How much will taxpayers finance economy?
You know the world has changed when Jim O'Neill, the chief global economist of Goldman Sachs - the investment bank that defined the culture of bonus-driven, globalised financial capitalism - grumps on the Today Programme that our government probably needs to create a state bank that will provide the vital credit that our commercial banks cannot provide.
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He's been banging on about this for months - because, as you know, it's been obvious for rather longer that the source of our economic woes is the savage contraction of lending by banks all over the world.
And the credit squeeze is particularly acute here.
So Goldman Sachs votes for socialist, state-directed lending. The symbolic power of this thought is mind-numbing, for those of us who immersed ourselves in the liberalised, winner-takes-all financial markets of the past 25 years.
Next week I'm going to write about the long-term implications of the failure of financial markets and the rise of the taxpayer as the new source of credit for the banking system and the real economy.
What kind of capitalism will emerge from the rubble?
But right now I want to look at the contradictions in government policy towards the banks - and the difficult choice it faces about how to revive lending.
The important point, which I've made many times before, is that the £600bn (and rising) of loans, guarantees and capital provided by taxpayers to rescue the banks does not encourage them to lend more, and may actually contribute to the contraction of lending.
For example, the terms of the £250bn credit guarantee scheme - which allows banks to borrow for up to three years from markets with taxpayers standing behind that debt as guarantor - are extremely expensive. So banks have no incentive to take advantage of the scheme to raise funds for lending to all of us.
The £200bn they're raising from the Bank of England by swapping mortgage-backed securities for Treasury bills has to be paid back in three years - which does not feel to banks like an eternity at a time when there's a global shortage of capital and credit.
And the preference shares that three of our biggest banks have been forced to sell to taxpayers are very expensive for these banks. So they want to redeem them as soon as possible - thus giving them another powerful incentive to shrink their balance sheets, reduce lending and prove to regulators that they no longer need the preference capital.
Then there's the impact of the Basel II global rules on how much capital banks need to hold relative to certain kinds of loans. Those rules make it hideously expensive for banks to provide mortgages to first-time buyers, by stipulating that banks have to hold massively more capital for a mortgage when the deposit on a house is 15% of value compared with when its 25%.
Also, as house prices fall, Basel II obliges the banks to raise yet more capital to cover the declining value of collateral held against their £1,200bn of mortgages.
Finally, as the FSA confirmed yesterday, the banks are being forced to hold hundreds of billions of pounds of additional government bonds.
Why?
Well, government bonds are liquid, so when banks have relatively more of them the risk is reduced that they'll fall over (a la Northern Rock) after wholesale markets shut down in the way they did in August 2007.
Which is all very well, except that the more gilts and other high quality government bonds that our banks are obliged to buy, the less capacity they have to lend to households and businesses.
So what are the policy options for government?
Well, the Treasury could, for example, revise the terms of the Credit Guarantee Scheme and perhaps expand it, so that banks start to use it on a substantial scale to raise money for lending to all of us.
And it could also provide taxpayer guarantees for other, more long-term borrowing from money-managers and other financial institutions - something along the lines of the sovereign-guaranteed, mortgage-backed securities proposed by Sir James Crosby in his recent report for the Treasury.
I get the feeling, however, that Crosby's narrow suggestion for how to revive the mortgage market has rather slipped down the Treasury's list of priorities.
What is higher up the government's agenda is an increase in explicit taxpayer support for any kind of lending to the real economy, or lending to small businesses, big businesses and households.
It could take a number of forms.
There could be taxpayer guarantees for real-economy loans packaged up into bonds, similar to what Crosby suggested for mortgage-backed bonds.
However, there is evidence from markets that even if these bonds were converted in this way into the equivalent of UK government bonds, so that they were an explicit claim on taxpayers and the state, they still wouldn't be bought by money managers.
You can see this in the failure of Northern Rock, a wholly nationalised bank, to increase its funding on attractive terms from wholesale markets.
Money managers apparently don't want to buy into the UK housing market, even when the risk is covered by HMG. And they may have the same qualms about buying any kind of asset-backed security, even when it's gilt-edge or underwritten by taxpayers.
So there are two alternatives. One would be O'Neill's state-owned, state-funded bank.
The other would be a longer-term, broader more ambitious version of what's already happening here and in the US. Which is that banks could package up loans to businesses and households and then exchange them for cash from the Bank of England.
In effect, we as taxpayers would be funding the bulk of the real economy.
It sounds extreme. There are big and serious issues about whether such an initiative would be perceived by international investors as seriously weakening the strength of the public-sector balance sheet, such that there would be a damaging run on the pound.
And it would probably only persuade our banks to lend more if there was a commitment from the Treasury and the Bank of England that this funding from taxpayers would be available for many years (certainly much more than three years) - which would represent a radical re-making of how capitalism operates.
However, such a substantial increase in the provision of credit by taxpayers has to be a serious option, because the sunny economic uplands won't be visible again until a solution is found to the vicious, inexorable contraction of lending.
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'........because the sunny economic uplands won't be visible again until a solution is found to the vicious, inexorable contraction of lending.''
I suppose your in the camp of the vicious, inexorable expansion of lending Robert.
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Banks lend to the taxpayer his tax money at a rate of interest. Good trick if they can get away with it.
or
State funded bank, funded by the tax payer, to make loans available. Good trick if they can get away with it.
or
Borrow money at interest, lend to banks and business and pay back borrowed money with taxpayer money. Good trick if they can get away with it.
or
Put gun to taxpayers head and demand money with menace. A good trick and they are getting away with it!
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'The other would be a longer-term, broader more ambitious version of what's already happening here and in the US. Which is that banks could package up loans to businesses and households and then exchange them for cash from the Bank of England.'
Am I missing something here, or is this the subprime fiasco again. The government being the fall guy for dodgy loans supplied by the banks !
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Is this a trick question?
For the record, I did not agree to fund banks, I want my money back
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It all sounds very depressing Robert.
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It would be nice if they asked us..
I kept my money in a UK bank at 5% interest, instead of icelandic at ~7%.
I've been rewarded by having my taxes pay for a 100% guarantee of the risk takers, even past the useless FSCS scheme.
I didn't buy a house at peak, instead saving a deposit for when i can afford a house even when they interest rates rise.
I've been rewarded by seeing the interest on my savings fall, the price for new mortgages rise, and now am subsidising via taxes everything from other peoples mortgage interest to a BTLs portfolio.
Why is that 'helping hard working families' doesn't apply if the family in question rents, has savings, and didn't apply for a mortgage they can't afford?
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Robert.
where are you going to have your "Mark",
forehead or right hand?
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As the 'spender' of tax payers money any government will have to be seen to be deeply conservative in its lending.
So it will appear expensive to banks and/or will not lend where there is a significant risk of not being repaid.
Hence liquidity will not (and in my humble oppinion should not) return to 2007 levels.
What we need is to find a way to cut out the gangreen that does not kill the patient OR require too many expensive drugs to keep the infection from spreading.
The more I think about it the more I am sure that the way to do this is to let GOVbank lend directly to credit worthy individuals and business at a sensible rate and seperate it from the political need to prevent wholesale colapse and redundancies, which is always going to have an element of throwing good money after bad.
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Robert - The tone of your blog almost suggests that the policy objective should be a return to 2006/7 as soon as possible.
I can't be the only one who thinks that a time of unsustainable behaviour based on false beliefs is not the best target.
We only have one planet, and it cannot sustain resources being used that fast in that way.
As a human race, it doesn't make sense to be replacing 32" TVs with 48" ones whilst millions of people starve or freeze to death.
The global policy objective should be for a more long-term sustainable system.
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Would the government not consider tax relief? As I mentioned in an earlier comment does my money really has to do the run around? Leave it in my pocket and I'll make much wiser fairer and profitable use, both for me and the economy!
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Instead of bailing banks out, let them fail and get the government to pick up the pieces and gain ownership. (cost saver)
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I don't understand why people keep talking about "the taxpayer" as if this is a separate entity from "the real economy".
The real economy is composed of taxpayers. So, if the "real economy" is starved for credit/funds, that's because the tax payers it is composed of are starved for credit/funds. THE REAL ECONOMY IS SIMPLY THE WORD FOR A GROUP OF TAXPAYERS - THERE IS NO DIFFERENCE BETWEEN THEM.
Thus, it doesn't make sense to act like the tax payer can lend to the real economy because the tax payer has nothing to lend. They are the same person.
Think about it like this. If a person has 2 pockets in his jeans, and a £10 note in the left pocket, moving to the right pocket doesn't create any more than the £10 that was already there. If the real economy and the tax payer are the same person, by acting like the tax payer can guarantee loans to the real economy, you are just shuffling finite amounts of value around. You are acting like the person with £10 in his pocket now has £20 to his name because he "lent" £10 from his left pocket to his right. But, he still just has £10.
There is no easy solution to this crisis, and the pain absolutely must be felt. All the stop-gap measures by governments are simply delaying the inevitable and making the inevitable worse. We borrowed from years into the future, and we've spent all of it, and now we have to pay it back. Unfortunately, that means that we'll have to live on pretty much nothing until the debt is repaid.
Anyone who is an optimist on the economy at this point is simply ignorant of the facts and the big picture.
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reading between the lines
- banks can not pay back the loans with (or without) interest,
- truth be told either can we, (or the gov/guv)
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Oh dear. Sounds a bit like social engineering on a vast scale, intentional or otherwise.
Drive prices down, curb lending, stop growth, reduce savings income and equalise the populace to the same level?
If we are to be poorer or mark time for the next two years, paying our tax bills to pay for it all, we might be better off with industrious and inventive individuals to 'coral' the working population for projects that could 'create wealth' or 'new money'.
(Shades of the Chinese revolution)
With so little in the nation to materially export, surely the nation must be able to tap into the brains and skills of those recently unemployed, amongst others, and sell them on as 'consultancy resources' to developing and needy nations?
HMRC would love taxing them and of course, the fees that it would bring in.
Anyone feeling a project coming on or are we to spend the next few years, reading Robert's blogs and along with bank managers, spend our time navel gazing and wishing for better times?!
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The rise in robberies of security vans and other raids is the real indicator of things to come. Sub-prime brokers have clearly gone back to straightforward blagging for cash as their tele-scams collapse.
The ruthless people previously in the financial scamming business are getting desperate and we should all be worried. Invest in a good quality safe and home security system. Buy gold and diamonds. Ignore this government - they are a lost cause and the measures they take are increasingly ineffective.
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The banks wont lend, because, in the current market, it is not in their interests. Effectively the return is not worth the risk.
A government bank, which returned lending to Brown's 2007 levels, would effectively be losing money by taking on the risk the Banks wont take.
Naturally the taxpayer will be paying for this. Again a situation of guaranteed income will exist, which will be exploited by rich speculators. However the window granted may be big enough to make Brown electable again which is all he is worried about.
Eventually this re-run of the 70's is going to have to end with 10-15% inflation stealth tax that will wipe out the value of the debts.
Let's hope Brown does not give us Argentina II.
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What we are seeing is the mutualisation of capitalism, something I have been commenting on for a while (see Kubernetes! from November 2006!).
The signs have been there for ages; consumer activism, the sustainability agenda etc. Big corporations that do not deliver super-normal growth have to consider the broader social agenda. Yes they have to deliver a profit and return on investment, but how and why that profit is generated is more important than the fact that there is one.
What I consider to be "raw" capitalism, where massive profits and big individual rewards are generated will (and should) be confined to genuine entrepreneurial activity i.e. commercialising new ideas that deliver real new benefits (e.g. low carbon technologies)
The big companies, (probably starting with banks but also then moving onto utilities, transport, retail etc) will increasingly be run or regulated to run to benefit the whole of society rather than just investors or management.
Where the government is missing a trick is holding their investment in any company directly. The government is just a proxy for society so let society i.e. individual taxpayers (or voters) own these stakes, increasing democracy in business and removing the opportunity for political interference.
Specifically what they should do is transfer ownership to a mutual structure e.g. a building society for financial services; a co-op or something like John Lewis for other industries.
It seems ridiculous that the so-called Co-op MP's (e.g. Alun Michael and David Drew) in the Labour party are not publicly agitating for this.
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In a nutshell we're all doomed.
Who in their right mind would have possibly thought that Goldman Sachs would be advocating a state bank to provide lending??
Did anyone think that it was in the realms of possibility that we'd need convincing that capitalism was a good thing??
I fail to see how we can get out of this mess other than to let it run its course and for the state to help people who lose everything.
This recently meddling in the house market will simply prolong the downturn - we all know that house prices are way way overvalued and need to fall another 20-30% - only then will some normality start to return.
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This has been pretty obvious to anyone with any knowledge of the property industry, both commercial and residential. They are all 'worth' substantially less than the loans secured on them. That makes the UK banking system bankrupt, PERHAPS with the exception of HSBC. Add to it all the non-jobs in banking/accounting/estate agency, and retail and givernment and you have a larger Iceland.
The repeated sticking plasters are pointless. The goverment should formally nationalize the banking system fully, how would t make any difference to what we have now where it is ostly nationalized anyway.
We need a good kicking from the IMF, drastic drops in standard of living, reduction in the size of government and the benefits system and higher interest rates to rebuild some savings. Only the IMF loan conditions will shake out our tendency to live now on tomorrow's money that is mysteriously 'created' in various bubbles.
Thanks to Brown, the IMF is exactly where we are headed. It is ominous that international money managers are refusing to buy assets even backed by the Treasury, given that it is indirectly linked to the worst housing bubble inthe world.
Let's all get used to it.
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Why am I laughing about all this?
Surely I should be crying?
The game is most definitely over people.
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..'coral' the working population for projects that could 'create wealth' or 'new money'..
Do you mean gamble a couple of pounds on the weekend football? .. I go to ladbrokes and william hill too
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The government is, as usual, operating at 2 levels.
On the one hand it is making it look like it is doing something to reduce the cost of borrowing by lowering interest rates and insisting that the banks pass the savings on.
At the same time it is failing to do anything about the interest rates it charges the taxpayer. I am sure there are more examples but at the moment anyone with a legal aid bill is paying 8%.
People in glass houses should not throw stones ,Mr Brown. Lead by example and cut the ridiculoius rates the government charges the taxpayer when they are unlucky enough to owe the government money, or shut up and let the banks make the commercial decision to go for a bit of profiteering the same as the government is!
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We were told the banks had to be saved because they were a vital cog in the economy. Without them, apparantly, are normal way of life could not continue.
Now it appears we require the Govt to take on the roll of National Bank to its people. If this is to be the outcome then why have we propped up the banks in the first place, they should have been allowed to fail, depositors protected by the Govt. and borrowers pursued by administrators.
It just proves that no-one knows what they are doing and are simply making it up as they go along.
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This comment was removed because the moderators found it broke the House Rules.
My tax is due to pay in January (I'm self employed) - I don't really want to pay it as I'm not happy with it being given away so irresponsibily.
If it wasn't for the bully boy tactics of HMRC I'd try to argue it.
Don't rate my chances of getting away with it and certainly don't want the fines.
Perhaps I should be as forceful in demanding some return from the vast amounts I've already donated!
I'm not threatening it like some but am really leaving this country - enough is enough - I'm fed up of being ripped off. I've never been in debt, always worked, always paid my way, my wife is the same.
Sold up 12 months ago - how lucky was that?
We're off to somewhere where we are appreciated and our savings earn decent interest (at the moment, anyway).
5 month and counting....
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This all sounds rather like the Third Option - between socialism and capitalism - inbetween WWI and WWII and that went nowhere, or like Fanny and Freddie in the US.
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CONGRATULATIONS NEW LABOUR.
YOUVE MADE UK plc POORER THAN
A BANANA REPUBLIC.
YOU MUST ALL BE SO PROUD.
ALL THAT PATRONISING FISCAL PRUDENCE.
PASS THE SICK BUCKET PLEASE
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I known all this talk on the economy is rather depressing but in the face of adversity we need to stand and fight.
What do I mean?
Reduce your debts, start now!
Reduce personal taxation, now!
Increase interest rate, now!
Capitalism has rules, these may be implied but rules it has. Those rule have been broken and the treatment may be unpleasent and loose votes.
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Re my pst 24
BACK TO CENORSHIP AGAIN???
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@23
Thats been my position from the start.
No company Bank or otherwise should be propped up by the state.
If the Government hadnt squandered that money propping up the banks they would have had leeway for real fiscal stimulus instead of the ineffective meddling that we had in the PBR.
They should have all been allowed to go into administration until the administrators got a competant buyer to run the business.
There are plenty out there, and they're still waiting for the green light to take over.
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I feel like post 19. Depressed!
It seems like we've either got years of state intervention and non-stop dam propping initiatives tying everyone up in complex peter robbing paul daily announced state initiaives. I.E. putting off the inevitable.
OR
We just let the correction happen as post 19 suggests and just get used to a completely new landscape of failed businesses and mass unemployment but with a levelled playing field at the end of it from which to re-build with the magic of real confidence.
Therein lies the enormous failure of the Blair Witch and Bluff and Bluster, Boom and Buster Brown's handling of our nations affairs. What a disaster!
I vote for short term pain and long term gain.
Bring on the recession!
No more state sticking plasters please!
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Robert
Let us rejoice that the poisonous, reckless selfish ideology introduced into the UK by the middle class upstart from Grantham has come to an end. It is sad that ordinary people will have to pick up the wreckage. However, working people will still retain their skills to, grow crops, build houses, and create every other 'real' product required for life to go on. The most important task now is to create a legislative framework to ensure that the wreckers will never again be allowed to exercise such influence. I remember when Gordan prefered Maxton to Friedman.
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So an industry "expert" now starts to preach the need for a state bank. It is entirely typical and utterly hypocritical.
There is nothing mind numbing about it. It is just crocodile tears!
An example of one of the major players who see's themselves in a losing position now preparing the ground so that they don't loose in the future. Future profitibility must be maintained, that is their sole position. It is utterly nieve to think otherwise.
The same old story, privatise the profits and socialise the risk.
Sound money usually indicates sound goverment, what do we have...?
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One obvious solution is to peacefully help, teach and develop africa to help themselves and set up fair trade to supply the world. The UK could be a partner to help educate people set up the system if they wanted us to.
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Actually I think I've read this book before, and I can just about recall the final chapter. I'm pretty sure it ended in a nice big war. Or was it a revolution? One or the other.
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I have been saying for a long time that it should be possible to create a major mutual bank particularly in Scotland where one well run and regionally focussed bank would be a huge benefit to the economy.
Similarly of course there could be a "Bank of Wales" and/or a "Northern England bank".
What has to happen though is that the banks are disconnected from the City and the Treasury and its malevolent influence not just over banks but the entire UK economy. By mutualising the banks this puts them under the influence of their members and the trusts that should run them.
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GORDY AND THE GANG
If this is your answer to this mess along
with all the other DIRE FISCAL PRUDENCE.
You YES YOU LOT???
FIRE UP THE PRINTING PRESS!!!
LETS ALL GO DOWN LIKE 1920s/1930s
GERMANY.
THEN JOIN THE EURO JOB DONE.
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It was interesting to hear Mr J O'Neil Chief Economist of Goldman Sachs talk on Radio 4 (link contained in your text - thank you) about the Gov't PRINTING money as a solution.
Money as an asset class will almost inevitable suffer along with many other asset classes....perhaps not initially as disinflation may be the first port of call as the mess unravels...but when the hurt really hurts printing money may be the next or even last port of call in this unpleasant journey.
The Issue Dept of the BoE 'allows' money to be printed in exchange for Treasury Bills and Bonds to finance the Gov't's spiralling debt.
As I blogged you yesterday Mr Peston the UK becomes more like Weimar Germany as each day passes . At the early stages at the moment....but one or two years down the line, who knows.
Next time you walk down the Wilhemstrasse (oops sorry, I meant Whitehall) and turn into Voss Strasse (oops again, I meant Downing Street ) to converse with the Good and the Great you could make a suggestion :
Buy up all of the still remaining Printing Presses from the old Reich's Bank at the best possible price.
I hope you are continuing to enjoy the usual round of parties your job entails at this time of the year.
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Yet more doom mongering Robert! Your entry contains contradictions though. You bang on about the £600bn "and rising" figure of government loans, capital and guarantees and then explain in the next paragraph how the £250bn guarantee scheme is too expensive and banks won't be using it. You also fail to state that the additional government borrowing is asset-backed rather than borrow-and-spend. It is the net additional debt and the net additional interest payable that we should be concerned with - you're only considering one side of the ledger.
You also talk about the "winner-takes-all" market of the last 25 years. I don't recognise that, maybe you could point it out. The last time I checked, the billions in City bonuses are taxed at over 50% immediately on payment (the employee pays tax at 40%, plus 1% NI and the employer pays NI at >10%). Hardly winner takes all. Sounds more like winner-splits-50/50-with-the-taxpayer to me. Who do you think has been funding our schoolsandhospitals for the last 10 years?
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I'm sorry, they wanted it all ways and now it looks like they lost the lot. This hand was the one who first wrote this particular Mene Mene Tekel Upharsin on this wall the day that this crisis first hit. They were warned, it was plain as a pikestaff and it's now inevitable.
What kind of economy are we headed for? One which will be a lot more socialist, but also paradoxically a lot less secure - I always said I doubted if I'd retire aged 65, and now that's almost certain to go for a burton. Salaries and state benefits of all kinds are going to be hammered too - get digging those flowerbeds, folks, we're headed back to the less idyllic side of Lark Rise, keeping a pig for the meat and a garden full of vegetables, if we get our acts together, or outright starvation if we don't. Tescos and the rest will also become a balloon, as no-one will be able to afford them, even Aldi. A wise man buys a pony and a paddock now...
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The only way out of this mess is to create wealth, not more debt.
Government effort should be targeted at policies to assist the manufacturing sector to expand into export markets where UK industry can be competitive. As regards UK markets, the government needs to be consciously pursuing the support of UK manufacturers and suppliers of goods and services.
If that sounds like protectionism, too bad.
Until this country can be ruun at a profit (i.e. a balance of trade surplus) we haven't a hope in hell of getting out of the mess we're in. Safeguarding jobs in the financial sector by propping up banks that are technically insolvent and currently a drain on national resources makes no sense whatsoever.
If general living standards have to fall before there is a general improvement, that is the price of the last ten years of unrestrained, debt fuelled consumption, and until the politicians have the courage to get that message across, we will remain in a deep slump for many, many years.
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Interesting and challenging article, Robert. Please accept my compliments.
If the taxpayer is to fund the government to fund the banks to fund the businesses in which the taxpayer is employed, then why bother with the two middlemen?
Let us just get rid of the government and the banks and fund our own employment.
Since Big Government and Big Business caused this entire mess anyway we might be a whole lot better off without these greedy busybodies who want to control everything because they are psychologically immature.
If I recall capitalism started from the cottage workshop or, maybe this time, we can all stay as meek Diggers and truly inherit the earth.
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Is it meant to be ironic, you putting a link to Northern Rock's website on your blog?
I'm sure they'll appreciate the plug!
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Robert
You sound a bit worried by all the chaos, contradictions, spin and hot air.
We all now know the final destination and it is exactly the same place as many of your contributors have warned of for years.
Deep Recession/Depression with a bankrupt UK
accompanied by 0% base rate and a disgraced, morally and intellectually bankrupt government printing money as the last pointless gasp before the new world order begins.
You ask Robert "what kind of capitalism will emerge form the rubble"
Answer: the same kind as always but the power will be else where. China and those with the resources.
It may be worth pointing out to those that currently applaud this talk of 'quantitative easing' and view the huge wave of inflation that is just around the corner and the reality of a currency crash as something to embrace because they think it keeps their little property empire going or allows them to continuing spending more than they ever earn, will find out they are still in debt and have no money. However as always the poor will experience the greatest pain. In addition extreme pressures on our society will grow with an ever increasing risk of violent protest or worse.
We are already seeing every day on this web blog borrowers set against savers, home owners against tenants. Every decison this government has made is the obvious empty cowardly populist one, and wrong every time. If you want to know what serious inflation can do look at Germany 1930's, look at Argentina 1990's and now Zimbabwe where people are reduced to drinking faeces infected water and dying of cholera.
Inflation was here all along we just pretended it wasn't by conveniently excluding housing costs.
Inflation is harmful because "it depreciates the value of the monetary unit, raises everybody's cost of living, imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest, wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals."
Sounds like the UK under Nu Labour. Those words were written more than half a century ago.
Savers get Euro's. Gordon Brown was not democratically elected either to party head or Prime Minister. Do not trust him.
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Risk
Why don't you inform us why we will be unable to understand the logic of what the government is proposing to do without presupposing the all-important concept that private risk can largely be eliminated by central control?
Because, if we continue to have in our minds that there is private risk, none of what the government is proposing to do makes any sense. The only way we can accept that the government is driven by constructive objectivity, rather than by self-protective dogma, is if it can be explained to us why the new philosophical concept of risk is more appropriate than the old one.
At the moment, the public is judging the government's actions on what effect they are likely to have on private risk, and, quite rightly, judging that they are contradictory and largely useless. But if the government were to explain why it sees the solution to the present difficulties not as intensive care to private risk, but as immunisation against it, wouldn't that at least tune us all in to the same wavelength when deliberating about what's happening?
The debate we should be having is about the correctness or otherwise of the immunisation argument, not about the quality of the intensive care - because it's not intensive care that's being given.
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It's extraordinary the degree to which, amidst occasional outbursts of big, blunt interventions, policymakers are just bewildered by what is happening. Half of what they do and say contradicts the other half.
