps to be triggered. This will severely damage US banks and some European banks. UK Banks are mostly exposed to Ford who seem to have a viable plan in place ,so the effect will be limited in the UK.
Despite whether Vauxhall is a going concern it is not big enough without opel and the rest of European GM to afford to develop new models. I expect either Germany or Australia to mount a rescue package for GM outside of the US.
Those that claim that commentators are just talking up the problems clearly don’t have much exposure to high street retail which I can tell you in some sectors is performing worse than the worst expectations. Many companies are leveraged and ill equipped for even the slightest downturn and those companies that are doing well are struggling with customers who are being tardy with payments.Depending on who you talk to you can Argue that Robert is talking the economy up, by not pointing out a bad it really is.
As for the banks not lending then I can say that I had no problem getting a loan for a car, but I did have some equity and cash as a deposit. Unfortunately a large part of the population have no cash and no equity in their cars and so are unlikely to get a car loan. Do we want to see car loans for more than the value of the car again and is that really an appropriate thing for banks to do ?
The most telling piece of news today came from Asda who said the consumer has changed their attitude to a depression era mentality. This tells me that the average person is taking prudent steps to curtail their exposure to forthcoming difficulties. The government needs to consider that consumers and businesses now have a strong distaste for debt and trying to force banks to lend to people who don’t want to borrow won’t work. It is too late to prevent the herd mentality where appropriate action individually damages the economy as a whole.
The governments answer is a Keynesian stimulus package. Economics has moved on from Keynes theories and there may be other suitable solutions. What is probably unforgivable and the German finance minister is quite right to point out is that a keynesian stimulus is only appropriate where you have build a trade surplus. It is the right answer for China but the wrong one for the UK and suggests that the governments reading or understanding of Keynes is less than complete.
Recent gilt auctions have been less than enthusiastically received unlike US treasuries, so we can expect a certain amount of back pedalling coming soon. If the government had watched and listened to the debt auctions in Germany this would be obvious, but I guess this government only notices the low bridge sign after they have bumped their heads.
Whilst the bank bailout’s were the right action, the details are poorly thought out and you just get the impression that new Labour wants to hold up their administrations achievements as a shiny example and tinker round the edges rather than adjust to the changed environment.
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#155 - you should get a job with Gorgon Brown - he likes talking things up
GC
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# 129 Old Habits
From this side of the pond it's hard to make sense of what has been going on with the US auto bail-out. Like the earlier US attempt at a bank bail-out, it seems to be part of cock-up and part conspiracy involving neo-con Republicans
Although the $14 bn bail-out was hardly going to be a final solution, it offered the chance of a bridging loan providing the incoming govt a few months to try to organise a restructuring, which would probably eventually lead to Chrysler disappearing and GM being substantially reorganised and shrunk; for GM and Chrysler to go into unmanaged bankruptcy in say January will be very destructive and may cause dangerous ripple effects through the more general US and world economy.
The US Senate modified the House bail-out bill and linked it with demands that the UAW agree to swingeing cuts in pay and conditions, amongst other things. Some of these Republican senators are violently anti-union but they also represent southern states such as Tenessee, Alabama etc where there are new Toyota and Honda plants; so this is cynical, pork-barrel, hard-ball politics at its most extreme
Have a look at the NY Times online; they have some excellent in-depth coverage of this issue and also an excellent comments string
http://www.nytimes.com/2008/12/12/business/12auto.html?_r=1&ref=business
This is a VERY BIG STORY and is continuing to develop unpredictably. The NY Times also says that autopart makers in the US are currently owed $10bn by the Big 3 and can't extend credit any further. It is a house of cards that is about to fall over. Canadian and European car-makers and parts makers will be directly affected as well, with hundreds of thousands of jobs at risk and no time to make any sensible transition to hybrid cars or turbines........
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Of course when the Politicians and shortsellers have completely wiped out Britains economy they can go cap in hand to Europe for redevelopment funding.
Or of course once our Country is bankrupt, they could hand it over to be the Slave state of their foreign masters........
Just think our kids and grand kids could be working in sweatshops making trainers for other countries.
Some people might say that sounds like poetic justice (not me though).
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Re 152 - Mr Ranter
About the same odds as you get for:
'Root and branch'
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159:
Someone once said Freedom has to be fought for, not one battle, but many battles, each and every day.
I can't for the life of me remember who that was but they make a good point.
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Sorry my last post should have reffered to 132 not 152.
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Mr Madoff has lost 50bn dollars, apparantly,
in a hedge.
This is one man that could save America if he can find it.
God help them in Detroit as they continue to make cars that nobody wants to buy.
If we now made the Morris 1000 who would buy it??
The BIG PICTURE is only just emerging and we in the West are going to suffer from the lack of forethought and investment that the East has put in.
The same motor in every car.
Suggestions please
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"Capitalism is hard-wired into our DNA; the acquisition of resources is what successful organisms do to reproduce "
Incredibly simplistic, unfortunately. You could equally argue humans are "hard-wired" to co-operate, from the earliest point of social evolution. Have a look at how social groups operate, in pragmatic and collective self-interest, and from the earliest human societies.
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Our BIPOLAR DISORDER Economy is
Totally SCREWED.
WELL DONE NEW LABOUR.
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@142. Brilliant post. A really good summary of what is happening which is helpful to novices like me.
You drew ref to my earlier post regarding purchasing a car and you have highlighted something very interesting. I presumed I could afford a car because I can afford the repayments on a loan. However, as you point out, I actually CANNOT afford the car as I don't have £30k in the bank. This is perhaps indicative of the problem we find ourselves in. I'm 26 and my mindset is that I can afford it if I can repay the loan! I'm actually part of the problem! I'm sorry everyone!
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This is indeed Black Friday because added to the misery, is the fact that the ADMINISTRATORS FOR WOOLWORTH, will be paying the Banks money due them, BEFORE THE CREDITOS, AND LASTLY the pension scheme, that has been raided to cover the Break up, tis is a montrous liablity for the woolworths pension scheme, and its workers,
The Pension fund is Individuals Money, and should be paid first and not to the banks.
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160:
Effective reconstruction and reorganisation of Britains manufacturing industry is long over due.
The longer it is left, the fewer luxury services (such as free Health care) Britain will be able to supply.
The Clocks are being turned back right now, rather fast.
If the Gov't acts it can stop the Clocks before they are turned back far too far.
!9th century Workers didn't have many rights at all.
The longer they take to act the worse it will be.
Woolworths closing is but a drop in the ocean compared to what could happen, and in fact may well happen within the next two years.
The Pound hit parity with the Euro, quite frankly, if action isn't taken, it could fall well below that, and we might think of One Euro One Pound as the good old days.
I would like to think I'm wrong but in reality, all my guesses have turned out worse so far.
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Fifty Cents (Euro) to the Pound could well happen next year.
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As the Spread betters would say, the Pound is on a oneway ticket down.
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ANY RADICAL SOLUTIONS FOR A SUB PRIME
GOVERNMENT???????????????????????????
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subsidised car industry? not another british leyland i thought we'd learnt our lesson then don't even go there
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It would show some ability and perhaps enhance the crediblity of the No1 public paid for communicator if they could format their blog software to actually show the Sterling symbol...c'mon get a grip.
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Some bloggers are giving Darwin a bad name. Companies going bankrupt is not Darwinian. Darwinian evolution describes changes in adaptations unconsiously developed by living things that result in them being more able to survive and reproduce. GM going bust would not be Darwinian it would be a result of conscious decisions by buyers, managers, workers both now and in the past and on Government decisions now and in the future. Companies can control their destinies (GM volt anyone?) and when they fold it is because they made wrong decisions. Evolution is a blind process - decisions not involved. Evolution is a wonderful thing as the wonder of life's variety demonstrates. Companies going bankrupt is a disaster although I admit it would be a worse disater if some of them survived (more SUVs anyone?).
So please, no more mentions of Darwinian
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Re 95:
"Vauxhall is a global brand". Actually the Vauxhall brand is only used in the UK I believe. Vauxhall is just the British name for GM Europe (called Opel elsewhere in Europe). Vauxhall simply couldn't be bailed out on its own - it would have to be as part of a European bailout of the whole of GM Europe.
If the Business Department really does "view Vauxhall [as a standalone entity] as viable" then it shows they know absolutely nothing about the motor industry.
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#128 wrote
"Why are we taking so much notice of a couple of German politicians? Just look at the state of the German economy - they already have a higher level of unemployment and a higher rate of debt. Add to that NO strategy with which to combat the coming maelstrom."
This would be the same Germany that took on board an Eastern European basket case economy 18 years ago and still matched us over the boom period.
The same Germany that is one of the worlds top exporting countries, and as an addition contrary to popular opinion the majority of Germany's exports come from small companies employing less than 100 people.
I think I know who I would prefer to be running our economy.
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#163 & 164.
"The pheonix shall rise from the ashes"
But not if we are stuck with the EU as our masters. I know this is off track, but it will play an important rolein our childrens lives, and we owe it to them, as we bought them into this world, to leave it in a decent condition
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I think we are now seeing the failure of the bank bail out package. The idea was that by bailing out the banks the level of credit in the economy would be maintained.
For obvious reasons this has not happened. On reflection the reason is obvious: the collapse of the banks was a symptom of a wider problem of a pyramid of leveraged debt imploding.
The effect is that the banks are safe minus a few thousand jobs but the economy is still imploding.
To squirt squillions of taxpayer money into the hole caused by this imploding pyramid is a pure and simple waste of money.
What is needed are pragmatic measures to sustain those parts of the economy we are going to need in the future. We don't need another car factory and someone else can do the CD distribution. We do however need steel.
At the expense of a cliche, perhaps we ought to adopt a pick-and-mix strategy as to which businesses get taxpayer support for the interim.
This is now getting very dirty. An American colleague who was recently in the West End told me that the UK now looks like the US at this time last year: a fire sale on every corner. So 2009 is going to be really bad and possibly part of 2010 as well.
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#156. Emzdad wrote:
"A nation is not a nation unless it can control its own borders, army,police and most importantly, its economy."
Not the UK then. No nation "controls" its economy - the whole World is interdependent. It the case of the UK our major trading partners, by a long wa,y are the countries of the EU of which we are (a semi-detached) member.
