Varley: credit to shrink for up to two years
One of the main contributors to what looks like a severe recession in the UK is a contraction of lending by our banks.
Which is why it's unlikely that a recovery will start until banks grow their lending again.
How long will we have to wait for that?
Well the chief executive of Barclays, John Varley, says in an interview with me for Monday's Panorama (8.30pm on BBC1) that it will take between one and two years for lending to stop shrinking.
He insists that banks are open for business, that loans are available. But he says that a reduction in the overall quantity of debt in the economy is absolutely necessary - although he concedes that the process is extremely painful.
John Varley also says that the banking industry is going through what he calls a public relations crisis, that it must apologise for what went wrong - because banks will not regain the vital trust of customers unless and until they own up to the sins of the past and say sorry.
UPDATE 09:12
Here are a few relevant quotes from John Varley.
He says: "I think that we will see the process of reduced borrowing play out over at least the course of the next twelve months maybe, maybe twenty four months. I think it's important to say though that the industry is open for business..."
Mr Varley stresses that credit remains available to businesses and households but that the amount available is "shrinking, it absolutely is, and that is a painful process; it's a process through which the world absolutely has to go and if you asked me 'when will it stop?' I think it will stop when asset prices stabilise.
"As soon as asset prices stabilise, then we will see the financial economy recover. And when will that occur? That will occur some time over the course of the next 18 months."
When he talks about asset prices, he means the price of property, shares and so on.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~36~RS~)
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"...until they own up to the sins of the past and say sorry..."
There could be a lot of startling revelations if the banking world were to enumerate "the sins of the past".
Does "sorry" mean never having to say I'll give it back? Forgiveness and reconciliation may only go so far.
I was a late post to Robert's Dec 19 article, so I'll repeat it here because it's a banking thing:
Deja Vu
"Like the financial disintegration hanging over us... [the] ...one of the 1340s was the result of 30-40 years of disastrous financial practices, by which the banks built up huge fictitious "financial bubbles'', parasitizing production and real trade in goods. These speculative cancers destroyed the real wealth they were monopolizing, and caused these banks to be effectively bankrupt long before they finally went under."
650 Years Ago: How Venice Rigged the First, and Worst, Global Financial Crash
by Paul Gallagher
Printed in the American Almanac, September 4, 1995.
http://american_almanac.tripod.com/pbgbardi.htm
Having bumped into the article that this extract came from, I followed links from the webpage to find more about the financial world of the Merchants of Venice. As financial wealth was a tad more tactile in those days than most of our modern day instruments, I was left wondering what happened to the massive quantities of gold and silver bullion that the Venetians had monopolized, hoarded, and traded on spread. Who made off with it?
Anyway, whoever was able to spirit sizeable fortunes away left a legacy for their heirs and successors to parlay into incalculable hard assets over the coming centuries. The financial world became more sophisticated and, until 1974, principally on the gold standard.
Intrigued by the link offered in post #80 to this board, I then wondered where the safe financial havens of the mid-14th century were (maybe caves or deep vaults were all that was on offer). I also wondered why the likes of modern day San Marino, Andorra, Lichtenstein, Monaco and other minnows were never swallowed into the nations that formed around them in later centuries.
I have my suspicions, of course, but I also wonder where our latter day Merchants of Venice have put their wealth to keep it proof from the current financial maelstrom. They surely knew it would come one day.
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Banks should fess up to participating in the greatest ponzi scheme theworld has ever known only then will public confidence [in freshly baked ponzi' pie in the sky ]be restored.
Doesn't sound plausible either way does it !!!
The only way out of debt now will be the oldest service industry in the world, appart from banking .
MPerrors will be turning their london residences into well kitted out brothels at taxipayers expence ready for the next olympics ,wait and see.
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If Banks make money by lending money, and they are not going to lend for a few years, so wheres the future profits for shareholders coming from ? Hmm That ones got me !
Oh maybe a 0% interest rate for savers, Loads and loads of money of Gorden (e.g the taxpayer) for recapitalisation ?
Still make profits for shareholders and no need to lend ! Fantastic ! Sit back and enjoy the the ride ! Unless someone is sitting on you of course.
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So, how come a significant number of politicians and commentators keep telling us that we'll be climbing out of the dive at the back of 2009/early 2010?
That would mean the oils of finance lubricating the economy nicely from about the second or third quarters of 2009 for us to see the positive effects by the end of the year. Since this seems highly unlikely, what is the realistic timeframe for us seeing the signs of sustainable recovery?
Also, square this away with the head of GM saying that he needs to shift millions of (rubbish) cars in the first quarter of 2009 in order to save his company's bacon. Has he had a word with Mr Varley?
How about no serious prospects of sustainable economic recovery until 2011 at the earliest? Has anybody told Gordon Brown, or will we continue to hear the patronising rot about how brilliantly he has positioned the UK for runaway success from late 2009 onwards?
Spin away Gordon. According to the polls, the British people are being taken in nicely. At this rate, you'll need them to cast their votes ASAP ... before you get rumbled.
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The problem will be to regain trust with the banks whilst the same people are in charge and more importantly, the same (bonus) culture that encourages greed.
It is a real shame we can't just swap out the senior management of the leading financial institutions and replace with successful managers of small-medium sized businesses, who are the savours of our economy.
Whilst a lot is made of the complexities of modern finance, the actual (senior) management of it is probably pretty straight-forward and based on common business sense, something that has been sorely lacking.
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Does he not know that Flash will print as much money as he needs.
Oh of course he did not sign up to Flash, that is why he will not get the new notes.
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Can we stop assuming that the only way to get finance is to borrow it.
At present rates of interest no one is going to lend to any enterprise with even a suggestion of risk;so it's either under the mattress, into gold, or as a last resort government bonds.
This means that the government has to do all the lending because they have got all the money.
Not a good idea if you make your money in the City as they will steal your clothes.
The other way to raise money is to sell a piece of the action.
This will mean offering a piece of the company at a discount on the present share price; so that the return is so good that a risk averse holder of cash will have to have some.
A rights issue!
At the right return, say 15%, in a well run business you will have no trouble.
When you are properly capitalised instead of having to dash off to the money lenders all the time, the small amount you need for day to day cash will be easy to come by.
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The credit markets have collapsed and will take a very long time to recover, if they ever do recover.
http://www.marketoracle.co.uk/Article7869.html
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lets not just blame the banks the vast majority of britons have binged on credit for decades now , the more material 'wealth' we obtained the more we wanted. it was allways going to end in tears it was just a case of when. that time is now so lets all who have borrowed take their share of responsibility and lets all learn from past errors and strive for a sustainable fair GREAT BRITAIN the best country in the world.
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I think what is happening right now is we are slowly returning to 'Normality' from the days of 'Irrational exuberance'. However it is the speed at which the tide changed that has caught out everybody. Most people had got used to living a life of credit with the assumptions; one that they would continue being in their job and in some cases gravy trains, two average house price would be half a million in another five years time.
In fact yesterday there was a report that said that the UK consumer has become more confident because our deluded Brown and Darling keep drumming up the message 'everything is hunky dory and we are going to recover by the end of next year'. The bounce back in the polls probably sums up the financial acumen of his country as a whole. It explains why we got into this position in the first place.
Personally I think eighteen to twenty four months sounds plausible assuming the worst is hopefully about twelve months down the line.
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Good morning from the Mad House. Varley
knows well that his employers - two of the greatest robber barons of the 21st century - only need to lower the extortionate rates of interest and charges suffered by their unhappy customers if they want to improve their public
image. They won't and they don't.
Shame about the company you have to keep to
do your job. Take care. Please try and have a bit of a rest this week-end.
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I have to agree with an earlier commenter that the banks have perpetrated the greatest ponzi scheme of all time.
In their short term rush for riches long term investors have been well and truly (place appropriate swear word).
As a result of the largess and the unparalleled culture of greed my "long term" savings have been decimated wit a 60% fall in the value of my pension and the collapse of endowment values (so much for the smoothing effect).
Indeed my pension pot is worth less than the total I'd invested more than 10 years ago having effectively been stolen by short term speculators.
To make matters worse those with final salary pensions (post office) see the government proposing to take over the pension deficit which I as a taxpayer will have to make up the shortfall whilst personally heading for retirement of poverty.
It's criminal and any executive with any sense of moral fibre would pay back the bonuses they effectively defrauded. But oh, if they'd had any morals or common sense we wouldn't be in this mess in the first place would we?
And if I hear one more MP blaming short sellers for the mess (David Blunkett radio 5) I'll die of despair. How stupid are these people - no really?
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Instead of continuing crying about how cruel the world is and how nasty the banks are should we maybe look at the real questions?
1) Why did people spend money they did not have?
2) Why the governement want to keep the same level of borrowing as before the credit crunch? To recreate another bubble? Doh...
3) Why the FSA, who did not see anything coming, is not only asking banks te recapitalised, which is fine, but is asking to do it at a much higher level at a time when capital is scarce and expensive? This will obviously prevent lending and put further unnecessary pressure on the system.
4) Many people here have critisised Barclays for not taking the money from the governement and went to the middle east to raise capital. Well first Barclays seems to be in much better shape than most of the other UK banks (not to mention the Americans!) and second few days after Barclays made its annoucement who was in the middle east? Gordon Brown asking for money!!! Well cut the middle man and stay independent!
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As predicted by Chelyabinsk a couple of weeks ago Robert Peston is being given his own BBC SCAM special on Panorama on Monday 22nd December masquerading under the title of the New Capitalism.
This will make great Christmas viewing for all the family!
The sound track should be Moby's Extreme Ways (The Bourne Identity) the lyrics are so apposite and the opening riff is suitably spooky and alarming.
Beware Robert Peston's "new, kinder, caring" capitalism message. There is an unreconstructed socialist message of the old school lurking here.
In recent weeks Robert Peston advocated the nationalisation of British industry on this website. Something which Gordon Brown has rejected. He is refusing to bail out UK carmakers.
Old style socialism has been tried and failed in country after country and especiallly in this one.
It's time to try the political system, never tried in the UK and advocated by John Maynard Keynes himself as the solution to the great depression, Social Democracy.
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We had a feeling the relationship was coming to an end, but it is immature of banks to say they wanted to end it because we were going to tell them the same thing. But there isn't any point in lending the bailout money at a time of fraud and banking crisis where many banks will go under.
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Banks need to do a lot more than say they are sorry. The sheer scale of the nonsemse they got up to is staggering.
I think all the stories about derivitives, securitisation, bonuses and in fact fraud have all been well aired- the banks credit committees and directors have done far more damage than what happened with Enron or Parmalat in Italy. What we need to see is some justice which means probably locking rather a lot of bankers up for a long time and making sure that the payments into their pension funds are adjusted so that no ex banker gets a pension more than average earnings. Their current schemes should all be would up and paid over to the tax payer apart from an amount that gives each employee a fund that they would have had if they had paid in a matched contribution of say 10% of average earnings- they can then reduce that amount by 40% for the fall in value that their behaviour has caused
for people in private pensions.
This may sound draconian but fundamentally the behaviour of the banks has been the main cause for many of us losing about 40% of the real value of our savings excluding cash- and that is before looking at the slide in sterling. Without HMG intervention they would all have gone bust just about so the people in the banks have to pay as big a price as their victims. The issue then is to make sure those that have retired also pay a price as they have rather large pensions earned on the back of dodgy practices.
We really do need to make sure these people realise what they have done to us all- better still why not send them all to Darfur or Zimbabwe to find out just how tough life can be.
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John Varley says "the banking industry is going through what he calls a public relations crisis, that it must apologise for what went wrong - because banks will not regain the vital trust of customers unless and until they own up to the sins of the past and say sorry"
We could do with our NuLab Government owning up to the "sins of the past" and say sorry (and mean it !!) rather than their usual "we will learn from this" statement.
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So Robert, you are interviewing one of the wise men at Christmas.
Is this the same John Varley who was to buy ABN Amro? He is only lucky that there was an idiot up in Scotland who was prepared to pay more.
Remind me, what have Barclays cumulative write-offs been so far?
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Can we have a link to the story now it's up? http://news.bbc.co.uk/1/low/business/7793035.stm
He's talking sense, unlike Labour. And the Tories are too afraid of the "do nothing" tag to state this clear truth. Until asset prices reach a firm bottom, things won't improve. The sooner they get there, the better. Labour want to do nothing but delay it, hoping to scrape through another election.
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John Varley is only speaking the truth about the gigantic reduction in liquidity/money that has, and is still, taking place. The synthetic money generators devised by the bankers over the last decade (which by the way kept interest rates low) have now vanished. This is a fact, and no matter how low interest rates are pushed can the central bankers regenerate anything like the sum that has vanished from the system.
In fact it can easily be argued that in order for a particular institution to get more than its fair share of money (which is what markets force them to do) they have to offer higher interest rates, which explains the inevitable decoupling of interest rates from the bank base rate. The central bankers need to recognise this urgently and put up their base rates to reflect reality and admit their impotence.
Oh, and apart from apologising the heads of all of the banks (and central banks and regulators) need to be fired as it is, and was, their policies that have caused this cataclysmic destruction of the World's economy.
The Archbishop of Canterbury is also quite right to be harshly critical of the present economic policy as reflected in interest rates - it is not the right way to do things to have ever lower interest rates when it was every lower rates that caused and now magnify the credit crunch. The problem is that the lunatics are still running the asylum! Fire them all now!
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#18
1) From what I remember Barclays was paying in shares not cash as RBS and Co!!!
2) Cumulative write-off seems to have been much much lower than the other banks
3) Barclays is still independent
Remind me, do people need to have a clue what they are talking about when they post here? ;-)
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In their quest to rebuild trust, banks may wish to allocate funding according to a mix of ethical and strategic criteria.
My ten year old daughter would have no trouble sifting the following list into a sensible order;
a. 20k for new kitchen
b. 10k for hip operation
c. 10m to reopen coal mine
d. 40k for new jag (25 mpg)
e. 500k for industrial heat pump
f. 50k for new range rover
g. 500m for high speed passsenger glider
h. 50m for ski-slope runways at Heathrow
i. 2m for bankers severance
j. 1m to top up headmaster's pension pot
k. 10b to help people buy tellies and clothes
l. 50b for complete set new power stations
m.30b for river based transport system
...........no need to labour the point any further.
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A Banker's Ode
I've got me City bonus boys,
Though our bank's gone down the pan,
I'm off to buy me Roller boys,
The Nation's carrying the can.
I've gambled away their billions boys,
Got the firm deep in the mire,
I'm cutting jobs like fury boys,
Too busy to retire.
Repossessing humble homes boys,
Foreclosing people's dreams,
Jack up those interest rates boys,
Mine those golden seams.
Let others fund our greed boys,
Pick up our failure's bill,
Then we can start afresh boys,
To watch our pockets fill.
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Re No.11
OK. Fair enough. Got a bit too near the knuckle.
Have a nice week-end.
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Darksurfer at 13 asks why people spent money they did not have?
The short answer I suspect is that they could resist "everything except temptation". They were encouraged to borrow ie to have now and pay later - on the false promise that they were getting richer because of increasing house prices. So everyone gave more and more of their future income to the banks in return for immediate consumption (where at least they got something) or for a house (where they got the same thing at a higher price).
In an earlier blog someone spoke about a lyric for these times. I recall one, years ago in which Alan Price sang, "You live forever on the never never..."
This process always had two natural limits. First, the point at which people had committed so much of their future income to paying of their debts (with interest) that further consumption was impossible; and second, the point at which first time buyers could no longer get onto the property ladder.
This latter point has been getting closer for some time - and was visible in the self-certification boom, in property sharing, and, later in the Government's efforts to help first time buyers.
The fact is that Government and banks (and other financial institutions) were encouraging people to borrow: and, as I said earlier in the week we stopped talking about "debt" and started to talk about "credit". So much more respectable.
Two more lyrics:
Your servant here he has been told
To say it clear to say it cold
It's over it ain't going any further
So now the wheels of heaven stop
You feel the devil's riding crop
Get ready for the future it is murder.
(Leonard Cohen)
Or perhaps, on the brighter side:
When money's tight and hard to get
And your horse is also ran
When all you see is a pile debt
A pint of plain is your only man.
Flann O'brien
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dear mr varley
banking is not rocket science, you get people to lend you money by offering a rate of return above inflation, you then lend that money to people at a slightly higher rate, the difference after deducting your overhead costs is called profit. anything else is called gambling and is not an activity that banks should be participating in. yes it is that simple....!
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For the banks to regain credibility, saying sorry is just not going to cut it, full and frank disclosure is required. Once they start to reveal what has been going on I then think we will see a couple more 'Madoff' style schemes collapsing as they realise their number is up. One much larger, say about 90-120bn dollars and a couple of smaller, about 25-30bn dollars. Confidence in the banking industry will only return when people start to see them as a safe place to invest their money. I would suggest that people invest their money personally in local small businesses (preferably ones that actually manufacture something) so that they can at least see where their money is going and not into some banks giant smoke and mirrors scheme.
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The only way to get banks to be sorry is for us ALL to whip our saving out!
MASS withdrawals from every bank in the UK would utterly destroy the banks, good enough for them i say!!!
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Is the global economic crisis not just a realignment to where we were before spending got out of hand? Like all things a bubble will eventually burst. Its just a shame that there have been so many innocent losers eg. Woolworths, MFI but this is testament to how naive we have been by assuming that we could forever live the way we have with our cash.
Whatever our social backrounds, most of us have gained considerable wealth artificially over the last decade whether through inflated property or share prices it was not sustainable. We cant blame the banks for this as all they did was fuel our desire for more spending.
It will be interesting to see how finance is distributed and wealth made in the next decade and how different our economy will be
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Why is Barclays apparently struggling after such a recent injection of money from the Middle East.
Contrast this with HSBC.
HSBC will lend up to £15bn in mortgages in 2009, a 20pc rise on this year.
HSBC said it would create a new $5bn (£3.4bn) global fund for small and medium-sized businesses (SMEs), including £1bn in the UK.
Paul Thurston, HSBC's UK managing director, said: "By some estimates, net mortgage lending in the UK will fall next year, but HSBC has no intention of closing its doors to customers, nor will we compromise our reputation for responsible lending. We remain open for business to the tune of £15bn."