Perhaps some of the measures you discuss will be wheeled out in the coming weeks, and months ...
But it's likely to be too late. This crunch has now truly spilled over from finance, and particularly vulnerable sectors like housing and retail. Mainstream manufacturing is at significant risk: and order-books for 2009 are dreadful, non-payment of suppliers is rampant - irrespective of borrowing difficulties and interest rates.
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We have yet to realise the full impact of this financial Tsunami. American Banks are vitually bankrupt and kept "alive" by life support from the Fed, who is just printing money (e.g. Citigroup). Technically, most of UK Banks are insolvent as well. Gordon Brown has lead this country to financial disaster with his over-spending policies. Jobs in the government sector has risen sharply since "New Labour" took office, while the manufacturing sector has shrunk.... who is going to produce the wealth for this country... Quangos!!!!
Prudent families who live within their budgets are now penalised in order to rescue irresponsible people who took out loans for their lifestyle. Yes, help should be given to people who are made redundant but not to over-extended individuals and businesses.
As the Sun Newspaper stated in 1992... "Will the last person who leave Britain turn off the lights!".
I am emigrating to new pastures while I still can afford to do so.
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About 6 years go i phoned Credit Suisse in
London about deposit account,the Account
Director asked me what my attitude to risk
was.
I stated NIL unless i fully understood the
risk i was to be involved in.
He then said he was too busy,and asked if
he could ring back.
I AM STILLWAITING
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Not only the the taxpayers finance the economy; it is primarily the savers.
No wonder people don't save when it is a mugs game. Those who have saved have been massively punished by taxation, inflation, capital depreciation, property price collapse, equity collapse and low interest rates.
Only savers save and only taxpayers pay tax; why not avoid being in either category and live off others? Many do.
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Is this a serious pitch for 'the workers shall own the means of production' ?
I understand the skittishness of the banks but if they won't touch certain areas of business because of the perceived risk then why should the taxpayer ? Do we know something they don't?
There is lots of evidence that the dead hand of government is not the quite the ideal organisation for running commercial enterprise and again there is clear evidence that an innovative finacial sector does lead to greater prosperity across the economy
Seems to me we need a less risk accepting culture in financial institutions but I would be perturbed if risk averse government came to dominate the sector - comrade
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This comment was removed because the moderators found it broke the House Rules.
41
'and until the politicians have the courage to get that message across, we will remain in a deep slump for many, many years.'
And there lies the answer. At the moment everything that is being done, or suggested, by both the Govt. and opposition is politically motivated towards the next election. Telling the truth about how bad things are about to get is not a vote winner, but it is what this country actually needs. Some realism needs to be injected into the Electorate. Lets just be grateful than Brown did not go to the polls earlier this year (before the s*!t really hit the fan) because we then we may have had this pathetic bunch for another 4 years plus.
But thankfully they couldnt even get that right.
At least the US has a new administration who will have four years to address the problems with a mandate for wholesale change. Wheras we wil just have to wait for something.............answers on a postcard to MR Brown.
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No. 44 MaxRelax
Well said. can you enlighten me wh you are not running either HMG/BoE/FSA and why we have the muppets we have in teh first place?
Does anyone not find it AMAZING that we have had not ONE single person in authority prescribe anything that resembles sanity. ALL the poweres that be seem intent on everything you listed, i.e. printing more money, inflating away the problems, re-starting the debt binge and shafting all forms of prudence.
I find THIS the biggest failure. Even Vince Cable harps on about lower borrowing costs and protecting the profligate. What am I missing?
In my humble opinion, the best thing we can do is CRASH the property market at FULL speed. Its amazing what reaching the bottom does to bankers, developers, FTBs, loan books and external investors that will start buying GB's debt again.
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Could the government have just paid out to all UK Taxpayers, past and present, a share of the money given to the banks? That way we would have all had to pay the money directly into our bank accounts and if the banks were still proving not to pass on cuts in interest rates, etc, then we could always move our money to another bank? Probably a daft suggestion but it seems to make some sense to me and would not leave us behold to the will of the banks who have let us down!
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When will you, Robert, begin asking questions of those in power about when they knew their actions would create this problem?
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This is the Taxpayer scenario:
Imagine you?ve just borrowed a lot of money and bought a worthless casino. Then you dress up, go to your own casino, and start gambling in the hope of winning some money to pay back the loan. It?s not gonna work!
The only (legal) way to pay back this loan will be:
A massive inflation that will erode the value of the loan, so that you can sell a couple of roulette tables and some spirit bottles and pay back the whole loan.
Inflation and high interest rates is the only solution to the problem we have caused.
Agree Robert?
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So money managers don't want to invest in the UK housing market. No wonder, everybody knows it's way over inflated.
They should want to invest in British businesses though as they remain some of the best in the world. Britain's infrastructure has been massively improved over the last 10-15 years. We are well positioned. Stop fretting the recovery will come and houses will be affordable again.
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Robert,
The first solution is to take mortgages out the the banking system.
Take a look at the Danish mortgage bond market - the most sophisticated, liquid and transparent financing model in the world for mortgage credit.
The model would have to be forced on to the banks by a government which has the vision to create the long term structural changes required to re-define the credit and capital markets
The banks would be very uneasy about such a system, as the strict cover principle means that the institutions/banks would have to pass on all interest rate risk to investors, which significantly limits the source of income and profit margin for banks/mortgage providers.
Removing property mortgages out of the banks, would free up their balance sheets allowing them to focus on commercial lending and unsecured personal loans - thus kick starting the eccomomy.
What the government needs to do is stop listening to the banks, stop abusing the taxpayers - and start to ?think out of the box?
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heheheh it's Friday afternoon and looks like this blog is building up a particularly good head of steam on the favourite topic - DOOM AND GLOOM
BREAKING NEWS:
ATTEMPTS TO RECREATE CONDITIONS JUST AFTER THE BIG BANG HAVE RESULTED IN AN UNEXPECTED FAULT; IT WAS A HUGE HOLE IN THE GROUND AND THINGS WERE JUST SPINNING AROUND TOO FAST; THE WHOLE THING HAS HAD TO BE CLOSED DOWN UNTIL FURTHER NOTICE; IT WILL COST A LOT TO FIX; OH DEAR
I hope you're reading this Gordy; your magnets are out of alignment mate
WELL DONE YOU'VE TESTED CAPITALISM TO DESTRUCTION!
As for these Goldman Sach's people advocating state banks etc come on we all know they are just trying to get us to 'socialise the risk'. But they will be back later to privatise the new profits when we start to come out of this crisis in a year, or two or three
UNLESS WE STOP THEM THAT IS
Real social movements need to take the opportunity to move the so-called centre ground back to a place where more than the few benefit. For years we've watched the corporations withdrawing from the wealthy democratic west until our economies were hollowed out; abetted by politicians and the corporate banks and their CDOs
MANY OF THESE PEOPLE NEED TO BE INVESTIGATED AND CHARGED
We're in for a bad time now for sure, and no amount of govt tinkering or intervention will prevent it (though much tinkering is needed to cushion the fall); so let's get out there and get some fresh air on our new allotments, go on some marches, do some chanting, and stop it all from starting over again in 2012
Oh and the good news: this downturn is going to slow down or even prevent a lot of harmful climate-change, buying us one last chance to smarten up our act generally before it's too late; don't forget the march tomorrow in central London - it's about the real economic crisis
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@52
"Lets just be grateful than Brown did not go to the polls earlier this year (before the s*!t really hit the fan) because we then we may have had this pathetic bunch for another 4 years plus."
Contrary to my normal position I disagree to some extent with the above. If he had gone to the polls and by some miracle won, then at least now he would have to be doing something for the long term, not just meddling around trying to last until he's forced into an election
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Crikey !
What a long blog.
Very informative though.
Explained the situation well.
This idea of state bank (as against banks that are in a state) seems to have been floating around for a while.
Isn't it about time somebody in Westminster stopped talking about the idea and got on with the job of implementing it.
I thought the Government had said they would do whatever is necessary ?
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As usual a clear summary of the mess we're in.
The real issue here, though, is that the "global financial crisis" (solved, we are led to believe, by Gordon Brown) has gone from bad to worse. It's just that we've put off the inevitable collapse and our politicians are now scared witless of allowing the laws of economics to run their course.
Sooner or later (probably sooner) we must face the reality of the debt bubble bursting and taking out one hell of a lot of individuals, businesses, even countries when it does eventually go bang.
Self-evidently, Gordon Brown is economically incompetent. He's also arrogant to the point that he genuinely thinks that ordinary folk (like me) believe the tripe that he and his government spew up about how they're dealing with this problem, how they're directing banking policies and how everything will be alright in the end. Yeah, right.
Robert Peston's latest epistle screams "disaster waiting to happen". My advice is don't rely on our political elite to sort this out in a hurry, if at all.
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We need Capitulation in the housing market.
We are a long way from it
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The trouble is everything Flash Gordon has achieved was based on debt and so now he is having his last throw of the dice, when really he should be walking away from the table, as the game of debt is over but he just cannot see it and keeps throwing hoping a seven will come up.
Please Robert tell him that the dice only goes up to six, a seven was just an illusion.
As with all gamblers he will end up losing everything, unfortunately so will we.
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Here's a crazy idea...
After nearly a decade of unearnt partying why doesn't the UK have the hangover now before it gets alcohol poisoning. Why is a reversion of housing prices to its long-term trend a "disaster"? Why would a massive cut-back on the expenditure on public services be a disaster? Why would have people who have irresponsibly borrowed getting their come-uppence be a disaster?
Has nobody noticed that all these schemes expire after the next election?
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Post 58 Sevtak
Great idea!
Let's have a non-profit making taxpayers mortgage bank.
Cleanse the banks balance sheets by moving their entire toxic mortgage loan book to this with a Gov't guarantee.
Let the NEW mortgage bank charge what it wants for mortgages.....and savings. Say 7% for mortgages and 6% for savings.
Then savers can deposit loads of money and the NEW bank can lend loads of money with a Gov't guarantee.
Ban all institutions from offering mortgages unless they act as agents only for the new bank.
This will get lending again to the mortgage market, thus making the housing slump less severe and helping the economy to recover.
Savers will prosper too!
Time to think outside the box!
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4maxrelax
You will have to do better than that if you want to be taken seriously.
We do not elect Prime Ministers in the UK.
Mr Brown was elected in the same way as every other Member of Parliament.
He was elected unopposed leader of his party. A common occurrence in democratic organisations.
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#25, may i recommend the far east?
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comrades
we need inflation . its the only way of reducing debt
oh ! and then the little problem of the public sector pension schemes, a bit of de-inflation on these please
come the revolution
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This merely confirms that capitalism is a fair weather success. Communism collapsed because it was forced to resort to massive state spending, financed by international credit, which was, in the long-term unsustainable. You could say that the fall of the Berlin Wall was caused by a state sub-prime crisis. [Unsuitable/Broken URL removed by Moderator] The capitalist west managed to postpone the crisis though the privatisation of debt and the reliance on consumption at any price. Now the winter of the long wave is upon us and there is little we can do other than pull the blankets tight around us and hang on until it passes. The only question is what the social and political consequences of this will be. As long as we stick with capitalism though, this sort of long-wave boom and bust will continue.
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Mr. Peston's blog today offers a seriously mistaken view of how the banking system functions and the transmission mechanism of monetary policy. In particular, his comments on the desirability of new FSA demands for banks to hold lots more government paper are completely backwards.
The fundamental problem within the global banking system is a shortage of truly liquid assets. Banks worldwide during the good times used a host of high-yielding assets (e.g ABS, RMBS, CMBS) as collateral in repo operations in the open market. The assumption was that such assets were highly liquid. That was a horrificaly bad assumption. Liquidity in secondary markets for such assets has dried up, with the central banks becoming the interbank markets of last resort.
The bank funding model in the US and UK is broken and it is essential that banks hold a considerably greater amount of truly liquid assets (i.e. government paper).
But that is largely an argument about structural changes in the banking system. The large take-up of government debt by the banks would also be a very positive short-term macroeconomic development if it actually were happening! In fact, the Bank of England's own data suggests that the Debt Management Office has been overfunding the government deficit in the last six months (i.e. selling more government paper than is required to meet the net cash requirement). This is partly to blame for the weakness of the UK economy.
It is completely backwards to argue that bank holdings of gilts somehow detracts from their ability to lend to the private sector and hence economic activity. First, the risk-weighting on holdings of government paper are minimal compared to those for mortgages and corporate lending. Secondly, in an environment where new lending to the private sector is stagnant (the constant references to 'savage contraction of lending' is total drivel - one only needs to look at the data), the only way to prevent banks balance sheets in aggregate from contracting is for them to lend to the public sector (or hold more government debt). Such a policy would prevent the stock of broad money in the economy from falling. In extremis, the Bank of England or HMT could buy securities directly off the private sector.
Far from hurting the economy, banks desperately need to hold more gilts, not less. This will boost to stock of broad money in the economy - hence activity - and give banks a bigger stock of liquid assets to alleviate strains in the interbank market (they have no liquid assets for repo purposes in the private market!). HMT and the Debt Management Office have not grasped this, in turn worsening the downturn in the economy. Until policymakers and the media get past this obsession with lending to "small businesses and hard working families", we are all going to be worse off.
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The main thing we all need to is to be given some indication that SOMEONE KNOWS WHAT THEY ARE DOING AND HAS A PLAN.
We need the government and the banks to come up with a scheme to rescue the economy and provide as smooth a transition to a SUSTAINABLE system.
This involves.
1. The government printing money and exchanging it for debt.
2. The banks lending just enough to get money circulating, all the while looknig to reduce the amount of credit and improve their reserve ratios.
3. Any bank which doesn't play ball (and since the government owns a lot of them is should be possible) should have all support removed.
A prime example of the problem at the moment is the cut in interest rates. When the BoE made its cut there should have been a (pre-planned) spontaneous response from all lenders. All that is currently happening is that the banks look greedy and heartless and the government looks weak and powerless. Whilst this may be true they should give the image of co-operation
At some point all of us (banks included) have to stop moaning about and pursuing our own NARROW MINDED AGENDAS and cooperate to bail ourseves out of the sh*t.
A lot of mistakes have been made and a lot of stupid and/or greedy people have been allowed to do whatever they like. THAT IS THE PAST, we must learn from it and move on. When the dust has settled we can think about punishments.
THE TIME FOR DOGMA IS PAST - COOPERATE OR PERISH
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Just what are we trying to save here Robert? An over inflated Global Economy!
It seems to me that nothing has been learnt from the past decade!
The UK, along with many economies, over inflated its economy and now we are paying the price (and will be doing for some years to come)
But if you believe in a free market and capitalism then the whole mess will sort itself out. It may require a little short term help (and a little legislation to help it remember), but if the market demands lending, eventually someone will step in and lend (at the going rate) ? in exactly the same way that if someone wants a new TV they?ll buy one OR NOT if they can?t afford it. This seemed to work OK for 100?s of years.
What we have to do is realign our expectations ? spend less in other words. But if this really is a global issue surely the playing field is level!
Won?t credit be just as difficult to come by globally!
If so are we really at a disadvantage?
You never know, ?Doing without?, might be the new ?Black?
Unless of course we are is a worse mess that other Nations..... over to you Mr Brown for the answer.....
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As efforts to save the Titanic continued the captain updated the passengers on progress.
"We have installed a lot of extra pumps to pump water from the flooded sections. Some of these pumps have not been switched on because the Chief engineer informs us that we haven't the power to run them. Some have been found to be discharging the flood water back into the flooded sections and they are now underwater and we cannot relocate them.
The capacity of the ones which are correctly installed appears to be insufficient to stem the flooding and the ship continues to sink.
However we think we know where some more are stored and are looking for them now - we however understand that these operate on a different current and we may need to change the electrics to use them.
The decision to take back on board a large amount of passengers luggage which they had relocated to the iceberg has not helped but the passengers affected seem to have calmed down. The extra weight is causing some additional flooding which we are ignoring for the moment.
The designer of the engines has said that he believes they are fundamentally faulty and are no longer safe to operate. The purser has found some paddles, sticky tape and a wind powered generator and is attempting to construct a replacement - thus far it has produced a lot of hot air but failed to make a significant difference to the efforts to save the ship.
On a lighter note the remaining stores on the shopping deck that have not flooded are offering a special 2.5% discount deal to passengers. Please take advanatage of this special offer as due to a shortage of currency (the safe is now flooded) charges for all meals will be increased from the next sitting. First Class passengers will now have to pay for their meals and the all you can eat buffet service is withdrawn until further notice.
Due to the increased charges some customers may find they can no longer afford their cabins - as all crew cabins have been flooded we will now no longer throw these passengers overboard immediately. Instead we will let them stay for an extra 6 months without paying then throw them overboard.
The engineering team met yesterday to review the ships situation and decided that due to the ship's continued settling in the water they would throw some further ballast overboard. We are sorry that a number of elderly passengers where unfortunately hurt during the operation.
The patron of the ship came on a flying visit earlier this week - due to circumstances we were unable to offer a full menu.
We are very sorry for breaking into the cabin of a leading member of the passengers action commitee but we had information from a kitchen porter that his cabin might be the source of some additional leaks which could put the ship in danger. The washer in the tap has been replaced though the sledgehammer used for the job has caused some collateral damage.
We understand that the Passenger Action Commitee has a plan to repair the damage to the ship which can save us.
Their 5 minute presentation yesterday was most enlightening as I was not aware that the ship had struck an iceberg previously and that people in the forward compartments had been affected by the flooding of their cabins and workspaces.
I am a little concerned that their proposal to share the plan is dependent on them taking control of the ship and the current officers leaving the vessel. Let me be clear - the only way I'm leaving is if the ship sinks or the other senior officers make it clear they have lost confidence in me. My compliments to their families at their home addresses.
The PAC's initial suggestion of throwing a significant number of the crew and passengers overboard to lighten the load whilst scientifically sound may leave the crew at risk of unpopularity. We have taken on some new crew memebers to discuss this in more detail and see how we can lose some weight without throwing too many people overboard.
I would add finally that despite it being clear that there are indeed 4 compartments which have been holed in the collision we remain in considerably better condition to recover from this than many of the other ships in the area most notably the Ragnarok which appears to have sunk with few survivors."
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Seeking Taxpayer's money is all the trend it seems these days. Today I heard in today's German radio that EADS has gone 'cap-in-hand' to their Goverment asking for 2 billion Euros.
I can imagine the Chief Exec saying (like those from Banks and Car makers) "I am really sorry for 'screwing-up' and for not doing my job properly. So, can we have our money now?"
Monty Python would have had a field-day!
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Apologies if you've all said this - I've not got round to reading the comments as yet, (same could be said of policy makers as well of course)... but is this a joke?
At what point do we actually say: "Please stop losing and wasting my money. I do not authorise you to use it anymore, you are bankrupt and derelict!"
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".. , winner-takes-all financial markets of the past 25 years."
sounds like the philosophy of war not peace,
[not condoning or encouraging war and greed should be a new house rule]
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If the government thinks i am going to apply for loans and other finance so that it can get out of the mess that too much borrowing made in the first place, it is sorely mistaken!
I'm clinging on to every penny I have right now, currently living in fear that i might not have a job in a few months unless the economic situation picks up!
I also find it funny that they want us to go on spending sprees to bail them out, cutting VAT does not make any difference to the money I have left in my wages after paying for the bills (Gas/Elec, Mortgage and so on). So how will 2.50 (or whatever) off of £100 that I don't have to spend going to "stimulate" the economy?
"Nothing New Labour" have my vote - a VOTE OF NO CONFIDENCE that is.
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because the sunny economic uplands won't be visible again until a solution is found to the vicious, inexorable contraction of lending.
I'll tell you what would work.
A televised statement by the PM explaining what has really happened ie we've all been borrowing too much this past decade and now we have to pay it back.
There will be job losses unless we take pay cuts. There won't be so much money to go around. I will cut borrowing. I will freeze public service pay and recruitment.
The truth. That would work. It has to be worth a try.
It's the misinformation and disingenuous blaming of the Americans, the banks, Uncle-Tom Cobbly and all to deflect attention from the fact that in the UK the biggest causes of this recession have been the failed policies of this government that means we're in this pointless period of threshing around while Gordon Brown tries to grab positive sounding headlines.
We need to be told the truth. We weren't doing well at all the past decade. The entire past six or seven years of 'the longest period of continuous growth due to my prudent policies blah blah...' has been nothing of the sort. Indeed it was the longest period of irresponsibility and imprudence in history.
Until the Maximum Leader acknowledges that or his focus groups tell him that (which is where the BBC and Peston should be taking charge) then nothing is going to happen that has a hope of fixing this catastrophe.
Look at the latest insanity. We print 37bn quid to give to the banks. We charge the banks 12% interest (chosen only because it isn't the 15% figure Brown likes to ram down the Tories throat at every opportunity). He then has interest rates set to 2% and forces the banks to buy his 2% bonds at historic lows while he charges them 12%. And how much will these bonds be worth when he has to increase interest rates when the IMF get called in?
A 10% paper profit on imaginary paper. Basically a 10% tax on the banks. More when the value of the bonds go down after he is forced to increase interest rates by the IMF.
And then, for further political advantage he spends all his time bad-mouthing the banks for not 'passing on' his interest rate cuts. Oblivious or unheeding of the economic reality of how banks actually make money.
The HBoS and RBS executives have all been trashed but I'm amazed anybody from Lloyds would want to sit through the coming hate-fest. Or why anybody would take over at RBS.
This is another Railtrak on the cards. The banks will be bad-mouthed and publically whipped for political gain and then renationalised with the shareholders and pension funds left with nothing. Brown will make off with the banks which he 'propped up' with a 10% tax and the voters will be cheering him to the rafters having spent the past year being told night and day that this recession is all the banks (and the yanks) fault.
Yeah. Stick it to the banks!!!
Certainly not Gordon Brown's fault. No sirrreeee. Nothing to do with me.
Utterly surreal.
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[cue Labour's 1997 election theme]
Their problem is they believed their own hype.
Maybe that's what you get for having a guy with a PhD in History running the country. Not a scrap of work experience in, say, management, economics or finance - he has no business qualifications at all. His last real job was a journalist. At least he's not in charge of the economy. Oh, wait..
Read more on wiki.
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"US employers axed 533,000 jobs in November, the biggest monthly cut in 35 years, the US Labor Department said.
In a dramatic indication of the worsening situation in the economy, the US jobless rate rose to a 15-year high of 6.7% from 6.5% in October.
Since these latest figures were compiled, further jobs losses have been announced, including big cuts at AT&T.
"
Oh boy are we in trouble!
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Houses are overpriced.
Until prices are back near a "normal" level, mortgage backed bonds are a licence to lose money.
The recession is inevtibale due to the lending bubble.
Defalting it will always be painful.
There are two choices:
a short savage bout of deflation
or
a long painful deflation lasting decades.
There are NO OTHER choices.
(except extreme inflation and busting the currency).
Hobson's choice,
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We've had a crash in our car.
Gordy's Garage is repairing it.
When's he going to tell us that we won't get it back quite the same as it was before crash?
When's he going to say that there's still danger on the roads, so he's had to put in a circuit-breaker so that only a government-registered driver can operate the car?
When's he going to say that this "temporary" measure has proved so successful that it's going to be put in place permanently?
When's he going to tell us that democracy has no virtue other than as a rubber-stamp for the decisions of the executive, to strengthen its ability to silence those misguided (courageous?) enough to hold maverick views?
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WHEN JOHNNY COMES
MARCHING HOME AGAIN
HE'S COMING BY BUS OR UNDERGROUND
A WOMAN'S EYE WILL SHED A TEAR
TO SEE HIS FACE SO BEATEN IN FEAR
AN' IT WAS JUST AROUND THE CORNER IN THE ENGLISH CIVIL WAR
IT WAS STILL AT THE STAGE OF CLUBS AND FISTS
WHEN THAT WELL-KNOWN FACE GOT BEATEN TO BITS
YOUR FACE WAS BLUE IN THE LIGHT OF THE SCREEN
AS WE WATCHED THE SPEECH OF AN ANIMAL SCREAM
THE NEW PARTY ARMY WAS MARCHING RIGHT OVER OUR HEADS
ALRIGHT
THERE YOU ARE, HA HA, I TOLD YOU SO
SAYS EVERYBODY THAT WE KNOW
BUT WHO HID A RADIO UNDER THE STAIRS
AN' WHO GOT CAUGHT OUT ON THEIR UNAWARES?
WHEN THAT NEW PARTY ARMY CAME MARCHING RIGHT UP THE STAIRS
WHEN JOHNNY COMES MARCHING HOME AGAIN
NOBODY UNDERSTANDS IT CAN HAPPEN AGAIN
THE SUN IS SHINING AN' THE KIDS ARE SHOUTING LOUD
BUT YOU GOTTA KNOW IT'S SHINING THROUGH A CRACK IN THE CLOUD
AND THE SHADOWS KEEP FALLING WHEN JOHNNY COMES MARCHING HOME
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The only thing that struck me reading this was to point out that it is the inherent massive increase in the debt/equity ratios - particularly in the financial sector which has been the building blocks behind the crisis (15-20 years of a credit ponzi scheme). Certain capital rules are now one of the inevitible consequences too ensure that bank balance sheet leverage does not reach such unsustainable levels again. We are now part-way through a massive de-leveraging process the like of which we have never seen before; this will continue until levels and the total level of credit/GDP in the main countries comes down to a more reasonable level. Arguing that banks should be rushing to lend seems to ignore the issue that it was excessive credit creation that got us here in the first place. We unfortunately are going to have to return to reality - saving up for higher deposits on homes. Banks will want protection and a buffer when they lend money against a property in case you cannot pay the debt and prices are falling. I think you'll find that you will have no problem getting a mortgage if you have actually saved up a decent sized deposit - so I don't really think that is the issue. Not until the banks have reached a level where total leverage levels are more sensible; risk has been adequately priced (particularly credit risk) will the markets unfreeze.