Business (and indeed British Tourists) need stable prices, but our great misfortune, due to people like you infecting the minds of the British people, is that we are presently deprived of the vital stability in currency. Join the Euro now so that we can start to recover from this terrible depression.
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Yes, it's another Black Friday, Robert, and not just in economics.
We've lost the plot altogether, don't you think?
What a dreadful outcome today, in the big inquest – even if it is the best that a hobbled jury could achieve, having been misdirected.
It is a wonder though that Damian Green wasn’t shot, given the licence the anti terrorist squad appears to have. An oversight in a catalogue of errors, I suppose - in shooting first and asking questions later.
My sympathies - in this my country where we seem to have lost the sense of proportion and the meaning of justice - are with the Menezes family. What an awful mess we are in! Call this civilisation?
It rather puts bad news about economics in perspective, doesn't it?
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The falling pound is probably a result of interest arbitrage and pessimism on the part of the markets about the likely depth of the recession in the UK. But there is another possibility, which is that foreign currency holders have decided that the British economy lacks the resources to escape from the current crisis.
In other words, they could fear that the government's efforts to sustain demand will be successful - but that when consumers do spend they willl, despite the falling pound, continue for some time to purchase imported goods because our manufacturing base has shrunk below the level appopriate to an advanced industrial state. In that case the pound may have to sink a long way further before it reaches an equilibrium.
The government needs to have an external strategy in case its stimulus package sucks in imports and provokes a sterling crisis and capital flight. If the worst happens it will either have to put the brakes on and opt for orthodoxy - or protect activity in the home market via an emergency package of import and capital controls.
Let's hope this never happens. But to help the UK avoid such a scenario, HMG needs an industrial strategy and agreement on exchange rate and interest levels with its OECD partners.
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Re:146
Prudence, if she ever really existed, has been booted completely out of the top-floor window attached to a millstone of debt,
But we need her more than ever now...
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Vauxhall might be worth supporting if our money is used to switch production to General Motors' new Volt car.
If there are no unforeseen problems with the new technology, this should prove an excellent investment.
The Vauxhall Volt - I can see it now.
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May I coin a new word?
Blogorrhoea: a profuse discharge of words onto a discussion board.
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Guy Croft @ 133
Guy - I take what you say on board, and have some agreement. I am in manufacturing myself, and I know it is VERY hard work at present competing with tat imports.
But my point in #125 was about flawed business models. The government wants to keeep "viable" businesses going. How you assess viability today I do not know as the biggest risks we face are bankruptcy of either our customes or our busines critical suppliers, and less to do with what we do or make.
But business models like Woolworths were not beacons if excellence. American car makers make cars their public don't want any more. The inability of management to detect this, and re-focus has or will utlimately cost them, just as it costs any UK manufacturer who does not change.
Many UK manufacturers are caught in the middle. Can't afford to invest; can't afford not to invest. But we can't get away from the fundamental fact that businesses can only survive by providing customers what they want, when they want it and a price they perceive to be valuable to them. If the sums don't add up any more, STOP - there must be a shakeout and adjustment.
Running a business today can feel the loneliest place on this planet. No leadership or help form government; no forward planning by anyone; no informed predictions of what the future may look like - but you can onoy play the game in front of you.
Sincerely Guy - all the best in these tough times. No jets or bonusses to fall back on here either, just your house on the line every day as you face the wife and kids every tea time.
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NEW LABOUR
an anagram of BLOWN ARE U
Sounds about right.
North-sea oil revenues blown
Wider economy blown,
Iraq blown up
Afghanistan blown-up
My future blown...
Everybody's future blown
Lets hope BLOWN ARE U's chances of re-election are also blown...
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#158 SUpercalmdown wrote
"A twenty percent rise for all Public Servants will boost the Private sector businesses that are flagging so badly now."
Now I am worried that hyperinflation is right here right now.
Supercalmdowns call for a 10% pay rise for public sector workers has gone up 100% to a 20% rise in the space of 24 hours.
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#176
You CAN afford a car if you have realistic prospects of paying back the loan.
What you can't afford is to allocate the same future income twice or thrice or four times over into payments for a fancy holiday, mortgage and student-loan repayments, dining out etc.
As this statement of basic personal finance starts to take root in more and more personal decisions, however, the chances are that fewer people will be buying the goods/services which you have to offer - and the question of what is a "realistic" level of planned expenditure on your part goes down too.
That said, there's surely going to be a boom in insolvency law. Get into that, and your realistic expectation of future income should do well for the next (let's guess) 5 years.
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"The people of Greater Manchester have voted against plans to introduce a congestion charge in the region.
A majority of voters in all of the region's 10 boroughs voted against the plans, with 812,815 (79%) no votes and 218,860 (21%) in favour of the charge
"
Unfortunately for Manchester Gordon doesnt beleive you actually meant NO. You will be asked again in 6 months time and like the Irish and the Lisbon Treaty you'd better get it right next time.
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Apart from the Olympics and Lewis Hamilton's last corner antics in Brazil, has there actually been any good news this year ?
If ever there was a time for some good news, a story like Woolworths rising from the ashes like the proverbial Pheonix perhaps, this is probably it...
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Couple more interesting stories on Bloomberg, one suggesting ECB is going to stop/slow the pace of interest rate cuts. The other is GB/Ally D's "phase two" for becoming Britains favourite bank managers ("no bail out too big").
Both stories show how utterly bonkers most of the people involved in "managing" our economies actually are.
http://www.bloomberg.com/index_americas.html
Check out:
"ECB Signals Unwillingness to Reduce Interest Rates Much Further, May Pause"
and
"Brown Says U.K. Working on New Stage of Bank Rescue to Spur Consumer Loans"
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#174
Thanks for calling it simplistic; we could have done with some simplistic evaluations of how to run an economy.
Seriously though, you make the mistake of confusing one survival device (cooperation) with the fundamental driving force of acquisition of resources. People only cooperate in order to advance their own interests. When cooperation ceases to do this, they stop doing it.
If you can show me any long-standing arrangement of humans to contradict this I'll think again.
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So, I went to Woolworths to buy "bargains" in the closing down sale.
After having been in the store for about five minutes I thought to myself,
"I haven't found anything I want to buy in this shop for about ten years.....and today is no different."
So I left, empty-handed, again.
And therein, I suspect, lies the reason behind the demise of that so-called "great" British institution.
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Again and again I will keep saying it. The conditions for a major war are slowly developing.
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158, supercalmdown
LOL
He’s gone from a 10per cent pay demand for public service ‘workers’ to 20, LOL!
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Hard Times don't bother me
Life is so glorious
Sticks and stones
may break my bones
But life is one experience
That only a fool could refuse
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#189
Yeah, we "vitally" need stability at a price above the value of our economy, so we dry up completely don't we?
At least with a crap currency we have a chance of recovering. I'm sure Gordy will put paid to that hope in other ways, but it's naive in the extreme to think we could run for cover behind the skirts of Germany. Anyway, they told us yesterday they wouldn't have out toxic policies in their economy.
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I have a bad feeling that we might be seeing the symptoms of fundamental problems in the way we create money.
What we have actually experienced over the last 30 years is an incredible expansion of 'wealth' or 'value'. This has come from technological improvements - PC, internet, mobile phone and 100 millions of people moving from subsistence farming into the industrial and knowledge workforce.
Both of these trends create wealth or value and economic activity but they don't create money. The only ways to create money are for the state to 'print' it or for someone to borrow it. Printing money is politically unnacceptable so almost all our money is created from debt. In a period of intense technical progress or when 100M's of people join the economy there is a need for more money since there is more trade and more wealth. Unlike money wealth can be created from nothing - one day someone invents something or writes a great novel.
The problem is that the only way to create the money necessary to support the larger economy is for someone to borrow it and the more technical progress we have the more borrowing is needed to support it. In the end there is too much stress and you end up with a crisis.
The question is - why should things which are wholly beneficial such as technical progress or moving people out of poverty result in increased debt. We are not 'borrowing' anything from the future what we are actually doing is contributing something to the future. Because it is very difficult to quantify the value of progress economics is treating it as having no value: which is easy but simply does not work in a period when there is a lot of progress, like the last few decades or when Edison, Westinghouse and Tesla brought electric power to market.
It would seem logical that to keep constant value of money during a period when wealth is being created 'out of thin air' by technical progress then some money should be printed rather than borrowed. If this does not happen then debt needs to increase to create the money needed to support the increased economic activity and sooner or later the debt becomes unsustainable. If the only way to make money is through debt then perhaps everything is by definition a bubble.
There is a lot more 'value' in the world than 30 years ago - almost every product we use is vastly superior and there are a lot more productive people. Therefore there should also be more money now than there was then if money kept a constant value. If technical progress is not considered then money actually increases in value over time (you get a better cellphone or car for the same amount of money this year than last year). This rewards people who have a lot of money and bankers when it would be fairer to reward everyone equally or those who were responsible for the progress.
Perhaps the way out of the present problem is to change the ratio of fiat based money to debt based money in the system by 'printing' more fiat money while bringing down the reserve ratio so banks can create less debt money and keeping the total amount of money constant.
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159. peterbaldwin wrote:
"Now clearly we are not all equal in the west, therfore communism will not work. However, slavery is alive and well here - (Mortgage holding PAYE with wife and 2 kids and a car loan man) - so to me the new pheonix economy will be one where the new slaves now become aware that they are slaves, as the present day illusion of freedom is stripped away."
Excellent analysis.I hope and pray that the masses will come round to your way of thinking soon.The current band of charlatans we are blessed with are no more than the appointed overseers(and don`t they just love using the whip on us to make themselves feel big!) for the slave owning elite.
http://www.ft.com/cms/s/0/7a03e5b6-c541-11dd-b516-000077b07658.html
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The Business Department Overseen by
MANDELSON
YOUVE GOT TO LAUGH.
Vauxhall Uk VIABLE on its own???
Could be if it got the FULL treatment.
Thats the A.C. treatment,out with the
hangers on. . . . .
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#162
I'm glad you found the link worthwhile.
If you want to go further & have the stamina:
http://home.earthlink.net/~lrgoldner/october.html
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Whilst the issues that Robert raises are important and worrying, perhaps the single most disturbing indicator at the moment is the Sterling/Euro rate.
It seems that foreign investors have really bought into the idea that the UK is "best placed" to survive recession.