Michael Geoghegan, HSBC's group chief executive, said: "This is a difficult time for business in many economies. Customers are rightly looking to see how banks can help. "SMEs are the lifeblood of most economies and it is their success that will create economic growth."
http://news.bbc.co.uk/1/hi/business/7771174.stm
http://news.bbc.co.uk/1/hi/business/7769740.stm
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This comment was removed because the moderators found it broke the House Rules.
Bankers no longer have any credibility, so why should we listen to Varley? It annoys me that the BBC keep wheeling out these 'experts' on programs about the economy.
None of them, or politicians, are likely to tell the truth because none would dare to tell us we are doomed, or how much they have made personally out of the boom.
I also wonder where those guys put all the money they creamed off, and whether it could ever be got back off them. The total amounts paid in bonuses would go a long way to recapitalising the banks, in fact.
I expect a lot of it went into 'castles in the sand' in places like Dubai. However there must be a reasonable chunk in T bonds and gold which could be recovered.
I am hoping a new political party will emerge that would be prepared to take the harsh steps necessary to properly punish the corrupt and get us 'back to basics' with the economy.
The only thing that worries me are the parallels with pre-war Germany and the rise of nazism. What we need is a Churchill, not an Adolf Hitler.
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No, it's not enough to own up to their sins and say sorry.
They should go.
No more ludicrous salary.
No more staggering bonus.
No more cushy pension.
They've broken their banks.
They've broken the country.
Why are they still in their jobs?
They should lose the lot.
But who will take their place?
People with common sense and less greed.
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BBC why does this forum display the dollar symbol but not the pound symbol? That is ridiculous. Sort it out please.
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GB, AD, MK want the banks to keep lending. There are borrowers and non borrowers so therefore the banks have to keep lending to the borrowers, with a fair few of these already up to the hilt in debt. It just does not make sense at all.
What no one in HMG or BOE seems to realise is that the big items bought over the last few years were funded by the re-mortgaging of houses and this avenue has now been blocked. The 4x4,s, exotic holidays, designer wear were all bought using the house as a cashpoint machine.
Many people, including the off-spring of people I know did this very thing and are now scared stiff in case house prices plunge further leaving them in negative equity. These idiots have enjoyed the pleasure, and so called fulfillment, during the last few years whilst their depreciating material assets will be worth nothing eventually.
A travel agent friend of mine recently spent one hour organising a holiday for a couple only to be presented with a credit card that bounced when they tried to pay the deposit. They duly declined the holiday and walked out.
I rest my case.
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#9
We must blame the banks! It is their responsibility to ensure that a person they are lending money to is able to repay that money back. We've seen 125% mortgages and 50 year mortgages and 5+ times annual income mortgages - loans which are far too high for most people to sustain, therefore are more risky to make.
The banks foolishly lent this money out, so helping to drive property prices up. Had they not made the loans, they would not now have the problem of negative equity and people would not be being put out of their homes. It is the lender's responsibility to say "No" sometimes. It is not wrong or greedy for someone to wish to buy a house as a home.
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@29
Sadly Woolies was going under well before this financial crisis, they had the rug pulled from under them when all their assets (the buildings) were sold from under them to pay cash back to shareholders after being taken over in a leveraged buyout. This exposed just how bad their retail business model was.
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Only 25% of Barclays profits where generated from retail banking the rest from Barclays Capital. It now appears from this interview that the retail customers who contributed this 25% are expected recapitalise 100% of the bank.
They was no admission what has brought the banking sector to its knees. It was these capital departments trading and speculating in every conceivable financial instrument which now has caused serious losses.
The recession will now be longer and deeper than necessary caused by the banks need to recapitalise against the public good in favour of their own business needs.
It is clear if the government wish to mitigate the downturn then further action will have to be taking to encourage the banks to act in the public interest.
Assets will only rise when bankers stop talking down the market.
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Hopefully they will have more accurate asset forecasts of house prices than the public , Nationwide and Halifax who have a vested interested in selling mortgages have stopped providing data because the market is falling and the government is using selective counting as usual to try and pretend things aren't as bad as they are in the real world.
If there is reduced debt avaliable lets make sure banks have enough UK staff employed to make sure they can make sure good small and medium sized businesses don't go to the wall because of poor judgements made by a 'senior banker' in front of a computer screen to try and make up for the losses they have made in investments financed by borrowing.
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#21
I like to see the opinions of people here even if they don't know what they are talking about. I think I've spotted s couple by Gordon himself.
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#30
Good to say that HSBC and Corporate Affair are working over the weekend, keep up the good work!
PS: How is lending doing?
"HSBC has emerged as one the largest victims of Bernard Madoff?s alleged fraud with potential exposure of about $1bn to the investment manager?s collapsed venture, people close to the situation told the FT"
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And it's the ordinary bloke in the street who's got to pay for this over-paid lots lash up.
And now we've got to pay for this for the next 20 years.
Ay any normal firm who had this lot in charge, they would have been booted out months ago.
Dont let the public school education and the smart suit fool you...they are idiots.
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#34
Just goes to show the strength of the $.
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Forgive me here Robert, but at what point is this startling news?
Just because Crash and the boy wonder have ignored what the banks have been saying and trying to drown them out with the rhetoric that you have reported on here doesn't mean it doesn't exist.
I am quite alarmed that you haven't managed to ask the questions that brought the government to account for their policies.
Once we know where the "floor" is then some kind of confidence will return, until then the cycle of negative feedback loops will continue.
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How come somebody else is always to blame ? Was it the banks or the people who borrowed more than they could afford to buy a bigger house than their neighbours , or to speculate on property thinking the price had to keep rising ? Blaming the banks is like blaming pubs for alchoholism or bookies for idiots losing their shirts. The basis of the problem is greed , by the banks the borrowers and the government which was riding high on a massive tax take from both. Hard earned cash was taken out of the economy by the government and ploughed into the workshy and the pseudo sick instead of into creating jobs and social housing. The result was an enormous unsustainable bubble of debt and overpriced property.
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#33
In Gordon's brilliant book on economics, in the last chapter "Revelations" it states that the person who gets the whole country into a mess should be the person who is forced to get them out of that mess.
We have to apply the same logic to bankers, those who acted with incredible irresponsibility will now act in the opposite way and save us all.
Likewise Armageddon Brown is the one to save us from the irresponsible mess he's created.
We only have to look at Zimbabwe, where the same thing is happening - Mugabe is just waiting his time to reverse all the chaos all around him.
There is of course another line of logic that says the bunglers should get fired, but I did't see it in the Brownian Revelations.
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"... he says that a reduction in the overall quantity of debt in the economy is absolutely necessary - although he concedes that the process is extremely painful."
Absolutely necessary, yet the Government have stated that they want lending to return to 2007 levels.
"... the banking industry is going through what he calls a public relations crisis, that it must apologize for what went wrong"
The Government could learn a lot from this approach.
"... but that the amount [of credit] is shrinking, it absolutely is, and that is a painful process; it's a process through which the world absolutely has to go and if you asked me 'when will it stop?' I think it will stop when asset prices stabilize."
Funny that the Halifax and Nationwide are refusing to comment on house prices for 2009. More than willing to talk them up during the boom years but gutless during the normalization period.
The Government really aren't helping here either. Firstly stating that banks have to rebuild their balance sheets, and then stating that they want the bank to resume 2007 lending levels. These seem to be contradictory requirements. That's why I raised the following petition:
http://petitions.number10.gov.uk/LendingReform/
As asset prices are inextricably linked to this problem, and considering the Government have bought the banks; I believe the Government need to state their aspiration for mortgage lending in 12 months time in terms of Loan-To-Value (LTV) ratio, multiples of annual income, and loan duration.
We're either looking at a real crash in house prices (not just flats and apartments) or a return to irresponsible and risky lending. This begs the question; do we believe that the Government has a real commitment to lending regulation and reform?
Please sign if it if you feel it's applicable, better still get your friends to sign it too.
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Where has Terry Callier been all of our lives?
spiraling guitar leads,
"Lazarus Man"
I thought I heard somebody call out my name
yeah somebody was saying 'Lazarus Arise'
I sat up opened my eyes
You know I wanted to dance
but I didn't have room
so I threw off the sheets
and walked out of the tomb
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In reply to 28, a friend of mine did just that. He explained that a competing bank was offering a slightly better interest rate.
His own bank instantly matched the rival level of interest and added an extra per cent for good measure. Withdrawal of cash is the banker's greatest fear ...use it as a weapon of reprisal
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So, Mr Varley reckons asset prices will stabilise in around 18 months. Since every banker I can remember in recent history has been severely over optimistic in their predictions I would say double his estimate and add six months (for the unforeseen bad news that we are slowly being drip fed) and you might have a realistic estimate of what will really happen.
Think about this: if the bankers can get share buyers to believe that 18 months from now is the time to start buying shares again then they can expect a nice bounce in their share price at that time (even if there is no sign of the end of the recession), whereupon they can recoup some of their losses and when they've done that they can confess to some more losses without taking as much of a hit.
Look at Barclays recent history: the subscribers to their first bail-out in the autumn lost out big time when the share price tanked afterwards, and then when they were meant to have shored up their position they confessed they needed even more money and, miraculously, they managed to get it! Will history repeat itself? Quite possibly!
By now it ought to be clear that we can't believe anything a banker or a politician says about the current economic malaise. They each have their own agenda. Bankers want to take our money and politicians want to be re-elected. Bear that in mind and read between the lines.
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#36 by no means am i saying the banks are blameless but as a individual i am responsible for living within my means and if circumstances change which they do in life you have to adapt to them for better or worse. you can not look to lay the blame at some one elses door whether it be the banks or politicians when times are diffulcult.
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Investment bankers and bank directors should be paid their annual bonuses and golden parachutes in the form of "toxic assets". Until they get personally hit hard in the pocket they will never learn. Credit Suisse has set a lead. May the herd follow.
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Just who does John Varley think he is?
Surely the statement 'lending will resume when asset prices stabilise' simply means that Varley, Barclays and other Banks are quite happy to see property prices CRASH before they will lend again?
It doesn't take a rocket scientist to see that PROPERTY PRICES WILL RECOVER WHEN THE BANKS GET OFF THEIR BACKSIDES AND LEND AGAIN!
Mr Varley's statements are more than arrogant and somewhat lacking in contrition.
Just who on earth do the bankers think they are? They will only continue to earn contempt with that sort of attitudes.
Barclays is well known to have had many murky financial dealings with dubious individuals and nations over its chequered history and is obviously desperate to stay away from any government control to ensure that the past remains closed. Like many before me, I would like to know what role Mr Varley played in these deals.
I think Mr Varley should OWN UP for the SINS OF THE PAST and confess to all and sundry, for what has as we now have come to realise has been inter-bank fraud on a colossal scale.
I don't yet hear the words 'apology' or 'what can i do to put it right' or 'yes we will treat our domestic customer base as a priority'.
Until that time, I think Mr Varley should be stripped of his assets and pay, put on the dole and asked to survive just like so many thousands are now forced to do, simply because he and many like him think they are above reproach for what they have done.
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This comment was removed because the moderators found it broke the House Rules.
"Which is why it's unlikely that a recovery will start until banks grow their lending again."
Oh... My... God... The world must be such a confusing place for you people.
Recovery CANNOT begin UNTIL the banks start lending. Why? 97% of our money IS BANK CREDIT. It is created when new loans are taken out. No new loans, no new money, no "growth". It really is that simple.
We have a recession BECAUSE the banks have stopped lending. There is a credit crunch BECAUSE the banks are not lending. Recessions, depressions, credit crunches are the same as credit contraction which is the same as banks refusing to lend.
By allowing the banks to create and destroy our money, they can (and are) literally bringing the country to a halt. With no money, there can be no transactions.
It's an entirely stupid state of affairs and why the power to create and destroy money MUST be removed from the hands of the bankers.
Watch, read and digest:
http://moneyredeemer.webs.com/links.html
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The banks stance on lending contributed to the asset bubbles and now are contributing to the collapse of those bubbles. All of this comes at the expense of genuine economic growth.
If the asset values are related to the amount of lending in the amount of lending is related to the asset values what magically stabilizes the system two years from now? There is a possibility, perhaps a strong one, that this feedback loop needs direct action to stabilize it. Otherwise we could be in for a repeat of the 1930s falling asset values caused buyers of assets to take a prolonged holiday and the rest of the economy took one along with them.
The banks collectively have a responsibility to stabilize this. Otherwise they should not be surprised if someone else does it for them. They accept hundreds of billions in bailouts and laugh at the rest of us. This is simply not acceptable.
The banks actions to guard against loan-losses are making those loan losses larger. We do not want the inflation in asset values that created the illusion of wealth without actually creating the reality of wealth. But neither do we want those asset values to collapse. It is not in our interests, and it is not in the collective interests of the banks.
Unfortunately, the attitude of each bank will be that whether or not there is a depression is outside of their control. They will take the actions needed to protect their shareholders in the face of falling asset prices by reducing the loans using those asset valuations as collateral. The government must intervene to force the banks to act in their own collective interest.
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The fundemental question is what are banks for? Their core activity is acting as the middle man between borrowers and lenders, charging for that service. This function is absolutely central to having fully-functioning capitalism.
Banks have moved on from this - using derivatives and other finanical instruments, originally set up to minimise and protect against risks, they ended up using them to spectulate. By having a salary and especially a bonus culture that encouraged speculation, the banks undermined their own core reason for existing.
Banks cannot be allowed to undertake activities that undermine their ability to carry out their role in matching lenders and borrowers. Much tighter regulation and indeed government interference in banking is needed in the future, not only in the UK but internationally, and especially in the US.
For the banks, this will mean lower profits in the good years to ensure lower risk in the bad years. Speculation and enterprenureal risk taking should still happen, with appropriate hign returns for the successful, but not using the money that should be available for the more mundane, day to day activities that banks are supposed to be involved with.
The alternative is that the state undertakes these core activities as indeed it will be doing, at least in the short term, as owner of the part or wholly state-owned banks.
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Talking of assets here's another one we no longer own.
http://news.bbc.co.uk/1/hi/uk/7793171.stm
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Robert Peston interviews Barclay's Chief Executive John Varley.
It would be more entertaining if Rory Bremner interviewed Captain Mainwaring!
And probably more informative.
I suggest Robert Peston jump into some London Taxis with his microphone and camera.
The Cabbies have a better feel for the real economy that fat cat bank executives in their ivory towers in Canary Wharf.
Apologies from these people are really not enough. A whole generation of Bank executives should resign or be sacked along with their regulators.
Stocks should be placed in Canary Wharf and the guilty men pilloried.
Or perhaps this is the closing scene of Robert Peston's Panorama programme. Is this what he means by the "New Capitalism"?
The guilty men actually get punished for once.
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This man Varley with his 'just too bad' attitude should be removed from office with immediate effect.
Why do we have to put up with a banking sector whose order of priorities is:
1. Themselves
2. Their shareholders
3. Their customers
4. Their country
Yours in despair etc
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This comment was removed because the moderators found it broke the House Rules.
The banks based the amount of lending in large measure on asset values and those asset values are based in large measure on the amount of lending. This is a giant Ponzi scheme and is inherently unstable. Any significant shock to this system and it goes roaring off in the opposite direction.
This is not acceptable.
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This comment was removed because the moderators found it broke the House Rules.
The banks should say sorry, eh?
It's EASY to be "sorry" after the ridiculous bonuses and profits they've creamed off over the years, and it's especially EASY to be "sorry" when your frankly idiotic mistakes catch up with you and the taxpayer comes along with a comfy safety net.
Maybe if we give them even more money they'll be even more "sorry", who knows?
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"13. At 08:11am on 20 Dec 2008, darksurfer wrote:
1) Why did people spend money they did not have?"
Because there is NO other CHOICE!
97% of our money comes from bank lending. If (under our current Fractional Reserve Banking system), nobody BORROWS money, or nobody LENDS money, then there IS NO MONEY.
Our money is "BORROWED INTO EXISTENCE".
Go learn what money really is. The vast majority of our population clearly have no clue what money is. How it's created, how it's destroyed. Which is simply a bizarre situation, what on earth do you go to work for? if you don't know what money is, why are you all out trying so hard to earn the stuff.
There are some links here which will allow you to begin educating yourself as to what money really is:
http://moneyredeemer.webs.com/links.html
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35,
'GB, AD, MK want the banks to keep lending. There are borrowers and non borrowers so therefore the banks have to keep lending to the borrowers, with a fair few of these already up to the hilt in debt. It just does not make sense at all.'
I think they know this and that this is why they are purposely devaluing the pound!
Watch out for major inflation and a boom (yes boom) in house prices coming to you very soon!
|For further info, if you had say 200k in a bank at the moment (taking inlfation into consideration over the next 3 years or so) where would you put this money?
Equities (Ha Ha, we own them all anyway!)
Keep it as cash in bank (Oh dear, you will lose it via inflation)
House stock (Hmmmm, inflation proof asset?)
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#65
Thank you for the laugh, very refreshing!
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53 - Property prices are recovering. They are recovering to their normal average price of 90% of the average house in the average area being 3.35 times the average wage (currently 26K).
The fact that this recovery is a downward adjustment is sad for a lot of people who bought in the last couple of years, but if you go around fooling yourself that you buy a house as an investment as opposed to somewhere to live, then you desrve what you get.
And the next time you here a banker or government minister or building society executive on TV saying "12 months this 18months that" ask yourself, ifr they know so much then how come 12 months ago they didn't see this coming and therefore, just how reliable are their predictions now?
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#15 - yes, it can only be a matter of time before he produces a book called "The New Capitalism" - not that there is anythjing new about it, just a rehash of corporatist state ideas that come out every decade or so. God help us if they are taken seriously - I just hope tha this is not the next Labour Party Manifesto out on a marketing trial. Taxpayers as the main source of funding scares the wits out of me - it is just compulsory saving
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#57
I couldn't agree more. Banks will have to downsize but lets all hope the first job losses are in the boardrooms of these failed businesses.