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Oh what has gone wrong with our MPs - across the board they have lost their ability to debate the issues that matter to the electorate to find a solution for now apparently none can or be allowed to think for themselves
Towing the party line and afraid to argue in the chamber for the people they represent they have so little regard for their own or for parliamentary privilege and essential independence they are happy to even loose independent speech over letting Mr plod improperly and or ignorantly into the centre of our FREE not Police state.
Our MP?s will tow any party line rather than show any individual, felt through thought so that they never need to be reminded to toe the line that is still painted on the floor and represents some of the reason they are elected for to - hold vigorous and full house debate on our behalf.
If we want twenty people debating our major issues call in a committee and close the house altogether it may make a good museum to how modern parliamentary democracy got started and then died.
NO I have not forgotten the remit of this blog but the above point is essential to it.
Our economy has like the world economy gone dreadfully wrong with many governments around the world complicit in allowing the bankers free hand to do as they wished in earning just what they wanted at the expense of every individual in the world.
The banker?s greed has not only taken money respect and prospect of a better future from a Zimbabwean peasant to a Chinese rice grower to a Louisiana street musician but to UK a farmer, a sheet metal worker, or our major international businesses.
The Bush and Brown domain based banks have had free running across the world and have stripped all of it and our true value so what is our governments answer when the gravy train hits the buffers.
Take what money the bankers could not get to easily our taxes and had over what?s left of every citizens and their children?s heritage to these bankers so they can carry on doing the same.
Seeking change and doing things differently has what has always moved us on
Dong the same continuously has al ways left us moving backwards
Doing the same and believing things will change is madness
And even the Americans have realised if you want things to be different you have to change the way you do things.
Banking is substantially old it has changed little in arrogance, immorality, pomposity and the principal of earning by risky trade, pillage and usury. We have to rethink the way we operate our nations, our world.
The concept of pouring all our money into the same pot that has squandered our money our talents and our reserves without very strong and clear enforceable guide line supported by rigorously backed sanctions is the true definition of madness.
Our politicians should stand up for the people they represent and start some very full and very detailed debates as to how we run a nation look after its people and play a proper part in world order for the future. Using their own wit and talent for which we elected them.
And now
But maybe if we don?t get our government, our constitution, our desires and our consumption into order the mother of governments will like all other governments find that something as obscure as Mother Nature has the last laugh with a plague of climate change on all your houses.
Nothing in the world works in isolation and distraction of our representative?s duties to debate vigorously verdantly and virtuously all our issues in clear visibility of all our citizens is now essential.
Wimps out, reformers to the front change is now essential - for clarity - that means doing many thing differently not the same.
Got it - debate it - create it
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@ 74 Whistling Neil.
Nicely judged.
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Seems to work for the Chinese!
Gordon Thompson
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I cannot recommend post #44 enough and want to reitterate his last point.
Gordon Brown was neither elected to the post of party leader by his follow party members nor was elected to the post of Prime Minister by the electorate of this country. He is by definition the least democratic PM this country has ever had the misfortune to witness.
How is this relevant?
Several posters have said things will not improve until 'the pain is felt'. However, it is precisely to prevent the pain being felt that the particular current choice of mearsures is being made. Brown is not opporating to an economic cycle but a political one. For example, he personally announced, after the Queen's Speach, the measure to delay repossessions for upto two years. A policy underwritten to the banks by HMG. Such a policy is directly against the best intrests of the morgage holder currently in arrears. It roles up both the principle and the interest and tacs them onto the end of the loan where they attract more interest. The term and size of the loan are thus increased for the indebted morgagee.
In a falling market as we have now, a house now can be reasonably assumed to worth more now than it will be in two years time. It's sale in two years time if seized will return considerably less then than now and may even mean the house being sold with a negative equity gap still being sort by the morgager from the now homeless morgagee if the house's sale garners less than the amount of the outstanding morgage.
Brown's only concern is that this is all pushed into the future beyond the next election. That election he hopes will see him return to office, with the a democratic mandate he so obviously currently lacks, allowing him the steamroller the freedoms that we in this country have for too long taken for granted.
Viva lá Revolution!
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In effect Northern Rock has been made into a State Bank.
Why don't they compensate the Shareholders of NR and B and B, and with whats left of those Banks create a National State Bank ?
Mind you where would National Savings fit in to this ?
Technically they already are a State Bank.......
But high Inflation is already with us, and the Pound will fall further against the Euro and the Dollar.
We just have to hope that British manufacturing can take advantage of the lower exchange rate.
I have to smile when I hear of people being so fed up their leaving the country.
Well, best of luck to them, globally most countries are feeling the pinch, some far less than others.
I smile again when I read of people asking for higher Interest Rates.
Well, to keep up with Inflation you would probably need twelve percent or more.
Funny thats what the Gov't charges on its preference shares to the Banks !
Its a funny old world !
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Today, Mssrs Brown and Darling live in Downing Street.
OFFICIAL: from next Monday it will be renamed DROWNING St.
By Order of the Permanent Secretary to the Cabbages
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Dear Robert,
I find this astounding. When the good times rolled and profits were wonderful any state involvement was, to put it mildly, a dirty word. Now the caplitalists want state help so unsurprisingly the state is a wonderful thing.
What I really want to know is if the market economy system had been left to its own devices without any interference what really would have happened?
The credit crunch has shown that greed, gluttony and avarice have to come to an end. It is time for a better and fairer system which does not condemn people to, for example, poverty and place the world on the brink of an eco-catastrophe.
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Why can nobody see that the capacity for consumers and borrowers to borrow more money simply is not there? We're maxed out. Britain's are the most indebted people in the history of the world. It doesn't matter how low interest rates go - there's simply no more room for anymore debt.
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Will the Gov't abandon its policy of lying about Inflation to keep wage rises down?
Or do they still wish to maintain the policy of trying to create a property rich class and a renting poor class ?
An injection of demand into the economy through Public Sector pay rises would help boost the Consumer economy.
Our consumer economy has been undermined by wage rises being held lower than the actual rate of Inflation.
Thusly workers can not afford to spend money in the shops as their cost of living has risen faster than their wages.
The Gov't knows this, and has it in their power to change this state of affairs at least for the Public Sector.
Any boost to Public sector wages would trickle down to the private businesses in which people spent their earnings.
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My God! The emperor has no clothes ...
Not only is he naked but as he chases his financial rear in ever decreasing circles he is in serious danger of disappearing up his own bottom.
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72 : iwanttoscream
"A lot of mistakes have been made and a lot of stupid and/or greedy people have been allowed to do whatever they like. THAT IS THE PAST, we must learn from it and move on. When the dust has settled we can think about punishments.
THE TIME FOR DOGMA IS PAST - COOPERATE OR PERISH"
Co-operate doing what?
What if the policy we're being asked to co-operate with is flawed? What's best? That we actually use the whole of human intelligence to devise the best policy, or that we ignore our differences and all pull together in the hope that those who happen to be making the decisions have made the right ones?
There's been zero coordinated political debate about the most appropriate way out of this mess. Zero. It is as though the establishment has decided that the general population is not capable of understanding thereal choices, so they must be restricted to a cage in which they are encouraged to busy themselves with subjects of discussion that are completely tangential to what's actually going on.
Meanwhile the power-elite is busy putting in place the new order, which will be presented to the general population as a fait accompli, to which Mr Average has had no input whatsoever, and which he has no prospect of modifying, let alone turning down.
Good old Common Purpose!
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Robert wrote:
"Money managers apparently don't want to buy into the UK housing market, even when the risk is covered by HMG".
And I absolutely agree with the view. The market is overpriced by at least 50 percent and the funding of the lenders is simply too unknown.
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This is what happens when you bail the banks out,
http://news.bbc.co.uk/1/hi/business/7767326.stm
the banks hoard all the taxpayer money while the entire economy goes down the toilet.
Nice one Gordon, your name will live on in Infamy!
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robert wrote
"However, such a substantial increase in the provision of credit by taxpayers has to be a serious option, because the sunny economic uplands won't be visible again until a solution is found to the vicious, inexorable contraction of lending."
For one thing the "sunny economic uplands" of the last decade or so were a fraud and another thing I'd give it a decade before stable conditions occur which will be compatible with economic growth. This is NOT doom and gloom - just realism and examining what happened in the thirties and before when asset bubble burst.
The short depression and short duration deflation fly in the face of arithmetic. Indeed if the Bank really believed that the upturn would be steep and sharp as it is predicting then given the fact that economic policy relating to interest rates takes a year to eighteen months to take effect they should be radically increasing rates now, not doing the opposite. They are the same bunch of incompetents who gave us this depression.
In fact let me throw this as a question:
It is widely accepted that interest rates take a year to eighteen month to make any effect. The predicted upturn is in the 2nd to 3rd quarter 2009 so the Bank of England should now be increasing rates to moderate the upturn shouldn't it?
Quite obviously the upturn will not, and is not, predicted to take place when they say it will and as they are saying it will they wish to fool us into spending as though it is a fact in the vain hope that it will happen.
Are we really the Gadarene Swine they take us for!
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No80 The spam hoarder from Grantham was a chemist.
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Please excuse me if I seem to be a liitel dim but I would like to be clear on what has gone wrong with our banking system and how the government is dealing with it.
As I understand it the problem started about a decade ago when the people who managed (or it now appears mismanaged) the running of our majopr banks and ran up debts of £700bn, by recklessly borrowing £700bn from overseas investors.
Exactly where that money went and how it was used remains unclear. Was it for example used by tens of thousands of ordinary people to buy luxury property abroad, or was it used by large businesses to buy up overseas assets at grossly over-inflated prices. Both the aforementioned helped to drain vast ammounts of money out of the country during the nice decade.
Now those overseas investors want the UK banks to repay those debts and because the banks unfortunately do not have enough capital to pay back their debts, it was necessary for the government to step in and act as guarantor. In order to preserve the UK banking system's integrity and credibility and presumably this now means that £700bn of the country's currency reserves are now at risk until these debts are paid off in full.
So on the understanding that it took 7 years to accumulate those debts then it is going to take another 7 years for the banks to pay off these debts plus the interest. Not the 3 years or so that is being quoted. To add to our woes our government now seems to be just as intent on reckless borrowing as the banks previously were and that is compounding the problem. In that case and although I have no desire to be seen as a Jeremiah a decade of austerity measures does spring easily to mind.
I for one would be in favour of a citizens or state owned bank (does anyone remember Tony Benn's Girobank) but not if it left the government with all the problems and none of the advantages of a commercial bank. This would be on the condition that ordinary account holders (who have their saleries paid directly into their accounts) as well as small depositors and small businesses would be required to use such a bank. The government would of course ensure that all users deposits were guarenteed.
If ordinary account holders, depositors and small businesses did wish to continue banking with one of the commercial banks then that would be on the understanding that the government would not guarentee their deposits. It should aslo be conditional on these banks that they must not use ordinary account holders money to bolster their profits (overnight banking abd risky deals) unless they give a good retun on the ammount kept in the account.
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Ive heard a lot of economic 'experts' say that we cant have a repeat of the 1930's depression. Mass unemployment, homelessness, starvation couldnt possibly happen again in our modern, hi-tech world.
At first I was inclined to agree, but now im not so sure. Things are getting worse day by day. Debt ridden people are losing their employment and are going to rely on a debt ridden state to house and feed them. There really is no quick fix to this problem.
I bet they thought it couldnt happen in the 30's, as they probably thought that is was a hi-tech modern world then.
Still at least this time we will have our Ipods and mobiles to keep us entertained while we queue for handouts.
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Why should we listen to anything Jim O'Neill says?
His outfit got it wrong for decades.
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As interest rates approach zero and it becomes clear that nothing will prevent the onset of a full blown depression, any return on deposits of any kind will dissappear. The temptation for HMG will be allow all savings rates to fall below zero to fund its spiralling and out of control debts.
It looks like Iceland was only the first of many. Get your trapped savings out of the nationalized banks fast and secure your home. Arm yourself. This one is going to be nasty.
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No81 Pot
Reminds us that 533,000 jobs were lost in the US in November.
I cannot wait to hear the Tory bloggers blaming Mr Brown.
They are, with one or two exceptions, rather dim.
One of our most distinguished contributers, laughatthetories, must be bursting at the sides.
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No89 Finger
Have a look at No67
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@74.
Spot on!
Any lookout see a yacht from Russia or the Middle East?
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Post 44, an excellent piece. Spot on with the exception as to how this current PM was voted in. It was a done deal with the useless mob in power.
Things can only get better, ring a bell with anyone! - A labour gingle ah 1997. What a joke now.
It is time Labour left as things will get better after they have been voted out. What a mess! You may as well sleep with the money under your mattress, you get a better return under your pillow. At least you know you it is save in your own hands as opposed to the government.
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comrades
my chickens have gone.
It must have been the fox.
can i eat the fox?
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Dear Supercalmdown
I am seriously beginning to wonder if your endless requests for a public sector wage hike are genuine, or well-directed sarcasm at the ever-lengthening queue of state handout recipients, bankers, homeowners, the car industry, the retail industry, 'small businesses, etc. etc.
In any case, to put you out of your misery (or to acknowledge your repeated sarcasm) may I point out the bleedin obvious:
1) GB created 2/3rd of 'new' employment since 1997
2) The govt. made in tax a cool 50% of all hideous banking salaries/bonuses and SPENT that on public sentor salaries. We all know now that those were undeserved taxes from salaries paid out of phantom profits.
3) ditto for all the corporation tax paid by banks and FIs
3) No one knows how to pay for FUTURE pension liabilities, let along PRESENT wage hikes
4) A majority of the allied employment in the UK in tax, accounting, retail, property-related sectors, etc. are all bubble sectors which have pad corporate and personal tax at levels HAVE disappeared.
As no. 95 says the Emperor is disappearing up his own dirty behind.
And you are repeatedly asking this 'brown' emperor for a wage hike?
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Post 89,
Sir, you are on the money. Your point address the issues which need proper explanation as the potential 1.1 billion or so of monies tied up in this awful scheme will create a huge time lag on those whom can't pay, and in some instances should not have never been given the money to buy property in this first instance. This is more wasted money which the UK can ill afford. A run on the pound? What pound there will be nothing left at this rate. The PM must think the voters are stupid. Who is fooling who?
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Just been sent this through by some Foreign Currency Brokers - seems to paint quite a rosy picture in comparison to all the gloom and doom in the article and comments. What does everyone think - realistic or just the brokers trying to get me to protect the existing rate?
We therefore believe that the picture will look like this over the next 12 months:
BOE RATE
GBP/USD
GBP/EUR
EUR/USD
1m
1.50%
1.39
1.11
1.25
3m
1.50%
1.6
1.23
1.3
6m
2.00%
1.66
1.23
1.35
12m
2.00%
1.73
1.28
1.45
As the table shows we expect a positive year in general for sterling against euro and US dollar albeit after a slump in the near term.
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One thing nobody seems to be talking about is the state of the States. They seem to be ahead of us in the crisis timeline and things are looking really desperate for them.
Not only is their domestic market dead but also the strength of the dollar must now be affecting their exports. With no sign of improvement in the US then its really irrelevant what's happening in the UK because even countries like China can't survive without the US spending (already seeing that effect).
Good luck Obama! Its a bit like the UK in that respect - if I was GB I'd call an election fast and make sure I lost, then go and live in a remote Scottish island!
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#94.supercalmdown wrote:
Nice idea to turn the trickle-down effect backwards but it doesn't work (either way).
Unfortunately your solution to increasing public sector pay cannot be afforded and wouldn't work.
It is revenue expenditure i.e. running costs of the government. This is money that has to be taken in taxes, therefore to increase public sector pay either the tax income must increase by economic growth providing more tax or the % of the economy taken in tax must increase - which depresses the purchasing power of the 66% of the economy who are not public sector employees making it a net negative on the economy - adding to pensions and the lowest paid through tax breaks is more effective (higher personal allowance for example).
At present the economy is shrinking so to even maintain current levels of public pay HMG has to borrow capital to pay revenue wages which is financially irresponsible and even Alistair is not that stup... anyway it is irresponsible.
Next year no increases can actually be afforded irrespective of what inflation actually is, though if you would like to repeat the winter of discontent feel free - the same result will occur, when the incoming Tories fire large numbers of public sector workers the general public won't care because any sympathy will have been lost due to the inconvienience caused.
As I assume you are publicly employed don't feel left out there will be considerable numbers of private sector employees facing zero increases or decreases (up to 100% in many cases). Already I know I will get no increase from my employer next year, hopefully though I will still have a job.
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Mr Peston
Excellent writing. I now understand why the Banks are not responding to the Government and I previously just did not get it. Hope someone in the cabinet reads this article because they don't seem to understand either.
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from wiki on Gordon Brown,
His father, John Ebenezer Brown, was a minister of ............
LOL, you couldnt make it up!
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"...it's been obvious for rather longer that the source of our economic woes is the savage contraction of lending by banks..."
No it's not. It's the uncontrolled expansion that preceded said contraction that's the cause of the problem.
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#67 bravesouter
Is that the best you got? Pointless semantics.
Post #44 is excellent as others have pointed out. The fact remains the nation wants an opportunity to decide in an election who they want to lead it.
So call it a vote for a party rather than the leader if that makes you feel better but either way Brun is going down.
So why don't you go and do a cryptic crossword in your guardian or something and let us get on with serious talk.
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Banks and businesses around the world have so far written off 1000 Billion US dollars worth of bad debt.
Only another 8 trillion dollars to go then and it's back to the same game we have enjoyed for the last 25 years.
What Mr Peston hasn't grasped yet (because his treasury moles haven't told him) is that all of this rearrangement of the deckchairs on the Titanic does not address the original problem which is the value of the toxic assets on the Banks' balance sheets
Unless and until these toxic items are quantified and removed then banks cannot lend any money because they need every penny they can get to cover for the liabilities of the toxic assets.
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#16 Forget Argentina II !! Let's hope we don't become Zimbabwe II !!
All this messing about by the government has driven the Sterling ever downwards.
I remember that during the Asian Currency Crisis, hospitals in Jarkata ran out of vital medicines because the pharmaceutical companies insist on being paid in hard currencies and refused to accept payment in ever depreciating Indonesian Rupiahs !! God help Britain if the same pharmaceutical companies refuse to accept ever depreciating Sterling and the NHS runs out of medicines !!
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Agree with post 44 - A fair money system is required so those on low incomes and with savings are not hammered. Interest rates are a blunt instrument at best at controlling the economy, and creating money through debt always leads to inflation which hurts poorer people the most. We seem to be heading back to the late 1970s where the taxpayer subsidised large sections of the economy at great cost. I hope all those who are interested can look at genuine money reform.
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Years ago when I lived in UK 2+2=4
My reading on this is that somehow many members of the public have willingly been led to believe that 2+2=5 (or even more...)
Now that it has been proved not to be so, Gordon Brown is still trying to convince somebody that if he just makes it a complex enough equation someone will still believe.
Who?
And why?
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Just a quick question...
What would be the economic impact of the following:
The government, instead of pouring money into banks to get them to lend to consumers, instead offers everyone in the country the opportunity to reset their unsecured credit to zero.
In return for taking up this option, each consumer would agree to have a proportion of their wages (equivalent to say 75% of their previous monthly credit payments)taken at source and placed into a savings account held with the same bank that their wages are paid into.
They would also have a cap placed on any future unsecured lending they could be given.
This would reduce the burden of debt on consumers and would give them more money in their pocket to spend each month on the high street without increasing their indebtedness.
They would also be using the money that they had previously been using to pay off interest and debt to actually provide themselves with some kind of security for the future.
The banks would clearly take a hit from the clear down of credit but if their customers had less debt pressure each month, they would be less likely to suffer defaults on mortgages and other credit facilities.
They would also still receive an income, in the form of regular savings payments, from each of these consumers every month that they could use to invest or lend to businesses.
Now, I'm certainly no economist but, looking at that proposal, it seems like a solution that would help to increase spending on the high street to stimulate the economy, would reduce the level of consumer debt, would give the banks some savings cash to work with and would help consumers prepare for a future where the government cannot afford to support an ageing population through the state pension.
Please feel free to pick gaping wholes in my proposal, I will be interested to hear them.
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The problem with taxpayers financing the economy is that in doing so, debt replaces real capital at the base of the economic pyramid. Banks would operate at infinite leverage (0% reserves that are not in some way debt) and rely on the power of taxation to finance their lending and losses. Taxation itself relies on income, employment and legitimacy of the taxing government, fragile things in this day and age.
If this precarious position represents the best prospects of the financial system for the foreseeable future, we might be better off in the long term allowing it to rebalance by letting nature take its course.
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#36 "Similarly of course there could be a "Bank of Wales" and/or a "Northern England bank".
"
There *IS* a Northern England bank called Northern Rock !! It is also a nationalised bank. Somehow it just does *NOT* do all the things that the government want other banks to do !! I wonder why ??
Is there an economy with the truth somewhere ??
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What is done to this country by ts own government is very unfair to those few who have been disciplined and prudent and ended up with savings and renting.
This country will go bankrupt eventually with loss of capable people abroad. Brown created this country heaven for bankrupt speculators and these are the people who will keep him company when the end happens.
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#96: Excellencefirst.
Those in actual "control" of the situation are about as united as those on this blog
For us it is irrelevant, we can moan on as long as we want without making any difference whatsoever.
In my opinion the WORST possible situation is the current one in which the main players in the game are all at war with one another. Many posters have pointed out the small illogicalities in the actions being taken but each one adds to the general disorganisation.
Yes there has been no genuine political debate, although most of the MPs are a ignorant of the real levers of power as the rest of us.
There are, however, influential and knowledeable people who can represent all sides of the argument, they need to get together and agree a course of action. Any one of the main players are probably capable of bringing the system down and they must co-operate to prevent this.
The general population has been able to make its "informed" decisions over the last few years, that's what got us into this mess. Most people in this country can't even be trusted to cross the road let alone contribute to the biggest decision of a generation. Public debate is always far too lead by soundbite (Save the pound, things can only get better, where's the beef, the age of change). If this blog is anything to go by we would have war breaking out between the various factions and by the time we had any constructive debate at all the economy would have sunk without trace.
Far better to have a fait accompli based on a consensus action which actually achieves something than a well informed public debate over why we all starved to death.
To use the Titanic analogy, while the ship was sinking the main purpose was saving as many people as possible, not trying to work out why it sank and who was responsible.
I am very scared about our prospects, I despise the governments - all of the them for the last 30 years who turned out banking system into a casino. I despise Gordon (No more "tory" boom and bust) Brown and Tony Blair (I'm a pretty straight kind of guy). I despise the bankers who extracted massive bonuses on the basis of dubious profits forecasts and I despise all the idiots who "consolidated all their outgoings into one easy payment" then took on more debt.
In spite of that we are all stuck with one another and if we do not find some way of working it out...........
As I write this the 5:00 news is reporting that Gordon is trying to push the banks to pass on therate rises and the Banks are saying No because they will make a loss - JOINED UP THINKING ?
I am a Systems Engineer, my job is to analyse requirements, break them down to specify component parts then manage the development of them so that when the parts come in they all fit together.
One of the biggest parts of the job is to make sure that the overall system is optimal, even if that means that some components are forced to operate in a sub-optimal manner.
Sorry for rambling on, I'm off to get a life...
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If someone with zero or negative equity in his house is given payment holiday for two years than it is discriminitarory if other person who rents - and is therefore in the same position of zero equity - is not given the same payment holiday. It is ourageous that this unfairness can happen!
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#100 BraveSouter
Well we have a Labour Stooge from Millbank in the house.
Do you have any ideas of your own? Or are you limited to irrelevent and pedantic comments about other better posts that make fine points.
Be off with you before I'm forced to get out the Glade and spray you with it.
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Labour has screwed up big time and the banks are playing for time to get the State to underwrite every last piece of dross they have citing the FSA's need for greater solvency.
Brown and Darling should insist lending to the housing market returns at to anyone with a 25% deposit straight away, and there is an accepted rising scale as the deposit shrinks. It really is that simple and no extortionate consultancy fee needed!!
No one trades property at this time of year so lets not worry. The recession only started oficially a few weeks back but everyone knows we have been in the cac since Northern Rock.
Which is why labour feel confident we will be seeing green shoots of recovery by the late spring coincidentaly when an election could be called.
Being in denial they don't realise that middel england and those who have been in pain this last year will not forget that Labour exacerbated the problems of debt here and will turf them out whenever they call for a vote on their performance.
The increase in National insurance contributions plus VAT and all the other obscene stealth taxes will be highlighted to remind the voters what Labour has led them into, and the weakness of the British peso will screw their plans to go abroard.
Prudence, no boom and bust, change!! yes change for the worse and we need to stop the spin and get real lives and clear understandings of what these fools are doing in our names.
We are not doomed but we neither have the resources or savings to pay for Labours spending madness.
There is another way and it will work biut only if Brown and Co turn honest and stop talking rhetorically.
Lets face it how will a bank ever come clean when the government is is absolute denial about the size of government debt and what it tries to keep off balance sheet.
Its not jus the electorate that will kick Labour out , overseas investors have altready voted as can be seen by their selling of the pound.