What does the exchange rate tell us about the willingness of foreigners to lend to the UK; and what interest rates might be necessary in order to meet HMG's borrowing requirements?
Low interest rates, like reduced taxes, might be a short-term phenomenon, methinks........
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Much as enjoy the comments on here and agree things are not looking as good as they were I can't help thinking things are not that bad either.
It was but a few decades ago that L S Lowry was painting matchstick men and matchstick cat's and dogs, entering the factory in their hobnail boots or pushing cycles.
Even today the same scene would be matchstick cars and matchstick mobile phones.
And surely we will not be seeing Dicken's style workhouses in the foreseeable future.
Nah, things ain't that bad after all.
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On the day of the HBOS shareholder meeting it cannot come as a surprise their woeful results.The BBC reported a couple of weeks ago that the BOS brand would remain with its Scottish headquarters at the Mound in Ediburgh.To-day's news indicates this is no longer the case.WHO IS CORRECT ????????? Can we not have some consistency in BBC reports.
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#191
"HMG needs an industrial strategy"
That's a good idea! I'm not holding my breath..............
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#189. John_from_Hendon wrote:
"#156. Emzdad wrote:
"A nation is not a nation unless it can control its own borders, army,police and most importantly, its economy."
Not the UK then. No nation "controls" its economy - the whole World is interdependent. It the case of the UK our major trading partners, by a long wa,y are the countries of the EU of which we are (a semi-detached) member.
Business (and indeed British Tourists) need stable prices, but our great misfortune, due to people like you infecting the minds of the British people, is that we are presently deprived of the vital stability in currency. Join the Euro now so that we can start to recover from this terrible depression."
I'm beginning to see the level of hope available to we humans in these situations.
Observe the beautiful symmetry of a flock of Starlings responding to stimuli. Then, a shoal of Sardines doing likewise.
Now observe the many smart participants on this blog all rushing around chaotically pontificating, clashing heads, tripping over each other and getting progressively more strident in an attempt to shout each other down.
And people keep asking why each measure taken by the politicians seems to make the situation worse.
The key word isn't "Darwin" it's "Human".
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Re Re:election of BROWN ETC
The sad thing is that they could well be
VOTED in AGAIN.
The opposition NEED to GET their ACT
TOGETHER VERY VERY Fast.
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This comment was removed because the moderators found it broke the House Rules.
194,
LOL Brilliant!
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This may seem bad, but the shocking news from the USA of the Hedge Fund that has FRAUDULENTLY lost $50 BILLION is just mind numbing.
HBOS may have extra losses, but how on earth (and who didn't do their job or even benefited) did this get past 'watchdogs' for so long? Methinks the 'watchdog' was somewhat 'blind and disabled'!
As regards the general downturn especially the pound, does anyone know if Government ministers are holding private talks (secret) with 'interested' parties and speculating against on the pound, in the 'nation's best interests of course (the euro, silly )?
What really started the 'credit crunch' Robert? Was it really the 'money markets' or has some social engineering to bring us all down to a poorer level been underway? Eco-anarchism against oil, transport, energy, capitalism? Or have the G7 meetings held a darker secret?
Why the global shutdown? Who is not telling who what is really behind all this mess? It isn't just about money.
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# 191. At 2:00pm on 12 Dec 2008, modernhistorian
I think GBP is suffering versus EUR because the ECB is sending clear signals that it intends to slow down the pace of interest rate cuts. Conversely, BoE is screaming to whoever will listen that UK rates are going to 0%. So it's a simple case of betting EUR deposits will yield close to 2% for the next few months, GBP ones won't. Just a reversal of the position for much of the last 10 years, over which time GBP has been overvalued, where GBP rates were markedly higher than EUR.
I think what's clear is that while economic numbers are very weak, and certainly while commodity prices are falling, the Treasury and BoE don't care what happens to the exchange rate.
I don't know anyone who thinks ECB can maintain its stance any later than early Feb, ie they might miss one month of rate cuts, or only cut 25bp. ECB rates are coming down to no higher than 1% by early-April just like BoE. Once this realisation sets in, GBP will strengthen (or EUR weaken depending how you view it).
ECB is stuffed with inflation nutters. This is the central bank that was still raising rates as recently as July. They won't be happy until everyone in Eurozone is unemployed.
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177 Free Cornwall
You expressed concern for the workers pensions at Woolworths.
Fear not.
"Its a monstrous liability for the woolworths pension scheme, and its workers" You said
True it is a large liability. However.
Current members of the old final salary scheme have a guarantee from the penion guarantee scheme (brought in recently following similar unfair collapses) which means that if Woolworths goes bust and cannot pay their obligations to pension scheme members then the government underpinned promise kicks in. By now you know who that is - us the taxpayer. Well upto £37k per annum at least. So it is the directors with large pensions that have large unprotected pensions that lose out.
Newer employees are members of the money purchase scheme. Their pensions are unaffected since the pots of money are held by each employee. However, they are losing their jobs.
So you do not need to feel bad for the workers pensions as you will be helping pay most of them.
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What really surprises me about Ford and GM is that people are saying they produce the type of car that the public (in the US) dont want anymore.
While this appears true on the surface when you see their SUV's and the like, Its not true in reality.
Both these companies have large european presence, and therefore they DO produce the type of car that the market requires.
The writing has been on the wall for years but seriously how hard can it be for either of these companies to use their European designs in the US.
The truth is its not. Ford have sold the Cortina/Mondeo for years in the US as a Taurus. They also sold the Escort from Mk3 onwards. GM have sold Astra and Vectra under a US name that I cant recall. This being the case why then the problems?
Really Robert why?
As for Vauxhall or Vauxhall/Opel being viable, this is only true when they have the backing of the R&D of the parent company
Same goes for Ford. Its the cost of scale that the US parent company delivers that makes these companies viable in Europe.
Look at the Ford Galaxy with its VW and Seat counterpart. The Fiesta and the Mazda 121. Gm with its Australian Holden tie up. At one time Honda and Rover (remember the 214 and its honda counterpart.
For years these companies have shared design and tooling and manufacture.
So i say again the US arms of these manufacturers have no excuse on the required model front. And NO company is viable in isolation.
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Sterling has been sliding against the Euro for at least 15 months, about 20-23% in total, from 1.45. This was long before the global crisis this autumn. The decline is now serious.
What was the root cause of this decline that started in September 2007?
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Re: 193
Or the Vauxhall OHMega perhaps ?
Yes, you're right about Vauxhall being worth saving if it uses our money to get alternative fuels onto the mass-market. I do happen to agree with you on that.
But what the motor manufacturers seem to be talking about is bail-out to pay wages whilst the credit crunch continues
And it is only OK to switch to electricity so long as it is derived from non-fossil sources, which is another big issue !
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The Germans are absolutely right. If the government had a trillion pounds that it had stashed away while tax revenues were high then using it now to stimulate the economy might be a good idea. However borrowing a trillion pounds to stimulate the economy makes absolutely no sense at all and will only makes things a lot worse. Mind you if the government had stashed away a trillion pounds then we probably wouldn't be in this mess in the first place !
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Re: Mr Madoff
He said he was "finished", that he had "absolutely nothing" and that "it's all just one big lie", and that it was "basically, a giant Ponzi scheme", the complaint said.
He wasnt just talking about his own fund - he was talking about the inductry as a hole (sic)!
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Re: 194
Yup, I'm sufferring from that.
And there's more Blogorrohea to come I'm afraid, unless things get better....
The cure is to get me back into work, so that I've got some money to spend and I can single-handedly save the world, now that Gordon has decided he's not really doing that at the moment ...
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#50 BMC had already been used by a defunct company. It stood for British Motor Corporation, pre-British Leyland !!
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56 (and responses):
What is highlighted here is the definition of the word "afford". This definition has become blurred, thereby contributing to our current over-borrowed problems in the UK.
Strictly speaking, one can only really "afford" a 30k car if one has 30k of cash that one does not need for more important commitments. A good credit rating does not mean one can "afford" anything; it means one is in a position to BORROW to buy the car, which is not the same thing. (My guess would be that you would be wise not to buy the car, and perhaps think about a cheaper one - there are lots of bargains now that the car industry is in such a mess).
Your contributions are very helpful, because they prompt a necessary debate about the meaning of "afford". The relationship between spending, saving and borrowing has been drastically skewed in the UK, and this is at the heart of the economic crisis.
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Re: 132
About a million to one at the moment I would think, to occur this side of the next millenium...
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"Seriously though, you make the mistake of confusing one survival device (cooperation) with the fundamental driving force of acquisition of resources. People only cooperate in order to advance their own interests. When cooperation ceases to do this, they stop doing it."
ah - but your original point wasn't about our responses to changes in environment, but what we might be *programmed* to do by the history of human development. The weight of human history suggests a long history of tribal co-operation from when we first became conscious. Capitalism ( and even feudalism) are a drop in the ocean of human development by comparison, if you look at the history of species.
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#194
Coin "blogorrhea" if you like. But any analogy with "diarrhoea" seems inexact.
While the latter refers to an almost entirely liquid substance, I'm still getting nuggets of new information and new viewpoints even this far down in the list.
#193
Re. the Volt. I understand that there are still some forseen problems to overcome (not just financial) before it reaches the showrooms, notably the battery technology (you really don't want the self combustion issues which recently beset a number of laptops).
But yes, I believe the Volt will be (would have been?) the first modern electric car with mainstream appeal (it seats four people for a start – not two like the electric Mini or Tesla).
More at
http://news.bbc.co.uk/1/hi/business/7734226.stm
as to why GM was not entirely silly, but simply got the wrong timing in trying to leapfrog over hybrid technology.
(Also check out "Big cars, big profits" as to how it was not the car makers alone, but also unintended consequences of US legislation which diverted too much production into SUV's).
#218
Re. Assassination. I'd take that bet.
(Since he would not be the first:
http://en.wikipedia.org/wiki/Spencer_Perceval )
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Re 221:
I take your point that, given falling commodity prices and the absence of inflation, the Treasury and the Bank may have decided to let sterling fall as far as the markets want it to.
But how will this feed through into bond prices? And therefore into government borrowing? And what will other OECD governments do if they feel the UK is attempting to undercut them in home and overseas markets via a policy of ongoing currency depreciation?
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174 / 202
'Thanks for calling it simplistic; we could have done with some simplistic evaluations of how to run an economy.