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There are 3 parties going for the same
(a) banks
(b) government
(c) the people
(a) + (b) are not real people and have lost all credibility, have proven to be manipulative, self-serving and are easily replaceable
(c) should be empowered to take self control and start to run operations
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re 71
for (a) + (b) this is only a 9-5 job
for (c) it is 247365
my tip is (c) can't lose
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Sorry from past and present PMs, MPs and politicians would be a good starting step too. sorry for putting personal ambition and glory before the interest of the country, sorry for toeing the party line for the interest of the party above the masses, sorry for demanding people do as they say and not as they do.
Another quick and sharp asset deflation to attractive and affordable levels could shorten the time to recovery. Eg. average house price at 3-4 time average salary, average FTSE350 PE of 10 or lower.
Measures must also be put in place to detect, discourage and limit conditions and causes of asset bubbles. Eg. buy-to-let, bonuses (some interesting recent examples from Switzerland).
Prudence and hardwork must be rewarded, not sacrificed to subsidise the feckless and the greedy. When listening to political and businesses lobbying, public servants should consider VERY carefully what are bring lobbied. It is no accident Obama did not take donations from lobbists.
Above all, lead by examples, not by words.
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This comment was removed because the moderators found it broke the House Rules.
Mr Brown only hears what he wants to hear and will disregard the comments made by Mr Varley.
The Government have to continue their message of recovery "mid to late 2009" in order to brainwash the proletariat who only hear what they want to hear and disregard the rest. This is their only chance to have electoral success.
It is refreshing that Mr Varley acknowledges that we are in for an extended period of turbulence, something that most Bloggers have known for some time!
Just what we have in store, nobody knows, but as long as Mr Brown keeps the money hose at full flow, I fear that Mr Varleys' forecasts will prove extremely optimistic indeed!
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I've said it before and I'll say it again...
Reckless borrowing and lending was the cause of the cedit crunch and global crisis.
A conctraction in lending is actually a good thing and I'm all for it...
But it needs to be permanent actually, or we'll only have a repeat of the reckless borrowing/lending that caused the crisis. I hope the credit crunch continues for a lot longer than two years...
All those bemoaning the lack of credit at the moment, need to think about the brave new world where credit is much harder to obtain.
They need to stop moaning about it and get on with the new ways of financing businesses, e.g. by re-investing profits instead of paying fat-cat salaries and excessive bonuses so you can all drive Aston Martins, Ferraris and Lamborghinis...
That's what we need in 2009. The big players in Finance, Commerce and Politics must move to the brave new world of greater financial and moral responsibility, instead of trying to retrieve the old failing system, which it has now been PROVEN BEYOND ANY DOUBT, served a few rogues at the expense of everybody else....
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As the Property BUBBLE has rendered the
UK as one of the MOST UNCOMPETITIVE
ECONOMIES IN THE WORLD.
THERE IS NOTHING GOOD OR CLEVER ABOUT
STUPID ASSET "VALUES".
THE STUPITY OF THE BANKS THE BANK OF
ENGLAND THE FSA & THE GOVERNMENT ARE
THE CAUSE OF THIS MESS.
DEBT HAS TO REDUCE AND BE PAID OFF.
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nar,banks been bailed out so will sell new loans, loadsa em, no risk when running a bank eh !
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68. RedLenin;
I don't agree with either your assessment of the long term average house price/earnings multiple (it's not the right measure anyway), or the validity of your average wage figure (as it applies to the average homeowner or borrower).
However, if you are saying that average house prices will fall to £95k, I thik that is highly unlikely. That would imply rental yields of 10%+ against interest rates of 2%-. There would be buyers long before then. Much better than trusting to a pension provider.
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The Crash Gordon response will be more spin and weasel words to hide what is going on. Fiscal Stimulus (more debt), downturn (recession) - I forget the one meaning print more money!
He looks happy and may be set for another term in office. How can we be so stupid?
Why is everyone avoiding talking about the near zero interest rate in the US? Money is in short supply so the cost of money goes down? What happened to supply and demand?
I'm getting the RP book for Christmas - Let's hope that explains things! My brain hurts!!
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As a matter of fact we own the money that the banks look after, so we should be getting the interest. Money by the people for the people. All it needs is intelligence-y to turn the tables
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34
Totally agree. The fact that this blog doesn't seem to be able to display the £ sign, especially when it's a financial blog, is ridiculous!
This perpetual fault shows a lack of attention to detail that could make one distrust other information on the BBC website. Get it together BBC and display pound signs for us, it can't be rocket science.
Or are you assuming the demise of the pound so soon, that you don't think it's worth making this correction?
Mostly fascinating reading otherwise, thanks everyone.
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Should banks be less cautious on lending? I have looked back at the history of US Toxic Debt, and it seems to date from good intentions in the Clinton years. The theory was that home-owners were more socially responsible, their children better educated, so banks were required to give mortgages to poorer people. If their lending did not reach the required level, the banks were prevented from opening new branches, merging etc. So they dropped their security criteria in order to comply. One they found that they could "lay off" this "secured" debt, the sky was the limit! We know where a road paved with good intentions leads! Let`s not press UK banks to take us to the same destination!
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Well if it comes from the mouth of a banker or politician or economist it must be true, that has been proven so much recently. These interviews come across as PR opportunities with what is spouted simple accepted. I found it quite noticeable that the suggestion the Sorry word should be used was to say the least very oblique. I did not see anybody actually personally saying sorry. So somebody else should be saying sorry, now there is something new. Or a nebulous sorry from an industry. An industry is individuals not a cloud.
First of all it is going to be over by Xmas, bit like WWI, then next year and now the year after, nothing to stop it slipping further really - its all words, not backed up with money - with recovery unlikley before the guillotine of a General Election. Interesting. Nowhere to run. I really do not take a great deal of notice of opinions because I reckon if you said to these types - if your opinion is wrong you will be stuck in a pit buried up to your neck and left, suddenly all these wordsmiths would be quiet. Whilst they can spout and ponificate with no penalty they will and that is how we got here. Global growth of 4% is needed - for a decade. Hmm. I guess if you push things low enough you are bound to get significant growth but it all sounds gross extrapolation. The word unsustainable comes to mind.
I have yet to understand what use an economist is to anybody. Their sole objective seems to be to say you should do something I say with your money, or somebody else should do something I say with your money. They seldom appear to do anything with their own money. And there are always apparently more economic opinions than economists, perhaps they occupy parrallel worlds. That would explain it.
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"But sacking all these hopeless bankers might upset the international investors"...it might do exactly the opposite...they might be pleased to see the back of them.
Probably the real reason the government is not throwing them out is because it would highlight government failure and lack of regulation.
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Be careful what you say. Jacqui Smith doesn't understand sarcasm when people told her they would 'love' to have an ID card. So we must categorically state we do not want credit card ID's either.
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What John Varley seems to be saying is that the banks are not going to help us out of the recession. They will be too busy recapitalising themselves by taking advantage of the scarcity of credit to increase their margins. They will be trying to hoover up savings at low interest rates, while re-lending very little, at much higher rates.
This confirms that it was a mistake on the government's part to bail them out. They should have been allowed to go into administration and bought from the administrator as going concerns, without the bad debts and loans, and then run in the public interest rather than that of their shareholders.
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A word of warning.
Has anyone heard an insurance company confess to holding any of these falling assets in endowments or pension schemes?
Thought not.
Beware. Make sure you know exactly what your money is invested in. Or you could live to regret not doing so.
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#74, don't spam us your 20th Century propaganda, please. The 'Energy Crisis' will be fixed within 5 years. Have a little faith in technology and your human ancestry.
Now, if you had something interesting to say about relative wealth and the manipulation of the plebs' expectations of material goods manufactured with that energy, I'm all ears!
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Re 74: Nice one. Couldnt agree more. See also 'The Revenge of Gaia' by James Lovelock. Someone wrote about confidence earlier today. Capitalism is a confidence trick, a pyramid scheme. But communism was corrupted by greed as well. There must be a middle ground out there but I cant think what. Anyone got any ideas?
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I have more or less abandoned the UK
BANKING SYSTEM both on a personal
basis and for my business.
I simply DO NOT TRUST the SYSTEM.
ALL FUNDS ARE SENT OUT FROM THE UK
UNLESS REQUIRED FOR IMMEDIATE
PAYMENTS.
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It is in the news but off thread so I apologise.
When a couple of decades ago a gent I knew let me know in an offhand comment that the buzz was Aldermaston amongst other activities was under review and that Thatcher was looking to see what could be sold I was dumbstruck. What about the Biochem warfare outfit I asked myself, is there no limit to the madness, are there not things best kept within state ownership. What is to stop the likes of Saddam making a bid. I see Aldermaston is now to be sold to a US company. Now theres safe, nothing to worry about. I can see no difference between Thatcher and Brown in policy. I thought Blair/Brown where elected to be different. Mistaken obviously.
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Was someone trying to tell Emperor Gordon and the real Joker (Darling) that they have no clothes?
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#21 "Remind me, do people need to have a clue what they are talking about when they post here? ;-)"
No !! Why spoil a good rant with truths and facts ?? After all, that's what the government is doing at the moment !!
Witness Ms. Frozen-rabbit-in-the-headlight Smith and her "Victory over knife crimes" !!
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@cynicaljock,
I think you'll find the middle-of-the-way-you cant-quite-put-a-name-on is fascism.
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actually thinking about it all markets are the same so we should go global everything all over the world
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Oh dear, moderators. We are touchy. So I make two general references to financial chicanery, using the terms 'crooks' and 'scallywags' and finish with a half joking statement that the use of these words will probably get the post moderated out, what do you do?: Bam! moderate it out of the blog. My God has it come to this? There's a double standard at play here. When references are made to the dirty dealings of politicians it seems OK but when it comes to the 'masters of the universe' bam! we can't have that can we? Come on: moderation ought not to be censorship. I know we live in difficult times but let's not slide into the abyss that is over policing. A little satire and word play never hurt anyone, well, except it seems those with big enough pockets to frighten the life out of the good old BEEB. What a shame.
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One of the things that really concerns me going forward is the availability of risk equity capital for startups and spin-outs.
It's always been more difficult in the UK to raise risk equity capital than almost anywhere else on the planet particularly when it comes to manufacturing start-ups. Now of course most so called VCs are investing as little as possible in order to preserve cash.
If we are to rebalance the economy properly then perhaps we need to make it a legal requirement of all the banks to make available say 10m pounds per annum each to a national venture fund.
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Finally, some common sense. Borrowing against a rising house price to buy consumer doodads is a mug's game and violates the first principle of gambling, namely not to count your money while it's still on the table.
Realised profits are great, but borrowing against unrealised profits is insane. My parents always used to tell me that what you have doesn't count, only what's paid for counts.
Now of course we need to get out of the mess we are all in, thanks to irresponsible borrowing. Crash Gordon seems to think the answer is more borrowing, which shows what he knows about economics.
Unfortunately economic cycles don't always line up conveniently with political cycles, which is the only reason I can see for Crash to be pumping so much cash into the system to delay the implosion, in the desperate hope that he can delay the meltdown until after an election and blame the conservatives for it.
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74. At 10:55am on 20 Dec 2008, PeakOilPaul wrote:
Stephen Hawking said something like:"the future of humankind is to explore space"
The amounts of helium-3 needed as a replacement for conventional fuels should not be underestimated. The total amount of energy produced in the 21H + 32He reaction is 18.4 MeV, which corresponds to some 493 megawatt-hours (4.93x108 Wh) per three grams (one mole) of ³He. Even if that total amount of energy could be converted to electrical power with 100% efficiency (a physical impossibility), it would correspond to about 30 minutes of output of a thousand-megawatt electrical plant; a year's production by the same plant would require some 17.5 kilograms of helium-3.
There have been many claims about the capabilities of Helium-3 power plants. According to proponents, fusion power plants operating on deuterium and helium-3 would offer lower capital and operating costs than their competitors due to less technical complexity, higher conversion efficiency, smaller size, the absence of radioactive fuel, no air or water pollution, and only low-level radioactive waste disposal requirements. Recent estimates suggest that about $6 billion in investment capital will be required to develop and construct the first helium-3 fusion power plant. Financial breakeven at today's wholesale electricity prices (5 US cents per kilowatt-hour) would occur after five 1000-megawatt plants were on line, replacing old conventional plants or meeting new demand.[45]
The Moon's surface contains helium-3 at concentrations on the order of 0.01 ppm.[33][34] A number of people, starting with Gerald Kulcinski in 1986,[35] have proposed to explore the moon, mine lunar regolith and using the helium-3 for fusion. Because of the low concentrations of helium-3, any mining equipment would need to process large amounts of regolith,[36] and some proposals have suggested that helium-3 extraction be piggybacked onto a larger mining and development operation.[citation needed]
The primary objective of Indian Space Research Organization's first lunar probe called Chandrayaan-I, launched on October 22, 2008, was reported in some sources to be mapping the Moon's surface for helium-3-containing minerals.[37] However, this is debatable; no such objective is mentioned in the project's official list of goals, while at the same time, many of its scientific payloads have noted helium-3-related applications.[38] [39]
Cosmochemist and geochemist Ouyang Ziyuan from the Chinese Academy of Sciences who is now in charge of the Chinese Lunar Exploration Program has already stated on many occasions that one of the main goals of the program would be the mining of helium-3, from which operation "each year three space shuttle missions could bring enough fuel for all human beings across the world."[40]
In January 2006, the Russian space company RKK Energiya announced that it considers lunar helium-3 a potential economic resource to be mined by 2020,[41] if funding can be found.[42][43]
Source: google wikipedia and there is much more information on the subject.
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This comment was removed because the moderators found it broke the House Rules.
*** STOP PRESS ***
You heard it here first, the economy will recover by January.
In the interests of political-speak I'll simply refrain from specifying which January.
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I recommend everyone on this blog to watch the Money as Debt video on
http://moneyredeemer.webs.com/links.html
Thanks #55
#74
Very informative and absolutely true all our resources must be directed to producing sustainable energy.
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This crisis is quite simple. 10 years of 15-25%pa house price inflation supported by 2-4%pa wage inflation. It never added up. And the gap was filled by fraud.
Robert, you need to put these people to the sword. As the BBC's leading correspondent on these matters in circumstances where the present government oversaw and encouraged this criminality, it falls on you to bring these people to public account.
Bankers and investors in Singapore and elsewhere are not going to risk their money using the City while it remains corrupt and incompetent, a place outside the rule of law. And that means mass unemployment for a long time.
Finally, the myth that share prices bottoming will help resolve this crisis is wrong. Our consumers and business' are over burdaned with debt, particularly mortgages, and until that is resolved falling consumption won't bottom and there is no recovery.
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#22 Reasons to lend -
a. 20k for new kitchen - What for ?? You mostly eat takeaways !!
b. 10k for hip operation - Why ?? It's free on the Great NHS that this government spent trillions on so far !!
c. 10m to reopen coal mine - For what purpose ?? Are there too many illegal immigrants in your area ?? The locals will not work unless it is at a rate that makes the mine not commercially viable, thereby making this a sub-prime loan !!
d. 40k for new jag (25 mpg) - Cheaper to buy a British made Honda and you get better quality build and features too !!
e. 500k for industrial heat pump - Show us yout business model and we'll see if it's viable in the long term !!
f. 50k for new range rover - Where do you live ?? What do you need to carry with it and where ??
g. 500m for high speed passsenger glider - Refused !! Definitely a pie-in-the-sky project with no possible profitability !! How do yoy sling a 500 passanger glider into the air ?? Using a nuclear explosion ??
h. 50m for ski-slope runways at Heathrow - Refused !! We don't deal with snake-oil salesmen !! If Heathrow wants the new runways, they can approach us directly !!
i. 2m for bankers severance - Approved, subject to which part they sever. The preference is the head but we'll accept other bodily parts !!
j. 1m to top up headmaster's pension pot - Why can't he top up his pension pot like all other people ?? He must watch "Goodbye, Mr. Chips" 1,000 times !!
k. 10b to help people buy tellies and clothes - Refused !! They don't need tellies and if they need clothes, send them to somewhere warm like Darfur !! The other place in mind might be a trifle *too* warm !!
l. 50b for complete set new power stations - What are you going to run them on ?? Fresh air, sunshine and love ?? Name the fuel/power source and we'll see how viable it is !! Example, a new power station over Westminster *WILL* be viable if it is powered by the hot air rising from the debating chambers !!
m.30b for river based transport system - Forget it !! Paddle your own canoe !!
Hope this helps !!
Captain Mainwaring,
Bank manager
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I agree with those who say that we are not in a recession.
Without a manufacturing base this is how we actually are.
The last few years have been a Flash inspired chimera.
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Apologise? Sorry? Your pain is my pain. This is the dead hand of PR. If you are beholden to no-one,all this is meaningless.
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As property prices continue, in some areas, like london, to plunge, will the local authority re-present reduced council tax bills?
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No 68. Yes quite right - we need property prices to "recover" to an historically normal 3-4X average income, ie a further 30-40% from where we are now & a sitiation where houses are bought as homes, not as any sort of financial investment. Only then will banks start serious mortgage lending again. The sooner property prices drop to those levels or lower the better for all.
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Hi Robert
It is likely that banks are looking long and hard at the securities against loans and investments that are sitting in their vaults and in the light of recent revelations of fraud in the US they don't like what they see. They also know that in the vaults of their contempories are similar timebombs that need to be carefull defused, otherwise they will crystalise and blow in their faces. This is the reason they are afraid to lend to each other or to anybody else. They have no idea what their real equity position is. They are not likely to be able to put a timescale on this journey back to safe ground - it will take as long as it takes and we can only hope they are able to weather the major calamities they are bound to meet on the way.
yoobistalk
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American Gangster Express : Charge It To The Game
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RE 101
I think the BBC knows satire serves a legitimate public interest. I really shouldn't have to bore the readers of this blog, but:
- Have I Got News for You
- Monty Python, etc etc
- ????
- Profit (AKA News at Ten)
do come to mind
The BBC might not be here for much longer. As each day goes by, it looks to me that Mandy will head up Little BBC PLC.