They may want to censor oposition here under the tenant of terrorism threats, yeah right on so a Conservative MP is now a terrorist in your dreams Gordon!!, but Britain may possibly forgive but it will not forget the mess that has occured over the last 11 years under Gordons financial stewardship.
Goodbye Gordon go now with Mandy and rest where we can enitehr here your madness or spin for one day more and save what little self esteem you have left.
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Robert,
I would like to suggest that you go a little further into the subject of "taxpayers"....You will find that there are net-tax-givers and net-tax-takers in the system.
My mother-in-law claims to be a tax payer....paid about £40k income tax in her working life, sent four children to university and had around £100k worth of NHS surgery...was married to a teacher who retired with a £100k pension pot in 1987...drew a stipend of £17k per year for 20 years,,,had £250k worth of NHS surgery .....last op was too much for the old fella! M-I-L still draws 8k of the teachers pension......
Apologies to the feint of heart but until we can talk openly about the voodoo economics of welfare (and banking) we are all living in denial....
I HATE paying tax but I like the police, army, schools, roads, hospitals etc that it buys....But I am a big boy and if someone tells me that I have to pay more tax / have reduced public services or work till I am eighty years old I will deal with it...
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I do not understand the constant distinction you draw between the real ecomony and "taxpayers" they are all on in the same effectivley the government controls every aspect of the lives of the residents of the country if you think otherwise ask an 18 year old boy called up to fight in 1939 and told if neccesary give his life for the country.
Any wealth that we have has only been possible because of the nation we all live in.
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#107
Update from the Captain:
"lookouts have reported a number of vessels circling the area.
So far one Dubai registered salvage vessel has picked up a life raft containing a group of first class passengers who fell overboard during the collision and refused to come back on board. The vessel remains in the area and further rescues are to be expected.
Efforts by the ships crew to rescue other passengers who fell overboard in the inital accident continue. We have tied a number of these life rafts to the stern on a long line and will worry about them later. Sandwiches and tea are being supplied to them as often as they require.
A Russian salvage vessel was in the area but according to the Chief Mechanic aluminium can't be welded to steel properly so they were unable to help.
A US vessel which was expected to arrive very quickly has been delayed until at least January due to a change of ownership and engine malfunction.
The entertainments officer regrets that 2 of the dodgem cars have broken down and is seeking interested parties to repair them. If no-one comes forward we may have to throw them into the sea"
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The UK house price bubble is really a land price bubble. It is site values that have risen much too far, not the actual cost of the bricks and mortar. The price of agricultural land has also risen way beyond a price reflecting the value of the crops that it can produce.
There is no way to prevent a substantial drop in site values nor should we try.
For decades UK interest rates had to be maintained at a level significantly above those of our competitors because of the bizarre nature of our housing market. This caused serious problems for industries which require large capital investment.
The bright side of the present crisis is that this restraint is at last removed and the aim should now be to have UK interest rates close to those in the EU and the US, to give UK industry a level playing field.
This might cause sterling instability, but this problem could be mitigated by announcing an intention to join the Eurozone in the near future.
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Robert,
You really shouldn't write blogs like this. You scare people. I think if you just calm down a bit, these sort of problems will take care of themselves.
I mean you could write about the Libor. Every day it is getting closer to the expectation of the bank of England base rate. That is good news.
So have a drink on me.
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RP: "So Goldman Sachs votes for socialist, state-directed lending."
Ermmm.. They were and investment bank, got it wrong, and are now a commercial bank with, let me see, several weeks experience?
Would we be prudent to take such advice?
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So we own two banks and have a majority shareholding in two more. We borrow money to buy two different classes of share in these banks. We borrow more money to lend to these banks so they can lend it back to us. We guarantee deposits in these banks. We guarantee these banks borrowings to each other. We borrow money to pay interest payments for people who cannot afford to pay back mortgages to these banks. We tell these banks they have to borrow money from us (!) as government bonds to improve their liquidity.
Then we have a new company to manage our 'hands off' shareholding in these four banks, a government treasury department, a state bank and a regulatory agency plus various statutory insurance schemes to regulate these banks. Then we have government ministers pressuring these banks through the media to to do completely contradictory things.
And all the people involved in these four banks and myriad government agencies are getting paid good money and bonuses to send memos to each other. And everybody pretends that they are acting in a commercial manner and protecting competition.
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#119 spledidhashbrowns
"Unless and until these toxic items are quantified and removed then banks cannot lend any money because they need every penny they can get to cover for the liabilities of the toxic debts."
It is clear this need to be done ASAP.
Are the Accountants, Auditors, FSA and CRA people working on this night and day as a matter of urgency?
When will they finish?
Will the numbers be public? Guess not!
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Thanks Mr Peston
As the uncontrolled increases in the housing market appears to be the prime reason for the present financial holocaust, why not peg house prices at their rebuild cost and allow inflation increase only [my pension works this way] The surveyors can sort this one out
If this had been applied from day 1 then the country might be a little saner
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Look, all of us who are worried or depressed must develop a new "couldnt give a monkeys" attitude.
We must be greedy, inconsiderate and not care about the future.
We must grab as much as we can, and " stuff everyone else".
We must be totally self-centred and dis-respect all others.
We must push all others aside for our own ends, including lies where necessary.
Yes...we must start thinking like bankers!
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I have a question that perhaps someone can answer. I have a new estate of houses near to me of about 40 new houses. About 10 were sold and 30 stand empty. The same is true for at least 3 other new local houses estates. What I don't understand is, why have we not heard of any building company going bust? Doesn't seem logical to me!!
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Introducing LOSERGUIDE.COM - your quick reference to shattered fortunes
Hi and welcome to LOSERGUIDE! Our goal is to bring you the freshest news on the latest losers, as close to the splat as we can get!
To help our readers we've developed a handy failure scoring system, so you can evaluate the loss in a single glance, with 10 points per criteria being the highest score possible! The criteria are as follows:
1. fatality - if the loss is, or is likely to be, permanent and irrevocable, 10 points will be awarded!
2. futility - if attempts to avert the loss were, or are likely to be, a total waste of time, 10 points will be awarded!
3. foolishness - if the loss was the result of at least one act of brazen stupidity, 10 points will be awarded!
4. incapability - if the loss was the result of at least one act of brazen incompetence, 10 points will be awarded!
5. predictability - if it was obvious to every man and his dog that the loss was likely to occur, 10 points will be awarded!
6. inactivity - if nothing was done about the pending loss, despite at least one warning in a national newspaper, 10 points will be awarded!
7. psychosis - if the loss was the result of consistent denial, obfuscation, manipulation and/or lies, 10 points will be awarded!
8. collaterialisation - if the loss results in the disenfranchisement of a substantial number of innocent bystanders, 10 points will be awarded!
9. sustainability - if the loss produces, or is likely to produce, losses for many years after the initial loss, 10 points will be awarded!
Extra points will also be awarded, at the judges' discretion, for losses that:
- damage or threaten international relations;
- undermine the rule of law and/or the compact between the government and the governed;
- cause at least one soveriegn default
Today's nominations ARE:
1. the guy who attempted to propose with the engagement ring hidden in a helium balloon (you can guess the rest)
2. the chief executive who "threw out his PC after it became infected by Koobface" (that's a SELL on RLM-NY I think)
3. the Labour party
Vote now!
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"Sound money usually indicates sound goverment, what do we have...?"
No money indicates no government!
My great grand father told my grandad who told my dad who told me - "The country will never be able to afford a Labour government"
How right he was!
I think my mattress will become a bit firmer once I take all my money out of the banks hands. Cash from now on folks, if it's worth anything!
Anybody recommend Australia as a good place to live or is it the same over there too?
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As usual, an interesting and informative blog - but . . . . everytime I read the comments after your blog, I'm bored to tears (and to be honest, infuriated) by the repetitive entrenched views of people with their own agenda.
These comments are usually not related to the blog in question - and are either 'Get rid of Brown' or 'Tories are Even Worse' . . .
Would it be a good idea to limit each person to one contribution - to try and prevent the drooling politicos from dominating the debate?
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I love the countryside, I love the Autumn, I love a log fire and dew on plant tips.
I also can not believe the amount of space we have on this 'small isle' as I fly high above the clouds. The green belt put in place to protect the blue belts.
Urban sprawl or aristocratic plunder?
So many view the iconic concrete to allow so few to appreciate their nature. Is it not time to ring the bell on those that 'protect' natural habitat by forcing the establishment to allow all to appreciate their personal panacea?
A state bank, a state housing regime, a dead monarchy .and all equal in the
eyes of the Earth
Reclaim the Earth, for the people, not for our future king and his personal garden.
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We are now entering what maybe described in the future as The Silly Season. Governments around the world have thrown money at the financial system to save our existing economic system. It hasn't worked.
The financial system still does not work. yet we still look at ways of propping up a failed system. We still look to the USA for clues about how to re-invigorate the world economy. We still talk in terms of a global economy - the very system that was so out of kilter that it forced our present situation.
So we run around like headless chickens getting nowhere fast.
We should now be laying the plans to protect ourselves as far as possible from the cruel winds of economic decline that are going to grow stronger about us. For me that will be a protectionist policy with our EU partners.
Within the EU we have a big enough population, we have the majority of our economic needs within our borders, plus united we present a viable entity for the rest of the world.
Sure, it will not be easy to arrange. But, as single economies we will wither and die in the maelstrom that will soon overtake us all.
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RE my post no 24 fro 12.15 today
Its been in moderation since posting??
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RE my post no 24 from 12.15 today
Its been in moderation since posting??
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Make hay while the sun shines. We're in denial that our safe european homes and lifestyles are about to change. Sometimes the big freeze can not be avoided.
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I wrote this back on 28th October
215. At 7:15pm on 28 Oct 2008, wakeupbritain wrote:
#200
You are at the heart of the problem! The pyramid has finally collapsed. The money that is being paid in now is not to solve the current problem, it's to repay the original debt (those at the top of the pyramid - the elite). Don't expect the bail out to solve the current problem, it wont.... and (UK taxpayer and pension holder) don't be falsely lured into further debt and thus transfer more assets to the elite! Gordy has tranferred enough!
So.... looking forward, what do we do about the provision of housing which started this crisis?
Here's an idea...
How about we create a "not for profit banking system", built on sound principals, highly regulated and in the ownership of all of the citizens of the UK, not the elite! Somewhere where we can safely save and borrow to fund the longer term things in life, like buying houses when we are young and providing for retirement when we are old. A mutual deal, we help each other out. WOW this sounds good!
And! ... it could fund business too!....
It's time to rethink, this system ain't working!
END
The bail out isn't working, the machine is broke. All the measures that are being taken at the moment will at best just stave off the inevitable collapse of our fractional reserve banking system. The real economy is now collapsing. It's pitiful to watch 3 CEO's on Bloomberg News pleading with the USA Congress to save the car icons of America. We have the same issue but thankfully less public.
Whats more China wont less us devalue the debt we owe them, they will devalue the Yuan first. A devaluation race to the bottom is on the way!
If you believe in the free market system (capitalism) then you should let the collapse happen and the market will sort it out (lots of people will loose everthing though). If however you don't believe in the free market ,or can't live with the consequences, then you have to change the system.
We don't have long, most companies have redundancy notices ready to issue but are holding them off until after you've digested your Christmas turkey.
I welcome more debate on alternative banking systems, in the new year of course, when all the sparklers have fizzled out.
Seriously, Happy Christmas and New Year to everyone in Britain.
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The tenor of today's posts is about home ownership mortgages. Just suppose the pressure on buying shifted to renting how would the banks react then? GB & AD cannot countenance that for political reasons.
One poster suggested the time line be extended past the next election. How about an MP proposing extension of the date beyond 2010? Ought to flush out the underlying truth of the proposals. Will it kill Cameron's fox?
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No118. I would of thought that correcting factual errors was in everyones interest. You appear to disagree.
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Investment banks/bankers suggesting something, without hidden agenda for their own interests, genuinely beneficial to society and the world? LOLLL. There is more chance of a world destroying meteror hitting earth in 2009.
It might have been more convincing if the investment bank/bankers had used their multi-multi-billion (at least $100+ billion in the last few years?) bonuses to rescure themselves instead of carpetbegging (by turning into banks overnight) of $10's billions of giveaways.
No, at best, it is damage limitation and trying not to kill the goose which lay the golden eggs so it can be harvested again and again.
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#141
Check out Contact Journal
http://www.contractjournal.com/Articles/2008/08/06/60695/2500-firms-could-go-bust-by-end-of-year.html
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Comment 127 : iwanttoscream
"In my opinion the WORST possible situation is the current one in which the main players in the game are all at war with one another ... Yes there has been no genuine political debate ... There are, however, influential and knowledeable people who can represent all sides of the argument, they need to get together and agree a course of action.
It's not currently possible to debate the "argument" as you call it. Because the concept of justification of a position by ideological belief has been eliminated from the political world. What has happened, particularly in thinkers of the left, is that the commitment that change should be achieved by popular acclamation has been replaced by a strategy of achieving it through the back-door, by stealth, at any cost. The discussion of ideology leaves too much to chance.
The sooner there's a general realisation that this is all that's "new" about "New" Labour, the sooner we can start the real debate about what sort of society we hope to construct.
"The general population has been able to make its "informed" decisions over the last few years, that's what got us into this mess. Most people in this country can't even be trusted to cross the road let alone contribute to the biggest decision of a generation. Public debate is always far too lead by soundbite (Save the pound, things can only get better, where's the beef, the age of change)."
We suffer from polarisation bias, in which it's deemed superior to be a believer than to be a sceptic. So it's better to believe something that's wrong, than it is to maintain that neither the concept, nor its antithesis, has established a case for preferment.
Is it any wonder that Mr Average draws his opinions from the tabloids, or that he elects his leadership from the ranks of the tunnel-visioned?
"To use the Titanic analogy, while the ship was sinking the main purpose was saving as many people as possible, not trying to work out why it sank and who was responsible."
To those actually on the ship, and their close relatives, yes. But for the rest of the world, the constructive action to be prompted by the Titanic disaster was the re-recognition of hubris as a human failing, the awareness of which needs constantly to be uppermost in our minds.
No ship is unsinkable, icebergs sink ships however much you say they don't, providing insufficient life-saving equipment will, one day, cost lives unnecessarily.
[Boasting of having abolished boom and bust makes the next bust that much bigger?]
"As I write this the 5:00 news is reporting that Gordon is trying to push the banks to pass on the rate rises and the Banks are saying No because they will make a loss - JOINED UP THINKING ?"
Yes, but what Brown's purposely failing to make clear is that the future health of an independent banking sector is not something that's uppermost in his mind. In fact, very much the opposite. He's trying to build a socio-economic structure in which independence from the state is impossible.
That's why Greenspan's financial illiteracy became so much the vogue in socialist circles - not because it heralded a new opportunity for economic expansion, but because it took away the essential controls, built by wise men into the markets, to save them from being overtaken by over-exuberance, irrationalism and good old hubris.
Why bother to go through the rigmarole of establishing guilt, when the accused can be "persuaded" to hang himself?
The banks are being made to look bad, because Brown isn't prepared to allow their defence into the debate. Rehabilitating themselves is "selfish" if it's not done in accordance with the government's wishes. Doing what the government wants is a suicide note.
Catch 22?
Brown's more dangerous than Hitler. Ignore this at your peril.
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Got it Al!
LET'S COERCE PEOPLE TO BUY JAGUARS, 4-BED HOMES, JOHN LEWIS SWEATERS, GUCCI BAGS, FITTED KITCHENS, FRENCH NUCLEAR, RUSSIAN GAS, AMERICAN SOFTWARE, STERLING DEBT, CHEAPER OIL AND JAMIE OLIVER DINNERS....
Nice One Gord!
WE COULD EVEN SUBSIDISE IT....
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No129 I have never been anywhere near Millbank. However, I did spend a little time at Central Office. It is many years since I read the Guardian, what I remember is that, for me, it was far superior than most other newspapers.
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The continued decline of the pound against major currencies show there is no confidence in the current bail out conditions.....there can be no confidence while the main protagonists are still in power.
We have all called for the heads of the major banks on a stick for their part in the Fiscal Fiasco we now need to have an election, lets see if the General Public have faith he is the right man for the job as he self proclaims....
Gordon put your money where your mouth is and give us a chance to have a say in this mess before we get to the point Africa are sending us aid.
Next May would be the time get your spin doctors on the job and lets have a sort out who the tax payer wants to lead us through this debacle.
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Brown's more dangerous than Hitler. Ignore this at your peril.
How easy it is to mix up the puppeteers with the tangled strings of lip service
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The world is my expense
The cost of my desire
(Easy Credit) blessed me with its future
And I protect it with fire
So raise your fists
And march around
Don't dare take what you need
I'll jail and bury those committed
And smother the rest in greed
Crawl with me into tomorrow
Or I'll drag you to your grave
(Rampant Comsumerism) I'm deep inside your children
They'll betray you in my name
Sleep now in the fire
The (Global Financial Bailout) lie is my expense
The scope of my desire
The Party blessed me with its future Child Tax Credits
And I protect it with fire
Sleep now in the fire
For it's the end of Capitaliam
It's (Libor) caged and frozen still
There is no other pill to take
So swallow the one
That made you ill
Borrow more now for more things you do not need
Just charge it to you children, to pay for it they'll bleed
In the sweat shops the new slaves are learning
As they work their fingers to the bone
To satisfy your consumer yearning
On just a dollar a day they try to feed their children
Will you still sleep as the world is burning ?
Enslaved to the Bankers the politicians cant hide their lying
While you watch the news on your new plasma TV screen
In the barren fields a child lies dying
The cost of your desire
So sleep now in the fire
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Buffet is still right. This recession will end when asset prices fall and wages rise back in to equilbrium.
The UK problem is asset prices and wage levels became extremely unbalanced, in large part due to the government of the day's desire to be re-elected.
Many argue that public spending is too high. And yes it was for the 10 years that house price infaltion of 15-25% pa was being supported by wage inflation of just 3-4% pa.
Think of the trillions wasted on non-productive extreme house prices. More than enough to have the best health care, transport links and education in the world. Then consider what our manufacturers could have done with that available investment.
What is really depressing is the tories and labour haven't learnt from this. There is a chance to create a vision that can pull us through. It just needs legislating to impose a maximum of 3x income for mortgages then let the economy get on with it.
Yes banks will fail. But it will be the ones who relied on fickle foreign capital to keep going. So they should. There are plenty of stable and well managed banks and buinesses that will welcome the chance to expand.
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No155 You are clearly one one of the most articulate, and informed contributors from a right leaning perspective. It is a pity that you spoilt your contribution with your childish reference to Brown and Hitler. I am interested in your comment about a debate concerning the type of society you would like to see in the future. I look forward to you elaborating on the issue.
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#123 gerry_francis'_mullet
well well well,
i've read 100's nay 1000's of posts here since this money thing kicked off. Only you brother, hit the nail on the head. Broadly, you have written exactly what is going to happen.
they will want security though.
think ID card
think small ID card
think #7
Think on
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I don't profess to understand the mechanics of how stock market prices are set, but how is it that the news that half a million Americans lost their jobs last month pushes the Dow up 3 percent? Or rather, what is the offsetting good news ( Oil at 40 dollars a barrel maybe?) that just brushes that catastrophic economic news aside?
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#155
yes
#159
yes, but, hitler was no more dangerous than you or I. Its the company one keeps that is the issue
brown's not a puppet he's a muppet
#160
such a sad sad song, i have children, i weep
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164
Its like gold panning, they will search out value albeit short term and wait for the muppets to come on in before selling again.
Dont look at the markets for what is happening now as they are the same as disciples looking for an apparition.
Capital is spent, the Helium of false laughter has come to an end and we are left with a false social fund for the rich called basil out
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Comment 155 : ExcellenceFirst
"Brown's more dangerous than Hitler. Ignore this at your peril."
Comment 159 : PetersKitchen
"How easy it is to mix up the puppeteers with the tangled strings of lip service"
I'm sorry, but I stand by my original statement. Hitler was never going to win, in the long run, because he left himself open to attack in vulnerable areas. He was no genius.
Brown, on the other hand, is cleverer than that. He's the supreme fifth columnist, who's used his genius, and his rejection of honesty, to reach the pinnacle of power, in a democracy, without displaying his hand. A hand that is made up of the very antithesis of what the vast majority of the UK people want.
Some of his party are fellow-travellers, some are pups. But unless they are exposed for what they are, there's no stopping the imposition upon us of the sort of top-down controlled society that would leave any libertarian wondering whether it would have been better not to have been born.
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State run bank? It was obvious a couple of months ago that would probably be required.
It's even more obvious that running our economy on credit simply allows banks to hold the entire country to ransom. I mean... DUH...
What I don't get is that none of you lot stop for a second and ask yourself "what IS money?".
This brings in a bunch of supplementary questions about money:
How does it behave? What kind of society does it's behaviour create? If I change the nature of money how would that affect the nature of our society? How should money behave?
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Comment 155: Excellencefirst
You seem to see everything in Black and white
"So it's better to believe something that's wrong, than it is to maintain that neither the concept, nor its antithesis, has established a case for preferment."
My contention is that there is a continuum of possibilities between nationalisation of everything to total laissez faire. Somewhere in this is a solution which offers the minimum harm to our society (in terms of short term recovery, unemployment, taxes, long terms sustainability-or however you define it).
It is the DUTY of all those who can have an effect to find that solution. Certainly to have a chance of success any solution must have more people trying to make it work than to work against it.
Some solutions will fail whatever is done and some solutions will fail if enough people undermine them.
I happen to believe that the course the current government is pursuing is one of those solutions which is doomed to fail. Even if it were the right thing to do (and I have no real idea whether it is correct) it cannot succeed if the banks are not playing the same game.
On the other hand if all the bankers were to go to the government with a plan which they all agreed to and which would allow the economy to be rescued then they ought to be able to persuade the goverment. This has to be done in secret, the government can't be seen to be lose face in public or else the great unwashed will finally realise how little say they have in running the country.
"that the commitment that change should be achieved by popular acclamation has been replaced by a strategy of achieving it through the back-door, by stealth, at any cost."
Popular acclamation ? Why don't we have a 3 week competition 'I'm an economist get me out of here'. The winner gets to decide the course of history
"We suffer from polarisation bias, in which it's deemed superior to be a believer than to be a sceptic."
I am sceptical of everything but in the end you have to stop sniping from the sidelines and try to make things work. When the evidence is overwhelming you have to change your opinion. If they all carry on as they are we are doomed.
There are certain FACTS we cannot change including that Gordon Brown is Prime minister. Until someone does something about that every solution has to take him into account.
Finally, back to the Titanic. At the moment we are ALL on the ship. Only if you have made your pile and gone somewhere very isolated are you immune from this problem.
If we are ever rescued then I will be the first to be baying for blood - until then we have to work with people we might hate because when the ship sinks it takes all of us with it.
If tomorrow never comes ........ that will be Gordon's fault as well.
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@citygambler
Pretty obvious really.
Cheaper labour, cheaper energy; more widgets per dollar.
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In the last few years banks have only been making 25% of their profits from normal retail banking, therfore I do not believe the modest fall in UK property values has brought our banks to the point of collapse.
I think the collapse has been due to banks gambling on almost every new financial instrument they could dream up.
The directors seemed to be oblivious to the huge risks they where running or thought it was only a one way bet.
The catalyst for the collapse was a fall in US property brought about by the huge rise in oil and food prices last year.
It now seems that these commodity prices where pushed artficially high due to banks speculating.
Prices of oil and grains are now less than half their peak, I suspect because western banks cannot now speculate.
The underlying demand has not changed.
Unlike property which has a tangible value this speculating on a vast scale had nothing tangible to support it.
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No. 37...agree absolutely...next step the printing press.
Has to be. There is no other logical solution than the confetti-fication of cash
I suspected many times in recent years that things were going to blow-up in our faces.....my wife calls me a catastrophist...but this is surreal...
Used to wonder what it must have felt like to be one of the last Easter Islanders to be toiling in a statue factory...chopping down the last few twigs on the instructions of the high priests (Read Jared Diamond's COLLAPSE) ......
This is only a financial collapse...no one's going to lose their life.....but boy do we need to learn some lessons......else my friends... the coming generations of westerners will suffer a hundred years of decline.
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This comment was removed because the moderators found it broke the House Rules.
well we are almost at the end of the road, the incompetents known as the UK government have tried throwing money at the problem and it hasnt worked. has lower interest rates ever worked, you had low interest rates in US and look at the trouble they are in! so you get to 0% and still it hasnt worked (see japan) so what is the next move? i know... GB/AD have a cunning plan lets move interest rates to negative so you actually pay the bank if you wish to save! that way nobody saves so we spend instead...yes exactly what GB wants eureka.....
Can someone tell me who actually does benefit from a lower interest rate apart from a few on variable rate, the vast majority of people are on fixed mortgages or the bank doesnt lower the rate anyway, millions of savers are punished....who wins really?
GB is always banging on about fairness for hard working families (he cant say families without the adjective), well what is fair about the taxpayer subsidising someones mortgage when they cant afford to pay and yet not doing the same for renters?
(by the way why has no BBC journalist pointed out the fact that GB lied in his statement as he said we have eight lenders already signed up to the scheme.... not true!)
GB's sole aim is to try to get house prices rising again...is he the only person left in the UK to realise this is not going to happen!
The only good thing about the whole affair will be seeing GB and his rotten government finally having to admit they got it wrong when they ask the IMF to come to our aid....... then again he will be still saying it is all due to the global downturn but luckily the UK is better equipped to handle the crisis than other countries due to our low debts.......hahahahahaha!