Seriously though, you make the mistake of confusing one survival device (cooperation) with the fundamental driving force of acquisition of resources. People only cooperate in order to advance their own interests. When cooperation ceases to do this, they stop doing it.
If you can show me any long-standing arrangement of humans to contradict this I'll think again.'
The human instinct that powers our economies is/was and always will be GREED.
However much you try to deny it, it is there inside all of us. It is a necessity to our survival as a species. We ALL want more. Some want more cash, some more food, some more knowledge, some more holidays and some more power. It is what makes us successful, yet is also our deepest flaw.
We can never get rid of it, we just have to learn to regulate it, because untethered GREED has brought us to where we are today.
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#217 - yeah it would be great if they could but they cannot.
Personally I don't want that mob back in, Lord Clarke of Brown Shoes and Sir John of Family Values et alia pulling the strings behind the scenes. They can burn to ashes that rotten lot as far as I'm concerned. They planted the seeds of this chaotic mess way back in the 90s.
Me - I want coalition government and an end to the Lab/Cons up-dwon and and end to the autonomous power-at-all-costs 'style' the maniac Brown embodies.
GC
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Re: 204
I agree with you on that.
It is very worrying actually...
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#184
What on earth makes you think these managers were conscious?
Comatose more like
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Gordon and Darlings klepto and son panacea intends to buy up everything that doesnt move to stop the full revealing of the New Laibor "things can only get better "ponzi economy that is fast turning into a giant boot sale
As i have said many times "To infinity and beyond"
Its Mperror Zorgo[GB types] missusing their sabres that caused this mess
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@233 Nod
I would reccomend everyone read the wiki on perceval
There are some uncanny parrelels with Brown
e.g. he was his own Chancellor when PM
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A long time ago, well Post 14 actually, I predicted that the US Government would step in to 'save' the Big 3 carmakers..Its about to happen, see the front of the Business Page. If it was blindingly obvious to even a simple soul like me that this was going to happen how come the markets reacted like the Senate decision was the end of the world?
Really,the people who 'invest' our money are such knee-jerk reactionaries its incredible. Warren Buffets basic investment principle of 'do your research, assure yourself that the company is sound and well managed, buy your shares, wait ten years, take your profits' doesn't quite seem to have got through to most fund managers..
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Guycroft - post 76
I certainly agree. If only we could get back to good, solid, down to earth democratic government. I feel a Rudyard Kipling moment coming on - the Gods of the copybook headings should be read by anyone who wants to understand our present mess.
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costaquenta, see 203/232.
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But HBOS are one of my delights! They are running an advertising campaign for recruitment locally which has a member of staff pictured with a quote that "For him it is working for a successful company" and I always laugh at it.
On a serious point, the Germans are right and in our hearts I suspect most of us know it. The really frightening thing is that Team Brown seem to be improving their position in the opinion polls! Well, if they win, they will have to face reality and then the Tories get in and spend thirty years sorting out the mess.
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I'm currently a final year university student and am slowing losing hope at finding work as of next summer.
I my opinion the advantages of being part of the EU are a long way off from outweighing the cost of it, we are not like France who gets billions a year to support agriculture, in the grand scale of things we get nothing!
I believe the best way forward is to split from the EU and put that money back into our economy, that does not mean bailing out the big companies, if they are that hard up they have a serious flaw in their business plan and money will not help in the long run.
Put money back into the small and medium companies, these are the ones that deserve and need the help and they are the ones who will get us out of this.
Take us back to the good old days when we produced things! The economy can pick up and the UK can start exporting again, China and India is charging more and more by the day to keep up there expansion, if we have the produce to sell, it won't be too long before we can be competitive again!!!
Of course this is all just what I believe.
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A very optimistic assessment. Given that it simply follows a black week, a black month and a black year. Just look at the FTSE over the past year; the exchange rates, the fall in GDP etc.
From 4th ranked global economy, UK is now 6th below France (yes France) and likely to fall below Italy next year. It takes a real financial ?(well something) to achieve that along with busting the boom.
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#221.
I think you've hit the nail on the head
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204,
‘conditions for a major war are developing’
You can count me out, fight for this country and its layabouts? What so I can come back to higher taxes / interest rates and more CSA bills? Lol They said to my Grandad’s (both of them) you will come back to a better Britain after WW2, well- did they?
On your bike mate!
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#245
Dead right. No hope of happening because you're breaching the orthodoxy, but you're right.
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#245
How refreshing to hear a young voice echo sentiments that I have been saying since I was your age, some 30 years ago.
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'Miliband steps in to smooth over relations with Germany'. Hehe. Jonah Brown has no diplomatic skills whatsoever. For the past week his cronies have been busy spinning against German policy and now it explodes in his face - GOOD.
Welcome news that the ECB is unlikely to cut interest rates further, if at all; about time we had some sensible policies from a credible government (Germany IS the ECB).
Jonah & Ally have turned into sorcerer's apprentices - remember the disney image? Well now its happening for real with OUR MONEY. There is now no limit to demands for cash, from all and sundry to the Bank of England and Treasury, by courtesy of Zanu-NuLabour.
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You know the best cure for Blogorrohea ?
Gas prices.
Having been sat around blogging all afternoon, with no heating on, the cold has got into me.
That's despite being sat at my computer with two pairs of socks (one thermal), a thermal-vest, a sweatshirt, two pullovers (one really thick from Army surplus) and a thermally-lined woolly hat.
I'm going to have to sign-off soon and run around a bit, before hypothermia sets in...
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# 234. At 3:07pm on 12 Dec 2008, modernhistorian
Short term interest rates (ie those that can be impacted by BoE decisions) have less and less impact as you go further out in time. The yield on gilts with duration of 10+ years ought to reflect simply the risk free rate plus inflation expectations. Historically the risk free rate for the UK has been about 3%, and if investors believe MPC will keep inflation around 2%, then the yield on 10+ year gilts should be about 5%.
In recent years, long yields have been lower, but that's mainly a demand/supply imbalance. The government has issued relatively little long dated debt, whilst investors, especially defined benefit pension schemes have materially altered their asset allocations and bought more bonds and fewer equities. Excess demand has depressed yields.
If you reckon the fiscal stimulus is inflationary longer-term, then expect long-term interest rates to go up, meaning the interest rate on long gilts will go up.
Nobody will notice GBP FX rates, GBP isn't important enough. The only currencies that matter are USD, EUR, JPY and CNY. And governments rarely intervene directly anymore to impact FX rates. They've worked out that it isn't effective long term.
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Post 217 Alexander, I am reminded of the words of Paul Weller whilst still with the Jam. "The public gets what the public wants".
Post 229 I think you will find he was being ironic re BMC.
Post 238 I think the word you were looking for is drunk. Drunk on alcohol from too many liquid lunches and drunk on the power of it all.
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Santander to shed 1,900 UK jobs next year.
How nice!
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# 246. At 3:19pm on 12 Dec 2008, WebComment
"From 4th ranked global economy, UK is now 6th below France (yes France) and likely to fall below Italy next year. It takes a real financial ?(well something) to achieve that"
Actually all it takes is a falling exchange rate versus EUR, as all the numbers are translated into a common currency, in this case USD.
We only moved from 6th to 4th in the first place because GBP strengthened in the early 2000s.
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And it gets worse:
http://news.bbc.co.uk/1/hi/business/7779442.stm
50 billion dollars down the swannee, thanks to a former chairman of NASDAQ, whose parting shot is to distribute a few hundred million to his friends.
Why does anyone even bother now, when hedge funds are allowed to continue and are actually in a position to pull stunts like this? A giant Pyramid scam indeed? That's what did for Albania, and will do for the rest of us.
I hereby volunteer for his firing squad.
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#240
Whoops. My last point was ambiguous.
I simply meant that no PM could now be the *first* to be assassinated, since Spencer Percival had been.
(I did not mean that, given some parallels, the chances of it happening again were increased.)
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Ref: 208
You confuse two words, "Price" and "Value"
I value many things which have no price, nor would I attempt to sell such things i hold as having real value.
Price is the number of determined notes or pieces of silver I will take for an item in exchange with another. ie Price determines the agreed relationship between contracting Parties.
I value many things havnig no price nor labels, so do you, I would imagine.
If I cannot be bought that means I may have values called integrity or honour, beyond price. We need to relearn values of happiness, contentment, unconditional giving and compassion for one another. Price just sets us against one another bringing both greed and fear in equal amounts. When we want nothing and need nothing, then we are understanding something of real " Value" Peace of mind
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It makes me glad I invested all my savings in the 4.45 at Lingfield.
I got better odds than investing in a hedge fund
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@258
I was mearly pointing out that there were parrellels also.
Far be it from me to suggest they might be the reason for the same thing happening either
But the parrellels are amazing.
Those who don't learn from history are destined to repeat it. Its almost 200 years ago, how's that for an economic cycle to balance the books over.
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This comment was removed because the moderators found it broke the House Rules.
Can anyone tell me why LLoyds wants to buy a pig in a poke called HBOS?
Can anyone tell me what we get for the billions we pay to be part of the EU that Switzerland doesnt get for nothing?
Can anyone tell me why Brown is even higher in the polls?
Can anyone tell me why we saved Northern Rock but not Woolworths?
Can anyone tell me what qualifies Mandleson to run a Business Department?
Can anyone tell me why Mugabe is allowed to reign supreme and Saddam Hussein wasnt?
Can anyone tell me why the irish have to vote again?
Can anyone tell me why Black Friday, when every day is seems black?
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The American car manufacureres are not alone in over producing cars, in this country there are, (and have been for the last several years) hundreds of thousands of new and secondhand cars parked on disused airfields and dockside locations across the land, when you see them it becomes brain numbing, vast sweeps of blurred colour.
You can expect your next new car to come with the complete set of brown pox marks thrown in for free just as they did after the last economic downturn, standing in puddles for a year or more does nothing for their longevity.
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Surely if entertainment Uk does not survive the others suppliers of cd's, dvd's etc will benefit as they will have to increase supply to meet this new demand. This in turn means they will have to expand and employ more folk. Although many redundancies look bad at first it is swings and roundabouts in the end as others will benefit. Where I live woolworths will close, but the site is so good that a Sainsbury's local or the like will open in its place and will employ many more people than woollies did. This is a natural cycle that has been repeated before and normality will return. We just have to work on lessening the severity of a future downturn. I know none of this will be of any comfort to someone loosing their job now but you cannot ignore the bigger picture.