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The latest energy crisis caused the financial bubble to burst, this has happened repeatedly for one reason or another (strike, war, ransom etc.).
We simply have to reduce our dependence on imported energy in order to stop the boom/bust (boom in cheap energy times, bust when prices rise)
As I sit here, the wind is not blowing but it is raining (a common occurrence in the UK).
We should have the government invest heavily not in banks and foreign windmills but in building efficient hydroelectric schemes on every river in the UK. This would have an effect in stimulating the construction trade and boosting the economy, at the same time the banks could be prodded into extending credit to those home grown businesses that would be required to build these structures.
This investment could be paid for by artificially increasing the price of petrol/derv to 2.00 per lt (let public transport run on red diesel)
Investment should also be made into UK r&d and manufacturing for electric vehicles and small scale (local) hydro power generation.
Here is a self financing scheme which would push our economy in the right direction ie.
UK money is reinvested in UK businesses (hard to offshore major construction work:)
At about 1.70 per lt alternatives become economic to use and people would probably investigate alts. when it is time to upgrade their vehicle.
1.90 per lt will encourage foresighted people to actively change before time
2.00+ per lt will make all but the most recalcitrant petrol heads to change.
At the end of the day it should be about choice.
Spinoff benefit would be reduced road useage and CO2 emissions
And before all those people start screaming that they need a car, they don't. I live miles from anywhere and I 'need' a car to get to work...No I don't, it was a personal lifestyle choice to live out here, I knew this when I moved, if petrol became too expensive to buy I would have to make another personal choice..move closer to where I work so obviating the need for a car or move my work closer to my home ie. find another job/career.
I don't need any of this stuff, I choose to have it.
This would be real economic stimulus and not just propping up an outdated banking system.
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I thnk the situation is being exacerbated by the banking industry itself.
I have my own business, that started trading in July 2008. We have a opportunities pipeline of a potential £5m and a "won business" of £100k that is being invoiced this month.
I bank with HSBC and when I opened my account with them they informed me that they would match the cash amount I invested into the business with a secured facility of loan plus overdraft. I invested £30000 which was all my savings. I also confirmed to them that I would secure my property against the facility - the property having more then adequate equity.
This week they have rescinded on their word and have left me and my business in the lurch, even though they agree that the business plan is sound and the potential can be achieved as forecast.
When asked the reason, they are not willing to provide an explanation (especially in writing). They give ambiguous reasons such as "the IT sector is not promising" and "We do not feel you meet the credit scoring" etc.
They then say they are going to help by passing me onto a private company that offers business loans at 19.6% interest.
And all this from an HSBC that is putting up £5bn to help small businesses.
To be honest this whole situation is a hypocrisy. The Governemnt is lending tax payers money to banks and reducing their lending costs to virtually ZERO and the banks are as usual being totally selfish.
Corporate Greed is what has got us into this situation and I fear thousands and thousands of perfectly viable small businesses that wish to do nothing but grow are going to be falling on the axe because of their beligerant attitude.
My personal view on this is that the Government should, if investing into ANY bank in any amount nationalise it and assist the people who put it there.
I am personally behind a rock and a hard place since the bank said what it did. I now have to essentially start all over again, and the next bank I go to will or may ask for a 1:1 investment again - what is one supposed to do?
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#108.... will the local authority re-present reduced council tax bills?
unless you are at the bottom of a band then the present correction will not affect your council tax bill...for example
Band G £160,000 - £320,00
so if you how was worth £200,000 and has now dropped 20% you are still in band G!
That apart can you really see councils doing a revaluation in the next five years? not likely...
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I have a lot of sympathy for John Varley's assessment of the situation.
So far, as earnings from my savings have evaporated, my income is down by about 25%. My sole intention is to reduce outstanding debt (of which there isn't much) with any surplus cash and to spend as little as possible.
If my position were different and I wanted to buy a house, I wouldn't want to do that now and then watch its value slip by 15% over the next twelve months. Nor would I be very happy if a bank tried to persuade me that it would be a good idea. Apart from the government and the BBC's economic's editors everyone else seems to think like me - this is not a good time to lend, borrow or spend if it's at all avoidable.
I worry that the falling value of the pound will drive up the cost of imports, thus keeping (real) inflation vibrantly healthy at between four and five per cent.
I believe that everything proposed by GB (without any rigorous challenge from the BBC) is smoke and mirrors intended to recreate the illusion of prosperity in an economy which he has effectively bankrupt. No matter how convincing, an illusion is an illusion. In the end debt has to be repaid, better to bite the bullet now.
Then - finally - if I read the BBC reports rightly not only do we have a national debt of a trillion pounds, but we owe about the same again to fund the public sector's pension black-hole and then there is the accumulated debt of GB's current spending splurge. This isn't a 12 month downturn in our fortunes, this is a huge recession for which our grandchildren will still be paying long after we are gone. Much, much better to bite the bullet now.
My impression of Robert is that he is inordinately pleased with his apparent abilty to predict events even though he knows what he knows from governemnt leaks. I think a little more humilty and honest advice to people who are going to suffer dreadfully over the next two to thre years would be a much better approach.
Cheers,
Charles
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I think when the commentators talk about
the People undertaking
'Reckless Borrowing'
What the commentators really mean is
'Reckless Lending'
Which is the Banks lending without conducting appropriate checks on creditworthyness and ability to pay back.
And as most of the Banks losses has been in taking depositor cash from the Retail arm and lending it to the 'Investment' arm to speculate and lose in dodgy assets worth zero, then the cause of all the trouble can be primarily seen as twofold.
a) Brown's fraudulent claim of 'eradicating bust' thus conning the People into assumption that stability could be used as a base for estimating future outgoings and ability to pay.
b) Banks failure to identify and quantify risk associated in lending cash to both retail borrowers and particularly to the 'Investment' arms of their own Bank.
Banks need to engage in appropriate lending which obviously doesn't incorporate lending to their own 'Investment' loss making arm.
Additionally, Brown and the Government need to stop indulging in their lying word games to the People.
So a twofold long term solution
Eradicate the Government lying and eradicate feckless Bankers who don't know how to care for Depositors cash.
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79 - those figurse are from the Halifax. The average wage is not to be confused with the average working wage which is considerably lower. And house prices would fall that far the only thing stopping them is supply shortage. Imagine the impact if the construction industry were still going full pelt and delivering more housing stock to a dead market. I can take you to mill developments for 'Urban Professionals' here in Manchester that have fallen 50% in 12 months and are still falling and they are still not selling.
Incidentally, Halifax's figures show that during periods of correction the price drops for a short period below this then rises to it then is static for 3-5 years.
But then again Halifax could be talking rubbish and their figures and their records/data complete tosh and you could be right. But most of the industry is now fairly solid that the decrease is going to be at least 30% from the 2007 peak.
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cash transactions only would really annoy modern businesses.
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#14 chelyabinsk
"Beware Robert Peston's "new, kinder, caring" capitalism message. There is an unreconstructed socialist message of the old school lurking here.
.........
Old style socialism has been tried and failed in country after country and especiallly in this one. "
I'm sorry, this is a very dishonest argument. You don't like something, so you label it as something else, then make a generalised attack on that something else.
This is something equivalent logically equivalent to your argument:
An sheep dog looks like a bit like a wolf
All members of the wolf family are unsuitable as pets. (not true)
Therefore don't let the sheep dog in the house
I have no idea what you mean by old style socialism anyway. The word "socialist" is just a label anyway. There was certainly no uniform model. Some models labelled socialst were successful in part or in full, (eg the scandinavian model) others were absolutely not.
I'm afraid your kind of argument is usually intended to stifle debate by making certain ideas unthinkable. It's a very common ploy with the political classes. (I hope you don't take this as an insult - it's not my intention! :-) )
#59 "Stocks should be placed in Canary Wharf and the guilty men pilloried."
I have more sympathy for this idea, but would prefer to strip them off their assets and make them live in B&Bs for a couple of years together with some of their innocent victims.
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If banks are so important to the country and too big to allow to fail, then their interests should be tightly tied to our interests. Bonuses need not be scrapped but it should be based over a longer period of 10+ years and include national performance factors like inflation, unemployment, average salary, crime rate, debt levels, £ exchange rates, budget surplus/deficit and GDP.
So, helping the country mean more money in everyone's pockets.
Ditto for public servants' salaries and pensions, especially MP's.
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117 strategycall
The two antics you identify - government misrepresentation, and overenthusiastic lending are both heading to solutions. It is not that fair to lump all banks together, the traditional high street banks have not been anywhere near as bad as the NR, B and B outfits. The NR types have been ringfenced, so job done up to a point. It cannot be sorted overnight. There is a GE in the pipeline. If GB is not booted out there is no hope really. There has been the economic equivalent of a landslip and there seems to be great reluctance to accept that the new landscape that results is exactly that, a new landscape. That the economy by definition has to reduce and many of the jobs where only propped up in some sectors by a bubble and will not come back. However equally well there is no reason that the new landscape cannopt be healthy and offer opportunity, there seems to be reluctance to accept that proposition, probably due to vested interest. The only two arguements about are the leap the gap types, which includes GB/AD, this cannot happen, and the armagedon type who are too gloomy. There will be growth from the landscape but there is no reason that it should be dramatic. Nor is there any reason that housing should not also stablise and provide investment opportunity. Again some people seem to object to that though why I cannot comprehend. The problem at present is that the main players in this - banks and government are hardly uninterested parties so say what they want to happen.
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#117.
Both, IMO, are correct.
There have been those that borrowed WAY beyond their means and those that have lent more than was possible to repay.
The lenders are more to blame, but sub managers and staff have been put under pressure from the boardroom to lend this money, backed by an additioal insurance policy, just to satisfy shareholders needs for a 10% dividend each year.
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Perhaps we should hope Gordon Brown listens to this.....but he wont !!!
This wins my "stating the flipping obvious" award for 2008 and 2009 possibly even longer of certain people continue trying avoid the issue.
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Er, isn't this one of the guys that failed completely to see the crash coming (can't find ANY quotes from him warning us). Of course why should he worry - he only trousered £35Mill last year.
Why should we trust anything these clowns tell us - look at their track record.
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123 emzdad
The fact this was driven along by shareholder pressure groups and demands is something that slips below the radar quite frequently. There is great silence on that point by shareholders, who are often still griping that their value and dividend has dropped. There is an almost complete denial of responsibility at all levels of all the spiders colony sitting on this particular web. B and B asked shareholders not to vote for mutualisation. Shareholders voted the other way, start of the problem. Gimme gimme gimme.
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I think it's about time the B of E set a negative interest rate. -5%?
So banks pay us to borrow money then we can join the Brownian borrow-and-fritter binge.
That would be a nice way of saying sorry.
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Finally a banker has confirmed my gut reaction that this crisis will not resolve itself before 2010 at the earliest. Let's start facing reality this is not a recession, it is a slump.
Therefore we must start thinking about how to protect our strategically important companies and industries. This will require a concerted effort from both the bankers and the government. The question is therefore are they up to it?
If Varley thinks that just saying sorry is going to get the banks off the responsibility hook then he is very mistaken. Throughout the financial services sector we need some form of Truth and Reconcilliation Commission - with teeth and penalties.
Personally, i would like to see us place R&D as an essential element of any national support/bail out package. We have been historically very poor at commercialising our developments and this problem needs to be addressed in the new economy.
Additionally we need to beef up the Civil Servant's skills in the negotiation and administration of commercial contracts - no more open-ended contracts, no more massive over-spends. fra more concentration on return of value to the economy and the wellbeing of the country as a whole.
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Re #79
All these people bellyaching about house prices falling are boring me. So here is a reality check.
There is no MBS market anymore. When it returns only those based on mortgages of 3x proved income (or thereabouts) will exist. In such circumstances current rent levels are unsustainable.
In these circumstances, to create jobs and seek real increases in the electors quality of life, there wil be changes to the planning laws to create jobs and a million or 2 new homes.
Believe it or not, the sustained low price of housing that will result in the UK is the best thing that could emerge from this crisis. For too long the investment capital available to UK manufacturers and for infrastructure, including education, health care,etc, has been limited due to the high volumes of capital absorbed by unproductive ever higher house prices.
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If he is so knowledgeable why did he let Barclays get into mess. Either it was deliberate and he should be kicked out and punished for deliberately distrusting shareholder wealth or he is trying to be some one after the mess.
I believe people like him should keep quit as they are non the wiser than the person next to him, its self publicity.
I believe government should impose wealth tax on rich bankers for profiteering, there is no point in taxing the bank, people who ran it should be taxed and imprisoned if they have been reckless.
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Actually commissar Preston's pdf enrobed pronunciamentos (mainly made to sell his book, eh Robert?) lack imagination and are more of the same-old, same-old.
Thusly, if only, sensible people, for example, BBC staffers and the caring, chattering classes of N1 and NW1 ran the economy. everything would be just peachy.
I don't think so, as one commentator has already said, this is old style socialism. I've also already heard Will Self (a fellow traveler in this style of thinking) that we should nationalise all the bank. Yeah Will, like Railtrack, for example.
Meanwhile, genuine radicalism and innovation, such as regional and local currencies and more emphasis on social enterprise (an actual third way as opposed to a soundbite, blairy one) are ignored.
Bring on the old, as long as we run it, eh?
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This comment was removed because the moderators found it broke the House Rules.
Why does the BBC keep giving this guy air time? The other day he was on predicting house price falls.
Given what we all know about what the banks got up to for the last 25 years or so why should we listen to him now? Advice from bankers is now akin to that of an Estate Agent selling a less than desirable property. Worthless. so why give him a platform to preach at us BBC?
I can't believe Brown has propped up these insidious institutions with *our* money only for them to again dictate the rules. Perhaps we should force them to lend or withdraw the bailout funding. If they don't want to lend then let them go bust.
If the banking industry needs some good PR then it had better start lending to sure fire bets (public sector workers, those with great credit history etc) in reasonable sums and not at extortionate rates. Capitalism needs sensible levels of debt and credit to work.
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A lot of the banks and other lenders were caught in the trap laid by unscrupulous, and apparently "good risk", loan companies that themselves specialised in lending to high-risk borrowers. They often didn't lend directly. I'm sure I remember seeing a programme about Canary Wharf explaining how it was done - shown on the BBC a couple of years ago. It meant that people who would not normally be given loans, because they were living on social benefits rather than earned income, could buy their homes.
The banks have got to take control back, no matter how much they are nagged by government to lend, lend, lend, they must look after their investors otherwise there's nothing in the pot to hand out. Investors are having an incredibly tough time just now, but the government doesn't seem to care about those who have been thrifty and put something by for a rainy day, they want us to spend everything and ultimately be dependent on state finances, which gives them ultimate control of the population.
@128 "Therefore we must start thinking about how to protect our strategically important companies and industries."
I've just read that government has now sold its remaining shares in AWRE to an American country.
They're selling the country off, including the critical infrastructure, bit by bit to prop up their damaging social policies. By the time they've finished there'll be nothing left.
The only thing we seem to have left is rain, and we're getting that in bucketloads, but don't have anywhere to store it for times of drought!
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Since the numerous bank leaders have been so wrong in the past, why should we give any credibility to Mr Varley's predictions about the future at this time ?
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Repossessions are fun if you are in that line of work.
Predictions for 2009 will be up by about 100,000 ish.
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Frankly more self fulling comments from John Varley.
Barclays take on more expnsive debt than they have too, but keep a government funding option in the back pocket, purely to avoid the government having power over the banks to operate in the best iinterest of the economy.
Its difficult to listen to projections from a man who's take over attempts, if they hadn't failed, would have been a complete disaster.
yes i agree personal and for that matter goverment levels of debt need to be reducing at a responsible level for the economy to truely recover but to read that the banks only really want to lend when asset values are rising does nothing to suggest they will ever show responsility towards the economy
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I'm sure others will point out lots of reasons why it wouldn't work but I'd vote to face reality now and suffer whatever comes rather than to have my children and their children working to pay for a mess that they are not responsible for. I can accept that numerous generations have over the years had to pay for past wars but this is different - on this occasion no-one was fighting for our freedom or for any other noble cause - and if we simply put things back together as they were then we should be ashamed of ourselves. We are in effect borrowing from the incomes of future generations and it is wrong. A mountain of debt if not much of a legacy for them so if it means the value of my home decreases 50% so be it - in fact bring it on.
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New Labour, new conservatives, why not New Capitalism, a phrase to pin our hopes to, as a bumpy 2009 approaches with so many factors at play not least fickle sentiment. Hopefully national schadenfreude has come to be a thing of the past as we look to the G20 to forge contingency plans for all half likely scenarios, as we find out whether what has been done hitherto has been enough to stave off unemployment figures reaching those unprecedented numbers produced by the turmoil in the financial markets. If they can make credible plans and be seen to make them, this in itself could bring enough stability to prevent the need to implement them. Plans inplace to deal with mass unemployment could create enough confidence to stop it happening. Plans to steady any to precarious upturn foundering on the rocketing of commodity prices that could ensue could make for a more sustainable recovery. Cooperation to regulate our multinational companies could give them a more fertile ground in which to flourish in ways that more beneficial to the populations whose lives they touch. Getting these things right in ways attend to the ways wishes and current difficulties of particular populations could do mre than armies against terrorism, so that the current problems of the oil producers should not be ignored. Perhaps I am saying some very obvious and simplistic things but there really does seem to be such a big oppurtunity in all of this.
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Isn't the crux of the problem that the entire worlds economy goes into freefall when things that have no tangible value or are priced on status instead of usefullness have their prices reset?
Water, forests or air have not run out yet and the Oceans still produce fish - these are our real tangible assets.
When you go to London Docklands and see a council flat side by side a million pound apartment you have to wonder why?
This depression will seriously help to level the playing field and the winners will be the poor. Those who were unable to obtain credit in the first place.
Another 18 months of depreciation is music to my ears and the more people that lose everything the better for me (for everyones sake, not personal jealosy), hopefully the majority of the private housing sector will collapse completely - this surely will false action to restore society to levels of social welfare not seen for decades.
My favorite words for 2009, Depression, reposession, bankruptcy, collapse and capitulation.
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So it's looking good for Darling's Q3 upturn forecast, then?