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167.........I'm sorry, but I stand by my original statement. Hitler was never going to win, in the long run, because he left himself open to attack in vulnerable areas. He was no genius.
If you understand the law of the dessert you will see that he was the Saddam, the Mugabe and Putin of his time.
Left to do the dirty work and only confronted when their wicked deeds were done.
If we hailed genius, Bush would be confined to eating Big Macs, Saddam would be a renowned architect, Mugabe would be a teacher and Putin a spy.
Each of them were and have been manipulated to be the fall guys. They are not geniuses, they are the puppets.
Its easy to hate individuals but these are all state supported murderers and you can not name Brown in the same context.
Brown like Blair have their orders. One carried them out and one needs to snap the strings or go down in infamy.
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My first thought...
If the chairman of GS says a publicly funded bank is the only solution:
This is the same as my wife saying she needs a break for 3 days to 'consolidate' her thoughts about our marriage, 'it will make ius stronger'
She returns with a big smile, a twinkle in her eye and a nasty STD requiring 6 weeks of antibiotics.
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#172 fridgelad
"This is only a financial collapse...no one's going to lose their life"
HAS THE COLD GOT TO YOUR HEAD
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Until debt inflated house prices are back to a "prudent" level the recovery will not be able to begin.
So we either let the market decide and bring on a collapse in weeks ..........a short sharp shock
or we apply sticking plasters in the form of non-stop Gov't initiatives which will be llike death by a thousand slashes.
What a choice!
If Ken Clarke had ran the Exchequer for the last 11 years it is certain that we wouldn't have to face the above choice.
Labour has bankrupted this country yet again!
Once Crash Gordon is removed I wonder how many decades it will be before Labour every get the chance to bankrupt us again?
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Banks have wormed and squirmed about passing on interest rate cuts and maintaining responsible lending.
Their actions are destabilising the economy and eventually the whole social order.
The option in the national interest is very clear, they must be nationalised.
The Bank of England has never in its 315 year history, even in wartime, set rates below 2%. And it does not need to do so now.
The Bank of England must exercise the nuclear option of nationalising the banks, if the banks do not behave responsibly now and maintain the economy.
Chelyabinsk
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Party Political Broadcast on behalf of people that do not want to elect a party who that can choose (with establishment input) a so called leader of the nation. A broadcast that would like the monarchy in monochrome and the chance for all to elect an individual and a team to represent the people for the people to rule and embraced and if and when spent be cast a yonder for a new franchisee.
If only?
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Re: 173 why did the mod get offended?
I only asked for more money referee
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137,
Yep, thats about the size of it mate!
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Much has been written advocating nationalisation of the banks as a solution to the lending problem. Several questions:
# who are the Banks - the Big 4 or 5? or all lending institutions? publically quoted and mutual? UK and foreign?
# who will pay for all the buyout? is this the govt eager for a FTSE collapse to undermine values or the creation of even more debt?
# all the focus is on lending but what would be the State Bank ( assume only one as how could there be proper competition) policy on savings rates - the current NS&I evidence shows a poor return can be expected.
# what evidence is there that ordinary joes will be willing to put their money with the State Bank?
# will the State Bank lending policy purely be to return to 2007 levels as Calamity Brown wants cos that will bring more taxpayer losses and more decline.
Ultimately we are sleepwalking into Labour politicians desperate to save themselves seeing State control as the only way out. If we think current prospects are grim, prepare for catastrophe if Calamity takes ultimate control.
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Comment 162 : braveSouter
Thanks for the compliment.
I don't consider myself to be right-thinking. I'm a libertarian who fervently believes that although humans will always get things wrong, they are capable of doing a hell of a lot better than they do now, if they are courageous enough to give full range to the one thing that separates them from all other life-forms - their intellect.
Maybe the Brown/Hitler comparison was a tad on the rhetorical side, but I stand by it. Note that I used the word "dangerous", not "wicked" or "evil". I have no doubt that Mr Brown's approach to governing this country is well-intentioned, but we are still in great danger because he is both a genius and a bit megalomaniacal - he cannot admit the possibility of being wrong, and he sees anyone who doubts him as an enemy.
Society? 5 Top Tips:-
1. Make the pursuit of self-interest only an acceptable social ethic if it is enlightened.
2. Enhance education to give many more people the confidence to be uncertain.
3. Create a social expectation that adults inform themselves adequately to engage purposefully in political decision-making.
4. Inspire people to accept reciprocity as default behaviour.
5. Never stop trying to improve.
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164 citygambler
Jobless rise = profit maintained due to downsizing. Classic move. It is as crude as the Aztecs, a bit of boodshed to apease the gods.
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#174
Businesses benefit from lower interest rates. Business overdrafts are linked too base rates at an agreed rate above base rate.
A business with a £500,000 overdraft facility will save up to £17500per annum in interest charges with the 3.5% fall in base rate in recent months.
This could very well keep someone in a job this is why interest rate falls are neccesary in a reccesion.
Having read some of the contributions on here I am amazed at the lack of knowledge on how an economy functions.
A bank can only pay interest to depositers if another person or business is willing to borrow that money, there is no rule that savings must attract interest.
Our system depends on risk takers to support the cautious.
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There is a way to get the banks lending more.
Tell them that each year they equal 2007 lending levels they can keep 100% of their profits tax free.
If they fail to do this then they must forfeit 100% of their profits including ALL bonuses to the Gov't/taxpayer and start again.
It's called justice.
That will focus the bankers minds..........the people who helped get us into this position aided and abbetted by Crash G.
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174. At 10:00pm on 05 Dec 2008, jolo13 wrote
Q:Can someone tell me who actually does benefit from a lower interest rate apart .....?
A: Companies and businesses who have borrowings benefit from this. It makes it cheaper to run the business and invest.
Development
Q:GB is always banging on about fairness for hard working families..well what is fair about the taxpayer subsidising someones mortgage when they cant afford to pay and yet not doing the same for renters?
A: You seem to have missed the whole announcement - the proposal is to defer the repayments and add them to the loan so they will pay in the end (and more since interest compounds whilst repayments are defferred). The government underwrites the deffered interest in case within 2 years they still can't afford to restart payments and the house is repossessed.
This is intended to stop people affected in the current recession becoming homeless during a time when it will be tough getting a new job. When repossessed the local council will have to find them somewhere to live - usually at largely taxpayers expense so this proposal actually saves taxpayer money in the short term.
So it is not a subsidy, it is a guarantee.
For renters in the same circumstances it's called housing benefit and it already exists.
Only exception being you don't have to pay it back - nice. This is a subsidy.
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Brown's more dangerous than Hitler. Ignore this at your peril.
I wish I could do italics, the real question should be is Brown intelligent
testing??v
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Robert,
The tax receipts from the financial services industry must have been an obvious golden hen for the Treasury. They must have known from the ever increasing receipts that there were ever increasing transactions, transactions that were dangerously exceeding the capital that this industry created in the markets they managed.
It all comes down to Governments must have known that the terms of fiscal trade in the city were not sustainable.
The whole thing was awaiting a small crack to break appart, and amazingly they got a great big chasm in the sub-prime collapse in the states.
Now everyone is concerned with how to get this shonky system back up again operating as it was and they believe tax payers debt will enable them to plaster over the cracks.
I do not believe it will happen in my life time (and I am 44). The government is never going to get the same level of tax income from the Financial Services Industry again.
Since it represents a great portion of the British economy, we have the clear situation where a massive debt burden is being placed on an economy that has contracted and is still continuing to contract, that will never again raise the funds to pay off this debt because of reduced market activity.
Deflation of this debt is the only conclusion that can be made. Eventually when the economy has deflated this away the accounts may begin to balance again.
The problem is, this appears a long way away, and more importantly there is great pain between where the U.K (and other World economies) is now, and our final destination.
Massive inflation to allow the banks assets to outstrip their liabilities. Massive inflation to increase workers earnings whilst pressure on housing will bring the biggest proportion of corporate debt to a more reasoned ratio.
A likely scenario would be average wages in 5 years to be in the 50K mark and average house price to be about 175K.
A near 100% increase in earnings and associated tax receipts, yet asset values remaining stagnant.
And as for the Jim O'Neill's and Gordon Brown's of this World, well they need stripping in the streets, publicly flogged, and stripped of all their assets. They are not worthy of the luxury and status they were afforded.
The CEO's of the U.S automakers have demonstrated that they are not the men to be given tax payers money. They didn't look after their own by trading responsibily, so why would the tax payer expect them to look after thiers.
As a final point I note, throughout history revolutions have occurred for less than has been inflicted by this level of the executive upon the consumption class. How much abuse of natural justice is society to indure before it reacts?
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POST 189
A DEVIANT more like.
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#187
Another way would possibly be not to make the banks pay 12% interest on money they have borrowed from the BoE and then cutting the baserate 2.5% reducing the interest they get back from the lending (4-5% on a mortgage.
The banks may then instead of hoarding as much cash as possible to enable them to pay off these loans and shares could actually lend the cash out.
It's why you can still get savings rates above mortgage rates - they are desperate to pay these loans off as quickly as possible.
The punitive rate may make GB feel some revenge has been exacted but it is ensuring credit remains tighter than it might be.
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Re BUSINESS OVERDRAFTS
I did a phone round this week to see what
our retail customers were paying the banks;
facilities ranged between 75K to 860K
rates varied between 2% to 8% over base
with MLR of 4.5%.
So minimum is 6.5% max 12.5%
BASE RATE CHANGE MADE NO CHANGE.
GOT IT GORDY? NO CHANGE!!
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re 170 and 185
I understand that 'cost cutting' invariably simply means getting rid of staff, but its sickening how 'The Markets' signify their approval in such a callous, inhumane manner
Stalin was right when he said that one death is a tragedy but one million deaths is a statistic..Behind every one of the redundancies, foreclosures/repossessions and bankruptcies is a real human experience but it all just gets stuck together into numbers on a spreadsheet that makes nice graphs to show 'trends' that analysts can turn into buy or sell recommendations.. No wonder this has filtered down into the every man for himself mentality that dominates all of society at every level, here and in the US..
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"state-owned, state-funded bank", - mmm
"create a state bank that will provide the vital credit that our commercial banks cannot provide" -mmm
sound like someone needs to remind themselves of Tokyo's Shinginko
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Good blog, as usual - especially the bit about government policy making banks want to shrink their balance sheets. Pity nobody in government seems to understand this!
Just one point though - I'm not sure that falling house prices will be having a major impact on the amount of capital banks have to hold (not yet anyway). Under Basel II, the level of capital banks have to hold is based on what they will need in a downturn. So banks should have factored various macroeconomic assumptions into their capital calculations, including a pretty hefty fall in house prices. Of course, if house prices end up falling by more than the banks assumed...
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The current financial system seems to have proven itself to be so utterly dysfunctional and on such a huge scale, that to keep throwing (international) telephone number amounts of money at it, would be to throw what little good money we have after bad.
Step back Mr Peston... is it not that the tower, having been built using shoddy materials by cowboy workmen is destined to collapse and that the best we can do is save whatever we have left to start afresh when the dust has cleared.
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#186/188
you miss the point... with lower interest rates there are more losers than winners.....thats why it is self defeating and does not work as for saving jobs tell that to the half a million that lost their jobs in November in the US, it just doesnt work, it never has worked and never will work .....and once again you get to zero% then what?
you are correct in saying the the GB plan to help homeowners is just a deferment....cynically pushing the problem down the road until after the next election...
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#188 +#192 Whistling_Neil
Whistling neil kinnock is it, yes i remember your financial skills and i'm sure you know how easy it is to claim all of those "benifits"
when you are at your wits end .Go back to europe.
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Are bloggers experts? Don't do anything for free. Cut it out now.
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The banks have been saved from collapsing - only the most extreme free marketeer or loony lefty should oppose this, after all most people and busineses have money in the banks and wouldn't want to lose it. The blog highlights the point about what else could be done, over and above saving the banks and that it a tough, tough question. Taxpayer funds have to be protected as far as possible and the schemes in place do this.
Savers doth protest too much - the real issue is not what the interest rate is per se, but what the interest rate is relative to the inflation rate. If as seem likely inflation drops to zero or even less, then any postive interest rate is good - certainly better than 30 years ago when interest rates were up at 15% but inflation was over 20%. If you want to feel sorry for someone think about those about to purchase an annuity - they really will suffer
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The City Boys will have to change their routine
09:00-12:30 Busy doing nothing
12:30-15:00 Drunk for lunch
15:00-18:00 Talking financial bollo
Senior Management are probably with their girlfriends of down the strip club
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"How much will taxpayers finance economy?"
Well by borrowing less to finance the UK's imperial ambitions, a little less now.
Aircraft carriers delayed by Ministry of Defence budget crisis
"A review of major defence projects will next week confirm that the MoD does not have enough money to meet its planned timetable for buying new ships, warplanes and armoured vehicles.
Instead of cutting any projects outright, John Hutton, the Defence Secretary, has decided to delay several of them instead.
The biggest to be affected will be the £3.9 billion purchase of two new aircraft carriers.
The vessels had been due to enter service in 2014 and 2016. But one of the new ships will now be delayed by at least a year and possibly two.
The delay will raise fears for jobs in the defence industry."
Also our troops may be home from Iraq in time for Xmas.
To me this sounds like a classic Government leak designed to provide a face saving excuse for getting out of this illegal war ASAP.
It's all very well for the UK to want to "play with the big boys", but maybe NuLab have finally learned that borrowing the money to do it is impossible for a wee European island.
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Robert:
i don't how much the taxpayers will ended paying for this mess...but, there should have been a "lock-box" on the amount of money given to these parties...
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#202, 9am start? you must have us confused with some of the harder working public sector workers!!!
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#194, intriguing that Stalin should be quoted in an attack on Markets... of course the statistic he was talking about was the number of people executed and starved to death to bring about a socialist paradise. Whilst repossession isn't nice I don't think it is quite in the same league.
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#186, no, "businesses" don't benefit from lower interest rates. Companies reliant on short-term debt benefit. What you have is less saving and more short-term expenditure because at todays base rates you are making a negative 2.5% real return on cash.
Companies dependent on longer term financing will find the cost of credit more dependent on liquidity and credit risk than base rates.
The access to credit is vital for Brown's UK because there is no real growth. It is all a mirage based on a debt-fuelled asset bubble in property underwriting a massive expansion in public sector spending. Without that mirage the lie that is Brown's economic miracle is clear for anyone to see.
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#105, happy to do a deal.
Crash Gordon stands up and says all the economic growth of the last 11 years has absolutely nothing to do with him. That he was simply a recipient of undeserved praise and he could be replaced by a shaved chimp because nothing he does has any effect. That he has been lying repeatedly for the last 11 years when he claimed that he was making a difference. That him and the Treasury are all wildly overpaid wasters because they have no impact.
In return all us "dim" people will then say that the crash is not his fault. Holding my breath......
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The bank's dilemma is this
If the government gave you £600 billion to pay off loans, liabilities etc, they are not giving you that money, they are giving it to some one else, you still haven't got anything except a loan and more regulations.
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"Too Big to Fail"
under the guidelines of "Survival of the Fittest", who's to say that in a shrinking world the Smallest are not the fittest
The time for change is here - the world spins around and time marches ever onwards
The £600bn should be returned to government and put to work in creating industries, infrastructure, technology and jobs for our future
To use it to in an attempt to re-create an unsustainable bubble borders on criminality
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#66 "Let's have a non-profit making taxpayers mortgage bank."
Great idea except for one thing !!
No profits = No tax !!
Which Labour (New or otherwise) government, will allow such a large cash cow to go untaxed ??
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#69 Come the revolution, comrade thepowerison, the first to the wall will be the "civil servants" who are neither "civil" nor are they "servile" !!
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Altogether now and
Swing to the left
Socialism is
Free
University education, health care
Cheap
Kinds of housing, food, clothing etc
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There is illogic somewhere:
1. Personal borrowing was unsustainable. 2. Government (i.e., people's collective) borrowing is greater than ever.
3. Wholesale credit markets have dried up.
So, as both personal and government borrowing soars, in Joe Public's name, a new bank should be created by 'smoke and mirrors' to lend to poor risks?
Alice, where's the White Rabbit?
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#123 "The government, instead of pouring money into banks to get them to lend to consumers, instead offers everyone in the country the opportunity to reset their unsecured credit to zero."
When the unsecured credit is reset to zero, the unsecured creditors will be hit hard. They will then take that out on the secured creditors, i.e. mortgages, loans to small businesses, etc. and repossess like crazy to try and recover their capital ratio !!
Lots of people will be made homeless (mortgages) or jobless (loans to businesses) and this will have a massive knock-on effect on other businesses and mortgages !!
Any surviving bank will insist on 100% security for their loans/mortgages !! Credit cards will disappear completely overnight and only debit cards will be issued on bank accounts that do not have *ANY overdraft facilities !!
Any cash in notes that you have become valueless since they are merely promises by a government that cannot keep its promises. The coins will have some value as scrap metal !! Government gilts(borrowings) become equally valueless for the same reason and, with no means of getting more money,the government will not be able to pay any dole or support any one !!
Bartering and anarchy will reign !!
Therefore, at a stroke, you will have created the biggest disaster since Atlantis sank beneath the waves !!
I hope this is a sufficiently large hole driven through your reasoning !! If not, there are still others !!
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To reiterate something I posted in a previous blog -
Oh, what a tangled web we weave,
when first we practice to deceive !!
Do I get the feeling that the Rt. Hon G. Brown esq. is seriously regretting not heeding this tiny bit of wisdom ??
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It's astonishing how the failure of America's financial system where the Federal Reserve helped them out is now being reflected in the creation (inevitable?) of a state bank in the UK against a previously stable and successful system. America sneezes and we all catch cold, but how far does devotion to the US extend? Will Barack Obama care enough to help the UK? Where is Tony Blair now?
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Robert
You focus too much on the elaboration of HOW economic problems are unfolding in the minutest detail.
To give a clear and integrate picture of any economic issues, a holistic approach and a wide range of perspectices including political, socio-cultural, global, and local forces are esential.
Has it ever ocurred to you that it is more important to inform readers and audiences WHY things are going in certain ways than committing yourself to a popular descriptive story-teller?
David Harvey's A Brief Histroy of Neoliberalism may provide some insight into the importance of analysing economic problems.
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#215 ishkander
I obviously see that the unsecured creditors will be hit hard but...
In this age of almost daily government intervention into the banking system in the forms of handouts of taxpayers money, could the government not use some of this £600bn+ to cover some of the writedowns from the banks balance sheets.
Also, remember it would be an option for those that were prepared to sacrifce their future credit worthiness for a clean start, so not everyone would have their credit reset. Those that felt comfortable managing their credit would simply carry on as we are now.
Coming back to the whole government intervention thing again. It surely wouldn't take to big a leap in government intervention to suggest that the government could impose rules in the banking system to protect those with existing secured credit from any kind of fallout in terms of repossession etc.
The whole point of my suggestion is that the government needs to actually start helping consumers rather than propping up banks. Taxpayers money should be used to assist taxpayers, not the irresponsible fools that have been creaming off bonuses on the back of bad lending for the past 10 years.
The banks need to be far more prudent with lending. The idea of an economy without credit cards and/or overdrafts is something that actually appeals to me. For too long, the consumer boom has been based on ever increasing liabilities to these 2 forms of credit in the high street.
We need to start creating wealth as opposed to debt in this country. If interest rates are set to zero, then what incentive will there be for anyone to save anything with the banks. This will just result in even less money in the banking system and more in people's matresses.
The major thing I fail to understand is this:
The reason we are in this mess is because the banks lent too much money and we spent too much money.
The governments supposed solution to get us out of this mess is to lend money to the banks in order that they will lend even more to the consumer who will then spend even more money.
Is it me or does that just sound like utter madness?
It is clear that all this money being pumped into the banks is not making a blind bit of difference, so surely the banks/lenders are in line for a major hit anyway which could really screw everyone.
Also, with the auto manufactorers in the US now seeking similar government support, how long before we have the construction industry (the only real industry in the country) going to the state for their taxpayer handout? Pretty soon we'll have state run banking, state run building, government guarantees for mortgage payments, full depositer guarantees for savers, the NHS and everything else financed by the government. Will we also get a red flag with 5 gold stars on it?
The real anarchy will come when people understand that the current governments actions are simply designed to postpone the problem in the hope that the good times come back. Unfortunately, with the current measures in place, i fear they will not.
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Hmmm!
LIBOR rate down to levels early last year. An indication of trust between banks? More likely that they are still not lending to each other and the drop will encourage them to lend to each other.
High LIBOR rates were supposed to be the reason money wasn't moving, hence the credit crunch.
Now, it's the restrictions of owing the tax payer restricting lending.
BUT.....who wants lending at 2007 levels?
Lending needs to be tight-how else can this situation be remedied? Our nation's spending habits have to be completely changed.
Continued reduction in interest rates may help borrowers short term, but watch sterling collapse. We need to attract and encourage saving and investment, not lending.
I predicted the current situaion weeks ago the day before the first rate cut. As AC says, noone in business is benefitting from the cut, so it helps the economy how? Oh yes, it means that the mortgage rescue business from Gordy will be cheaper!
Unemployment will continue to increase
Companie will fail
Civil unrest will increase
Depression, suicides and domestic violence will increase
The only all round plan would be a cut in PAYE and NI
All we see is tinkering-nothing tangible and effective has been done.
We will have a Depression, not just a recession.
It is reaching the point where all the tinkering in the world won't make any difference.
This government has failed its people resoundingly. We are going to have to ride out this dreadful storm, see what's left (hoping that UK plc doesn't end up like Iceland), and start again.
Wonder how long it will be before we hear about an IMF loan, and joining the Euro (not just rumour in the papers)?
Continued cuts
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No184 ExcellenceFirst.
I agree that fewer psychological egoists, a well educated populace, politically aware, tolerant and self improving individuals would certainly improve the social fabric of society.
How would you deal with the issue of conflicts of interest?
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199. lookslikereindeer
The only thing I share with the welsh waffler is a hairstyle.
As to the benefits I know precisely how difficult it is to qualify following redundancy in the past where due to having savings I was elligible for diddly squat except basic JSA. If you are really in need there is a safety net but it shouldn't be easy.
In the end I had to sell up, move and start again having my entire equity in the property destroyed in the process.
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Robert
Just a point of accuracy, your headline reads:
"How much will taxpayers finance economy?"
The reality is that the taxpayers have now reached the maximum that they can afford, the question really is:
"How much will international borrowing finance the economy?" which is a completely different question to which the answer must be "depends whether international investors think that they would get their money back from this "Za-Nulabour Government." On the basis of other Zanu governments not very likely.
Start the printing presses Zimbabwe here we come, get down to Woolworth's and buy a wheelbarrow.
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Comment 218 : onjournalism
I couldn't agree more, and it's not just why things have happened the way they have, but also why "remedial" policies are being framed the way they are.
The trouble with taking on "why" is that it requires a more detailed understanding of the subject than "how", and much more again than "what, who, when and where". And detailed understanding of subjects just doesn't blend in very well with the emotionally manipulative one-liners that seem to be the technique of choice for most modern communication experts.
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I've been doing some sums. About a year ago I had a net worth of about £500K. Since then the pound has gone 20% costing me £100K in real terms. My principal asset, my house, is down an additional 15% costing me about £45K. A property interest is down about £25K. My pension funds, ISAs and shares are down at least £30K. In short I am worth about 40% less than this time last year thanks to the recession Gordon Brown said wouldn't happen.
If I am reasonably typical the idea I or we are going to go on a spending spree whether Banks will lend to us or not is simply crazy. I am doing the rational thing and saving like mad to repair the damage done by economic incompetence of the first order. After all there are huge tax bills coming up to reward me for all of this.
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GORDY???
Did your ma & pa ever tell you the story of
THE BOY THAT CRIED WOLF?
EVENTUALLY NOBODY BELIEVED.
GORDY THATS YOUR PROBLEM.
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NEW LABOUR PRODUCTIONS
BRINGS YOU
"ECONOMIC APOCALYPSE"
DIRECTED BY
TWO THUGS IN SUITS
&
VOLDERMORT
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#169 "On the other hand *if all the bankers were to go to the government with a plan which they all agreed to* and which would allow the economy to be rescued then they ought to be able to persuade the goverment."
It would be nice if *ALL* banks were so homogeneous in their thinking !! Unfortunately, even as bankers are people and people will differ in their thinking, banks have different thinking and priorities !!
Where banks like HSBC, Standard Chartered and Barclays are developing the overseas, developing countries' markets to fund their capital and profit expansions, banks like RBS and HBOS are trying to be the biggest fish in the local pond. And then there are those who think nothing of gambling with their depositors' money in an utterly reckless manner like Northern Rock and losing, not only their shirt, but everything else as well !!
So how can there be a one-size-fits-all plan from such diverse thinking ??
As it is the first lot of banks have cocked their snoot at Gormless Gordon's fairy gold and the third lot are dead and gone and nationalised.
That leaves the second lot where various Scots are savagely slashing at each other with rubber chickens in place of claymores to see who will control them and how !!
None of these banks will agree that the sun rises in the East without some clause that favours their way of thinking !!
Remember, a camel is a horse designed by committee !!
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ive got an answer to all these financial problems let brown call an election , so we can get rid of this appalling government, and iam a labour voter!!!ive never seen such a shambles in all my life, brown is going around telling banks.. mugabe..king(of b of e fame) and everybody else what to do.anybody that votes for this bloke needs their heads testing.