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242:
Good point - Kipling would be a great read right now. 'Puck of Pook's Hill' tells of the making of what used to be a great country.
But my preferred book for insight into the present mess is "Parkinson's Law" by C Northcote Parkinson. It's all about the self-perpetuating expansion of bureaucracy and the stultifying pettiness and inefficiency that this creates..............
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RE JayPee253bpr
Actually I support the stimulus package; it's just that I am slightly concerned about the speed with which the UK economy can respond to it.
I suppose that now is as good a time as any for a major sterling depreciation: the question is, how long before the J curve effect starts? This is a political issue for the government (with an election due in 17 or 18 months) as well as an economic one.
As for inflation - why not get the Bank to encourage a little, either simply by printing money or by the purchase of long-dated treasury bonds and gilts? This will help with the government's borrowing. And inflation will also reduce the impact of general de-leveraging on economic activity.
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Mr Peston
Bad news is goods news to some. I wonder if this applies to your media coverage.
Have you not heard of media privilage? Make goods out of bad news.
When you cover a story, please do remember that there are real people out there who are affected by your special privilage position.
Lets be impartial, shall we, and help this good country and its people get through these worrying times. Honestly, are we facing armageddon?
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So Robert, more of a slightly murky grey Friday with hints of gloom. Have a good weekend coming up with more tales of doom(TM) for next week.
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At 12:34 I post (#139): "surely even Santander is not as immune as is portrayed"
Then at 03:40 Emzdad (#255) picks up on this latest anouncement of job cuts:
http://news.bbc.co.uk/1/hi/business/7780069.stm
Where are the safe havensand rewards for probity?
Anyone want to join me setting up a restaurant/hotel in Sark? I believe that there's a shortage of open ones at the moment.
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85
- and if you read to the end of the article you will notice that one third of the Phillipine budget is devoted to paying off Marcos's overseas debts. How many years is it since Marcos was deposed?
And how many years after Brown goes shall we need to repay his debts?
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BBC Breaking News!
"The giant Spanish bank Santander has excluded 1.8 million UK shareholders from taking part in a new share issue"
Inward investment - that it is a good thing and to be encouraged - once again shown for the myth it is.
Ahhh. Poor old Britain. Formerly bastion of democracy, a great and proud country - selling off all its assets to generous foreigners to beg a living.
This is all so utterly pathetic. We can fight the Taliban, the militia, anyone who comes our way in pub or battlefield (ho ho) but can't stand up on our own two feet as a trading nation. Labour and Cons have EMASCULATED Britain.
GC
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I'm going to tell a brief (and true story), and see if anyone agrees with how striking the parallels are:
1. Britain elects a youthful, modernising Labour PM, who always talks about things being "new", but in fact is a bit of a self-serving spin merchant, though personally likeable.
2. A decade on, though still quite young, he resigns.
3. He is replaced by his Chancellor, who becomes an unelected (if you see what I mean) Labour PM. (He has never led his party to a General Election victory, and is fated never to do so).
4. Within two years, the economy is in ruins, unemployment is escalating and the IMF bails out a near-bankrupt UK after international markets refuse to put up the money.
5. The government denies any responsibility for this mess, of course, blaming it on Johnnie Foreigner (overseas events outside our control).
6. Meanwhile, output has nosedived, the stock market has crashed, and the government has 'rescued' lots of fundamentally non-viable companies.
7. Labour finally recants and admits that you cannot borrow your way out of recession.
The modernising ("white heat of the technological revolution") PM in question is not Blair, of course, but Wilson, and his successor is Callaghan. The overseas mess - meaning that everything can be blamed on foreigners - is an oil crisis rather than sub-prime.
There are limits to the comparisons - Wilson did not get a straight ten-year stint, and Callaghan was an honest and reasonably capable Chancellor.
But the parallels remain striking. Cap in hand to the IMF in 2009 if the parallel holds.....
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#269
Not hard is it?
These days are making Black wednesday into a tea party. We lost - what - £4bn that day? We're losing that by the hour now.
Dark days indeed.
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"That's causing massive anxiety in the British car industry - and is particularly alarming for Vauxhall, the British subsidiary of General Motors."
Pardon? What British car industry is that?
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I just viewed the news conference by Ron Gettlefinger, President of the United Auto Workers--defiant to the end as he rides over the cliff. He derided yesterday's efforts by Senator Corker to hammer out out a compromise, efforts undertaken at Sen. Corker's initiative. He blamed everything, of course, on those nasty mean Republicans--never a mention of the Democrats who voted against the package, and the many abstentions.
This followed by Senator Corker, the freshman senator from Tennessee, in his former life a business owner and city mayor.
He had contacted the UAW to attempt to negotiate a solution. He said it broke down in the end over three words: 'a date certain' for the UAW to bring their contract package in line.
GM debt now trades for .11 on the dollar.
There is no 'debtor in possession' financing, outside of the Treasury, to carry GM through the bankruptcy that must now inevitably come.
GM is bust.
The UAW has taken them over the cliff.
Now they all look to the White House and Treasury for transfusions of cash, so they continue to conduct business as usual. The taxpayers and customers can go hang--we're GM, we're the UAW, we're too (expletive deleted!!) big to fail!
HMG should do all they can to detach Vauxhall from GM, and put it and its associated businesses out of reach of Gettlefinger and the idiots who run GM and Congress.
The UK should not be dragged down into this American sinkhole.
Save your good country, friends.
American is run by idiots.
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What if the big car manufacturers fell over, and no more volume vehicles were produced?
1. Are there enough cars in the world to keep mankind on the move? Probably. (Post above mentions acres of unsold cars. Look around any car dealer site and see more.)
2. Would there be massive job losses? Maybe in the short term, but components will still be required to maintain existing vehicles, and with more repairs and maintenance necessary over time, new jobs might be created, including jobs to retrofit new technology to our existing fleet. There would still be a need for showrooms and dealers as there would still be a market.
3. Environmental impact? Major positive benefits. Current production and disposal not sustainable. This is another bubble that needs to (and will!) burst.
4. Social impact? People seeing their car as a handy tool rather than a status symbol. This is beginning to happen already through Car Clubs.
5. Impact on personal finances? Just think of the £ks saved on depreciation and car loans. Maybe more on repairs but still overall quids ahead.
6. Still opportunities for small, specialised manufacturers? Definitely. Look at the huge industry built up around classic cars.
Conclusion? The world might actually be a better place!
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I believe everything they tell me
http://news.bbc.co.uk/1/hi/uk_politics/7780057.stm
Where is it going to stop?
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I understand from the BBC main news website that the America car bail out failed because the workers wouldn't agree to lower their wages to those of their Japanese competitors. Are we talking about American workers of Japanese companies in America or Japanese workers in Japan? If the former, then there should be no bail out. If the latter then exchange rates must be influencing the comparison.
Ex Lehman bankers seem a bit unhappy about the prospect of Japanese wages too but this is an area where we know there has been unacceptable excess.
Japan is a modern economy. The Japanese I meet in this country seem reasonably well off although they're probably amongst the better paid. Just sensible without excess.
How would Btitain look if we were paid Japanese wages? Could someone please enlighten me.
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Gordon's stimulus package should provide free Vaseline
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New Labour hasn't served us well, but there's a tidal wave of right-leaning propaganda on the blog today.
Would we be in better shape this evening if we'd expanded the financial sector even further at breakneck pace, using " Iceland as a model " , as a number of Tory commentators and politicians have suggested over the last decade ? Let's have some realism, please.
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#272
"We can fight the Taliban"
Apparently, the Taliban recently said that they couldn't go on unless we gave them some money. I forget exactly how much it is we're paying to keep them going.
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A retail contact has just told me he reckons that after the January sales the High Street will go west, fall off a cliff, draw down the curtain and join the choir invisible. Select your own metaphor.
He left the question hanging as to how the February and March sales figures are to be made.
Batten down the hatches, it is starting to get very stormy.
This was the guy who last Easter told me that talk of a recession was all got up by the media. He is a sinner come to true repentance!
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#277
You said "6. Still opportunities for small, specialised manufacturers? Definitely. Look at the huge industry built up around classic cars. Conclusion? The world might actually be a better place!"
Have to say this has occurred to me. But then I remembered that I live in the UK so the chances of funding a car building start-up are probably zilch..
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Post 263 here are my guesses at answers to your questions.
1) Because the Chairmen of both banks are personal friends of Gordon Brown and the deal was agreed at a private meeting at number 10.
2) Very little. It actually costs us money. This might explain why Lewis Hamilton has gone there to live for tax reasons.
3) Because the population are stupid.
4) Because there are 23 labour MP's out of a total of 26 in the North East where Northern Rock has its headquarters and most of its branches. At least half a dozen of these are Ministers or junior ministers. Woolworths jobs are spread across the whole country.
5) No idea. You would have imagine his past dealings would have counted against him. Obviously not in ZanuLabour.
6) Iraq is sitting on huge amounts of oil and Zwimbabwe isn't.
7) Because the EU loves democracy so much it wants you to keep voting until you vote the way they want you to.
8) Because it sounds good and dynamic and no doubt sells both newspapers as a headline and gets clicks on a news link on the web.
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#267 Modern historian
"As for inflation - why not get the Bank to encourage a little, either simply by printing money or by the purchase of long-dated treasury bonds and gilts? This will help with the government's borrowing. And inflation will also reduce the impact of general de-leveraging on economic activity."
Oh dear - it all sounds so sensible and easy. As easy as an alcoholic having just one more drink, or a smoker taking a little drag for old time'e sake. In fact it is the easy option, but it is fundamentally wrong!
Inflation is the panacea that gets politicians (G Brown) and large borrowers (G Brown again) off the hook at the expense of genuinely prudent savers and those on fixed incomes. Please remember, inflation is the tax you didn't vote for, and it will empty your pockets year after year after year. Only those with deep pockets, or an ability to dip into someone else's (G Brown yet again) will survive it.
In my view, the painful, and only, answer is to wean everyone off the unlimited credit mentality, reduce government spending year after year and allow individuals to spend or save as they see fit.
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277. r_macgeddon:
Great post, extremely well put.
