Lend, lend, lend
A dizzying number of banking initiatives is likely be announced by the Treasury tomorrow morning.
But they'll all have two things in common.
They are designed to improve the supply of credit to the economy, to prevent this recession turning into something even more prolonged and painful.
And they'll involve yet more commitments of taxpayers' money, of our money (we could be talking as much as several hundred billion pounds of additional help from taxpayers, to add to the £600bn of our wonga that has been provided to the banks in the form of guarantees, loans, and capital).
Also, they are way outside of most people's experience, so they may seem complicated.
For example the government will - for a price - provide a guarantee that bonds created out of mortgages or out of loans to companies won't go bad.
The point of this is to encourage investors with billions in cash, such as pension funds or hedge funds, to buy these bonds.
Think of it as investors lending to us as taxpayers, and taxpayers then passing the cash on as loans to credit-starved housebuyers and to big companies.
You may think it odd that investors would rather lend to taxpayers rather than directly to businesses and households. But, rightly or wrongly, they think that we are very unlikely to default (and when I say "we", I of course mean the United Kingdom, the state, as a sovereign borrower).
So the device should increase the supply of precious credit to the real economy - although some will worry about whether taxpayers should be taking on the risk of financing the housing market and companies in this way.
Also - as I pointed out yesterday - we as taxpayers will be insuring some of the bad loans made by our biggest banks, to limit their future losses from their reckless lending.
The aim of this would be to give banks greater confidence about their prospects - with the intention of assuring the banks that they have sufficient resources to lend more to all of us.
Yesterday I disclosed two other Treasury wheezes: to reduce the massive cash drain for Royal Bank of Scotland, HBOS and Lloyds TSB from the dividends payable on preference shares held by the Treasury; and to staunch the massive contraction of lending by nationalised Northern Rock.
What's more, there'll be a new Bank of England scheme to allow banks to swap assorted loans for Treasury bills - which in effect gives them access to a vast pool of cash to facilitate the provision of more credit.
I hope that by now you spot the pattern. It's all about making sure that enough loans are being made to keep afloat viable businesses and to prevent the contraction of the housing market becoming devastatingly savage.
But you'll also identify an apparent injustice and a paradox.
The seeming unfairness is that banks are being sheltered from the full consequences of their own fecklessness - for the supposed wider good.
And the paradox is that the government wants to make more credit available to reduce the severity of a recession that was caused by a decade-long, crazy lending binge.
Update 19:32: Royal Bank of Scotland will convert the £5bn of preference shares it has sold to the Treasury into ordinary shares - which means that taxpayers' stake in this enormous bank will rise to more than 70% (again, see yesterday's note for more on this).
I'm 
© MMIX~RS~q~RS~~RS~z~RS~47~RS~)
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But will it fly this time?
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Dear oh dear!!!! ..and so it goes on to the ever so predictable leap (of the cliff)
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Until it is clear as to how much each bank has in bad loans there will be no floor under the credit market.
I do not see any of these measures resolving that issue.
Why oh why oh why can't the government get a grip on this thing?
Are they too scared and hoping that a bit of bull will pull us all through?
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Have you heard anything on why a forced debt for equity swap of the banks' subordinated debt isn't being planned? They holders of that debt got paid a premium to take a risk - and now they're being bailed out by us.
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The loans given out initially should be debt consolidation loans to mange the existing level of debt
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as Gb has asked the bank to "come clean" on their toxic assets it is obvious he h
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sorry........finger slipped!
. .....he has no idea how much risk there is....if you dont know the risk how do you insure against it? will this work? just like all his other schemes i doubt it...but lets wait and see!
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This is like giving an alcoholic another bottle of whisky... the last thing the economy needs is more credit. The only lasting recovery will come when all the bad debt is flushed out of the system, and we learn to live within our means.
Never has there been so much proof of the incompetence of this Government, as the idea that we can borrow our way out of debt.
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Followed by the inevitable increase in inflation and interest rates going skyward with people defaulting on their mortgages. By which time of course Zanulabour will be in opposition and accusing the Torys of being the party of high inflation and interest rates.