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The anwser is staring economists and politicians in the face. It's the one answer they don't want to consider because it will destroy their friends in the financial world. The world in general and the US, UK, and EU in particular need to print massive amounts of money. What this will do is deflate the value of currency and lead to enormous price inflation. It will also make money easy to come by. The lenders including foreign governments and banks will be paid back their loans of expensive money with cheap fiat money. They will and should get burned. The value of debts incurred in the past will be reduced to pennies on the dollar. I'm not talking about the kind of runaway inflation of post WWI Germany or Zimbabwe, I'm talking about a 60 to 80 percent or even a 90 percent deflation and a corresponding rise in prices. This is not like the million percent of those broken economies. Here is where the crucial difference between the UK not having adpoted the Euro and if it would have and the sovereignty it still has left will make a telling difference. Whether this happens, to what degree, and exactly how is still under the control of Brits. Had the UK joined the Euro, they'd be at the mercy of the EU bank which like the rest of the EU government couldn't care less what happens to Britain. (Neither do I, why should I? I'm not a Brit.) But before this happens, we will see a round of deflation and a stock market crash that has just begun. We are still going into the forest, we are not yet coming out. For those who have cash, this period will mark a time of incredible opportunity to buy both stocks of good companies that will survive and real assets at fire sale prices as those who don't have cash are desperate to liquidate them just to survive. Even in a depression, there are winners as well as losers. The trick is to see it coming and prepare for it.
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#225 waitingforthepain
Alternatively -
A year ago the market was grossly inflated by a bubble in the housing and stock markets with "imaginary" money.
You were never actually worth that much.
What had you done to "earn" that imaginary level - bought a house and invested in the stock markets. Did you imagine that would go on forever?
Hopefully you weren't daft enough to borrow money on the basis of those false numbers.
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#225 i agree with you....but theres an answer...if you cant beat them join them.cash in all your assets have a really great time in cyprus or where ever. spend the lot then come back to the uk and sponge off the state that brown has created. that way this useless government wont get the benefits of your spending and at least you would have had a good time.
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#219 Gerry_Francis'_Mullet - "Will we also get a red flag with 5 gold stars on it?"
No, there will only be 4 gold stars and soon there will only be three when Scotland leaves !! Sorry, just can't resist being sarcastic about the Union of Soviet Socialist Britain !!
While there is absolutely no doubt that many banks have behaved badly and have taken risks that would be treated as insane in normal times, there is also the fact that the borrowers *ALSO* behaved badly and borrowed to spend on luxuries that were way beyond their means and, thus, fueling a consumer-led boon.
To reset the credit status is a one-sided punishment of the guilty !! I'd say punish both and let the banks go bust while trying to recover as much of the borrowed cash as possible from the irresponsible borrowers !!
Taxpayers' money should be spend on encouraging *MORE* research and development in order to re-build manufacturing capabilities !! Already, there is no hope that the sunset industries can ever be revived. What we need are new industries and that can only come from more R&D and investments into start-ups !!
The last thing we need is more consumption. We cannot carry on forever consuming what we cannot produce !! Or, at the very least, we can produce something else that can be exchanged for what we want to consume !! Magic wands, funny money and fairy gold will not feed the nation !!
Now is the Winter of our Deleveraging (to Americanise an old quote). We can accept a short, sharp pain now or suffer a longer and even more painful malaise later !!
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yes #186 certainly seems that its working!! but what do we know about economics, i mean your an expert...why not have a negative interest rate..we pay the banks so they can have our money!!! yes what a great idea. the problem with economics is that its not an exact science...its made up off the hoof by people who cant do "proper jobs"
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#186...you really talk claptrap...in the 91/92 recession i dont remember interest rates falling to 2%.and we survived that one. theres no divine right in interest being paid to money invested in banks!!! ok fine so nobody invest in banks then. then what?
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#233 "Start the printing presses Zimbabwe here we come, get down to Woolworth's and buy a wheelbarrow."
Sorry, no can do !! They are all sold out when Woolies (or their administrators) offered them at 20% and the hordes of bargain hunters snapped them all up !!
Try Homebase, though. They don't look too firm on their feet either !! And, whilst there, you can get a large spade to shovel off the manure that various parties will lob at you in the near future, oops sorry, I'm told it's called "election campaigning" !!
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Why can't we have 2 different interest rates?
To attract savers' money to banks and building societies from home and abroad a higher rate than the BOE base rate.
To boost the economy and ease the pain for mortgage account holders a low rate (the 2% we now have)
I think some other countries adopt this approach. I don't see why we can't do the same.
Maybe someone else can point out flaws in this.....
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I always read your posts and often comment but have not done so for a couple of weeks now. I have been watching and listening with interest to the breaking economic news, hoping that people in general get what is happening - but few have.
The UK is a badly run, over priced, badly educated country with a work force that is generally badly motivated, badly trained, massively over paid and largely fixated by celebrity.
The country, government, people and business have generally been over rewarding themselves for many years and financing it by borrowing, employing cheaper labour, importing better goods than they can produce at home, and inflating their assets (especially houses) to pay for it.
The global circumstances that allowed the UK to get away with this, (such as cheap international credit, flexible cheap labour and under valued currencies) have now receded.
For sure, many other countries are suffering, but which are suffering the most ? those whose economies have been run like that of the UK.
The UK is nonetheless the shining example of this morally bankrupt ?inflate, borrow, exploit and over reward? method of economic ?management? that is why it will be worst affected.
This is happening but has still not been fully grasped. IT IS NOT INDIVIDUALS OR CERTAIN COMPANIES WHOSE FUTURE IS UNSUSTAINABLE WITH THIS ECONOMIC MODEL ? IT IS THE WHOLE ECONOMIC MODEL ITSELF. IF WE DO NOT STOP NOW THE COUNTRY WILL SIMPLY GO BANKRUPT, SUFFER HYPER INFLATION OR BOTH
And the solution? ? well would you believe, hard work, modest pay, spending only what you earn, low levels of government spending, low levels of welfare, no government borrowing and a sensible measure of protectionism while this is all put in place. A Bit like it used to be when Britain did not need to borrow to sit at the top table.
Can you see it happening ?? me neither ???I emigrated about seven years ago.
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Comment 230 : MarcusAureliusII
There's little doubt in my mind that the problems of the dollar, pound and euro will be dealt with by inflation. It's the least painful option to the economies concerned, and the pursuit of short-term self interest, which governs the attitudes of these societies, will dictate that this is the "corrective" action taken.
Bad luck to those in financial surplus, you may think. And, to an extent you are right. However, the governments of the surplus countries must share some of the responsibility for the collapsing state of affairs. In many ways, it's just as irresponsible for a country to run a large surplus as it is to run a large deficit. The world's financial system cannot cope with massive persistent imbalances between creditor and debtor nations. The overall utility in the world is being severely cut back by nationalistic attitudes driven by immediate concerns of self-interest.
More than anything else, what's needed is something in the system that discourages the over-producing economies from building up huge foreign surpluses. In this way, the problem of over-consumption in the other economies would be very much reduced.
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what those people who say.... well tough to savers, you are lucky to have money to save.... do not take into account is that...
savings = mortgage lending!
punish the saver and next year there will be even less money for lending; i have no incentive to save as the interest rate is less than inflation but i dont go out and spend (as GB would like)as my income is reduced.
i think GB's policies are what are known as lose/lose
no winners (apart from a handful of tracker borrowers) and millions of losers! So much for "a fairer society"..
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If people are concerned about inflation they may like to look Here.
It would appear that the Government are going to hide the amount of money that the BOE print. In other words clearing the deck for the nuclear option.
Any comments Robert?
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Didn't anyone notice money was getting tight, when everyone started smoking Roll ups.
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#242 kikidread
I suspect that's more to do with the substances in the roll-ups!
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Unfortunately, the government will eventually conclude that the easiest way of reducing the nation's debt burden is to allow inflation to increase. If inflation rises to 10% pa then the real value of fixed loans will halve in less than eight years. Wage earners can compensate for the reduced value of their pounds by demanding higher wages, leaving those on fixed incomes (eg level annuity pensioners) steadily poorer.
Therefore after a brief spell of mild deflation we may well see several years of significant inflation "to get the economy moving again".
Welcome back to the 70's.
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I think that its about time you explain how the monies lent to the banks is "taxpayers money" as I am fairly sure they weren't included in the horrendous taxpayer debt figures presented in the pre budget report.
My suspicion is that this is money borrowed from overseas by banks but with the govt acting as guarantor after expensive insurance policies paid for by banks are in place to protect HMG.
It was the use of terms such as "taxpayers money" that led to the nationalisation of Northern Rock and it is interesting at a time when so much capital is required by banks that HMG have no intention of paying for the share capital that they have stole from Northern Rock shareholders.
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The whole problem is that "we" as a country we have borrowed too much money on too little assets (all encouraged by goverment policy).
So Gordo CUT goverment spending.
Cut income tax.
Increase interest rates.
This would give people cash which they could choose to spend.
Deter people from borrowing more.
Encourage people to save.
This would ensure that the companies where there was a demand (from the public spends) would survive and the others would fail.
Sad times for many people but we have got to get back to the real world and not the false bloated economy we have been living in for the last few years.
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I would be interested to know Roberts views on the fractional reserve banking system.
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#237 thats far to simple you cant expect brown and darling to work the maths out on that one surely.
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There is another aspect of the crisis which hits the virtuous again. I'm administering the estate of a relative, and there's nary a bank or Registrars who understand plain English. We the executors wrote to them stating our requirements, filled in their forms, presented our authority, and stated our instructions on the covering letter.
About nine out of ten have been returned because their form was not filled in to their satisfaction, mostly because they didn't read our letters carefully and jumped to their own conclusions. They don't explain what their problems are, nor how to answer their needs, so I'm reduced to returning our submissions telling them to fill in their bloody forms themselves - we have given them our instructions, we're not performing seals to jump through hoops at their behest, and they must obey, or we complain to the top.
This nonsense bureaucracy is not a legal requirement, each asks something different, and it disrespects their shareholders.
If UK PLC wishes to privatise, or nationalise, for God's sake get on with it and let us know. In the mean time, facing millions of our own citizens being unemployed because of the third world, can we please fire the offshore call centers and their brethren who are simply incompetent to do the job. And the twits who think everything falls into the 95% probability bands and fail to provide for the exceptions in their ruddy scripts.
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all you savers out there....go out and spend your money in a nice hot country, and stick 2 fingers up to brown and his rag bag government. dont...spend it in the uk....and let the scroungers benefit. my old dad was right when he said he fought in ww2 for nothing.
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third world countries offer better interest rates.
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Somewhat perversely, the recent cuts in interest rates are proving to be unhelpful in resolving the current crisis. There is plenty of demand for borrowing, but banks are struggling to fund themselves and/or find terms on which they're happy to lend. Higher rates would encourage savers, allow banks to reestablish more reasonable lending margins (this is really to big change in banking over the last 10-15 years, as margins have shrunk for no change (or possibly an increase) in the bank's risk), which should commercially encourage banks to start to lend. Exceptionally low rates make it very hard for the market to reopen, leaving plenty of demand for borrowing unsatisfied, and the vicious circle continues.
Meanwhile, in my opinion, it is most likely that the government may ultimately make super returns on it's 'investments' into the banking sector, but fail in it's attempts to kick start the economy before the next election. This is no more than they deserve for their appalling economic mismanagement over the past 11 years.
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yes#251 except for the uk were 3rd world and have low interest rates
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janchild #237
"Why can't we have 2 different interest rates?"
We can and do. We have many around the world. One way to make money is to borrow from those who charge low interest rates and invest with those who pay high interest rates. That's called arbitrage and many have made fortunes on it. The problem is that when different currencies are involved, currency fluctuations can wipe out your profit. But within a single currency we have the same. We have institutions which exist to do just that. We call them by a lot of names but they are all banks. They pay you one percent on your bank deposit and charge you 8% on your mortgage, 30% on your credit card. Rates like 30% are called usury in the US. Illegal for loan sharks, perfectly legal for Visa, Master Card, and American Express. Too bad for their investors that they were too stupid to avoid making so many bad loans.
ExcellenceFirst #239
We know exactly how to keep trade in balance. It's called tarriffs. This keeps people who are paid 30 dollars an hour from having to compete with people who are paid 30 dollars a month. If you want high tarriffs on imported goods, you won't get any argument from me. America championed "free trade" first to help rebuild Western Europe after WWII and then China by exporting jobs, technology, factories, entire industries. They didn't stop though when these economies came up to speed. American industry claimed the Smoot-Hawley tarriff act was the cause of the depression and wants to keep things the way they are. (It wasn't.) This way they have worked around 100 years of fair labor laws, environmental protection laws, child labor laws, social security, and countless regulations that were so painstakingly won in the US and later in Europe. If a guy gets his arm cut off in an industrial accident in China or he gets killed in an unsafe coal mine disaster, well that's too bad, they just get a replacement for him. But what they forgot is that if they bankrupt their markets because all the 30 dollar an hour factory jobs were exported to China and all that's left for a lot of people is to hash hamburgers and McDonalds for $6 an hour, there won't be anyone to buy their products. That's why they had to make it possible to lend enough money for a McDonalds counter clerk to buy a house and shift the risk to someone else. Europe for instance. An MBA from an American school may be the best in the world you can get but it isn't very good. Just look at all the dumb bunnies who were paid like aristocracy while they drove their companies into bankruptcy. Knowing a lot of facts doesn't make you smart. Many of these people were congenitally stupid and beyond hope.
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In Britain we have got to pay all our debts TWICE.
If you have debts of 20k you have to pay that off.
But as the banks have gone bust through all these debts you will have to pay an extra 20k in tax over the next 10 years.
You pay your debt then you pay to save the bank that gave you that debt.
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Funny how many solutions to the current mess are being proposed - if there are so many geniuses (genii?) around, why did they not spot this particular train in the tunnel?
Another point that seems to lack mention is that money is no more than a concept - it means nothing - only pieces of paper & metal discs.
So, virtually the entire modern world is ready to reach for the revolver/jump of the 24th floor - for a concept?
If that is not insane - I don't know what is!
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Would anyone like to explain why the projected downturn is SUCH a problem given the rather dramatic upturn that we've been having for so many years?
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#239 "The world's financial system cannot cope with massive persistent imbalances between creditor and debtor nations. The overall utility in the world is being severely cut back by nationalistic attitudes driven by immediate concerns of self-interest."
If there is to be a realistic adjustment of the imbalance, then countries like the USA must open up its markets to the creditor nations so they can spend the surplus.
Unfortunately, as you say, nationalistic attitudes get in the way every time !! Hence the surplus will never be reduced without a lot of pain for the debtor nation !! One obvious form of pain will be the devaluation of the debtor nation's currency to junk status, thereby destroying any hope of them ever becoming anything but a Third World nation !!
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Will all clients of the welfare state please form an orderly que on the left....yes bankers you too....councillors and politicians you as well...unemployed people over there...retirees too....long term "disabled" just there please.
Innovators, grafters, inventors, fighters, honest earners form a line on the other side please....OK let's have a count-up!
......er hang on a minute that can't be right....must have made a mistake...better do the numbers again.....holy cow there has to be some mistake surely...doesn't stack up.
Ah don't matter...kids'll sort it out won't they!
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An UK national bank indrectly controlled by politicians, staffed by public servants is a very bad idea. There will inefficiencies, full of leaks and open to influenced by lobbists who only have their own interests at hearts, however well dressed up as in the public and UK's national interests. Politicians may be good in playing politics and pulling the wools over the eyes of the public but skillful financiers can get them to eat from their hands any day.
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can someone have mercy on the detached from reality person and explain this to me:
people, banks and governments are in debt, if all of them are in debt, who are the creditors? where are they? where is all the wealth? someone must be very rich with all the nations' IOUs.
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after the cut in interst rate all the politician & commentators looking at the hbos .lyods ,barclays and abbey asking if this major banks pass on the new rate to to customers , but none of them mentined anything about Northen Rock wich the taxpayer owned.Make me wonder if in 6 months time we will hear that the N R close the huge deficit in their balnce sheet and start paying the money back so the gouverment can score a political point agains the tory who were against the bail out from the beginning.
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Northern Rock will never pay back all the money. All they have done up until now is to get people with good mortgages to remortgage with other lenders. All the dross will end up on their (our) books.
I bet we will end up at least £10bn out of pocket when it is either closed down or restarted clear of debt as the ZaNuLabour North East Mutual
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Bluff and Bluster, Boom and Buster Brown announced today that ?enough is enough? in connection with Zanu PF or did he mean zaNuLabour?
Ladies and Gentleman our unelected Leader must go.
House prices have collapsed, companies collapsed, mass unemployment, repos, mega personal debts, mega Go?vt borrowing, savers under threat, mega tax rises to come??.total depression and austerity for many years to come.
If you?ve got mega debts and in negative equity then bankrupt yourself for £350 and in 12 months you?ll be free to start again.
Don?t suffer because ONE MAN has totally mis-lead you for the last 11 years. Don?t suffer. Start again.
WARNING: Labour Governments in the end always damage your WEALTH, HEALTH and RELATIONSHIPS.
Your home, your job and your family are a risk if you do not vote them out next time.
Here are some helpful websites for those affected by Labour?s wholesale mis-management of this country?s affairs.
http://www.nhs.uk/Pathways/depression/Pages/Landing.aspx?WT.srch=1
http://www.insolvency.gov.uk/
http://uk.news.yahoo.com/4/20081206/tuk-credit-crunch-hurting-relationships-dba1618.html
http://www.relate.org.uk/
http://www.jobcentreplus.gov.uk/JCP/index.html
More to come????????..
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#247
Hushh don't mention those words
He won't reply anyway.
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China, US pledge $20bn trade aid - BBC headline
"Earlier, China called on the US to save more, blaming its excessive consumption for the financial crisis."
As had been said before when the Americans asked the Chinese to spend more to boost the global economy, the Chinese reply was that the Chinese try to save today's spending for tomorrow while the Americans try to spend tomorrow's savings today !!
At the end of the day, the Chinese have to keep the US$ high until they can deal with their holding of US$ 2 trillion of US$ debt !!
Meanwhile, back at the ranch, save more ?? save what ??
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#265 and #247
Why?
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Hey!
Where are the moderators when you need them?
Censorship is sometimes needed.
Why have so many off topic, inane, comments been allowed to infect this blog? It is becoming unreadable.
I quite realise that the very nature of this blog can be contentious and raises the hackles of posters.
All the more reason for off topic comments to be culled.
ps.
I quite expect this post to be culled with hopefully quite a few others!
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Petition to make Fractional Reserve Banking illegal:
http://petitions.number10.gov.uk/frb-reform/
With links to various resources:
http://moneyredeemer.webs.com/links.html
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264
please no more .gov or .org sites to pretend you/they care
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the government always pretend they fix things when they don't
e.g. DCA/they say statistics show Courts help fathers get contact (wrong / not a right)
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insolvency.gov.uk are not happy with your house when they can get the former matrimonial home too, apparaently you have the right go to high court at hmcs.org something but costs top dollar
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When a person can borrow 100% to buy a football club, you know something is wrong. When a bank lends 125% for you to buy a house ( and rent), you know something is wrong.
When a country is billions of Pounds / Dollers in trade defecit, you know its broke.
To carry on the same lifestyle as before buying foreign goods you cant afford is .... madness.
It will catch up with us sooner or later.
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"When a person can borrow 100% to buy a football club"
=>it means future income from fans will pay the debt
"When a bank lends 125% for you to buy a house and rent"
=> it means someone else pays your mortgage
e.g.if property doubles in value and you sell half as an MBS stock it means
=> someone else paid your original purchase cost
=> if it goes down again it didn't cost you a thing
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261 heavybozon wrote:
"can someone have mercy on the detached from reality person and explain this to me:
people, banks and governments are in debt, if all of them are in debt, who are the creditors? "
That's the rub: it's all fictitious money.
Bank A owes Bank B, which owes Bank C,....... which owes Bank Z, which owes Bank A.
Get the picture?
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The biggest problem with our country is we produce to little and consume to much.
Manufacturing industry now produces about 12% of GDP, which is far to small a figure to support the rest of the economy, especially the public sector.
As my old maths teacher used to "never go looking for difficult solutions to easy problems"
So here is where the problem lies-
After birth, until about the age of 20 we are just "consumers" i.e. we use up huge amounts of food, clothing, energy and consumer goods without giving much in return. This is obviously because we are first of all babies and incapable and then in education, when you would not expect us to work, other then a part time job. Hopefully at around the age of 20 you may get a job.This figure can of course be much later, depending on further education choices and, of course, the new fad of a "gap year".So when we finally do get round to working, what does everybody desire?
1- as short a working week as possible
2-as much holidays as possible
3- as much money as possible for doing as little as possible (see 1)
4- paid sickleave (whether genuinely sick or not)
5-paid maternity leave (for men and women of course)
6-retire as early as possible (forget this 65 rubbish- especially in the public sector)
7-guaranteed gold plated pension
We then go on to live far longer (in retirement) then our ancestors. Back to consuming again without contributing.
So when its all said and done most people wouldn't even spend 10% of there lives actually working.
There will of course always be a % of the population who can't work for genuine reasons. Therefore a % of our efforts must go to support them as it does to those who just refuse to work.
Then to exasperate matters, very few people actually want to work in a "real"job.
As long as it's nothing more strenuous then pushing a mouse over a mouse pad all day they are happy. (see 000's of unemployed bank workers)
This of course explains why over a million immigrants have been able to find work without any problem.
There are of course many jobs still out there, but unfortunately they are not "sexy" enough for the indigenous population.
Solution to the problem?
PRODUCE MORE- CONSUME LESS
Only then will the countries balance sheet be balanced!!!
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My point was if you dont put a penny in to a business or home ... then the banks have more to loose.
When the going is good ,its great, when its bad its 2008.
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Who's favourite?
Who are we going to pick a fight with to get out of this mess?
My Monies on Iran, who will give me 3 - 1 ?
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If we are heading into the 1930's again, then be wise and invest in munitions.
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btw there will be no rises this year because the economy is suffering from Economical Erectile dysfunction, sometimes called "impotence," is the repeated inability to get or keep any economical growth firm enough
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275#
You obviouoly listened too much to the quotes of your maths teacher and not enough to the math as the manufacturing sector of UK GDP is 26% and ranks 6th or 7th in the world. We do however consume too much and if you want someone to blame why not everyones' parents as every generation wants more for their children.
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281 BillieBson
Manufacturing used to mean capital plant shipped worldwide, you know big bits of complex and very very expensive machined metal that cost a lot. I know because I have designed them, I dont any more, better things to do. However - Now a sticky label machine connected to a PC is classed as manufacturing. It could just as easily be classed as the service sector because it is consumed locally. If you take all of that garbage out then you will get a more accurate picture, but of course nobody really wants to know. It is nothing to do with maths and you are letting people feed you garbage data. It has all gone and the government was only to happy to see it go because it needed a long business cycle and a quicker buck could be made on financial paperworking and property. The removal of tax breaks on stockholding in the 70s caused a lot of damage, if you are running on a long cycle you have to carry stock. Much of manufacturing in the UK is satellite production units of foreign companies which come here because of grants and go at the drop of a hat. There is little core technology development and you are then left with a labour market, with cheaper labour usually elsewhere, usually in countries less bothered about Health and Safety. In other areas eg car production the massive EU funding given to member countries such as Spain to develop car manufacturing units when excess car production was already present in the EU has, surprise surprise, caused problems where unsubsidised plants operate. If by any chance you think manufacturing will save the UK you are mistaken.
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I'm dead
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IT?S A MAD WORLD 2: The Tale of the Evil Saver
The not-so-young woman pulled up her collar against the cold and scurried past the row of shops. Save 30%, 50% - 70%, the windows screamed at her. Nearby a row of ATM?s winked invitingly. She resisted the lure. But then, just as she thought she was home free, came The Voice. Its humourless, Presbyterian tones chilled her very marrow.
Gordon:
Halt! Is that an Evil Saver I see?
The woman shrank back against the shop window.
Wharfgirl:
Are you speaking to me, Great Leader?
Gordon:
Are you or are you not a saver, madam? And don?t lie to me. I watched you pass by those festive displays just now.
Wharfgirl:
(nervous)
I do have a little money, my liege. Put by for my old age. In my business you see, they rarely offer jobs to the over 50s, even at the best of times. And these are not the best of times.
Gordon:
Selfish, unpatriotic woman! Your money is doing NOTHING to help us. It should be out there buying things, keeping people in jobs.
Wharfgirl:
But it IS out there, sire. I mean it?s not like I?ve stashed it under the bed. It's in a BANK. Being loaned, I presume, to all those ?hard working families? and ?small businesses? you love so much. How can banks lend like you want, if people like me don?t save with them?
Gordon:
But surely you?d like to go into one of those fine shops and buy yourself a new winter coat. Look! You could save up to 60% in there. And the jobs of those two poor young sales girls into the bargain.
Wharfgirl:
The ones who used to spend the whole time gossiping on their mobile phones and telling me they had nothing in my size? If it?s all right with you, I?ll save the whole 100%.
Gordon:
You, a lifelong fashion victim, in a last season?s coat from Monsoon!? A ?fat woman?s shroud? I believe you once called it. Have you no shame?
Wharfgirl:
Sire, people don?t buy new coats, when their income has just been cut by 60% in five weeks. I?m frightened. I?m disoriented. I?m hanging onto every penny I can. My car stays in the garage. My heating is permanently off. I can count on the fingers of one mutilated hand the times I?ve been for a meal or a drink these past few months. At this point, I'm my own mini slump, rationed to one cup of coffee and one newspaper per day. And even those tiny luxuries I am thinking of giving up.