Vehicle ownership intensity in the US is near saturation, and it's not far away from saturation here. Congestion and environmental issues are serious. The car industry has made remarkably little fundamental progress in decades - there have been significant gradual improvements, but the basic concept (a metal three-box structure with an internal combustion engine) hasn't changed for decades. (If aviation fundamentals had changed that little, we'd still be flying piston-engined biplanes).
Some manufacturers have done better - using advanced materials, much smaller designs, environmental and fuel-efficiency savings (smart have done this, as have some Japanese manufacturers).
Another point is that car longevity has improved drastically (better reliability, far less rust), so the theoretical need to replace one's car has diminished. Even before the current economic crisis, there was clear evidence of huge overcapacity in European car production.
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Obama's treasury secretary used to run the federal reserve in new york, his energy secretary is a nobel prize winning physicist and so on.
Gordon Brown's cabinet is full of lawyers, siblings and spouses.
Which approach will result in the best decisions?
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286
Sorry, old boy, that's the recipe for a slump. Won't do.
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#252 - you might want to put some pants and trousers on...
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#287, 277
Intriguing posts here. It saddens me that, in amongst the colossal borrowings the Got uis planning, they can't find the odd billion or two to promote sustainable transport - hw about a nationwides system of batteruy charging points? Far better than incentivising people to buy more imported goods, upping tax credits etc etc.
More broadly, the current recession seems to me to be not so much the economy shrinking as turning out to have been smaller all along than we had thought it was, with so much spurious activity dressed up as profitable banking. It is lunacy to try to borrow to cover this gap - we need to recognise that we are all poorer than we had thought.
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This is what happens when you ramp up the money supply by 15% year on year.
Watch asset prices rocket, equities, shares.
All off the back of cheap debt.
People fraudulently led to believe by a government addicted to spin, that good times were here to stay. They shopped because they felt rich - their house was appreciating 10-20% a year.
It was a mirage built on debt.
All of it, assets over-valued, company valuations overstated, house prices, stock, shares, T-bills - all not worth what it originally was.
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#282 - nice one!
GC
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#285:
Congratulations! You got the top score of 8/8. Award yourself a gold star.
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#56 "This is true of myself. I have been looking at cars recently, I have a good credit rating but seem to be opting to not consume for the sake of consuming. I have a large amount of student debt to pay off too!"
Good of you !! The point of consumption is to buy what is *NEEDED*, not what is *WANTED* !! This is especially true when you do not have the cash in hand.
As you have pointed out, you have student loans that have to be repaid. To add to your indebtedness just for the sake of wanting something will give you long term grief. This is the cause of the problems currently afflicting this country.
It would be far better to pay off your debts first before getting any capital items like a car or a (large) TV. A small cheap TV can be had, second-hand, for not very much and are available because there are those fools who throw out their TVs because they are more than 2 years old and/or no longer "fashionable" !!
Keep it up !!
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289
Good point, and thank you for the comment, but from where I am we are already in a slump and heading into deeper slumpdom by the day.
Since this slump is at least partly as a result of unfettered increases in the money supply it seems quirky to prescribe more of the same?
In wartime, countries have tried to undermine each others economy by printing counterfeit notes on an industrial scale - so on balance perhaps not the best policy for ones' own economy?
I don't claim it will be a painless process, but a "little bit" of inflation is far from pain free.
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I wonder if the tide (worm?) may finally turn and that people will begin to see manufacturing as the Herald of a New Age.
Ho hum. Those of us who make things - have been saying this for the last ten million light years, shouted down by the 'Service Sector is the Future' lobby.
HOWEVER. Gifted Gordon (aka Great Pretender) is by no means yet convinced and will doubtless let mfr slide into oblivion.
Is this a Paradox? Or a Pandora's Box? Either way, solutions with reasons on a postage stamp please.
GC
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#297
As a fellow manufacturer, I agree. We might even be the new heroes of the economy!
Like I care anyway, I just like running a good company that makes things so well I can beat off all foreign competition!! :-)
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297 Guy:
Three suggestions re your questions about manufacturing:
1. Renationalise rail - all of it - and use it not just as a transport provider (where we really need ifrastructure investment) but also as a Centre of Technical Excellence; offering apprenticeships in engineering; promoting R and D; building for export; creating a world-class infrastructure; buying British as far as EU rules allow. It could be a flagship enterprise for UK manufacturing.
2. Build more warships. Britain is an island. Our sea traditions are outstanding, but today we get sucked into too many land campaigns where our resources are always going to be inadequate and our brave troops are hostages to fortune. Switch the defence emphasis towards seaborne power projection (as the US does, by the way; China is moving this way too, likewise Russia, and they can't all be wrong). Reinstate the timing for the carriers. Place orders for three more Astute class subs, replace all 12 Type 42s with Darings (instead of just six as planned). A huge shot in the arm for British engineering.
3. Get tough on tariff barriers. China and India thrive on manufactured exports, but impose stiff tariffs on British (and other) manufactured exports. A low GBP is not going to help much if manufacturers face huge tariff hurdles in key markets. This needs to be co-ordinated (US and EU). It sounds like protectionism, but we didn't start it. Ideally, China and India will remove their tariff barriers, so it won't be protectionist, it will further free trade.
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This comment was removed because the moderators found it broke the House Rules.
For some time I've advocated we concentrate on what we're greatest at.
Well, we're bloody good fighters. Why not become the UN's "force for hire"? That way we can make weapons and fight wars properly AND get paid for it!!
While we're at it, we can sell weapons to anyone, especially troublemakers and then get paid by the UN for sorting them out.
True World leadership at what made us great in the first place!!
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The Economists have got it all ass about face!!
Up interest rates to 5% minimum. Set mortgate rates for borrowers at 6%.
This will have numerous benefits:-
The Banks work for nothing
The £1 will rise against the Euro and Dollar
Our imports will cost less and as we currently run a huge balance of payment deficit this will be of major value
Exports will cost more but as we do not make and therefore export a great deal the impact of sterling's rise will be negligible
Savers will get more interest and therefore spend and save more
Santa will deliver Brandies all round
And I'll have another double G&T before I hibernate for the Winter.
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It will be interesting to see whether the US car makers actually do collapse - Ford said it didn't need the cash immediately, but the other two said it will be all over by Xmas if they didn't get the money.
But is Chaper 11 bankrupty so bad anyway? It would force the car companies to sort themselves out (and clear out what is clearly inadequate management) and give them a breathing space to obtain finance (hopefully through the markets, but probably via the Obama Congress). The problem would be for the huge number of sib-contractors, dealerships etc that rely on the car makers.
The short term problem for the car makers, is the problem that everyone has - the credit crunch. New cars are expensive items and many need to borrow if they want to buy one - the credit crunch makes credit difficult to obtain and the recession makes people reluctant to take on any more credit even if they can. Governments around the world (even Germany) are doing what they can - relaxing monetary and fiscal policy and proping up the banks.
Besides a few loony 'freemarket at all costs' supporters which is a group somewhat over-represented commenting on this blog, most accept that governments are right to intervene. There is plenty to debate about how far to intervene and how to do it but doing nothing is not really an option; not unless a return to the 1930's is what you desire.
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The reason the republicans voted down the bail out is that currently for every GM car sold $2,000 of the price effectively goes to FORMER workers to cover their healthcare & other benefits, the current GM staff are paid massivley more than other auto workers in the US, particularly those that work for Toyota plants in the States, and they want the entire senior management team at the company removed for their incompetence.
GM and Chrysler need to go into some form of administration process to get rid of the excessive benefits schemes to former workers, get the current employees paid appropriate market rates, and get a new management team with the strategy to design and manufacture cars that people want.
Looking at Woolworths, that business is rightly doomed. It does not sell what people want. Anything electrical they sell can be bought online cheaper. Anything edible can be bought cheaper at a wide range of establishments. I could go on.
The other factor that is stopping anyone buying it is that there is no bank appetite to lend to this sector now or for the next 9 months.
It will be retail armageddon in January, the sales being closing down not just January sales. Also watch out for a leap in bars and restaurants going under. The common theme is business models that rely on property to carry their operations out. Too many idiots out there thought that paying £10m for a pub making £300k a year in profit was sensible, just because property valuations came in at that level.
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#299 - I read you all the way on that.
G
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Here we go again, 200bn euros to save Europe!
Credit to Brown he gets value for our money - not onlu is it saving the UK and the World but is now part of the Euro saving announcement - three seperate pats on the back for one wedge of cash..... oh and in addition it seems to be contributing the the Labour Party Election Fund!
Robert, do us a favour and have a look at the 'G-whatever' get togethers please. They decide nothing of any significance, and at the moment seem to be freebies where leaders go to be seen to do something. I certainly know both the French and Spainish leaders are giving the impression THEY are an integral part of the solution - just like GB!
Are all leaders going home and telling their voters they saved the world?
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I’ve changed this morning’s note, because I’ve been told that numbers directly employed by Entertainment UK are 1,075. The 5,000 figure relates to all the businesses owned by Woolies apart from the stores (which employ 25,000). And I’ve also provided a bit more detail on next steps to slim down Entertainment UK.
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305 Guy:
Thanks.
I have to admit to bias - I have always believed that engineering excellence, exporting and the Royal Navy were the three things that put the "Great" into Britain. This country's prosperity was built by manufacturers, notably small firms in the norh and the midlands, people who took risks, innovated and exported. We had a huge chunk of global seaborne trade and shipbuilding, and built on Nelson's Navy to protect our seaborne interests.
Nowadays, China is a success, has an emphasis on engineering, manufacturing and exporting, and is building a blue-water navy. Not a coincidence, in my opinion!
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# 277 your suggestion is great and it's so obvious; have you ever been to Cuba? they have kept their 1950s cars going with a bit of wire and welding, though they do belch out a lot of pollution
following the Cuban example there are easily enough cars in the developed world to keep us going for a decade or two, by which time we should have developed some truly viable alternatives for clean personal transport
the whole cuban approach in the face of the US embargo deserves close study in fact, as they also grow a lot of their food in allotments and cope quite well with a permanent recession
it will be tough on all the car workers and parts suppliers until they are retrained though, so the companies would still need some kind of bridging loan whilst somebody sorts out the details
# 299 your suggestion that we should build a huge navy is just too daft for words; we need to manufacture useful stuff; building more warships would be even worse than continuing to overproduce cars when demand has collapsed; presumably you would want to use said ships and start some conventional wars since you can't manage to apprehend a simple Somali pirate with all your big expensive guunbooaaaaats
I TELL YOU WHAT, WHY NOT START A 'WAR AGAINST STUPIDITY' THE FORCES OF STUPIDITY ARE LEGION, SO IT COULD BE A LONG ONE AND WOULD COST TRILLIONS
UNFORTUNATELY IT WOULD ALSO BE A CIVIL WAR AND YOU'D HAVE TO START BY BOMBARDING PARLIAMENT
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The Woolworths in Haywards Heath in Sussex is looking tragic - plenty of glow-in-the-dark sweets still available but empty shelves everywhere else.