Wanders off disconsolately, shaking head.
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#122 - realistic comments I think. Neither paradise nor armageddon are very close, we as a nation are less wealthy than we had thought we were but it is not he end of the world. What really worries me is that most of the Government's increased borrowing is not to stimulate the economy but simply to replace the income tax lost from the bubble parts of the finance secotor. That income is never going to return but te Government seem to be planning to borrow in perpetuity to 'fill' the gap. But then, I suppose, once quantiative easing gets undeway, the BoE will 'buy' the gilts issued and after a year or two of inflation, no-one will worry much about it, except for the poor old savers
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@129. At 1:45pm on 20 Dec 2008, sizzler944 wrote:
//
There is no MBS market anymore. When it returns only those based on mortgages of 3x proved income
//
Quite so. My first mortgage in 1979 was 2.5x, 30% deposit (low salary), and we had to save for the deposit at a Building Society, who would only then accept the application (no guarantee it would be accepted, as they would go further into your budget).
So the watchword 30 years ago is one we are all very familiar with, that is, except by the compulsive liar in #10 - Prudence.
Prudence doesn't pay now. I paid off the mortgage, my pension is worth around what it was in 1990, and my savings are, in effect, taxed by low interest rates.
Wonder why I bothered, really?
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#57 stevenpalmer
Yes, we must have all of this and in addition we must make the regulators and rating agencies legally responsible to prevent any more of these disasters.
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12#
"How stupid are these people" , could you be of the same mindset ?
Are'nt " short term speculators " similar to "short sellers".
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Hear, hear #9
Yes, mistakes were made but we all need to focus on working together to improve the future, not just trying to outguess each other how bad it might become.
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18#
You forgot to mention the other two idiots in Belgium and Spain!
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So, the banks won't lend money until the prices of houses stops falling. But then if we can't borrow to buy them, the prices will continue falling and so we won't be able to borrow. . . .
Anyone see the logic flaw?
Isn't it about time the banks stopped being the problem and helped with the solution?
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seem's a fair point to me
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Has anyone in the banks lost their FSA Approved Person status as a result of the fiasco they have caused?
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When you are Poor
Food and Exercise
Is Like Putting
Money in the Bank
Thug Workout is
Like Prison Life
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148 - Do you not think borrowing has caused this problem and if we allow it to go back to the levels it was at we will just crash again?
We need to go back to the 'old ways'. Like 143 above I bought a house donkeys years ago. I had to save a 10% deposit in a Building Society for 2 years. I was then allowed to borrow 3 times my wage to buy a house that the Building Society's valuer checked to make sure it was worth the asking price. In fact there was a 1500 pound difference so I had to put that in with the deposit. I had to undergo stringent financial checks and sign a form that I had fully disclosed all my owings etc. My employer had to certify that my payslips showed my true wage not one boosted by bonuses and overtime. I had to have face-to-face interviews to see if I was of sound character. If I wanted to borrow money from anyone for anything (which I did a few years later for double glazing), I had to ask the BS first as as far as they were concerned that was their house until I paid for it 25 years down the line. In short, the Building Society did everything in it's power to minimise the risks to itself and it's investors.
That is what we need to return to - full credit checks and proper risk assesments.
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For thousands of years the wise men have been preaching only spend the money that you have. Spending money that you have is a virtue whereas spending money that you don't have is a vice.
Nobody earns money for anybody else, which includes fund managers,corporations,bankers and politicians. Think about return "of" money not return "on" money. Nobody should have placed their hard earned money in the form of pension with fund managers or politicians.
When will people learn, there is no point playing blame games.
We see this time and again, Enron, Worldcom, Dotcom, Subprime, Credit Crunch, Madoff, when will people learn and stop giving the hard earned money to fund managers,corporations,bankers and politicians.
Everybody should withdraw money from banks, funds, pension and shares or else it will get stolen by fund managers,corporations,bankers and politicians.
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If Brown thinks he is THE NEW MESSIAH?
Who is his JUDAS?
Varley just like Victor B is just another troll
"It wasnt ME"
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#9 'metallicinglewood' writes 'lets not just blame the banks, the vast majority of britons have binged on credit for decades now '.
On what basis can you claim 'the vast majority of britons' are to blame?
I am one of a large (and increasing) number of pensioners, most of whom have not 'binged on credit'. Also there are many hard working, honest citizens who pay their taxes, support their families themselves, and have lived within their means for the past decades. We are now paying for the profligacy, greed, and selfishness of what I suspect is a 'small minority' rather than the 'vast majority' of the population.
The people who are the architects of our current economic problems are, in my view:
1) Obscenely-overpaid senior members of many types of financial institutions, who, like Mr. Varley, express regret but suffer comparatively little pain.
2) Gullible borrowers who are seduced into buying the latest 'must-have' gadgets and borrow to satisfy their desires.
3) A government that seems to have little understanding of the problems confronted by most families, and even less in the way of ideas as to how to resolve them.
I deeply resent being cast as part of the cause of this country's economic plight, and equally resent suffering financially to bail out the irresponsible.
Trevor H, Farnham
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Mmmm I saw a few noble attempts to resolve the situation by taxing more all these horrible bankers, might be an idea but still limited in regard of the amounts involved. In the light of some of the comments displayed here what about taxing stupidity? It seems almost unlimited, I think this would look very promising...
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Blame the Fattest Bankers
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"I paid off the mortgage, my pension is worth around what it was in 1990, and my savings are, in effect, taxed by low interest rates." - JeremyP
You've got no mortgage, a pension and savings, and you're still whining?
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All John Varley is doing is restating some of the fundamental rules of economics something which this government and some of the more hysterical commentators seem to have forgotten.
We have experienced c 15 years of sustained economic growth. Asset prices became inflated, too many people borrowed too much money. There was bound to be a downturn - nobody has yet managed to change the economic cycle. Yes, the banks played their part in this and have lost huge sums of money - but this is not the first time this has happened. In 1992, Barclays announced its only full year loss in its history. Banks now see lending to certain types of enterprise or against certain assets as being too risky in the current economic climate. Thats why the price of borrowing is going up and why the availablity of credit is being tightened.
Asset prices need to correct themselves, some companies will go to the wall as demand for their products falls - nothing can nor should change that. Its part of the correction thats required. Things in time will bottom out and the economy will start to recover again. As it does the risk profile of certain sectors/businesses will change and banks will lend.
In the meantime it cannot possibly be right, as this government is doing, to borrow the country's way out of a boom that was financed by excessive borrowing. That way is the way to complete ruin.
Its a tough time for everyone at the moment and we need to help protect the vulnerable as far as we can. But, I'm afraid, its not possible to avoid all of the effects of the economic downturn. Things, will though eventually, get better.
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Part of the problem, it seems, is that we're being told that "house prices will start rising again in...."
but surely there's the nub of the matter, when you are trading on notions of value as opposed to actual value, then you will hit the wall of reality at a point in the future.
House prices need to drop, significantly, and remain dropped.
We need to stop building an economy reliant on housing value, and re-invest in an economy based on production, manufacture and services instead.
One thing that does bother me is the rental market. With everything losing value, everything destabilised and under pressure, how come rental charges remain the same? Surely a reduction is over-due, or else that rental market will collapse under the pressure of both saturation and lack of new customers? who, in a recession, can afford to rent at pre-recession prices?
Housing benefit bills, last time i looked, cost the government 14 Billion pounds a year, as taxpayers we should be pressing for value for money, and for reductions to that bill.
I would love to see rent controls given priority by this government, for the sake of the country. Putting money back into the disposable arena, and not into the hands of landlords and their mortgaging banks.
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"Blame the fattest bankers" - kikidread
No, eat the fattest bankers!
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"In the meantime it cannot possibly be right, as this government is doing, to borrow the country's way out of a boom that was financed by excessive borrowing." - MarkL64
Oh yes it can. (I assume by the way you mean "slump" when you say "boom" - we're no longer in a boom.) What governments should do, so long as we have a capitalist system, is act counter-cyclically: save and repay debt while raising interest rates in boom times, spend, borrow and lower rates in recessions. The current government (and on a far larger scale the US government) failed to do the first, but they should still do the second.
Here's an analogy. If you are a doctor called to attend a barbiturate addict who is in withdrawal, you quickly give them an injection of barbiturates - otherwise they will probably die, and you will be struck off even if you escape prosecution for manslaughter. This despite the undoubted fact that it was their use of barbiturates that is the root cause of their condition.
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"Bankers should say sorry. This is correct".
I am the chairperson of a major bank.
I am sorry for lending out and 'investing' all the cheap money, which the government let flood the market.
Now, where was I?
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#12
Politicians will blame everyone:
Barclays
Short sellers
Shoe sellers
Shoe throwers
Oil Cartels
Bird Flue
Human Flue,
Terrorism
Wars
You name it.
They will attempt to take legal action against all of the above somehow. To win votes.
If we want to blame someone in hindsight, it should be the "independent" Bank of England (BoE and also the FED)
In 2001 - 2006 the rate should have been kept above 7-8% and they should have been threatening with even higher rates.
BoE is there to prevent bubbles and target inflation/Credit bubbles.
Did it target it? Are BoE's target's set wrongly?
These are the things that need to change. Who sat on BoE MPC at that time. Ask them questions! They will say "easy in to say now!" They are supposed to be experts, the best brains in this area.
#13 #36 #130
"Why did people spend money they did not have?"
If you offer me a mortgage at 3% interest, I'll take it and spend it on a big house.
If you offer me a mortgage at 10% or more, I won't take it and I won't buy a big house.
BoE has the biggest influence, more than the Barclays bank!
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#164
Why blame the BoE? After all it was Crash G that insisted that house price inflation not be included in the MPC's inflation calcs.. If it had been then perhaps we may not have got into this mess as deeply as we have because interest rates would have been far higher earlier.
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#121
Not sure if you're denigrating short-sellers or not.
But they are part of the solution, not the problem.
In a market where everyone concerned is interested in prices rising, a bubble is inevitable. Having some balance with short-sellers identifying overpricing is a good thing.
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MarkL64 wrote: "We have experienced c 15 years of sustained economic growth."
However, when we finally come to write the critical analysis of the last 30 years we may well find that we have had over 20 years of financial growth whilst the true strategic value of our economy has probably stagnated at best or even declined!
When we now need to look to the other arms of our economy to save our bacon we find that the majority of them are no longer in our control. We have sold nearly everything that was possible to sell, we have privitised our national services only to find that they are less efficient and have not produced the free market benefits that we were assured would accrue.
It's going to be a long cold 2009, 2010 and 2011 - if we are lucky
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John Varley said in an interview with the BBC?s Hard Talk in January 2007 that it was not a bad idea for house prices to rise continuously! The programme can be seen here:
http://news.bbc.co.uk/1/hi/programmes/hardtalk/6226037.stm
He also made a number of other forecasts during the interview and all of them turned out to be wrong! His forecast for house price fall of around 15% for next year and his claim that the economy will start to grow in 2010 is just wishful thinking!
The Treasury forecasted earlier this year that the economy would grow by 2.75% in 2009! The Treasury now forecasts a NEGATIVE growth of 1% in 2009! Even this looks optimistic. In late 2007, Nationwide Building Society forecasted house prices for 2008 to remain flat!
Banks (including Barclays) have been responsible for lending irresponsibly and for creating the asset bubble and massive debt. He has also criticized Northern Rock for offering 125% mortgages. But Barclays thorough its subsidiary (First Plus) offered similar mortgages.
What the UK needs to do is to move away from wasting precious resources on property and speculation and invest in industries (especially knowledge industries) that create long-lasting benefits. Banks should be made to support these industries instead of lending money to speculate on the property market.
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Is it a coincidence that two of the oldest industries are banking & prostitution?
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#169 That's a very unfair slur - on prostitutes. They provide a bit of comfort to the needy and a social safety valve. Quite useful citizens in fact!
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Rocking Universally
(Armagideon Style)
Hey! Why Can't Rome
Set Gods Children free
Babylon Let it be
What it must be
Don't you remember
Down in Egypt
It was the same trip
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JV train Varley recieved years of bonuses[rise crispies ]until his shareholders went snap crackle and pop
,now he wants another bowelful from those who will have to walk the walk while Parley Varley talks the talk before going...boom boom with another serial killer
I will be changeing my name to knower and building a boat on my roof instead of a loft conversion [dont laugh]
Remember the good book said the meek shall inherrit the earth ,a clear enough prophesy about the coming deflation.
Bible prophesy is coming to pass for the self deluded fools that believed in the "enlightenment"
Varley has said things will get worse before thet get better which is another way of saying that we wont be back to even where we are now for atleast five years
Remember the Bible referred to the seven fat cows and seven lean cows at the time of ancient pyramid building , a historical parralell to where we are now .
Joseph with his coat of many colors[O bama]survived slavery to become the prime minister of Pyramidsarus[USA]
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Great stuff from you still Robert but...
All the doom and gloom bothers me because some of it doesn't seem to add up.
You write that "for the UK the aggregate of consumer, corporate and public-sector debt... is over £4000bn." There are circa 4.7 million private sector enterprises (2007) and thousands of public sector enterprises as well as the Goverment itself. That looks like debt averaging £800,000 each - it looks huge but some enterprises carry billions.
You also write: "Households borrowed too much, £1200bn on mortgages alone." but there are 24m (approx) households in the UK so that is £50,000 per household; or about £75,000 per privately owned. Even with crashed property values that seems covered? And hardly too much in all cases? I have none, my kids less than 40 and 10% LTV respectively.
Surely the issue is this failed asset value coupled with over-optimistic valuation (current cost accounting maybe?) - and as Varley says it will take time for debt and asset to get back into sane relationship. So meantime it is tough on credit. What we need is a Government with the guts to restore forced deposits on ALL purchases. It was like that last time we had interest rates this low. I think we should be welcoming the correction and urging to Government to stop throwing money at the causers of crisis and do more to help the victims.
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John Barclay Varley come
But he had to run
He had to leave
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A lot of people won?t get no supper tonight
A lot of people won?t get no justice tonight
A lot of people are going to stand up and fight
The battle is getting hotter
In this iration, It's Armagideon
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#113 Great idea !! Once fuel reaches 2 quid per litre food costs soars since much of the cost is transportation of fertilisers, pesticides, farming materials and transportation from the fields to the supermarkets !!
Following the increase in price of food, all other products will increase in price leading to massive inflation !!
When it gets to 10 quid per pint, there will be riots in the streets !! The Greeks are already showing the way !!
Hope this is helpful !!
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170 Sash clarkson
Are you a pollytitian ,and have you invested in any trojan whores lately ,with a view to keeping them off the street or entering them for the gland national .
Labour will of course be using their trojan whores for double entry bookeeping .
Thats the only way they will make their ends meet [no pun intended]
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#128 "Additionally we need to beef up the Civil Servant's skills in the negotiation and administration of commercial contracts - no more open-ended contracts, no more massive over-spends. fra more concentration on return of value to the economy and the wellbeing of the country as a whole."
The Chinese have a wonderful way of doing that !! If the civil servant cannot do his job properly and massively waste public money, he's taken out and shot !! It surely concentrates the minds of the others !!
In Britain, if a civil servant massively waste public money, he is knighted !!
Rather shows the differences in attitude !!
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#169 "Is it a coincidence that two of the oldest industries are banking & prostitution?"
Banking is *NOT* one of the oldest professions !! In the West, it began in around the 1300s !! Long after there were smiths, carpenters, butchers, bakers and candlestick makers !!
Just FYI !!
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re: 169, 170, 179, 181
forget about prostitutes
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In my view there are only three tyes of banker. 1, ignorant, mainly thise too low down the packing order to know whatr is going on. 2, incompetnet supposedly in charge nbut taken for a ride. 3, corrupt all those who created this mess. There are two questions, which one is Mr Varley and why does Robert Peston continue to want to listen to these people rather than seek factual information on what is going to happen. Who in their right mind would listen to a banker? Less trustworthy than estate agents, and anyone else you care to mention.
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Folk should just recognise their place and get to it.
It is all very well complaining that the banks are not doing what they should be doing. The fact is that the banks are doing what is right for them.
The system we have depends on a great number of people having to work, and work hard. Part of their work is truly for themselves. A much bigger proportion is for other, non productive people. You can make a great big list of non productive people. Starting with pregnant women unable to work and ending with old age pensioners - also unable to work. In between those extremes are any number of other folk, politicians and pensioners included.
But of course also hidden amongst the rest are some special classes of people. There are those that do not need to work, produce anything worthwhile, due to accident of birth or their chosen profession.
These people are necessary of course so that others can lead meaningful lives producing goods and services efficiently.
There needs to be a balance between those toiling and those resting.
This is where the politicians come in to decide the ratio.
However there is a problem since the politicians are not actually in command of the way that the economy performs. The economy has two masters. Whether we like it or not the banking system determines how much credit is offered and therefore how much money is created.
The bankers need to kept onside or the economy falters.
The government cannot King Canute style decree that everything shall be rosy. The bankers need to be assured that they will make a living and also that the loans they offer will get paid back.
It is all about confidence.
Arguably the post war baby boom generation were an ideal population. Loads of confidence; loads of loans taken out. Leading to loads of money for all.
Not any more. The baby boomers are retrenching. Result, lack of confidence, no loans, no money.
This of course does not have anything to do with the government. After all they want to return to the good times just as much as we all do.
No. It is all to do with the banking system. Like it or not the bankers decide whether to make loans or not.
Until a system is devised where confidence - general acclamation - is removed from the money making process then we will just have to accept our place in the pile.
The bankers have decided their place - on top of course.
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I'm livin' on a Chinese rock
All my best things are in hock
Everything is in the pawn shop
It's hot as a beach, itch
I should've been rich
But I'm just diggin' a Chinese ditch
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Maybe Varley has picked up on the FSA paper that says that large banks will have to acquire up to £300bn of Government debt (post haste) which they can only fund by dumping other assets, finding retail deposits or lending less
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#160 Re yr comment on the rental market, the Evening Standard addressed this on Friday in an article buried on pg24: "Rents falling faster than house prices as sellers turn landlord"
According to the article, rents are down 15 to 20 per cent in "cold-spots" such as Kensington and Chelsea and double digit falls across swathes of West and Noth London.