Gordon:
But this is insane. Starving yourself when you have money in the bank.
Wharfgirl:
The folly is yours, sire. Yours and King Merv?s. We have literally no idea what you?re going to do next. If you want people like me to feel safe enough to spend, you?re going to have to restore the world to the rational, sensible place it used to be.
Gordon:
No can do, sweet pea. That world is gone. I have those ?hard working families? to worry about now. They vote for me. You?re southern, middle class and well past your sell by. I?m guessing you don?t.
The woman?s heart sank. She didn?t matter to this creature. She had nothing he wanted or needed.
Wharfgirl:
(desperate)
But sire, I was a ?hard working family? once too. I played by the rules, held down a job for 40 years, ran my own business for 20. Raised my kid, paid my bills and my taxes. And saved for the day when there would be no more work. Now and for the rest of my life, I have to live off those savings. I have elderly parents who need me. A son who will never have a home of his own, if I can?t provide the deposit.
The Voice shrugged ? if voices can shrug.
Wharfgirl:
So you don't care about people like me?
Gordon:
In public I shall of course pretend I do. I?ll bung you a winter heating allowance or something, provided I can claw it back in tax. But let?s face it, who?s really going to care? The media aren?t with you. All those London-based journalists with their massive mortgages, they love low interest rates. The banks aren?t with you. They?re busy rebuilding their balance sheets like nobody?s business. Older people have no future. Your only function is to die and leave the rest of us ? and of course my government ? whatever cash remains.
Seeing her shoulders sag in defeat, he adopted a more kindly tone.
Gordon:
Look, you?re a Baby Boomer. You?ve had a bloody good innings. You enjoyed a lifelong career and an affordable home, when there were still lifelong careers and affordable homes. So don?t bleat now. Hell, we?re throwing you a free bus pass in a few weeks time. What more do you want?
And with that he walked away.
The woman was suddenly angry. How dare he turn his back on her? She shouted after him.
Wharfgirl:
Well if you don?t care, I won?t care. I?ll take my money and change it into euros. Or dollars. Then we?ll see who?s laughing, when the pound drops like a stone.
The Voice laughed over his shoulder, his words whipped away on the icy breeze.
Gordon:
Oh yeah? You and whose army?
Wharfgirl:
The army of Baby Boomers you seem so roundly to despise. The over 50s make up over a quarter of the population, you know. They?re the only generation that actually does have money. And if they all do what I?m doing, cut back their spending, put what little they have left into foreign currencies or under the mattress, if they all ? oh glorious day ? get together and march on Parliament in their own little revolution, then you?re ?Jonathan Ross?ed?, my friend.
And with that, the woman stomped away. Her coat might be hideous, but she there was a new fire in her heart. He would disrespect this Baby Boomer at his peril!
WATCH THIS SPACE FOR THE NEXT INSTALMENT OF ?MAD WORLD?
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#281, not sure what stats you are reading:
http://www.ifm.eng.cam.ac.uk/cep/mfgstatistics-macro.html#Chart3
note the direction manufacturing is heading in too....
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284 wharfgirl
Wonderful expresses exactly way I feel nasty little Gordon punishing us for doing the right thing over the years.
I may not be a baby boomer but my dad taught me everything about money that?s important, never borrow, never lend and if something?s worth having it worth saving for.
In short real prudence - not the bastardised version Gordon promoted.
Those principles helped me work my way through university and not living of loans, they helped me save for a house by doing without pointless pleasures.
The exact opposite of what brown promoted over the years, result healthy savings (now offshore) no dept.
Gordon?s wealth machine has crashed and he wants me to pay for all those who rode that lame horse.
I have zero intention of paying for other ppls lack of discipline in short I have contacted my brother who emigrated in 2001, and will move out there to work with him, taking my savings with me, at least until the tax bombshell is paid back.
S^%^& Gordon brown to Hades.
After the last couple week watching him attack ppl financially savers single ppl childless married couples etc in form of interest rate cuts - giving our tax money to everyone that may vote labour, watching my pension being reduced to the price of a packet of crisps despite following the advice and putting extra each month into it - enough is enough.
I will forgo my none voter status and I will apply to vote while I am abroad so I can vote against labour. I like nothing better than to see anyone else walk into number ten grab him by the collar and physically boot him out into the street. Him and the rest of his labour loser?s.
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Two centuries ago the victorians used to visit asylums and poke sticks through the bars to tormente the inmates for fun.
1) Privatise the NHS. Now. Completely. Private insurance and if you cant pay you sicken and die. Philanthropic charities will spring up driven by well meaning administrators to deal with this problem. Generating Jobs.
2) All vehicle manufacturers who get assistance from their home governments are to provide free vehicles to our emergency services as the price of doing business in the UK.
3) Double the number of police cars. Triple the number of police - so there is actually some on duty at night and we dont get just an answerphone. And we will need more police,
4) Slash, and I mean SLASH welfare. Means test everyything. Child benefit ends at age 5. Mothers must WORK after that.
5) Expand childcare centres and after-school clubs.
6) Remove VAT from housing renovations and materials. There is a vast degraded stock of second rate housing that needs upgrading - Why is it cheaper to new-build.
7) Ease planning restrictions massively. Ignore detail. Caveat Emptor and if there is problem with the build the buyer sorts it out.
8) Scrap foreign supplied arms and ammunition. Scrap trident mark x. R&D our own nuke deterrents, build our defences on home grown manufacturing. (We were once the best at this).
9) Infrastructure. Time for double deck trains and corresponding rail upgrades. All cities with rivers to get new car and walkway crossings. Above ground monorails or trams for cities? Congestion charge HARD for city centres.
10) Subsidised bus services for rural communities. 24 HOUR public transport.
11) All vehicles speed limited to 120 KPH. saves oil.
12) Open mining schools and reopen mines. Stop importing fuel oil and coal.
13) Develop second burn tech for power generation emissions. Develop and store CO2 wastes in biomass.
14) Education. Real, Honest, basic Education. Starting EARLY at 3 years. Home environments arent working for this. We have lost a generation.
16) Internal Economics. Remove growth as the measure of economic success of UK.
17) Space (yes for real) we need a technological driver for motivation and a direction for technology. Alternate fuel/rocket research.
OR
Subsea farming.
'Removes stick and goes for tea at his gentlemans club'
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287,
I find that post very thatcherite (spit) and disturbing, its all very well privitising health care and slashing benefits - But what about the folk that are NOT GOING TO BE able to get jobs because they won't be there soon?
You're asking for a revolt with that post, btw I've worked since leaving uni in 93 and have never required benefits.
Perhaps that will change soon .................
Oh and btw, I have NO TIME for labour either (just in case you think I'm some sort of socialist deviant)
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259 Fridgland
You have absolutely got the point here
We are a nation where 25% of the population contribute positively and the rest are a net liability.
Do not get me wrong I strongly beleive in safety nets for the seriously disabled, fantastic care for mothers, infants the sick etc,.
Problem is we have a welfare state for whole industries, countless pointless minority groups and millions of otherwise unemployable (at less than famine level wages) bureaucrats. I do not think that was what was originally intended
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You hand in your ticket
And you go watch the geek
Who immediately walks up to you
When he hears you speak
And says, "How does it feel
To be such a freak?"
And you say, "Impossible"
As he hands you a bone
Well, the sword swallower, he comes up to you
And then he kneels
He crosses himself
And then he clicks his high heels
And without further notice
He asks you how it feels
And he says, "Here is your throat back
Thanks for the loan"
Now you see this one-eyed midget
Shouting the word "NOW"
And you say, "For what reason?"
And he says, "How?"
And you say, "What does this mean?"
And he screams back, "You're a cow
Give me some milk
Or else go home"
Well, you walk into the room
Like a camel and then you frown
You put your eyes in your pocket
And your nose to the ground
There ought to be a law
Against you comin' around
You should be made
To wear earphones
Because something is happening here
But you don't know what it is
Do you, Mister Jones
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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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Seems to me one bunch of people who have escaped the blame game hitherto are economists and that what is so confusing is that within certain limited frameworks the laws of arithmetic seem to apply and there is some very complicated arithmetic involved which when examined by the likes of Robert can reveal some surprisingly counter intuitive seeming facts which all makes economics seem like a science or some kind of idea of what we expect science to be but as for the broader picture economics certainly doesn't look like an exact science or any kind of science at all, so that here we are with something like a biblical plague looming over the world, threatening real suffering, mass unemployment, poverty possibly death and devestation, which has its source in no natural disaster, no microbiology but only in a system dreamt up and evolved by our own minds. The scale of the problem we have created means that the solutionneeds to be on a scale that only governments are big enough to provide, governments interacting with each other not in a bloody great world war like last time but hopefully something more constructive like a war against climate change providing employment security and so preserving our creditworthiness with the banks etc.There will still be sweat and tears, less luxuries but also I hope less blood. Hopefully Obama and team are going to lead the way but in the meantime prepare the plans to renew and extend the National grid with emergency powers for a team of green wise men to ride rough shod over planning laws, this is war but not the bloody kind please.
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I hear the NAVY is reduced to 22 operational
ships???
The Falklands are now covered by a civilian
ship??
TIME NEW LABOUR WALKED THE PLANK!!!
MUTINY ANYONE?
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#291. igiveup2 wrote:
"..This (lowering interest rates) then removes far more spending power from the economy than is in reality put in...
Along with many other, but still a minority, of commentators I tend to agree with your analysis that lowering interest rates is a recipe for further deepening the depression.
I will reiterate my view of the conditions required for a recovery: stable interest rates for both borrowers and savers that value money properly. Borrowers need to understand that they will pay a real cost for borrowing and savers need to assured that saving is worthwhile.
Presently there is a negative value for saving, after inflation, and this needs to be remedied post-haste. Essentially the World's bankers have made money worthless and this situation cannot continue if we are every to get a recovery (what ever 'recovery' means - a subject for elsewhere!)
Your final (Confucian comment) "we are living in interesting times" is quite terrifying, and what is more frightening is that the same group of economic managers who substantially caused the problem are claiming that they can fix it. Again I reiterate my view that they should all go. (Governor of Bank of England, the whole MPC, the head of the FSA and the head of the Treasury.) These, well meaning but wrong headed, men gave us the conditions that created and managed the unsustainable bubble economy and are unfitted to manage the recovery. They should show some vestige of intellectual honesty and resign now.
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How much we finance the economy depends on what we do with the money.
UK Ltd is broke. We owe money all over the place and have very little way of working our way out of it because our biggest earner "Finance" is shafted and our next biggest "North Sea Oil" is in decline.
For years we have lived on borrowed and North Sea Oil money; our politicians have bought popularity by sloshing money into benefit and state non jobs that pay obscene salaries (and pensions), viz the director of Harringay Social Services.
We now have to get real and what does Brown Darling do? Throw money out of the window quite indiscriminately to "get the economy going". If we are going to get going we had better decide what direction we are going to go in.
There are some glaringly obvious things that we should do.
There are a large number of excellent Eastern European workers over here doing jobs that the indigenous population are too idle or proud to do.The reason that our unemployed can get away with this behavior is that the rules surrounding benefit payment are easy for the determined recipient to manipulate.
Let us remove benefit from those under say 21 for a start, that should deal with the excessive boozing as well, let us also make percentage reductions in benefit in areas where jobs are available. A sliding scale springs to mind.Those who keep rejecting jobs or who engineer rapid dismissal should have benefit stopped.
This way we can reduce the drain on our finances caused by those who could work but will not.This will cause a huge outcry from those with a monopoly in compassion but we must live with it.
Secondly let us see what we are importing in large amounts and see if we can replace it internally. Throw some financial incentives at the home grown version of those industries. Energy production is a good place to start.
Thirdly lets get rid of all those agencies that the government has created; that do very little but cause difficulty for the productive sections of the population and create cost and gold plated civil service pensions for the rest of us to pay.
The problem is that most of the current bunch of politicians will be quite unable to do this as it requires them to overturn everything that they believe in about compassion and social justice.
I can only say to them that if we allow the money to run out, compassion and social justice will cease to exist. If you want to retain these two admirable things you must put our house in order and that requires some painful pruning.
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#292 economics is not an exact science,engineers would make a far better job of running the uks economic system(my kid could compared to brown). can you believe that £2142 released the grand total of £2.88 interest in november from lloyds tsb on line saver!!! what a disgrace...and they have the cheek to advertise this account on line as if its something special!!!. from a maths point of view if 2% interest is better than 3% then surely it follows that 0.0001% is better than 2%. this is where all this economic stuff falls down there are no natural laws!! its off the hoof stuff made up by people who cant do a "proper" job so they deal in fantasy figures.
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*292
The maxim must be "Keep it Simple Stupid"
The economists,bankers,commentators and even bloggers have an interest in keeping it complex.
It isn't.
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Comment 276 : louandway
"As my old maths teacher used to "never go looking for difficult solutions to easy problems""
It's probably a good assumption to make, given the outlook of our education system, that your maths teacher didn't go on to say:-
" ... but, equally importantly, don't fall into the trap of believing that all problems are easy ones."
Thus leading to a whole generation being programmed to reject the idea that trained human intellect is capable of effectively resolving situations with multiple consequences. And that therefore there's no better way of dealing with the world's problems than to take the most obvious, intuitive way out, and deal with any negative consequences as new, separate difficulties.
We'd still be living in caves if mankind hadn't realised thousands of years ago that this wasn't the best way of doing things.
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#295 you make some excellant points....but we seemed locked on a downward spiral here...the tories and libs ,by and large support what browns trying to do. this is the thing that alarms me..theres nobody out there that sees the way forwards with any logical thought ..anybody with 1 grain of sense knew what was going to happen 2 years ago We have a society now ,which, by and large, is poorly educated and will be swayed by browns antics. the worry to me is that if this pm actually gets away with this shambles then we are all in deep trouble.
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#267 Japanbytes
Because FRB is not widely understood. It is opaque, fraudulent and is instrumental in creating bubbles and boom and bust cycles.
Mainstream economists dismiss any questioning of the Money Multiplier by labeling critics as cranks. But the would wouldn't they!
There are many thoughtful intelligent people
who have taken the time and trouble to read and digest the smoke screen that surrounds the creation of money. Sustainability must be on the agenda in any future discussions on money theory.
"The Money Reform Party needs you"
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There are lots of thoughtful and some not so thoughtful comments here.
The overwhelming perspective is that we are stuck deep in the sticky, smelly stuff and expecting even more to arrive at any moment.
Given last week's unemployment figures in the US and the knowledge that they are further into the recession (slump?) than we are the general picture is not hopeful.
What is also very apparent is the concern that UK government policy is quite wrong.
Now at this point I should declare an interest in that I am a saver, a pension fund holder, reasonably salaried but with no debts at all.
I have taken a tolerant view of government action to date. I appreciate their concerns, have my own reservations and observations but am getting increasingly bothered at the absence of any strategy other than throwing taxpayer money at the problem.
The government argument is that by encouraging consumer spending and public borrowing the effects of the recession can be mitigated. Clearly they fear mass unemployment, huge welfare payments, an asset value collapse, unpopularity and electoral defeat. They castigate the Opposition for doing nothing - I am not really sure what an Opposition can do anyway - but are not really producing any perceivable benefit of their own either.
The argument that it is impossible in the face of recession to do anything is a strategy I can understand. You can't rebuild the economy until it has had a hard landing. Also in trying to avoid a hard landing you might do more long-term damage.
I think the government is at risk of causing massive long-term damage to the economy by its policy of spending. Massive deficits will lead to inflation and high taxation. This will deny us the necessary space to rebuild the economy after the slump (recession?).
It is now imperative to begin planning what will happen once our economy hits bottom. We will need to restructure our economy towards employment and value creation. This means manufacturing industry not services.
The idea that this country can go forward selling houses and insurance to each other is, and has been, a ludicrous fantasy. For the government to direct public policy to the continuation of what we have had previously is absurd. We need radical change and we need it now. There is no sign of it at all.
Public policy seems directed to one goal and on goal only: get Gordon re-elected even if it means we have to sell our children into slavery. This is unacceptable and the government must go and soon.
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you have to let a stone fall all the way down until it hits the bottom, you can deflect it a little bit.
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So the 600,000,000 GBP we are giving the banks is not real money is it? .. Sorry, I should know this stuff by now.
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excuse typo should be 600,000,000,000 GBP not 600,000,000 GBP
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#298 "" ... but, equally importantly, don't fall into the trap of believing that all problems are easy ones.""
... or even solvable! Many problems have no solution at all, or no solution other than by trial and error. This is why we need to beware of politicians promising the impossible.
One Welsh politician admitted last week that things were "bloody" and he hid not know when and how they were going to get better. He was attacked for this honesty by an opponent who told him to "inject confidence" into the Welsh economy - as if this could be meaningful in the context of a far wider problem.
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Hi Sasha,
One Welsh politician admitted last week that things were "bloody" and he hid not know when and how they were going to get better. He was attacked for this honesty by an opponent who told him to "inject confidence" into the Welsh economy - as if this could be meaningful in the context of a far wider problem.
I think its fair to assume that when elected politicians (or any for that matter) have no idea how to fix a problem, its time they stepped aside.
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There's a bitter pill here and it needs to be swallowed: we gotta live within our means. If you want a higher standard of living, then find a way to make that money. Sounds crazy eh? Cheap credit made many of us feel far richer than we ever were. That bubble's burst and the government is attempting to play the big spender now that individuals can't. That might have worked before the 'global economy' came along, but conditions are different. The levers don't work, leaving Westminster with really only a lot of hot air, and sound-bite economics.
Take as an example, one mortgage lender - standard life - after the two big rate cuts it's dropping its standard variable by... 0.9%... from the start of next year. Owning various banks won't make much difference as wealth will simply move on out elsewhere.
Wouldn't it be far easier to just take all this on the chin? I could respect that approach from a party politically too - cruel to be kind and encouraging personal responsibility. We could do with a bit of that all round.
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anyone seen what Clarkson has to say
http://news.bbc.co.uk/1/hi/business/7766057.stm
LOL !!!
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@300
FRB is the basis of our banking system, and all the money that has been pumped into the banks is in an attempt to keep the system up and running.
The £37bn bailout was to cover increased reserve requirements.
Now that base rates are dropping to head off deflation, there is very little scope for the banks to restore their lost reserves, with ruinous lending and borrowing rates.
We will have to come up with a much bigger bailout if collapse of the economy is to be averted, now that we are all debt junkies.
The problem is that we don't have any money left to do it, and will have to borrow from the IMF or worse.
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Comment 301 : stanilic
Can I recommend this article by Roger Bootle, from last weekend's Telegraph:-
http://www.telegraph.co.uk/finance/comment/rogerbootle/3536572/Roger-Bootle-How-on-earth-did-we-get-into-this-mess.html
Absolutely key to dealing with this economic mess must be to recognise how deep it is, how misguided has been the race-to-riches of the last 10-15 years, and how living in unreality ensures a post-comedown level that is far lower than it would have been had we been less infantile in our outlooks.
I take from Mr Bootle's article the following section as being the most important realisation that we, as a nation, need to make:-
"The scale of the shift in resources implied by the need to adjust the international trading aspect of the delusion is widely underestimated. Our overall trading position, including services and investment income, has been running a deficit of roughly 4pc of GDP. To bring this to balance would require a corresponding squeeze in the other parts of the economy. The public sector is supposedly going to trim back a bit but the lion's share of the adjustment will have to come from consumers.
What will happen initially is that we will buy less from abroad, because the stuff is relatively more expensive, including foreign holidays. But if we are to recover from this ghastly mess the process will have to include strong growth of exports. As and when that happens, it will boost GDP and employment but it will do nothing, directly, to boost consumption. In other words, there will be years ahead when the growth of consumption is below the growth of GDP, pitiful though that might be.[my emphasis] For some time, we will be making additional goods and services for people abroad, without the quid pro quo of receiving imports in return. We will be doing this in order to reduce our borrowing from abroad."
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309,
worse = declaring ourselves Iceland (aka Bankrupt) ?
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Advice to everyone;
Stop spending money.
Prepare you own meals from raw ingredients, don't waste money on prepared food.
Economise like mad.
Get your credit paid down as fast as your circumstances allow.
Don't trust anyone who offers you anything on zero interest credit.
Get your family close to you, maybe have your parents move in and get what you can for the house.
Just take the Cold turkey and live within your means. Do that and you'll be alright.
If you ignore this, and buy the garbage that many are trotting out about a 2009 recovery led by consumer confidence, you'll be in far deeper doo-doo than you are now.
Don't worry about companies needing demand; the best run ones will survive and come out stronger, the poorly led ones will go to the wall, which is good in the long term. Look at Tesco, seeing "only" 2% organic growth, and Woolworth (who were rubbish before all this).
Evolution; painful, but it makes things better in the long run.
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Comment 305 : sashaclarkson
"#298 "" ... but, equally importantly, don't fall into the trap of believing that all problems are easy ones.""
... or even solvable! Many problems have no solution at all, or no solution other than by trial and error. This is why we need to beware of politicians promising the impossible.
Trial and error? Come off it! Trial and error's about teaching schoolchildren how to think, not a serious technique for dealing with adult problems.
I think it was Douglas Hogg, back in the 90's, who was interviewed after coming out of one of the endless negotiations in the Balkans. The interviewer asked "Do you think you've reached a good solution here?", to which Hogg replied "We're not expecting to reach a good solution. We're trying to get to the least bad one".
Something to bear in mind in these days of compulsory positivity?
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#309 ok but dont expect people like me to help this government. as soon as the alliance and leicester drop their savers rates again ..thats it its all coming out and being spent in cyprus.... this is the banks problem ..on 1 hand they have mr brown telling them to pass on rate cuts...on the other hand they have people like me saying"to hell with this country lets draw all the money out"we have nobody and i mean nobody that has a clue what to do....we are all,in general,poorly educated and overpaid .the shower that we got now.king hi rag bag monetary policy , the fsa and treasury officials should all be sacked.estate agents and solicitors made a fortune out of the over inflated housing market should pay back some money to the banks.then call a general election and get some educated people in to run the economy probobly from industry and engineers.
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HSBC makes £1bn credit available - BBC headline
Alan Keir, co-head of HSBC's commercial banking, said:"This is new money, new money *to support struggling small businesses that bank with us*."
Meanwhile, splashed on the front page of a Sunday newspaper is the article that Northern Rock is actively repossessing like crazy, totally contradicting the government's *great dictat* that repos should be delayed for 6 months !!
In previous blogs, there were many who wrote that they were taking their account(s) out of HSBC and putting them in Northern Rock because HSBC was *not* toeing the government's party line !!
Well, I wish them Good Luck and Merry Christmas if they need to borrow more to keep afloat because NR is so *NOT* lending and HSBC will only lend to *their own customers* !! Something about charity begins at home !!
Doesn't this show clearly that this, a bank that does *NOT* want the government money is the one able and willing to lend to its own customers who are/were prudent and well managed, belies the government's spin about how they, and only they, know how to solve this crisis ??
Doesn't this show that the government's free-for-all spend-and-lend policy has a disastrous effect on the economy and that the money should be better focused on those businesses that are well run and just needs working capital (i.e. short term loans) to tide them over the hard times ??
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Poor Brown; I begin to think that far from being cynical he really just isn't very good at business and economics.
Just a man with good intentions, but little or no ability to back it up with delivery. Obvious in hindsight I suppose; he never ran a business, never turned anything into something worth more than it was before he got his hands on it. Just a political person, competent at talking and good at getting his way over others.
So what does a man like that do when faced with the proof that his ideas are wrong? Well, lacking the talent to understand why it was wrong in the first place, he lacks the ability to diagnose the problem. So he goes into denial and repeats his errors. He lies (encouraging people to buy depreciating assets, that's immoral) and the hopes. He probably even prays for it to come right. He surrounds himself with equally unproven people who agree with him, so they all gather together and reassure each other that they are right; that it'll work through; that good news is around the corner.
Sad and pathetic, but the consequences will be felt by other people.
Mr Brown will be judged by history as probably the Prime Minister of least validity ever; no General election, not even a party election, and a failure. If it wasn't for the cynical edge to the man I'd even start feeling sorry for him, but it's the poorer people who really deserve the pity.
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Vauxhall's future now depends on the US bailout of GM !!
"He (a Vauxhall spokesman) said the company and other vehicle manufacturers had instead "pressed" the government to help consumers obtain the finance they could then spend on cars."
Do these people live on the same planet as we do ?? More government money so they *can spend that on new cars* ?? This is so typical of the American-style robber baron capitalism of the early 20th Century !! This "I don't care if you die so long as I can make money" thinking is what got us into trouble in the first case !!
That poor, poor boss of GM offered to work for $1 per year *salary* !! What he did *NOT* mention was what other perks he is or is *NOT* giving up (like private jets, "performance bonuses", etc.) !!
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#310 I recently attanded a discussion amongst some fellow leaders of successful manufacturing businesses, our bank, and a government-connected economist.
You would not beleive how disconnected this guy was. I challenged him the the Balance of trade was THE real issue, that it was this which bled the country and made recovery from any downturn almost impossible.
His response: it wasn't a problem with a floating currency as it was before. This guy has some influence, people turn up to listen to him and he doesn't see the problem in trading at a deficit of £4bn net each and every month!!!!!!
I must say that the growing band of peole now coming to that view were conspicuosusly absent over the last 10 years. I've felt like a dinosaur and have sometimes been treated like one for going on about this.