If they don't get fresh stock it won't be worth opening their while opening on Monday.
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#77 lawyer4justice
You may find this interesting:
http://video.google.com/videoplay?docid=-9050474362583451279
Yoy will need 47 minutes and it may change your life.
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#299 "1. Renationalise rail"
That particular privatisation was a piece of industrial and economic vandalism, motivated totally by ideology.
But do we make our own engines and rolling stock any more? (Apart from Mamod that is.)
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I said at post #1 the markets would rise and they're very nearly there.
The 'financial establishment' is taking us all for a ride. They know that money will be hosed at the problem until it goes away or until the pumps run dry.
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312 Sasha:
Absolutely, and it was a Tory MP of the time who called it "the poll tax on wheels". High time we renationalised, but it needs to be used as a progressive technological beacon, not a lazy state enterprise as the old BR, regrettably, often seemed to be.
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#168
Thanks for the info.
It was just that when one considers the socio/economic consequences of doing nothing, (bearing in mind much larger sums have been spent by sharholders/ Government in the UK financial sector), at $14bn a rescue of the US car industry seemed cheap at the price.
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re the rail network,
I've seen some debate on here regards nationalisation of this.
For me its a no brainer, should NEVER have been privatised! And you get folk on here wanting to privatise the HEALTH SERVICE!!!!
Grow a brain for gods sake, and if not for him for your children!!!
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#314 "not a lazy state enterprise as the old BR, regrettably, often seemed to be."
Ok, but how do we do this? Accountancy seems to have turned into a branch of organised crime. Perhaps we should create all accountants in big companies to have 10 years of experience in engineering first?
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One can only be amazed at the quality of French Roads, Railways, Health service and host of other superb facilities.
This was achieved at a price - a massive mountain of debt the French government managed to accumulate.
Just imagine now, in the UK we're going to have similar debt levels and nothing to show for it whatsoever. I pity our young generation who will have to pay for this mess.
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# 58 by Maxrelax
New to this message board in the form of posting but I, goodness knows why, tend to read a bit of the dribble that is posted here. No I am not referring to the posts by Maxrelax. The contrary applies and I agree with just about everything that he writes about. Pity a lot more people do not take the time to digest his words.
The reason that I have decided to post is that society as a whole is exceptionally fickle. When everything is rosy and bright nobody says a word and everybody just carries on spending and having a good time. I could get technical here but the message that needs to get across to the 'majority' is that we [as in developed and emerging nations] have had it too good for a long time. It had to come to an end and when it did we immediately reverted to a blame culture. Don't get me wrong! Some of the imbeciles that headed up the companies in Peston's blog need to be held to account.
But what really gets to me is the fact that Peston, and there are may others like him, who, can only report on the present. I liken it reality TV. If it may happen sometime in the future then it is of no value at all. Shock them now! The populace as a whole have been kept in the dark [akin to mushroom farming = reality tv programs]. When you watch these so called Business Editors being interviewed it makes you want to cringe. 'Peston scoops what? He must have inside contacts! Attending all these unwanted lunches, dinners etc! Dearie me - no time for research! Lets just post what everybody else is posting with a small change here or there. Wow! Done it again.
Robert for what it is worth this is not criticism but fact. The complete subject surrounding the so called credit crunch, which I will not refute or disagree with, has been in the making for almost 3 years now. Forgive me if I am out by a couple of months. I am not saying that it is your duty to have reported on this so long ago. My point is that it was there was enough evidence to have created a 'real scoop' and you, and others in your 'professional' field could have instrumental in the changes that have taken place if you stuck to investigative journalism. Is this not what this career is all about in its specific fields? Unfortunatly not sir. The lemming syndrome is more like it. Read one newspaper and you have read the lot even if it only takes 10 minutes.
I subscribe to several online newsletters and a lot of stuff I receive flies right over my head. But I make a point of trying to understand what the contents mean and the future impact it may have on the economy and society as a whole. The sad thing is that the authors of these newsletters have seldom been wrong because they substanciate there claims with facts. You cannot beat that.
I also see many folk talking about incompetitent government etc etc. If either of the top two parties were so great why did they not see this whole fiasco unfolding. Does anybody really think that by replacing Brown with Cameron [?] there will be a change for the good. Many years ago one could have distinguished between the policies and 'public aspirations' of political parties. Not any more. Not any more except in Name I'm afraid and the change of slogans. What does the word 'labour' mean. No! its too close to the working class - lets call it NU LABOUR. The idiots can at least understand it in a text message! What do the Conservative stand for! I think the last time somebody could really understand their policies and the meaning of the word was when a certain Iron Lady was in charge- hated or liked-it does not matter. Mind you, mistakes like the nationalisation of key British Industries comes to mind. But everybody new what Conservative meant. Nowdays the names mean zip. The policies mean zip because they have all run out of ideas. There is nowhere to run to because the manufacturing bases no longer exist. Thought of and designed in Britain - built in China or some cheap 'emerging country'. Problem with your product guarantee, telephone banking etc etc etc - speak to Johnny Goombah in India. Why? The answer is simple! Greed! More greed! Executives who are seen to be transparent and realistic about their business models are not wanted. Not enough dividends, profits and exhorbitant growth forecasts=on yer bike matey! And who fuels this train of thought! Us! We want more! The banks turned into supermarkets with ridiculous products. Companies appeared out of nowhere making loads of dosh by providing products that 'joe/joanne public' did not need. 'Make millions out of spreadbetting, fx trading etc etc'. Ah well someone had to make money. The one that hurts the most is online gambling. I love to gamble by the way. But I want to see some 'form' for a horse at least or touch my playing cards or see the physical spin of a wheel or the throw of a dice. Yet there are a multitude of muppets out there who think they will stand a chance against a machine connected to cyberspace or wherever and the fact that a lot of these companies are based offshore means that the government cannot collect taxes from these sw**es.
Common Robert, why not investigate the last observation I made. From initiation right through to the operational aspect of online gambling companies. Who knows! You might even uncover things that people in high places do not want you to know. For a start: The analysis [how to make as much profit as possible], the marketing [how to drag them into cyberspace kicking and screaming] and development of the software employing loads of people who will not be needed once the site is live. All you need is a couple of bods watching screens and hitting a button if it transpires that somebody is about to win big. But you have to let them win now and then to draw them back in - No kicking and screaming now- Its easy - they want their money back- Suckers! Serves them right!
Am I being unreasonable? Yes I am to a certain extent. I feel to those who are going to be affected in terms of pensions and savings which were entrusted to so called 'experts'. People who earned big money! People with degrees who could not see what was looming on the horison. People who could not make rational decisions based on facts. I will not even delve into the latter observation! There are too many educated people on this blog who will run rings around me. All I can say is that those who live in glass houses should not .......
Merry Christmas to you all.
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#298 bogbrush.
I don't know if GC is a manufacturer, as I understand it he remanufactures things.
Anyway I am with you on competing against foreign manufacturers.
Our own government is stacked against us though. I was talking to someone the other day who had decided to advance his business by involving the local university. He implemented a teaching company scheme, knowledge transfer etc.
The university supplied a graduate for a year and the idea was that his brains together with the back up from the university would allow his company to technologically advance. Motion control etc.
The graduate got trained up in all aspects of the job but did not actually come up with any ground breaking new ideas or techniques.
And at the end of the year he then went back home. Overseas. Where presumably his newly found knowledge was most sought after.
Is this what is meant by Knowledge Transfer?
The universities get their money from UK students, from UK government grants and foreign student fees.
In order to attract foreign students they push the opportunities available to students to join teaching company schemes etc. The government likewise encourages universities to get foreign students. Attracts foreign currency.
But it is so short sighted. The universities are killing off what is left of UK manufacturing and engineering design.
The universities also have spin off companies that purport to help UK manufacturers directly. But in doing so they kill off the engineering design companies that they are in competition with.
It is all very well saying that the universities can't actually compete with established companies. But they do, by doing the work for nothing. The universities meanwhile attract grant aid from central government or the EU.
When will folk realise that universities are actually just companies? Big companies at that. And they get supported by the government.
I suspect that the awfully clever Gordon Brown, child prodigy, and university denizen will see nothing wrong with the universities acting in this manner. He no doubt thinks the universities are the economy. To his eye the rest does not matter.
Who needs manufacturing?
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Robert....
it is another black friday!
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What sort of logic says "give the car manufacturers public money to go on producing vehicles we obviously don't want (i.e. are not buying)"
The proper use of public finance would be to enable us (including companies) to get out of the present mess: not to stay in it.
Bite the bullet: the auto industry is most definitely in need of help. But it would be a good thing if that help included down-sizing the firms and the vehicles.
Alf
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The USA can make the best weapons in the world, if only they diverted some of their efforts in to their economy ... and the car industry. I wonder which is more important military domination or economic domination.
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#320 - I do many things incl remanufacture, which is a fundamental op in prepping aftermarket race engines. It is backed up by intensive design and manufacture in house too. It is also supported by large spend with a small nucleus of the best racepart manufacturers in the UK and Calif USA.
My firm's spend, sales turnover and profit ratio pro-rata would - in a good year - make a multinational blush, but the whole business of making things and exporting them (which my firm absolutely depends on) is being ground to powder.
GC
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Do the banks know something we don't about the final appeal decision on unfair charges?
After another recent acrimonious encounter with a member of staff at my local branch of HBOS, they have decided they don't want my business any more.
My suspicion is that they know that the appeal has gone against them and are getting rid of my account before I land them with a claim for repayment of unfair charges.
In the last instance £175 made up of 5 x £35 charges, when I was over my overdraft limit OVER A WEEKEND. One of the transactions was only £5. The situation was corrected when I read my email on Monday and I moved money from a savings account also with HBOS.