Government attempts to reverse the asset price falls are destined to fail. The sooner they get down to a floor the better. This is not all bad news. Thinking of my children, they will be more likely to be able to buy in the future.
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#164 Excellent comments
The interest rates were too low. Is the Fed/BoE to blame for this or are they only nominally independent.
Certainly Brown gave the BoE the wrong target by not including house prices in inflation.
I know that Greenspan gave the US economy a kick after 9/11 but why did low interest rates go on for so long.
Was it China offering cheap credit and refusing to devalue their currency? Is this a dictatorship indulging in economic warfare?
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118.
No, this is from the Halifax November release:
"Key housing affordability measure is at its most favourable for over five years
The house price to earnings ratio ? a key affordability measure - is declining significantly. The house price to average earnings ratio has fallen by 22% from a peak of 5.84 in July 2007 to an estimated 4.56 in November 2008. The ratio is now at its lowest level for more than five years (July 2003: 4.54). The long-term average is 4.0."
Given that the related Halifax house price is £163,605, that implies an average full-time male wage of nearly £36k.
But I don't necessarily disagree with the 30% fall from the 2007 peak. That, according to Halifax, was £197k. That would mean a low of £138k, still quite a lot different from the £95k implied by your earlier post.
P.S.
Note from Halifax release re. HPER:
PRICE/EARNINGS RATIO
Ratio of the Halifax standardised average price to national average earnings for full-time male employees. Price Earnings ratios revised to reflect new data in the Annual Survey of Hours and Earnings (ASHE).
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How pathetic chemengrules 188! Why should we all suffer for the sake of your children? It was you who decided to have them in the first place and therefore they are your financial responsibility.
What's wrong with renting? It's a model that is more usual in Europe where rental contracts are the norm. perhaps we should now stop thinking about ownership of houses and start thinking about homes - however they are financed
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"One of the main contributors to what looks like a severe recession in the UK is a contraction of lending by our banks."
it would perhaps be more accurate to say
""One of the main contributors to what looks like a severe recession in the UK was an insane expansion of lending by our banks."
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A contraction in debt will occur. Painfully.
That is because money is created from debt, requiring even more money to be created so that the interest can be paid. Engineers understand exponential functions, economists do not.
With low inflation and low interest rates it just takes longer. Of course if the 'created' money is used to explore the world or create/improve manufacturing plant, then new worth is created and all is OK.
So...
shall we have inflation or shall we default on our debts? The complicating factor is that foreign debts may not be affected by inflation of sterling.
Meanwhile let's continue to understate inflation (keeps pay rises down and makes GDP look positive). If we haven't already tried Hedonics this can help as well.
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I seem to remember Barclays swallowed up the Woolwich,some time ago,and was instrumental in financing African,and less educated countries may be for their mineral wealth,and a higher return,but in fact financing the arms industry.
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Maybe I've missed something, but I haven't as yet heard a single word of thanks from the banks to their customers for bailing them out, albeit an action taken on their behalf by HMG.
Having received the survival pill, would it be too much to expect some help from the banks to those of their customers who might need it as a result of the economic downturn that the banks are entirely responsible for?
Or is morality exclusively the ethic of the common man.
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Rents are being pushed higher by Housing benefits,lack of a ceiling,currently some £400-£500 per month,as property prices rose so did the benefit.There have been cases where the amount is enormous.
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What really irks me is the arrogance of the business managers at ground level. All of the bank's without exception show extreme arrogance towards their business customers.
What they fail to understand is that had the tax payer/shareholder not bailed them out they would by now be on the street. It may not have been their decision to make the crap investments their banks did, investments generally far more risky that investing in local run and managed small business and entrepreneurs, but, at the end of the day its the same small businesses and entrepreneurs that will lift them out of the mire.
Some contrition and hard work to look after the only asset this country has left would go a long way.
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Recession,read Famine,Money syphoned off to Build the Golden palaces in the middle East,and the reconstitution from war damage.We will need to resort to old fashioned Barter,unless that too will be made illegal.I expect drug prices will plummet,and will become the major industry,along with Football,and Sport,over taking manufacture.
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why should we give any credence whatsoever to a single thing sprouted, either in public or in private, by the head of a major bank?
'specially about anything to do with banking?
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Always worries me when these CEO's find time to speak to the media. It's usually a sign of trouble at mill and they want to take their mind off things. Hope I'm wrong,
Yours Aye,
Graucho
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#102
I hear we are going to have a general election on Thursday.
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# 182 TransitionPaul
Somewhat off-message, but a good post nonetheless. I know that you and I think alike (check out some of my other posts).
Our fellow bloggers need to realise that this whole global financial crisis stuff may have been triggered by the debt-fuelled, exotic derivatives, sub-prime mortgage nonsense.
However, what most people are missing is that the root cause of our current predicament is, indeed, the beginning of the end of mankind's era of cheap energy. Almost without realising it consciously or explicitly, the markets have signalled that endless economic growth on the back of debt, itself riding on cheap energy and finite natural resources is no longer going to work. Hey presto! Global financial meltdown under way. It's happened in the past of course, but this one we don't come out of and carry on like we did before. That's the big difference that the politicians haven't yet figured (or choose to ignore, more likely - too difficult to deal with).
Varley or anyone else saying we'll be out of this and back to normal in one, two, three years or whatever is in for one helluva shock: it ain't gonna happen. What is truly terrifying is the extent to which politicians are now compounding the problem with untold vengeance by squirting $billions/$trillions into the system which they don't have (it's tomorrow's money, if it exists at all) and which will never, ever now be recovered. Simple as that.
My money's on a future scenario that could well make Mad Max look like Noddy Goes to Toyland in terms of how our lives are going to be changed over the next decade or two.
I'm suffering from a macabre fascination watching events unfold like this ... for now anyway. But I worry about the forthcoming realities when I reflect on the likely circumstances for me and my family over the coming months and years; I'm as exposed financially as most I imagine.
It's all looking very precarious, despite the disingenuous pronouncements of our glorious political leaders (and, to some extent, the BBC which resolutely refuses to challenge the received wisdom).
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I hate it when news programmes camp outside woolworths and say it is in trouble because of the credit crunch, they were in trouble before the credit crunch and i think they would still be in trouble without it. The same goes for MFI and some car firms.
It is too easy to simplify things and blame it all on the credit crunch its a nice ALIBI.
As for the Madoff affair, the Banks would have been hit sooner or later. The thing is bad business or bad management will fall sooner or later.
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#103
"#74
Very informative and absolutely true all our resources must be directed to producing sustainable energy."
All our non-renewable resources should be directed to producing sustainable energy?
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195. At 8:38pm on 20 Dec 2008, mickeymole wrote:
Maybe I've missed something, but I haven't as yet heard a single word of thanks from the banks to their customers for bailing them out, albeit an action taken on their behalf by HMG.
+
What do you expect, they're bankers
they charge you extra for any work involved.
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I wonder if Mr Varley is familiar with the last 3 weeks' movements in the savings market? This market, which is entirely controlled - or manipulated- by the banks, is behaving as if the banks have accumulated so much money washing about in their vaults that they don't know what to do with it. Savings interest rates have crashed in 3 weeks from 4% to 1.97% in 1 of my accounts, 95% of all 1 and 2 year fixed rate savings deals have been withdrawn, and my wife has been lied to by Birmingham Midshires in order to prevent her from successfully investing in a 1 year bond. So much for the shortage of money, Mr Varley. Or are Barclays and its ilk using this money purely to prop up its bottom line and liquidity at the expense of UK citizens?
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lessons learnt (or not)
1. You can not buck the trend in a bad market (except if you sell short or borrow tax money)
2. Personal Investors don't stand a chance when the big boys can't make it.
3. Banks want and love your money (but not you)
4. People will commit felonies to get your money.
5. A fool and his money are easily parted
6. There are no real financial experts or magic guarantees for low risk investing
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I found this on the internet, it was written by a couple of blokes called Marx and Engles....................... 'to
mention the commercial crises that by their periodical return put
on its trial, each time more threateningly, the existence of the
entire bourgeois society. In these crises a great part not only
of the existing products, but also of the previously created
productive forces, are periodically destroyed. In these crises
there breaks out an epidemic that, in all earlier epochs, would
have seemed an absurdity--the epidemic of over-production.
Society suddenly finds itself put back into a state of momentary
barbarism; it appears as if a famine, a universal war of
devastation had cut off the supply of every means of subsistence;
industry and commerce seem to be destroyed; and why? Because
there is too much civilisation, too much means of subsistence,
too much industry, too much commerce. The productive forces at
the disposal of society no longer tend to further the development
of the conditions of bourgeois property; on the contrary, they
have become too powerful for these conditions, by which they are
fettered, and so soon as they overcome these fetters, they bring
disorder into the whole of bourgeois society, endanger the
existence of bourgeois property. The conditions of bourgeois
society are too narrow to comprise the wealth created by them.
And how does the bourgeoisie get over these crises? On the one
hand inforced destruction of a mass of productive forces; on the
other, by the conquest of new markets, and by the more thorough
exploitation of the old ones. That is to say, by paving the
way for more extensive and more destructive crises, and by
diminishing the means whereby crises are prevented.'
Probably a pair of nutters! Still.........
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#116
I sense a kindred spirit here - well said.
I do think your prediction of "real" inflation staying between 4 and 5% is optimistic however.
There are a lot of people in this same position, people who have been careful with their money, who are now beginning to feel a bit insecure with low interest rates and higher inflation. For many the best option is to stop spending on anything that is optional - a new TV or fridge or washing machine...whatever it may be...to "make do" until a greater feeling of security comes about.
I don't subscribe to theh notion that "everyone has been greedy", over the last decade - there have been millions of people living within their means and saving for their future - and these people are being hit as hard as anyone else.
If these same millions of people do not buy new products for a year or two and businesses fail and many unemployed are created because of that, perhaps we should find a spokesman who can stand up and say to a reporter "Oops, sorry" as Mr Varley has done.
"Oops, sorry" is not a very good response from an industry that has quite so much blood on its hands.
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#181
The Church financed the Crusades through the Templars, who issued a form of Bill of Exchange facility from around 1120. They also dealt in primitive mortgages financing Godefroid of Bouillon's participation in the First Crusade.
The Jews operated a primitive discount financing operation from even earlier.
The Chinese had paper money from around the 600s, and the Tenth Fretensis Legion counterstamped the Temple Shekel from 72CE, indicating there was a cash management operation even then.
The Old Testament injunctions against certain forms of monetary operations strongly suggest such institutions were in existence among the Egyptians, Babylonians and possibly Hittites.
So although they may not have uninterrupted heritage (with the possible exception of the Rothschilds, whose progenitor Mayer Amschel Rothschild was clearly from older roots dating to the period of the Hasidei Ashkenaz I was talking about), there were certainly banks long before the Guilds you talk about. Unless you propose that the Ugh's wife was a pro...
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In my limited experience of the financial sector one thing that stands out more than any other is their ability to spin more than political parties do. I would say believe the general outline but be wary of the small print. I think the banking system is bracing itself for more home grown problems that may affect their ability to function as viable businesses. In hard times, when redundancy looms and the possibility of loosing ones home arises people resigned themselves to it in the past. Now concidering the performance of said financial institutions it may be advisable to check the small print of your agreement and the penalty charges you may have been charged.
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For all those who suspect bankers are a bunch of international crooks hell-bent on global power at any price, treat yourself to a Christmas read - Hot Money and the Politics of Debt by R.T. Naylor.
As one newspaper described it: "Naylor's presentation is disturbing reading.
"For that reason alone it merits the attention of anyone concerned about the current international money mess, its potential for destruction, and its heart-rending impact on millions of defenceless people."
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Perhaps Mr Peston should have asked the gentleman from Barclays if his company is contracted to purchase any further "toxic Loans". It is my belief that all the major institutions are, and that is the reason why they are unwilling to advance further loans to business until they have written off the next trance of these ldebts.
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I think what is truly being said here is that, banks are not going to start lending money untill house prices have recovered and they can recover any losses made on negative equity. So, while it may be a great time to buy a house no one is going to lend you any money to do so.
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Crisis? What crisis?
The market always fixes itself. That's what the market is - humankind's most brilliant achievement to enable us to climb our own bootstraps.
It's about the only thing I can think of that pursuades me that there might be a God.
From time to time it makes adjustments (sic).
If the government wants to mess around with the absurd initiatives we've seen recently, then at least it keeps them occupied. It won't make the slighted difference in the end - the forces are just too vast.
Have to say, though, the prospect of giving huge sums to Jaguar (not even a British company any more) so that sinecure workers can produce cars that they know they won't be able to sell is hilarious.
I'm glad to see that while Mandleson is not the sort of chap I'd trust to handle the fiinances of a village fete, he's obviously got a sense of humour.
Best thing to do is nothing. Let nature take its course. A period of mass bankruptcies, and hunger will work wonders. Should be a very entertaining New Year.
Personally, I have liquidated what assets I had - moved into rented acommodation and bought gold.
So screw everyone.
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I have had 3 people writing on spec trying to buy my shop in the past month, and have noticed that a lot of publicly financed contracts are back on the agenda as their loan interest costs have halved. And my bank are no longer poo-poohing my development plans. A local plot of land which had been repossessed attracted 18 cash bidders at auction at a price well in excess of the original purchase price.
There are real share bargains to be had, not least in the banking sector ,and serious shedloads of cash are going to be made by people with enough balls to get on board right now.
The older I get the more I realise that you cannot predict the future based on the present. S--t happens ,yes, but tides turn and storms quell.
As the song goes....Love is in the Air!
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Once upon a time, money was an interest-free medium of exchange rather than a financial product sold by banks.
At the end of WWII, virtually half of the money in circulation was interest-free, the other half was interest-bearing credit. See http://forumnews.wordpress.com/public-interest-article/2-what-is-the-cash-crumble/
Now, 97% are interest-bearing credit. How did we get weaned off Cash for the real economy of the Nation?
Why does everybody assume we can only get money from banks, at a cost, I wonder?
What does Mr. Varley want to achieve while his and other banks 'sit' on credit?
More along this line of thinking on our petition "Stop the Cash Crumble to Equalize the Credit Crunch" on http://tinyurl.com/666rwd
With 'globally warm' regards,
Sabine
Organiser, Forum for Stable Currencies
http://forumforstablecurrencies.org.uk
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207. At 9:55pm on 20 Dec 2008, kikidread
This comment is awaiting moderation. Explain.
+
are the moderators watching the strictly come dancing final right now
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#202
I think I can bring this back on-message.
When the West has burned the world's last litre of petrol, the last cubic meter of gas; when all the land fill is full and the American dream has burned up everything consumable; a final email to eveyone else on the planet should be sent, with the last bit of available electricity to say, "Oops, sorry".
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#34
Just a guess, but it's probably because the software for running the blogs is written in the US where they know about the $, but the £ (pound) is probably not on their keyboards.
Quite likely not a trivial task to sort it out - maybe even writing the software again from square one.
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As long ago as 3000BC, a Sumerian philosopher said "Money is a figment of imagination".
5000 years later only senior investment bankers and fund managers have really got to grips with this.
As one can see, their imagination has grown with time.
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#113
I agree with your sentiments, but there is a problem with your degree of trust in a government raising the cost of auto fuel and using the revenue sensibly.
The Conservatives applied the infamous fuel tax escalator, which Labour continued with for a while. The idea was always to dissuade us from using the car so much, encourage the production of more fuel efficient cars and use the revenue to improve public transport. After years of paying increasing taxes on auto fuel we then watched the railways fall apart (literally) in front of our eyes. We were of course betrayed.
I expect to mistrust the government, doorstep salesmen, internet spam and all advertising. I never expected to mistrust my bank or other institutions I might leave my investments with.
I will feel a lot happier when I know the industry has been cleaned up. Is anyone planning a clean up?
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190. At 7:29pm on 20 Dec 2008, morebalanceplease
These are their figures going back to 1983 (25 years) as a multiple of the average wage for that year. If you ask them nicely, they are extremely helpful amd will actually dig out the figures going back a lot further and it just reflects these anyway. Now then, the average wage (higher than the average working wage) is around 26.8K at the moment, therefore their statistics show that housing is grossly over-priced and will continue to fall for some time yet.
1983 3.51
1984 3.52
1985 3.56
1986 3.71
1987 3.91
1988 4.47
1989 4.85
1990 4.40
1991 4.04
1992 3.57
1993 3.36
1994 3.28
1995 3.14
1996 3.14
1997 3.14
1998 3.14
1999 3.19
2000 3.29
2001 3.40
2002 3.97
2003 4.55
2004 5.16
2005 5.22
2006 5.43
2007 5.74
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I wish people would think before bleating out Daily Mail/Robert Peston mantras that "everyone has borrowed beyond their means".
This is absolute sensationalist rubbish.
One or two percent of people may have borrowed beyond their means (look at repossession/bankruptcy figures), but the vast majority of people assess their income/savings/prospects before taking on debt.
There is nothing wrong with debt if taken on sensibly (i.e. you can service/repay it).
Robert can you please stop whipping the nation whilist it's down now please.
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202. At 9:18pm on 20 Dec 2008, moraymint
You are right, having looked at your previous posts, we are of the same mind. I find the Transition Movement (www.TransitionNC.org and similar sites) to be helpful in redirecting our lives to sustainable community based lifestyle.
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If one were to do away with the Fractional Reserve Banking, may be there'd be no need for the economy to grow exponentially?
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I am afraid that the financial collapse we are experiencing and the global energy, which has temporarily subsided, will ruin the lives of our children's generation.
I have learned about Peak Oil 4 years ago and was so shocked by the implications that I abandoned my career, sold our house, bought a small farm in Cornwall, producing organic food for local people and now in the process of converting to 100% renewables (electricity, heating, hot water, fuel and also bore hole for own water). I would advise anybody who can to do something similar.
If you are still employed, if you still own shares, if you are not yet in control of your pension pot (through SIPP or similar), if you live in a city, if you can't grow your own food or keep a few chickens, if you rely on Utilities, if you buy the fuel for heating and transport, ..., you are lining your family up to be one of the many victims of the 21st century, the century of decline.