I'd like Messers Peston & Bootle to produce their articles up to two years ago warning of this and calling Brown a clown. I must say they got past me.
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#313 "Trial and error? Come off it! Trial and error's about teaching schoolchildren how to think, not a serious technique for dealing with adult problems."
I was thinking from a mathematical/scientific point of view :-) Many "adult" problems are solvable only by approximate methods, hopefully with a reliable error bound.
Quantum Mechanics in Chemistry is only accurate for the hydrogen atom - everything else is approximate. The Periodic Table is proof of this: it's not what would be expected from the hydrogen based model.
Economics is much less of an exact science because human behaviour is not entirely rational or predictable. Bad economists seek to impose an ideology; good ones try to come up with a reasonable working model which can be refined in the light of experience and new facts. All models will be at least somewhat coloured by the social prejudices of the authors.
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#310 Your analysis is OK as far as it goes. What you don´t explain is exactly what goods and services the UK will produce that the rest of the world might want to buy.
The manufacturing base is too small to cover this - and I don´t see any viable method of recreating what we have gleefully destroyed these past 30 years. Given the magnitude of the problem that is being revealed on an almost daily basis I would be amazed if anyone wanted to buy our financial services.
In any event exporting doesn´t seem to promising at the moment. If the US bails out its car industry then it is reasonable to assume that others, perhaps specifically the Germans, will retaliate and bail out their car industry. From such actions are born trade wars. We´ve been there before.
About the only thing that the UK has a clear competitive advantage in is arms manufacturing. We´ve also been been there before.
This whole scene is akin to a cheap thriller -you can guess the end long before you finish the book.
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Let the bad car companies go broke. If people want cars then good car companies will supply them. Better.
People need to find something else to do than make products badly that others don't want. Giving them $100bn never mind $25bn won't help at all, just delay the inevitable a year or two. Their rubbish, suck it up.
Baling out the car makers is acceptable as a stop gap, so long as you don't think they're going to become great again just with money; they got into this because they have crap management and workers, you won't turn it round until you change that - starting with the management and then getting onto getting the workforce to face reality.
Obama has a decent vision, wanting a massive investment in competitiveness-enhancing work (best internet connection, that sort of thing which will make America more able to beat off competition). Brown will just want to give it to "hard working families" to piss away on new plasma TV's from Korea.
Honestly, the guys a buffoon.
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ExcellenceFirst Message 310
I read that article by Bootle last week as well as many others. These underpin my concerns.
We are clearly going nowhere at the moment, nothing works and the outcomes of current government policy suggest an even more dysfunctional future than the present.
Perhaps doing nothing is better than doing something.
I had a discussion last week with a colleague over sourcing. At long last people are now saying why don't we find UK suppliers rather than run off to China because it is `cheap'. What does `cheap' really mean these days?
We decided the term one should use is `optimum': optimum quality, cost and supply chain. My view is local sourcing has to be best in the medium term as it involves less stock-holding and expensive freight. What an opportunity for UK employment?
Yet UK businesses are strapped for the funds for the necessary investment and all the government can do is scream at the banks.
I am old manufacturing man. In the last thirty years I have had to make my living as a supply-chain man. We have to go back to the idea of producing value. If this means we dump globalisation as it is currently defined, well so be it.
We need to focus on what works for the country and not what just works for the party. A national government to rebuild our economy though orchestrating an industrial revival would not go amiss.
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Lady Sasha
YOU ARE BACK.
THINGS HAVE ONLY GOT
WORSE,
GREETINGS FROM
NEW LABOUR.
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TIME FOR NEW TOPIC MR P???
THE FINAL DAYS OF UK MANUFACTURING.
PERSONALLY DELIVERED BY GORDY
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I would just like everyone to consider Goldman Sachs and how they have behaved.
They became almost a monopoly on giving advice to governments. Clearly from the way things have gone rather than being geniuses as they were often presented they have turned out to be foolish. This is both in their own company trading and the advice they have given.
The only area where they showed any sense was in squirreling away salaries and bonuses for themselves.
The Buffett statement of " it is only when the tide goes out you discover who has been swimming naked" applies here.
Those who run Goldman Sachs should be ignored because of their track record. Why should we listen to them at all? They seem only to benefit themselves.
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I don't know much about biology
I don't know much about geology
I don't know much about geography
But there must be something for me
I talk about the ghetto-ology
Gheto-ology. Life in the ghetto
Starvation frustration
I've got an 'A' in starvation
I've passed my grades in sufferation
Life itself was my teacher
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how come brown doesnt push the energy companies to reduce prices? that would free up money for people to spend.also i se brown says he hasnt forgotten savers...ok right hmm how come brown is telling mugabe how to run his country? wow theres a match brown and mugabe ....i would say 23rd and 24th in the league division 3.also have you also noticed how many scotsman are in power now? even that super efficient speaker is a scotsman.yes mr brown ,not even elected by his own party, god its true a country deserves what it gets .
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Comment 316 : bogbrush
Gordon Brown
"Just a political person, competent at talking and good at getting his way over others"
Yes. Little changed, fundamentally, from the outspoken student activist of the early 1970s. Ditto Hain and Straw, out of the same stable. Also I expect, though I've no direct experience of it, Balls and Miliband in the 1980s.
The key to our political problems is the open-endedness of the concept "he who wins the argument earns the right to decide policy". Because giving the spoils to the winner of the argument is no guarantee that we get the best policy. There are far more effective ways of winning arguments than by pitting policy against policy.
Brown/Labour's obsession is with never having to confront the possibility that they are wrong. Using Justin Frank's words, describing the President in Bush on the Couch:-
"Not only do they fear discovery; more deeply they fear discovering, having to take in any evidence that their way of thinking is flawed"
To them, avoiding any possibility of being made to feel uncomfortable is far, far more important than demonstrating the correctness of their policies. Because, to their minds, there's no possibility of their policies being other than optimal, so having to defend them's a futile waste of time.
Again, using Frank's words:-
"The ease and frequency with which they misrepresent the truth gain new resonance when seen in the context of personalities that consider themselves exempt from the laws that govern others. Why don?t they tell the truth? Because they do not have to. They get away with lying not because they are good at it ? they?re not ? but because in their formulation there?s nothing to get away with: The laws of accuracy mean little or nothing to them."
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Bluff and Bluster, Boom and Buster Brown announced yesterday that enough is enough in connection with Zanu PF or did he mean zaNuLabour?
Ladies and Gentleman our unelected Leader must go.
House prices have collapsed, companies collapsed, mass unemployment, repos, mega personal debts, mega Govt borrowing, savers under threat, mega tax rises to come??.total depression and austerity for many years to come.
If youve got mega debts and in negative equity then bankrupt yourself for 350 pounds and in 12 months you?ll be free to start again.
Dont suffer because ONE MAN has totally mis-lead you for the last 11 years. Dont suffer. Start again.
WARNING: Labour Governments in the end always damage your WEALTH, HEALTH and RELATIONSHIPS.
Your home, your job and your family are a risk if you do not vote them out next time.
Here are some helpful websites for those affected by Labours wholesale mis-management of this country?s affairs.
http://www.nhs.uk/Pathways/depression/Pages/Landing.aspx?WT.srch=1
http://www.insolvency.gov.uk/
http://uk.news.yahoo.com/4/20081206/tuk-credit-crunch-hurting-relationships-dba1618.html
http://www.relate.org.uk/
http://www.jobcentreplus.gov.uk/JCP/index.html
More to come????????..
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Man hungry, I mean get angry
it's just the same thing every day
innocent ones getting robbed
same thing every day same thing every day
because of the rich mans administration
it has polluted many nations
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#329 brown probobly likes your idea!!! make ureself bankrupt....mmmmmmm....i might just blow a few grand overseas...come back skint borrow 200 000 grand on a bar in cyprus at -10% interest. (Thats minus)then make a complete hash of it then come back to the busted uk and sponge off the system mmmmmmm yes sounds good...if u cant beat them join them.
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Is the third way the path between order and chaos?
[Clive James kicked this off with his missive on creative spaces - http://news.bbc.co.uk/1/hi/magazine/7768021.stm - the third way mentioned has nothing to do with a certain political party.]
The first way - under-organisation (unsustainable - in an emergency, critical systems are unavailable) - typified by a lack of structures and processes, with every case being exceptional
The second way - over-organisation (unsustainable - in an emergency, critical systems are hamstrung by red tape) - typified by rigid structures and processes, with no exceptions tolerated
The third way - semi-organisation (potentially sustainable - in an emergency, critical systems are present, but are flexible enough to accomodate the circumstances) - typified by flexible structures and processes, which allow for exceptions
The third way seeks to balance turbulence against itself; it seeks to build dampers into the system, so that when the system is stressed, the dampers absorb and dissipate the excess energy.
Engineers build bridges in this way - but do politicans build their social systems with this in mind? Is our society and culture built this way? Or is it the case that the State, in particular the welfare, education and taxation systems of the State, has been designed with a particular lifestyle in mind? A lifestyle that has become inefficient and toxic? A lifestyle which no longer exists? A lifestyle that might have been the norm 50 years ago but has now changed, and finds itself grating against social systems designed for a forgotten age?
Perhaps the correction in our economies is a natural consequence of this inefficiency. As the end of the first decade of the third millenium AD approaches, perhaps this is an opportunity to modernise these relics.
Even if our elected leaders could see this vision - which appears unlikely, given their ad-hoc approach to strategy formulation - the politicial will to implement these changes is unlikely to be forthcoming. It's too hard. All our leaders want is to be in power. Meaningful reform requires hard work - it's so much easier to tinker, so much safer, so much more *comfortable* to have to do nothing meaningful at all.
It seems that in order to quench the inefficiency in the State, we must quench in the inefficiency in the processes that create the State. These being the process of elections, and the process of government. If those processes are inefficient, they will of course produce inefficient outcomes.
And so we find ourselves back banging at the door of democracy. As civilisation has progressed, the people have slowly but surely wound back the yolks imposed by the rich and powerful. This process has produced the State we have today - but it's not good enough. The process is not over. The UK in particular is saddled with an archaic political system that, through the method of counting votes, produces governments unrepresentative of the vote; the same system also possesses an unaccountable upper house. These inefficiencies undermine the effectiveness of the system, and leave the UK vulnerable to unscrupulous politicians, external manipulation and unforeseen events.
We can try and pretend these problems aren't hurting us, but we all know that if there's two people in a race, and they are identical, EXCEPT that one is half as efficient at conserving energy, which one of those two people is going to lose that race.
It seems the end-game is simple. Reform, or die.
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So, in suimmary, we have a government which:
promises to borrow to cut our taxes itemorarily f we spend more but will then increase tax to repay this, with interest, the following year;
compels the banks to maintain higher reserve ratios just as the recession bites;
offers them the necessary capital to maintain these reserve ratios at rates so penal the banks' priority is to repay the Government first;
provides credit insurance packages at effectively unaffordable rates;
presses the banks to maintain the 2007 rate of lending (i.e. continue to expand their loans books) when excessive lending was part of why we got here in the first place plus, the banks don't have the reserves necessary anyway;
sells gilts to raise the funds it needs, then effectively obliges the banks to hold these as their reserves, in a completely circular process except that, of course, commissions are charged at each turn.
Is anyone surprised ths isn't working? - unless the whole aim is to create the impression of activity in the run up to an election? How long until the printing presses will be working shifts?
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Comments 318 (bogbrush), 320 (armagediontimes) and 322 (stanilic)
Thank you all for your comments.
I think the key to dealing with the Imbalance of Trade problem is to recognise what's at its heart. Will it rectify itself, or are we, and/or other nations, putting such obstacles in the way that it will never recover, as things are?
Who needs to change what they are doing? Can anything we do be successful if, for example, the Chinese are not prepared to act in the same direction at their end? If the free trade/floating currency route is, for the moment, not possible, what do we need to do to minimise the damage to our nation - weighing this up counting both the near-term and further into the future. It's no good doing something that works wonders for a couple of years, but b*ggers up any possible progress for the next fifty.
How can effective decisions be made about exactly where we're going to generate additional exports until we've got more information about what the terms of trade are likely to be? Bretton Woods II must come first, surely?
But the hopeful point is that we're just as capable as any other nation in the world of producing value, and thereby creating prosperity. But, perhaps more than most, we need to re-learn that there are no short cuts to this position - they're ALL illusory.
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Comment 332 : Isi-92
Interesting thoughts, though the yolks would be more messy than burdensome, wouldn't they?
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Bizarre as usual????????????????
GORDY is on the Mugabe scent,a little
diversion to take the heat off his own
problems.
THE MUGABE ISSUE COULD HAVE BEEN
DEALT WITH A DECADE AGO.
SEEMS THEY ARE BOTH IN THE SAME
CLUB.
THE UNWANTED LEADER CLUB. .
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the first thing in busted britain is to improve education. the government keep telling us that standards are improving year on year since 1981!!!! well i dont believe this for 1 moment.(they must have been a bit thick in 1980) where i was working some of the young people ,in an electronics enviroment, cant do simple maths and simple logic tests. once we have sorted the education system we can start showing people the real worth of money jobs ect. everything now is get rich quick. people are not educated enough to realise this is a false fallacy. houses are not worth the current market prices....wages are far to high for a basically an unskilled workforce. how can the bbc justify paying a bloke £600 000 a year to play a few records in the morning?...its discusting. theres no easy fixes ,in most peoples life times on here we wont see the benefits. education education education sounded good mr blair its a pity you never done anything about it.
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dam it i did a 6 way accumulator arsenal won chelsea won rangers won liverpool won man utd won...and yes u guessed it a scotsman messed up again celtic...lost... still thats the way brown ... irrisponsible spending... blow all your cash on gambling..0% tax also..which is surprising..hay brown you forgotten something? and dont keep calling him gordy.. it adds somekind of respectibilty to him, which he certainly does not deserve.
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Javaman,
Nice riposte. Thatcherite :)
My Parents, their parents and their parents created sewage systems, water, gas and electricity supply systems. A world respected infrastructure and education system and a manufacturing base second to none.
Our manufacturing markets were sold to the USA in return for arms.
The rest of the family assets were sold in the 80's and 90's (Started by Thatcher).
If 'we' still owned these, and our collective gold reserves, this country would be on a much better footing. Its not and millions will suffer severe hardship now.
This could have been alleviated by REAL prudence.
'great' BRITAIN has been bankrupt for 30 years.
Any of you who bought gas, electricity, water, rail etc shares are part of the problem and should go away and think what you have done to us.
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For Mr Curzon.
The CZ government is only just waking up to this crisis, they predict it will hit in about 4 months. Get prepared early, the ODS and CSSD have no concrete plans installed.
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It's all very well praising post #44 for his insights but the quote he gives comes from henry Hazlitt, a fundamentalist economic liberal and free marketeer and therefore one of the inspirations behind the very movement which got us into this mess, i.e. deregulation, financialisation and all the other dogmas of the wall street consesus. It is all very well blaming New Labour for this crisis, and sure they could have handled it a lot better, but much of the policy straight-jacket they have been in is one imposed by their determination not to go against the thatcherite/hayekian consensus which has ruled since the mid 1970s. If one good thing does come of this crisis, it will be the death of the disembedders; those who believe that the state should have no control over what the markets desire.
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the government keeps saying they need the banks to resume lending to normal levels now that the boe has reduced interest rates.
what is the normal lending level?
if it's the level of lending we have seen in the last 4 years then isn't that putting us back in the same cycle that got us into this mess.
if its pre-2000 levels then are we already there?
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It's far from the full answer, but we need to make a start.
How about declaring a 125% first year allowance on investment in plant & machinery? At a stroke we get businesses to spend on competitive activity. That stimulates the activity amongst capital providers (I mean makers of capital equipment, not bankers).
If we have to "fund" this (yeah, like everything else is ....... lol) then do it by increasing Corporation tax, thereby further INCREASING the incentive to invest in plant. Hell, we in my business invest hard anyway, but if I had that situation in place I'd probably throw the kitchen sink at efficiency investment.
This bunch of divs recently reduced Corp tax and reduced plant allowances, thereby creating a double disincentive to invest. What else would you expect from people who haven't a clue how a real business is run?
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No 337 RVP.
Education is a cultural thing. It is a LOT to do with the prevailing memes and language modes in a society.
My 4 year old talks about tractors and lorries. He is interested when he sees ordinary people welding up their ehicles (I live in East Europe)
My friends 4 year old in london talks about transformer toys, football and pop celebrities.
Which of the two would be more receptive to REAL education do you think? Science, Math, logical thought?
Just modifying the edu system in the UK overnight just wont cure the problems short term - but in 50 years... Yes.
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#312 "Don't worry about companies needing demand; the best run ones will survive and come out stronger, the poorly led ones will go to the wall, which is good in the long term."
Not true 312 and that's a big part of the problem. Perfectly good companies will go to the wall now - and have been doing so for some time. The human cost of 100's of small businesses going down is going to be like a cancer across the whole country with obvious knock on effects; job losses; repossesions; bankruptcies etc etc.
The Government banging on about saving banks to save the over all financial situation is just spin and rubbish. They should have bailed out the public, who, in turn, would have bailed the banks out by spending and investing. It's not rocket science.
But, as the Government have taken the other route, they could, at the very least, remove some of the worst culprits in this debacle. But no, the same old foxes are still in place to run the chicken coups. And sadly, those foxes do not live on the same planet as normal people. They are so detached from real life they are immune to what is really happening. And even if you point out the cats out the bag and we all know what's been happening, they just go on saying the moons a balloon!
Take a look at this article for an example of how well our banks are being run:
http://www.sundayherald.com/news/heraldnews/display.var.2471816.0.hbos_faces_hard_
questions_overuse_of_troubleshooters_
who_misappropriated_company_money.php
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Mr Curzon,
The MD of my CZ company said to me, 'we have good orders for 4 months but then they reduce'
'But its ok, we will get more work from our Swedish sister company'
Here is naivety in management and if you REALLY have production plants in CZ you need to be very careful of this.
The news outlets here are 'positive'.
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#339 ok fine but brown has had 11 years to put right thatchers disasters. hes not even makes start in fact hes done the ultimate...made thatchers government look pretty efficient. the problem with the uk is that science maths ect arnt cool...even the media say it.....were stuck with moyles(600 000) playing records......simon (somebody or other) talking about something or other on prime tv...and russel brand....wow the finest stand up comedian.!!!....eric ernie tommy must be revolving in their graves.the truth is nobody cares as long as they can flog some rubbish on ebay and drink gallons of beer ..whose bothered.
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I'm going to assume the reason we're seeing the insane idea of printing cash being floated widely in the media is because it's another Labour plan to put out a few feelers to see how receptive we are to the idea.
It's absolutely insane.
You can't just print cash and hope to get away with it.
I assume some beautiful mind at the treasury has figured out that if we simply print 100bn we don't have then that will devalue the currency by (say) 10%. So that's okay. We can live with that. They'll say.
Noooooo!
If they so much as print a single fiver it will devalue the currency by 90%. Because the whole world will know that once you get a taste for these things (like power Gordon) then there is no stopping some people.
But they're going to do it anyway. I can feel it in my bones.
We are utterly doomed.
We need more reporting of the Bank of Zimbabwe's chairman lauding Brown for following Zimbabwe's economic polices.
Cholera anybody?
Would you like ID cards with that?
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ExcellenceFirst,
Thanks. After consideration, I must say that from my philosophical standpoint, all yolks are burdensome, by definition. They may also be messy, but they are always a burden.
I can't even concede that some yolks might be necessary, in order to maintain a stable society - because our environment is constantly evolving, stability is ultimately an illusion. In this sense, stability is undesirable and thus yolks that maintain it will ultimately be toxic.
So, I answer no to your question.
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#345
We must disagree.
Of course, some good businesses go but on the whole it'll be poorly run ones that fail. Those failing to attend to their customers needs or those with high gearing and slack management.
I'm not against interim suport but only if you know where it's taking you. Just spraying money around to consumers to "save" banks is, well, daft.
I'll agree on banks; I wanted to see them let go bust right from the start. While it would have been rough, all that toxic loss would have spread to other countries and we could have used all this bail-out cash to create a "Retail Bank of England" and attend to ordinary liquidity needs.
Recessions are endurable and can have some silver linings so long as you know where you're trying to end up. This lot don't have a clue, except they quite liked that economy where house prices went up like crazy and everyone invented money so they could blow it all on a bloated public sector. Typical socialist dream; loads of wealth to blow without any need to create it in the first place. Like all dreams, it's time to wake up and return to work.
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ExcellenceFirst,
I have now looked up YOKE on wiki and can now possibly see where you were coming from. Looks like I laid that one on myself...
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#267 re:fractional reserve banking
Cos its seriously messed up and is the root cause of all the economic problems imho. Of course its not uttered in the maintream media.
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Lending is not the answer, it is the lack of real "equity" capital in the system that is the problem
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329 Bankrupt,
If you do not understand that Mr Brown was elected like every other Member of House of Commons, it is doubtful if the rest of your contribution will be of any interest.
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Re post 329
'If youve got mega debts and in negative equity then bankrupt yourself for 350 pounds and in 12 months you?ll be free to start again.'
This is entirely misleading, yes your debts will be written off, however your credit rating will be z minus or whatever the lowest rating is FOR THE NEXT 6 YEARS. You will not be able to obtain a bank account with a Debit Card. let alone a Credit Card. You will not be able to get any kind of personal finance, other than the dodgiest loan shark type deal. You will lose any assets that the receiver asseses as having a saleable value of more than 3,000 pounds..goodbye house, goodbye car (unless you can prove categorically that the vehicle is essential for your work).
In short, going bankrupt is NOT a step to be taken lightly for most people. I bet that we will see a huge increase in IVA's rather than bankruptcies in the next few years once people realise what is involved..
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re: 335
true, you also become unemployable
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whoops should be re: 355
.. but at least creditors stop calling you 200 times a day
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#228 ishkandar
The comment
"On the other hand *if all the bankers were to go to the government with a plan which they all agreed to* and which would allow the economy to be rescued then they ought to be able to persuade the goverment."
Was made in response to an earlier post accusing me of advokating the government be dictatorial.
So how can there be a one-size-fits-all plan from such diverse thinking ??
Well it can't, but that doesn't mean they shouldn't try. Provided enough can be made so act together then it doesn't matter if a few are left outside.
I think your response and your claims of what the banks think just about make my case for me. Rampant self interest has got us into this mess and while ever the main purpose remains one of serving only our own ends we have no chancew.
Is it not better to all gain half of what we want than lose everything. These people are gambling with OUR LIVES.
The answer is not simple and it requires some of these people to give a little. At the moment only the ordinary people who are stuck in this hole are paying the price - UNEMPLOYMENT, REPOSESSIONS, TAX RISES. Yes, they helped create is by their stupidity, the most stupid thing they did was to belive the government, business and the media who sold us this nightmare.
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#233 ishkandar
Yes, put money into British Industry. I happen to work in one of the only industries which is manufacturing and exporting.
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It's been an interesting few weeks but things are getting a bit repetitive.
If any of us come out of this mess we can meet up on the other side.
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH !!
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359 iwanttoscream #233 ishkandar
I read with alarm and dismay in the paper this morning that the government plans to throw money at university start-ups that have not yet turned profitable.
In my experience university start-ups are a waste of time and taxpayers money.
No doubt there are some that do eventually end up profitable.
But there are an awful lot more that just waste taxpayers' money and distort the market place that is already occupied by private sector companies.
Typically university personnel think they have a good idea, get backing, fail in that endeavour but then mess up the rest of that market segment.
In order to feather bed and protect the universities the government rides rough shod over existing competition legislation citing regional development issues.
And of course the taxpayers finance all this largesse. But of course this government policy gets rid of taxpayers, replacing them with perennial students with outstretched hands.
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#329 We do not have a directly elected Prime Minister in the UK. Perhaps we should have. But there have been a number of Prime Ministers in history who have "inherited" the office and then not gone to the country. The last was Neville Chamberlain in 1937. There are many good reasons why Brown should go, but, at least constitutionally, this is not one of them.
#348 "....the insane idea of printing cash ..."
Where does money come from? These days, most of it is not even printed: it is "created" by Banks' ledgerbook or spreadsheet entries. If your Public library stll has a copy, I would recommend J K Galbraith's " Money - Whence it Came, Where it Went". Very readable and informative. It's also available online 2nd hand. In Chapter III, JK states: "The process by which banks create money is so simple that the mind is repelled".
If the goods and services available in an economy increase, as does the population, then money must be "created", or there will be deflation, which causes other problems.
Nor does a gold/silver standard guarantee "sound" money. In Andalucia following the 100 years following the Spanish American conquests, the increase in coinage caused a five-fold increase in prices.
In the last hundred years, governments of all complexions have pumped "created" money into the economy when it suited them, usually leading up to an election.* Unfortunately, at least for the last 60 years or so, whenever this has happened, too much has usually gone on imports, and has led to an economic hangover subsequently.
*Notable exceptions were Roy Jenkins in 1970, Hugh Gaitskell in 1951, and Stafford Cripps in 1950.
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This comment was removed because the moderators found it broke the House Rules.
Unfortunately, the printing press approach to solving the problem is the poilitically-savvy one, even if it is technically the most disastrous. This will only change once the electorate learn, or at least are told, that inflation is simply another stealth tax - the tax you didn't vote for.
Even now with RPI at anywhere like 4%, or whatever it really is, bank deposits paying 1-2% before tax, are withering away while the depositers are powerless. This is nothing short of a disgrace - in effect it is a deliberate taxing of savers to fund overstreched borrowers.
The icing on the cak