On another occasion, I moved money to cover an expected transaction which was not yet showing on my online account screen at 10am on the morning I credited my account. The following day I received an email saying that a £35 charge would be made for being over my overdraft limit by less than £10 for less than 12 hours. The expected DD had actually come out BEFORE my credit.
How can that be fair, surely it is misrepresentation to show one sequence of transactions on a printed statement or online screen when the reality is totallly different?
Their attitude to me when I complained was disgraceful and my anger was increased by the Customer Manager having the insolence to comment on one of the transactions.
Surely they should be ingratiating themselves to customers, offering them the best rates they can in order to get more business in the door, not SHOWING customers the door?
Obviously their poor customer service has been part of their downfall.
Finding another bank to accept my current account and savings in my present financial situation is going to be very difficult.
Shame on you Scrooge HBOS!
Perhaps my first port of call should be Lloyds TSB, if only to gauge whether their attitude to excessive overdraft charging is similar to HBOS.
Whatever the outcome of that appeal decision (the delaying of which is highly suspicious in itself) the banks are damned.
If they lose they appeal, they are going to be faced with huge demands for repayment of unfair charges compounding their difficulties.
If they win the appeal, the public will see it as the banks being allowed to flout the law on unfair contracts and will suspect that the judge was instructed by the Government to find in favour of the banks because of the economic situation.
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There seem to be a number of people on here who run a small business, claiming to manufacture and export, all who seem to have a lot to say about the current climate none of which is good, yet surly the current fall in the pounds value must be good for you if your business relies on exports.
Seems to me some have far too much time on their hands judging by their multiple negative posts.
As for the US car industry that died years ago Ford and GM’s main income has not come from manufacturing cars for years. They both became finance companies long ago, and until a few years ago GM actually was the largest producer of adult videos in the states. The biggest problem both these companies have is that both their current workforces are dwarfed by their number of dependants who no longer work for the company but who are still covered by pension payments and more importantly medicare.
Its no good saying manufacturing is the only way out, if your are manufacturing something the public no longer wants or can source cheaper elsewhere you are going to fail.
We are rapidly becoming a nation of whiners’ always wanting something for nothing, moaning about a nanny state and as soon as something goes wrong (normally when stuck outside the country) blaming the government for not being in control or getting you back home, well you can’t have it all ways
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#326 Sadbloke, what a surprise to find you chiming in with all your vast export experience.
"current fall in the pounds value must be good for you if your business relies on exports"
So obvious and so simple! Silly me. I'll email all my export clients and tell them to start spending right now after years of being fleeced by the high pound.
Gc
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#326 your name says it all
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Just a thought, if Vauxhall is a viable business, presumably it has a positive cash flow. What is, or can be done, to prevent this being hoovered up by the US parent, along with any UK taxpayers money?
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The costs inherent in building a car in the UK, Europe and and the US - costs that not only have to include salaries/pay packets, but other substantial benefits - make them difficult financial propositions for those that seek to purchase a car; and the main factor behind the car industries previous success was the ability of consumers to be able to draw on credit in order for any purchase to be possible...
The markets thrived because of the availability of credit...you take that away and you have no market...
This is not just the case with cars - you have houses, and other purchase-ables...
Fort too long, most of us were led to believe that the prices of things as they stood - cars, houses/homes, etc - and the increases we have been observing - were part of a natural trend, when in fact these were 'artificially' maintained and propped up by the availability of credit, particularly where it should not have been made available...
What we learn today is that the world has been functioning on flawed economics; on false premises...
This financial situation was inevitable and would have come at some point or other; the variables, factors, opportunities and circumstances would present themselves at some point and the march for profit, growth, status etc would take us down this road...
Brown's previous proclamations that 'Boom 'n' Bust' are over are in fact now laughable - and though he tries with every opportunity to direct the blame to the US, he was still fundamentally wrong; the fact that he is not able to own up to this is severely poor quality.
However, the US with its arrogance - particularly and Bush's total lack of appreciation for what is required to macro-manage an economy, amongst many things etc - is what really takes the soggy biscuit...Bush, Paulsen and Bernanke, the three stooges, have really led their people and the world back into the primordial crud...
So what are we left with? And what is to happen? Who know?!
What worries is that society itself has, it would appear, become unsustainable...
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# 271
Good point about Marcos' debts still being repaid. Also interesting to note that the UK paid off the last of its WW2 debt to the US in 2006. Don't think the 2008 cost is in the same league as either of these, but still a valid question to ask what the pace of repayment will be, and the consequent impact on tax etc.
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What I don't understand is why firms going bankrupt should be protected from doing so. After all, firms going bust is good news for competitors who don't go bust. Since there's a glut of cars on the global market, some have to go. The demise of GM etc. would at least be good news for other major car manufacturers. Bailing them out to avoid immediate repercussions is not helping the economy in the long term.
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327
Yes I do like to chime in every now and then as unlike some I do not have enough time to contribute multiple posts all day long, a little thing call work gets in the way.
As for my vast export experience, you have no clue as to what my experience is so please don’t comment on something you know nothing about.
Yes it is simple a lower pound will help exports, notice I did not say it was the whole answer, yes the problem is bigger than that but please explain if you can how a lower pound can be anything but good thing for exports or perhaps you would rather a strong pound just to make the problem even worse ?
328
Would you like to expand on your comment, I’d really love to know what you think is wrong with it or is that asking a little too much ?
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if, as it seems, the credit crunch and the ensuing fall-out is largely a matter of confidence, in the market place if not indeed everywhere now, why not simply set a date - say 6 April 2009 for convenience - upon which across the world, government and business agree to resume "business as ususal"!
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I do agree that the government seems committed heavily to bailing out all over the place, but as has also been stated here we are just at the very beginning of the start of a recession. Monies promised to date will seem like a drop in the ocean to what is required in Q1/Q2 2009.
But where do we stop? bail outs seem to be expected from here on in, a sort of 'don't worry, Gordon will pay for it' mentality. As has been said above if a business becomes severely unprofitable and builds massive debts, then there is a case for it to fail and in the 'natural world' this would happen.
These businesses say that they cannot get credit from banks - in truth they can however now they are asking for many multiples of what they had before to try and stay afloat. The banks, mindful of Gordon Browns words on 'excessive risk taking' that got us into this mess refuse to support such requests. The catch 22 then is that they are lambasted by Gordon for not lending!!!!
Again I read with interest above 2 points;
1. The market lived on easy cheap credit
2. We beleived house price rises were part of a never ending organic growth (I refer back to the risky lending catch 22)
Put simply, the 2 great mainstays of our economic growth as above have gone and will not return in the next 2 years at least. Problem is, all our industries are geared to it being there and depend on it so here is the question to be answered;
How long will the government keep bailing out the economy for given that the forces that supported it no longer exist? Surely at some point they will have to let the recession take its course? I watch with fear as 2009 approaches.
The rhetoric of 'spending our way out of recession' seems at odds with its cause in the first instance. I can only assume that it is a confidence thing and the intended aim is to try and make us spend more of what we do not have?
Lastly, I agree with comments talking about how those who have not spent beyond their means being penalised as those who did are bailed out at every turn. It demonstrates clearly that 'prudence' is not ultimately rewarded whereas wreklessness is. A sad day when the latter is rewarded!
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You may remember that this Government had no qualms about killing off the only real innovative car company in Britain namely Rover in 2004, but the truth of the matter was largely that it was a political deal and that Labour was not really bothered, it is quite strong up north. Fords and General Motors not to mention Chrysler have frequently obtained tax and loan concessions by threatening to pull out. Ford actually stripped Ford UK of all its assets in order to say afloat in the US in 1976 or 7 and the reason was the oil crisis. Frankly the truth is this- if all the motor companies in the US shut up shop someone will be there to take up the slack and at the moment there are enough cars unsold to keep going. Another big thank you to the Americans.
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As a share holder and customer with HBOS I am now activly moving my accounts to another bank. Firstly I do not like Lloyds who have bought HBOS on the back of the short selling. I for one suspect that all the problems with the banks in this country is down to the government looking for another stealth tax and 58% shares in banks is just that as the dividends will be payable to Brown and his profligate government which had put the country into hock already and intends to keep us in hock until we become part of the EU. You will notice that there is nothing being done to stop the Pounds slide toward parity with the Euro, a position which must be one of Browns red lines.
Thank you Brown for all you have done to us in the last 11 years.
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Import controls.
That's going to be the only way to prevent local industry being swamped by other manufacturing nations with lower labour costs, and fixed exchange rates.
Our labour costs are higher not because our workers are lazier, but because they only have to work 8 hours a day, get days off, and have to contribute to looking after others. This, as we know, is not true for the nations we import most from. This constitutes state subsidy, and thus imports should be subject to balancing duties.
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There are a few downsides to creating false markets by using tactics such as import controls,
firstly if we introduce them other nations will almost certainly reciprocate and ruin many operations that rely on exports
secondly the majority of operations or manufactures require to some extent on imports to complete their products, very few produce anything that is solely UK sourced, and those that do will be the first other nations would hit with their own import controls (think what the far east could do to the Scottish whiskey industry)
Thirdly and maybe most importantly think what import controls would do to the man in the street and inflation, it would hardly help bring prices down
Lastly and least importantly just think of the cries of stealth tax the government would have to put up with.
The one good thing about a weakening pound is that it will reduce the cost of our goods abroad, encourage foreigners to spend money here and will go some way to stop the leakage of UK earned cash to the continent and the USA by reducing the number of overseas purchases of second properties and multiple foreign holidays just because they look cheap.
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"Though the principles of the banking trade may appear somewhat abstruse, the practice is capable of being reduced to strict rules. To depart upon any occasion from these rules, in consequence of some flattering speculations of extraordinary gain, is almost always extremely dangerous, and frequently fatal." "But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments.......".
Also in the Wealth of Nations Adam Smith [1723 -1790] commended the Bank of Scotland and the Royal Bank of Scotland, established respectively before and after the 1707 Act of Union.
The City of Glasgow Bank failure of 1878 was a salutary lesson to heed Smith that Government, the Bank of England and Scots respected for over a century till a new age of permissiveness with diffused accountability dawned.
William Lithgow
Director, Bank of Scotland, 1962 - 1986.
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