Read more about it at www.TransitionNC.org or similar sites.
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The Debt Trap - If you are behind on payments you never get out. Money spent to catch up means you always be short for existing payments. Nearly all money paid covers interest but not capital. If you have not got equity in property, or expect a windfall, or change in circumstances in the future you will be stuck in a rut unable to progress. Unemployment, Illness etc can force you into such a situation.
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Dear Robert,
May I ask you why you wasted licence payers fee on conducting an interview with the chief executive of Barclays? These are the people who caused the mess in the first place and you are broadcasting their opinions about how long this recession is going to last? Why should anyone listen to them, they haven?t exactly got a very good track record and they could be wrong yet again.
Unfortunately most journalists seem to enjoy glamorising doom and gloom side of any news and optimism is nowhere to be seen. They are doing an excellent job of destroying the morale of people which will result in destroying this country we all love.
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You know, in 227 postings not one of you has examined the Chancellor's likely reaction to this. He's not far off the nationalisation thread himself, he made that clear last time he tried to tell the banks off.
If Barclays thinks they can let everyone else run the risk and then step in in two years time, either to scavenge the survivors, or claim the glory if we recover, then they're going to be very, very mistaken. Their aim to cream off the top in the mean time is likely to be their last: HMG will have little taste to be dragged down the Fortis route, as the Belgians have been.
Try Ephisode 4 of the current Spooks series for size. The de Menezes trial made it clear that an affair of state can legally be out of reach of human rights legislation, under ECHR, in other words that the licence to kill can be very strong indeed. There are more forms of treason than planning to debauch Camilla, like planning the downfall of the Chancellor, and the death penalty for that was only marginally defeated in the Crime and Disorder Act 1998 c.37, if you check back.
This may appear excessive, but given the security, financial and legal power of the leaders of such a bank, their increasing disrespect for the hand which feeds them (secured credit, to whit) may become intolerable. If they refuse to do as asked, and as given every facility to do so, then they have no role left in the Chancellor's eyes.
Let's look at that from a different angle. They claim to be unwilling to take the risk on defaulters. Yet there is no risk if HMG is underwriting the loans. So they are effectively claiming HMG's credit is shot. You've argued the indebtedness of the country to exhaustion here, but there is still one thing remaining: if you take that argument to its conclusion, then there are few countries which remain solvent. So where is the credit? In the hands of relatively few, who have a problem: once the governments turn on their havens, they will have no place to hide. It's an inversion of the old argument that if you owe the bank ten thousand pounds, then you have a problem: if you owe then ten million pounds, then the bank has a problem. The problem now is where to put your money if you've got a stash, you don't want to do the only thing you can do, paradoxically.
Because just as I floated aspects of property a couple of days ago (reminding you of the feudal concept of fee, easily transferred titles and little true possession), so it might be possible some swinging re-equilibration of assets will occur, implementing a more socialist economic by reversing the ever-increasing divergence between the rich and the poor.
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#185
Please may we have less slander about that great wise old King Canute on this Blog.
Contrary to popular teaching (and for this I blame the standards of education) King Canute did NOT try to hold back the tide.
What he was trying to demonstrate to his sycophantic advisers was that a Royal edict would not make a thing so.
Now for advisors, read civil servants and for King, read ministers.
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I'm sorry, Robert, but an apology is not acceptable in the slightest. Sorrow does not give back that which has been both stolen and lost, nor ease the nightmare that the next 2 years are going to be.
I'm an unforgiving man until righteous justice is served, tit-for-tat, and oh! do I want it!
As one in the 'know', you will be quite aware of the scams and all their interconnections, of how the people of this nation have been duped and ignorantly participated in them.
Job losses, pensions losses, and a well-deserved loss of trust, have brought our society to a brink of collapse! Now Brown, somewhat patriarchially, decides it is morally prudent to dip his fingers into the coffers of the over-taxed in order to 'bail out' those whose mismanagement has allowed this debacle to arise.
No discussion, no dialogue, just 'you will do as you're told and accept it' because he believes he cannot allow this corrupt society to fail and fall. I disagree. The people should not reward mismanagement with bailouts, but with incarcerations, and hard labour jail time.
Banks should be allowed to fail and fall, they should go under, and if it takes society with it, then so be it. Let us rebuild a better one, not from the ashes, but from 'real' moral and ethical thinking...it's going to happen some day. The so-called 'underclass' are not going to allow this system to continue the way it has been going, as if it has been traditionally accepted for it to do so...all it needs now is a spark or two, and it's all coming down.
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Thanks, No. 103, the Money as Debt video was quite interesting.
No. 106, I am inclined to agree with you. Sure, the media call this a recession, but maybe we are just shrinking down to the real level of our economy. We don't have much of a manufacturing base anymore. The Americans and the French make aircraft. German companies churn out power stations. What do we make that the world wants to buy? Certainly not enough to keep all the people of working age who want employment gainfully employed, let alone earning enough to make a decent living.
No. 117, accusing the banks of reckless lending seems to be a bit harsh. The banks can only lend to someone based on their creditworthiness and ability to repay at the time they draw down the loan. Do we really expect them to become fortune tellers? The vast majority of loans on their books would surely predate the current crisis by some months, if not years. Take someone who bought a house four years ago for £300K, against a salary of £60K per annum. They had a secure job. They could afford to make the repayments. Here we are in 2008, and they have been laid off. Maybe they worked for HBoS, or one of the car companies, or any other one of the myriad of firms now shutting up shop and retreating back overseas. How can either party have been expected to have the foresight to predict this crisis a few years on?
NO 227, that's very good advice, and I fear you are right about the 21st century being one of declining wealth. But how many of us actually have enough unencumbered assets to be able to buy a farm somewhere and become self sufficient?
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If you have a problem... and there is a solution... why worry?
If you have a problem... and there is no solution... why worry?
Nothing lasts forever - not even your problems or worries!
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You don?t have to say you are sorry
For all the wrongs that you have done
I don?t wanna hear a sad story
'Cause the damage is already done
Oh the damage is already done
Although we forgive
Seven times seven
So much damage already done
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Some thoughts...
1.
How is it that people from countries like China, etc. can save more than the UK?
2.
If you were to lose your job, how long can you survive with existing savings (if any)?
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Re 59
The BBC reports 02:00 21 December 2008
"Banker found hanged in hotel room"
To read the full BBC report about
"A senior banker with HSBC",
go to BBC News UK.
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More thoughts
How can Barclay's charge the equivalent of 30 litres of petrol every time they send you a letter for going overdrawn?
Who is the coolest?
The man in the M&S jumper or the versace
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John Varley says:
"
... that a reduction in the overall quantity of debt in the economy is absolutely necessary - although he concedes that the process is extremely painful.
"
This is the most sensible thing anyone has said over the past 6 months.
Yes - blame the banks for being part of the problem in the past but please, please don't ask them to behave like that again in the future.
Lets stop pretending we can go back to thinking we are richer than we are !!!!
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#237
If he followed us, then I have sympathy as for him as a person, but regret to have to say that was the easy way out. As a professional, he should have sorted out whatever happened to put him beyond the boundary before killing himself: now he's left a mess for some innocent to clean up.
The longer the governments take to get a grip, the worse it will get.
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223. RedLenin
Thanks for the numbers, which average to 3.9.
I have the figures back to 1976 and have been tracking them since 1996 when getting them out of Halifax (and Nationwide) was like getting blood out of a stone. Halifax have also just updated their "economic factbook" on their website which has housing and other economic statistics going back as far as 1956.
I don't really want to argue with you, as I respect anyone prepared to do a bit of sensible research before posting. (Unlike many, including, on occasions Mr. Peston).
However, you are using a different denominator to the Halifax (and most other commentators), so your comparisons to historical averages are not really meaningful. Using your Halifax numbers, the long(ish) term average is 3.9 and the current multiple is 4.56, according to the latest Halifax release. On that basis, there is 14% to fall to get to the average.
That, however, ignores mortgage rates which average about 6% now v. 9% long term average. (Back to 1976 again). On that basis, the affordability of property is now pretty close to the long term average. That is not to say that they will not fall further, but simply to point out that they will start to look quite cheap quite soon if lower mortgage rates persist. (They will only go higher if the BoE is forced to protect sterling and get their gilt issues away, which they will do all they possibly can do to avoid. More likely they will go lower).
I don't disagree that housig remains overvalued, simply the degree. I think if you rework your numbers using a consistent methodology you would have to agree.
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Let me all give you a moment of silence
bankers are 'dead'
making hundreds of thousands
you didn't even see it coming
because you were high as a £
'dead' you trusted your partners
and they lined you up
and now you don't want to give
them diamonds up
you owe everyone thousands of bucks
but on some real £ don't try to be tough
tell them you ain't got it
and times are rough
why should you be afraid
don't earn from their mistakes
learn from their mistakes
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Can someone please answer me this question...
Why am I paying to keep these failed bankers in their multi-millionaire lifestyle?
There are about 30 million of us out here asking the same question.
And merry xmas to the BBC moderators, as they get away from all the whinging for a few days.
God knows we've got enough to whinge about.
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A number of very hot topics have been discussed recently on the various business and finance blogs and I am far from being alone in thinking there is a hell of a lot, for the banks, the regulators and the big cheese himself .guv to answer to. Anyway a post above [#227] rightly points out that the... best placed, or right thing to do during these difficult economic times is buy a farm. Not many of us actually have enough unencumbered assets left, but perhaps we can we all chip in, making it more affordable? Modify it. Round up the shower, throw em in it, and draft in a Mr Curzon to head a Quasi Public firm to tutor profit and loss, set up daily tasks, listen to them when they're at their most productive - in their sleep; And take notes on the painstakingly slow process of how they all adapt to life living under the very rules and popcorn laws they created/allowed in the last 11 years. We can marvel at the skill and/or ineptitude of how they respond in a reactive environment. Take a few side bets as we gouge out on the fats of the land while they?re all being ruled and have no other choice but to play Musical Meals. (same principle minus the chairs). Tough rules apply. On the Farm. Tough on the causes of the farm. There will be no boom and bust on the farm. Sure there will be the false hopes, sound bites and mention, of signs of improvement, but everyday will be a busted flush! Perpetual decline engineered and stealth games like Pin the ?that?s not classified as a knife? on the ?seriously misguided journo?.
Of course this will never happen and the poor will be forced to squat land and make straw bale houses in new dwellings dotted around Gilberdyke and Pangbourne.
#202 Great post by the way.
As is #210 Any ideas as to why some of that old money is headed for Montenegro?
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The action of the banks and people like Mr Varley is absolutely disgusting, it is all about self preservation. It also shows fundamentally that successive governments reliance on the service sector is wrong (moths to a flame comes to mind).
What we need is civil war and an end to the un equal power that the City of London holds over th rest of the UK.
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Trust. Before Deregulation from 1982 s 'trustee' standard was used as a benchmark for investment conduct, but abandoned. For numerous investment-banking activities we should legislate and re-introduce that benchmark.
Reflating the Real Economy. There is a well organised lottery system and 'Erni' the premium bond scheme which could well be used to distribute as by 'helicopter' the funds the banks refuse to employ to reflate the real economy, despite government urging; change the 'win-chance/risk' computational numbers to get the funds into circulation
Ruebii
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post 238 Kikidread
Neither is COOL
John Smedley is cool as in 007!
I am about to submit our application
for a Banking License,there will be no
Millionaire Salaries at our customers
expense . . . . .
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241. I just used the last 25 years as an example and to not post one huge column and annoy people (like some on here are prone to do). I've actually got the average house/ average wage ratios going back decades before that right back to the 19th century and believe me, 90% of the price of an average house equates to around 3.35 times the average wage.
As a 'real time' indicator of how things are going though, I have family on Anglesey living in the port Holyhead. The price of a 2 bed terrace has dropped in 12 months from 109K to 80K and they still aren't selling.
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#238
More thoughts but not much ideas...
Who is the coolest?
The idiot who spend money he does not have and goes overdrawn or the one who spend what he earns and does not go overdrawn?
Stop crying and get a life!
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247 correct, but how can barclays charge you for going
overdrawn if you don't have an account with them?
Naledge of Kidz In The Hall released a very dope mixtape
'Will Rap For Food'
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To the best of my knowledge not a single politician, commentator or presenter including Robert Peston, and certainly not a single 'expert' in the news has correctly identified the true nature of the two interlinked problems the world is facing today, which currently manifest themselves as a recession:
1. The little financial difficulty.
True, it started with sub-prime mortgages, BUT it is far deeper than that. After all the total of sub-prime mortgage debt is reported as being some $1.5 trillion, whereas world Governments have so far pump close to $10 trillion into the banks. If the problem was sub-prime mortgages, or now 'banks not lending to each other', this $10 trillion cash injection would have solved it in one go.
No, the problem is 'derivatives'. These debts and bets are worth some $500 trillion. Compare that to the GDP of the whole planet of just $50 trillion and you get some idea why this fantastic burden of debt and/or potential liabilities can NEVER be repaid.
How absurd that John Varley claims to be open for business, lending us money that we gave him in the first place and worsening the situation further.
The only solutions I can think of are
a) hyperinflation to degrade the whole of that debt (following Zimbabwe)or
b) legal cancellation of all derivative contracts (!!) or
c) collapse of the whole financial system incl just about all banks, and starting all over again.
We need to choose one and go for it. The future is bleak whatever Gordon and other governments do, but pumping borrowed money into the economy in the utterly vain hope of recovery is just about the worst possible strategy.
2. And then there is the little problem of Energy and Growth.
2008 is the end of the Era of Growth (as growth is predicated on the availability of cheap energy) and the start of the Era of Decline.
No matter what investment is made in oil or gas fields, the total production from 2009 onwards will decline by perhaps 4% on average every year, thus our primary energy sources will halve every 20 years or so. This ?peaking? has already happened in 60 oil producing countries around the world, incl USA (1972) and UK(1999) and now, from 2009, global production will also begin to decline.
This decline will be on a massively larger scale than the 1930s depression. To start with, it will be at least 40 years long. 40 years will take us to about 25% of current energy usage, which is about the level of energy we can expect from all renewable sources combined. So at that stage, provided Governments have been wise enough to have invested massively in renewable energy, renewables may be able to take over from fossil fuels and perhaps stabilise the world economy.
However, pumping trillions of dollars into rescuing banks and car manufacturers and further trillions into ?restarting the economy? may impoverish governments to a point where no investment will be possible where it is really needed, such as renewables.
So, what should we do now? I suggest:
a) embrace the Green New Deal (Google it) incl. £50 billion per year invested in renewables in UK. This £50 billion investment will be easily repaid through lower import bills for fossil fuels in the years to come.
b) forget about tax cuts or increases in current spending, they won?t do any good anyway and just add more and more to national (mine and yours) debt
c) choose one of the strategies above for the self inflicted financial crisis - and follow through
d) and go sustainable ( meaning: if you can't continue doing the same thing for say 100 years without damage, then its not sustainable)
Look at TransitionNC.org for much more info and discussion
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yet more woffle - Robert, interview me-a normal hard working business owner, with no credit facilities, cos I don't want any!
Like AC my money goes elsewhere-in preparation for UK bankruptcy and an IMF loan.
Bankers say sorry? NOT ENOUGH
Full disclosure, fraud investigations
Then, overhaul their behaviours to reinstate true customer service. ie:
Tax them heavily for overseas call centres which are bloomin' useless
Top level salaries to be no more than £60k
Lower level salaries to be no less than £17k
Remove commission and bonuses. Rewardgoid work with a pay rise
Give back the control to managers who know their customers
Scrap the credit rating system
Make them pay fines for rubbish customer service.
In short, make them the hard-working customer orientated institutions they were-make them accountable
And in the meantime, scrap the FSA and get this government out.
Banks and GB need to return to working for the people-they obviously can't, so replace the heads with those who can.
There are lots of people on here who know how to sort it out!
Let me at them-I'll do it!
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Alexander-great news in the licence-you've got my email and know my requirements-let me know as soon as you are up and running!
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Maybe, just maybe if Robert Preston stopped looking for any negative in any story the real workers in this country may have a chance. Prestons sole aim is to undermine any positive news at the mo just to keep his own self importance at the highest level. He is a disgrace to the british working people.
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Red Lenin wrote
"12 months this 18months that" ask yourself, ifr they know so much then how come 12 months ago they didn't see this coming and therefore, just how reliable are their predictions now?"
I agree with your comments about not listening to the public projections of bankers, or anyone else. However, I really wonder whether they did not see this coming for some time before it actually hit. I get the impression that many in the industry saw this coming for several years.
I suspect that the CEO's of the banks were at least warned about the problems, but, if so, they did nothing to protect their shareholders against the inconvenient truth.
This view calls into question their competence, or their honesty, or both. My suspicion is that some of them were both dishonest and incompetent. And now they have our bailout money.
Unfortunately, to a man, they are basing their lending on the presumption that there will be a long and severe recession and, in the absence of some kind of intervention, the reduced lending will ensure that there is a long and severe recession. We have turned insane asylum over to the inmates. We have to take it back again.
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NEW GAME FOR XMAS
RELEASE FOR 23 DECEMBER
PASS THE PARCEL OF TOXIC DEBT
OPEN TO PLAYERS OVER 6 YEARS OLD
TOXIC DEBT FANTASY
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WARNING TOXIC DEBT CAN DAMAGE YOU AND YOUR FAMILY IF LET OUT IN YOUR HOUSE/STREET.
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What a contrast between Mr.Varley's candour and the attitude of the government.
Varley identifies the issues and puts an approximate time-scale on the processes involved and identifies some of those processes to us. This is positive.
What he does not say is how long to go before the economy recovers. I appreciate that is in the lap of He Who has Saved the World, but the recovery time is probably now as more important than the depth of the recession (slump).
I have been doing some rough calculations as to the time it took for us to put aside the effects of the 1991 recession. It probably took five years for asset prices to recover. Then we had a small recession made far more complex and deep by stupid exchange rate policies that finally blew up in 1992. Our surrent situation is far, far worse.
I expected the current recession to be bad but never factored in a major banking collapse. I was one of those who just wondered what would happen if the acronym soup of the deriviatives markets unravelled as I thought it all too technical for a layman like me to understand. Little did I appreciate that this market was all babble and bovine biological solids. I and others didn't understand it because we were not as stupid as the people acting in those markets. We had swallowed the Master of the Universe's propaganda.
The problem that all progandists including He Who Saved the World now have is that we can see through them.
There is no government strategy as they have no idea how long this is going to go on. They are throwing everything and the kitchen sink at the problem as they want to secure their own jobs; nothing else. Thus they are then going to saddle this country with more debt than ever, thus ensuring that we will not escape from this mess for a generation.
To those on this blog who appear to be advocating farming as a solution. I live in the middle of farming country and just about every farmer I know is very worried for the future. What you are advocating is subsistence agriculture. I appreciate its virtues but its success is dependent upon your age and fitness. The cooperative society that once existed in the countryside was put to death with the Inclosures. We have to go through a whole lot more change before we can recover it.
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Transitioned Paul wrote:
The 500 trillion is the same set of mortgages repackaged and traded over and over again. The problem is no one knows who owns what to whom. So to solve that problem we have to go back to the physics. If $1.2 trillion in mortgages are causing defaults on $500 trillion, the solution has to start with a $1.2 trillion in mortgages that are the root of the problem. For example, if we were to guarantee payment on a $1.2 trillion we can avoid defaults on the $500 trillion.
The problem with derivatives is that they are too divorced from the physics. The physics are a homeowner and his mortgage and a banker who wrote that mortgage. Everything else is financial fluff.
Unfortunately, tackling this problem at the financial level will not get around the problem you raise about the $500 trillion. We have to tackle it at the physical level and keep houses off the market to avoid further depressing house prices and increasing the $1.2 trillion. The best solution to keep thousands off the market would be to allow the people who live in them now to rent them at a rate they can afford. They would not build up equity, but they at least would have a place to live.
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TIGERJAYJ POST252
100% Agreement.
By mid january we will have completed
abandoning the UK BANKING SYSTEM
apart from our payroll for UK
employees.
So Varley and your fellow Chief
Executives thats in excess of 500
million sterling which is off shore and a
loss of circa 670 million turnover
removed from the UK system.
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Transition Paul, in a thoughtful piece, goes on to note the potential decline in energy production over time. He is quite right that sooner or later our ability to find new sources of non-renewable energy will run out. In the near term, I am not so sure that it will decline at a rate of 4% per year.
There are new sources of energy, albeit probably more expensive than current sources, such as shale oil and tar sands. The problem with these is that they are more expensive and take some time to bring a plant on stream. They also take large amounts of capital and manpower, possibly imposing limits on their rate of growth.
There are also technologies, such as nuclear power, which have considerably longer resort's lifetimes, if we exploit all of the sources of fissionable energy. Some years ago, a Scientific American Article estimated that there would be about 35,000 years of fissionable material available at a price less than that of coal. With the high capital costs of nuclear, obviously there would be an increase in costs over time, offset by any technological advances.
Another alternative could be zero emission coal, which is technically feasible but not yet exploited. Several years ago the estimates of coal reserves were about 400 years at the Van current rates of consumption.
There are new technologies for extracting and exploiting existing energy sources. This kept, for a long time. the price of oil down in the face reserves.
There are much more energy-efficient end use technologies that customers could adapt to. These can reduce energy demands. An example of one of the many such technologies would be hybrid vehicles. Two that we can add lighter weight materials. Finally we can drive smaller cars and improve our transportation systems so that people will find it convenient to drive less often.
And last but not least our renewable energy technologies.
A single pronged approach to this problem will not lead us out of the wilderness. We need to use all of them.
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kickidread post250
Overdrawn??
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Given the recent problems with the economy I feel it is time for the Government to look into the workings of the main credit reference agencies in the UK. They have far too much power, operte as a form of cartel and prevent a large tranche of the potential borrowers ie the general Public and small Business from obtaining credit, thereby reducing the amount of cash in the economy and having an adverse effect on the retail trade...
This may at first seem perverse, after all, the credit crunch was in part caused by too much careless sub-prime lending in the USA. However the UK credit reference agencies often hold incorrect information on borrowers, they allow all sorts of Uk sub-prime lenders to register often fallacious defaults on borrowers (often out of spite) and generally allow them to penalise many borrowers without the need for a dispute to be settled by a neutral third party. For example family A may receive a default because the lender concerned made an admin error. This may take months to be even noticed and therefore prevent the said borrower from being able to raise monies.
Who are Equifax/Experian et al? Why do they have so much power, why are they not regulated...In fact it would be to everyone's benefit\ for them to be brought under Govt control....
Yes banks choose how they use the information concerned, but for God's sake lets regulate them to make sure this information is fair, accurate and relevant and with an element of current and future prospects included, not just past credit history
Lionel Refson
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Plenty OF STUFF ON HERE RE
HOUSE PRICES.
WHEN WILL PEOPLE LEARN A HOUSE IS A PLACE TO LIVE, TO BRING UP A FAMILY ,TO DEVELOP
A LIFE EITHER AS AN INDIVIDUAL OR AS A FAMILY.
A HOUSE SHOULD BE A SANCTUARY.
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This comment was removed because the moderators found it broke the House Rules.
lionelrefson 262
The reference agencies have too much power over financial agreements.
IE anyone can get a default notice posted on their file and have no knowledge of it.
My view is that they should only record court judgements.
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Having read a bit in the Sunday papers and the blogs, I do not think the bankers have got it yet. They have presided over the biggest issue with asset values since civilisation began. Through their inability to stick to banking as opposed to artificailly trading in instruments that they clearly did not have a clue about, they have destroyed whatever value was in their own businesses and probably teh value of teh entire financial services business sector- some of which like insurance and pension companies- help most of us secure our futures.
They have the gall to say they have to pay bonuses to keep the best people- what tosh- they are paying people bomuses in investment banking who have not made a bean in real terms in the last 10 years- they reported profits by buying and selling to each other not by creating value. What is even worse is that they seemed to let part of a bank to use asset to short sell against- pretended they had made a profit on the fall and then handed the assets back to another bit of the bank- now worth a lot less.
Banking is necessary to create conditions for business to trade at acceptable risk by using our money to provide credit. They do not exist to trade in securities other than to reduce the risk attached to being a bank- teh sooner they get this the better. The only way this will be achieved is to break uo the banks and make them stick to defined activities and they should be banned from leveraging traders. A banks should have a retail arm and a commercial arm- investment trading should be using equity of those who want to take risk, Investemnt by banks should be long term and no bonuses on trading short term.
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#262
Who are Equifax/Experian et al? Why do they have so much power, why are they not regulated...In fact it would be to everyone's benefit\ for them to be brought under Govt control....
They are a pain because they get so much wrong. However they are accountable and for a fee of about 12 squid I was able to get a report on my rating and was able to correct it for another 12 squid.
There is regulation to give the report for 1 squid but you end up going for their quicker commercial service.
They are essential aspects of a capitalist economy and there is competition, so I would suggest while not ideal they at least function as intended.
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252 tigerjayj
If you listen to what the banker actually says he is not saying sorry, he is saying another banker should say sorry. At no point does he say sorry. All very carefully worded, a set piece, no sensible challenge, just lap it up. Clever stuff as it has now been 'repeated', actually mistated as an apology when it wasnt - by people on tv who should know better.
As for the credit problem is here for a while story it comes back to the fact you can make just as much profit from a small turnover as a high one, it is a matter of margin. This is just a message to say expect to pay for access to credit
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267 gruad999
Should report to trading standards.
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A robust Irish view?
http://www.independent.ie/opinion/analysis/dont-help-the-banks--take-them-over-1582376.html
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Plenty of RANTING on here. It's really getting VERY TIRESOME.
Nothing wrong with discussing house prices, IN MY VIEW.
On a personal note I HAVE NEVER seen housing as an investment. I am on to my six now and have worried about paying too much every time, but, hey, IT'S A PLACE to LIVE, not AN INVESTMENT. (Having started in May 1988, well used to losing money, ON PAPER).
Doesn't stop property being an INTERESTING and IMPORTANT discussion topic.
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re. #268
Varley and his cronies' apologies would be the same as Tony Blair's. Remember -was it over Dr. David Kelly's death, or any other number of this Gov't's shameful and devious activities when they were discovered- when he said (and butter wouldn't melt in his mouth) ".... I can apologise....." blah blah blah..
I know you 'can' apologise, but 'are' you actually apologising right now?
No chance mate.
We dont need apologies (never trust a banker, they never write any notes and never confirm an agreement in writing unless they can raise a fee). We want some of them in jail for the frauds they have inflicted on us. That would taste much sweeter than some weasel words with their fingers corssed behind their backs.
I hope Pesto was fairly brutal in his cross-examination of Varley, but I fear it will be all to polite on the broadcast. Hope to be proved wrong.
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"Varley: credit to shrink for up to two years"
writes Robert Peston.
On 27th October 1986 BIG BANG happened, the deregulation of financial markets in London.
It unleashed an era of unfettered competition and a massive expansion for the City, which extended its every more exotic financial alchemy to the aptly named Isle of Dogs.
After 1979 the infrastructure of Britain's industrial base was shut down or sold off making the UK an importing and consuming nation dependent on financial services, public spending, house prices and credit. To service all of which the UK imported an army of labour.
Now that the game is up, Mr Varley like all his banking colleagues, are behaving just as bankers always do. They lend an umbrella when the sun is shining, and want it back the minute clouds appear.
The re-balancing of the UK economy is going to be painful and will take years and will have immense political consequences.
As in wartime draconian measures may be required, the suspension of civil liberties, and a coalition government.
Where is our Churchill?
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#273
'As in wartime draconian measures may be required, the suspension of civil liberties, and a coalition government.'
No.
While a considerable body of civil liberties are stealthily being removed/manipulated at present, the long term solution must surely not be draconian.
Draconian measures tend to be employed by the existing 'Establishment' to wipe out informed debate and hide the real problems.
We are coming to learn a lot more about the seedy corridors of real power in GB and Ireland. To have real chance in the future we must re-learn the power of democracy, and correct the faults.
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#267
How naive!! Equifqax/Experian are not regulated. They sell incorrect info received from financial institutions onto other financial institutions. They have no real duty of care to check if the info is correct or not... because they are private enterprise rather than properly controlled.. There is no real recourse against them either
As far as I understand it, we need to boost consumer spending...Lets say at any one time there are 2 million files on equifax with errors/mistakes preventing 2 million people obtaining credit...How does that impact on consumer spending !!
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274
Mouzel1
Chelyabinsk wrote (273)
"As in wartime draconian measures may be required, the suspension of civil liberties, and a coalition government".
You opine that "Draconian measures tend to be employed by the existing establishment to wipe out informed debate".
Wrong.
Draconian measures are usually employed when the state is under threat of its existence externally or when internal order is under threat of breaking down.
This has got nothing to do with what you perceive as "the seedy corridors of real power" or any other conspiracy theory.
The power of democracy lies in being able to take the necessary measures to defend itself.
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#276
'The power of democracy lies in being able to take the necessary measures to defend itself.'
Good rhetoric but isn't 'itself' our existing system ?
If so, it does need to be changed.
'Defend itself' against what?
Would we be defending ourselves against the disenfranchised? If so that's a pretty big task and the list is growing fast, from pensioners to unemployed young people.
In fact the language of 'war' isn't really helpful - though wars can be very helpful in propping up major businesses and financiers e.g. the continuation of Germany's war effort in 1916 or the use of Blue Circle cement in making German trenches.
Isn't negotiation and problemsolving preferable to control and enforcement?
Once the Pandora's box of force is an element in confrontation it is very difficult to close it. Innumerable examples of this from history, most resulting in a plus ca change situation.
While I'm not a great fan of conspiracy theorists, there is certainly a great deal which has gone on which at the very least might have been prevented by government competence (this not solely in reference to GB, you only need to take a quick look at the next country to the west).
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"At my feet is the Bank of England, and over there is Parliament, the Treasury and 10 Downing St."
Robert Peston verbatim, The New Capitalism Pt1.
There you have it.
All these august institutions are at Robert Peston's feet.
Can't wait for his debut on Panorama.
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277 - you only need to take a quick look at the next country to the west.
You mean thr Republic of Ireland? I don't quite follow
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forget Churchill, we need Cromwellian integrity!
Lord save us from the greed and utter incompetence of bankers and government.
Frankly, noone else will!
Vote for none of the above!
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Lizzards in human form have taken over the politico financial system .[i have just seen the prince of darkness himself baron von M andlestine on Roberts video talking about gentle prodding ,as if stuffing and mounting Jaguar wasnt enough for him ]
No one is laughing at David ICKE now !
It should be obvious by now [even to deluded fools] that the clause in the banking act that says only fit and proper persons can ru[i]n banks, favoured the descendants of Blackbeard .
The "problem " could be solved if those astute enough to be cash rich were allowed to start new banks .
Unfortunately those that control banking and pollYtricks are not about to let wise r interlopers in on their cheesey little counterfeiting racket.
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The housing market will not 'bottom' until 2013.
The Credit markets are fundamentally broken. Any infusion of capital into banking system in 2009 will be used to recapitalize banks.
There is still a lot off-balance sheet risks that we are not aware of.
Dropping interest rates to 0% makes no different to banks since unless they know they will stay low for a considerable amount of time they will not be able to make any profits from it.
Most of the credit that inflated into the Housing market over the last 5-years came from mortgage companies that has been borrowing from wholesale international money markets.
Since that wholesale lending will never be there again, banks will have A LOT LESS money to lend out.
If there is less credit for lending to the housing sector (since they need to lend to small businesses as well) then that will reduce DEMAND. If Demand reduces then prices will fall.
So there are 2 factors that will determine when "Asset Prices will stabilize", how long it takes credit markets to start lending again... and when earnings to house price values return back to the historical mean of 2.8x - 3x.
http://smartcrisis.com
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Guys,
Apparently my post 101 (lol, you can't make it up) was removed because 'it contains words or phrases in a non-English language'
Indeed part of the post was a regular expression that was not English. Did you feel stupid, Mods, when you read it 'cos you didn't understand it?
Funny. I just checked the BBC World Service and ya know a lot of that is non-English too.
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Re 217
It is possible to use 'M4' money but in a non-interest bearing way - if you spend on your credit card, pay off in full each month from your salary which is credited to your bank.
This mimicks being paid in cash, carrying it around in your pocket and spending it. After all, interest on bank current accounts is small.
In principle, therefore, there should be a derivative of "M4" which captures electronic money used in a non-interest bearing way - in the 1960s "M4 lending" was less than "M4" indicating that a non-interest bearing part existed. Now this is swamped by the greed of banks for interest.
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PR Crisis? And then some!
The PR experts are certainly going to have their work cut out on this one.
Nearly everyone I have talked to over the past few weeks appears to having nothing but the deepest contempt for our banks and the banking "system". Do these institutions have any idea how much they are despised by the vast majority of the population?
Let?s be honest, the vast majority of "ordinary" folk have been disillusioned with the financial services industry for some time now.
From the Equitable Life debacle to the more recent, well publicised excesses of the investment banks and hedge funds whose single minded focus on corporate profit and personal gain has resulted in what can be only described as a decade of conspicuous greed at the expense of any real and proper governance. God knows I am no socialist but the rewards and bonuses thrown around over the past few years have bordered on the indefensible and in some cases have been arguably obscene by any measurable standards.
And let?s face it, this alone has been in part-way responsible for fuelling the property boom over the last five years ? particularly in the South. How many of us have heard stories of quantum gazumping?s by bonus fuelled buyers with their telephone number bank accounts. The purchasing of second and third properties in rural areas resulting in the inability of local people to buy and the subsequent disintegration of long-established communities as a result. One Cornish estate agent I spoke to last year estimated that 80% of his new buyers were City Fuelled Bonus Types who were willing to pay on average 30% over asking price to secure a property. And 80% of those probably only visit their twice a year anyway!
But should we blame individuals or blame the ?system?? The inexorable pressure to deliver year on year profits, the compelling need to satisfy stakeholder expectations and increase stock value has driven many institutions to sacrifice their terms of corporate governance and commercial integrity on the alter of enhanced shareholder value. And they have done this with OUR money ? with our trust and without our knowledge. (Not that many people actually understand the derivatives market anyway ? I certainly don?t). But this pressure on everyone to sell, sell, sell and lend to anything with a pulse (and in many cases when the patient was already on life-support) and ?screw tomorrow? has handicapped every one of us for the next ten to twenty years.
Of course now we have our base rate at the lowest for over fifty years and just you try and get a sensible tracker mortgage! Yes, I know it?s all about Inter-Bank lending rates and willingness of institutions to lend to one another, but you try and explain that to Joe in the street. All he sees is a £500M Government lifeline with huge tax hikes to pay for it and he can?t get a mortgage at a sensible rate.
Good PR is the least of their problems. New principles are needed and stricter regulation is required. But we (the greater WE that is) have also learned a painful lesson. There?s no such thing a free lunch?. And maybe that?s not such a bad thing after all.
Personally I find the lyrics of ?The Road to Hell? by the great Chris Rea strangely prophetic:
?And I'm underneath the streetlight
But the light of joy I know
Scared beyond belief way down in the shadows
And the perverted fear of violence
Chokes the smile on every face
And common sense is ringing out the bells
This ain't no technological breakdown
Oh no, this is the road to hell
And all the roads jam up with credit
And there's nothing you can do
It's all just bits of paper flying away from you
Oh look out world, take a good look
What comes down here
You must learn this lesson fast and learn it well
This ain't no upwardly mobile freeway
Oh no, this is the road
Said this is the road
This is the road to hell?
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I'm fed up to the teeth of reported like you talking the economy down. Yes we are in a downturn but is it really as bad as it seems? We need realism when reporting such events not victorian melodramatics with trying to win the best eye catching dire headline.
People like yourself have a duty to also talk up the economy and put over a balanced point of view not sensationalise the whole event.
How about injecting some positve headlines into your repertoire instead of the usual day to day downer.
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