We've had Crash Gordon now it will be Dash for Cash Gordon followed by Trash Gordon.
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from the "you couldnt make this up" department....
Treasury officials checking the books of the Royal Bank of Scotland, now controlled by the Government, were shocked to discover that £2.5billion had been loaned to Russian oligarch Leonid Blavatnik in his attempt to build a massive business empire.
The RBS has had to write off the entire debt because one of Mr Blavatnik’s foreign companies faces going bust – with British taxpayers left to pay the price.
Now this was discovered AFTER GB had bought 60% of this bank....so much for due diligence!
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The big question for me is, is this going to make mortgages available to those with small deposits and who want large income multiples? I hope not.
As someone who has worked hard over the last decade, is paying off a student loan and is fortunate enough to earn a good wage for working long hours, I find myself in a position where the house deposit I have saved is earning next to nothing in interest. I have been priced out of providing a decent home for my family because the government have engineered a situation where house prices have reached obscene levels through loose financial regulation and stifling planning laws.
The silver lining is that this ridiculous situation is unravelling quickly, with credit being limited to an affordable amount, and house prices dropping at 2%+ a month. If left alone, I will be able to provide a home for my family in the coming year. But the government is seeking to punish me on all fronts. I pay student loan repayments every month, high tax, and look at poky houses that are essentially dumps on sale for 200k.
Where is the justice?
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Here we go again. We all have to commence borrowing again because GB says so.
As I have said on numerous occasions, people with money do not need to borrow, so that just leaves the reckless borrowers of the past few years, to carry on with their binge, and maybe not pay it all back!!
I work for a charity that gives advice to debtors and I could spend hours informing you of the horrendous situations some people have got themselves into. I would not have lent them a pound, let alone the huge sums that the lenders have given them, sometimes on salaries under 15K per year.
There is no solution to all our problems until the lenders begin to weigh up risk and ask for proof of earnings before offering the huge sums given in the past.
Some people do not have savvy to take responsibility for their own lives, for to them a credit card is not really money at all. If they had to hand over cash they would think twice. The attitude seems to be that something better will turn up tomorrow.
Come to think of it, isnt this the attitude of GB.
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This describes total failure in the market. It involves risk taking on behalf of the taxpayer. I hope the premium is high. I also fail to see how the strategy of very low interest rates can coexist with this approach which inevitably increases the costs in the system.
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RP: "And the paradox is that the Government wants to make more credit available to reduce the severity of a recession that was caused by a decade-long, crazy lending binge".
To put it another way: 1.5 years into the burst of the debt bubble the only response we can hear is "lend, lend, lend". I have yet to read an analysis, be it from Peston or anybody else, that states that the only cure from debt-addiction is productive work, the return to real economy. There is not the slightest hint in British politics or media as to how the UK will change its ways. To me it all looks frighteningly similar to a hopeless case of alcoholism, where the ill doesn't even understand he's ill. Until this self-diagnosis is made, there is no such thing as a future.
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What is the current national debt. Could we have a display on the BBC Have Your Say site that shows the total as it increases.
How did we end up with Brown, unelected in his job, taking the country further down each day.
Are there no labour MP's left with any decency?
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Despite what Robert says, it's far from clear that high levels of debt "caused" the recession. Indeed it's very plausible that high levels of debt are completely appropriate to a highly developed economy, and the recession has been caused by the forced reduction of debt from its optimal level.
However, putting that aside, here are some reasons why the government is doing us all a favour with this scheme - the taxpayer will make a profit and the economy will benefit:
http://www.knowingandmaking.com/2009/01/borrow-borrow-borrow.html
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I am SICK of bailing out these merchant bankers.
I am SICK of hearing them bleat that the problems have been caused by a 'failure of the regulators'.
I am SICK of the large bonuses and wages for management justified as 'we must pay a premium to attract the best talent'.
I am SICK of knowing that I may lose my job because of an economy built on debt is contracting and if this causes me to default on my mortgage, I may lose my home but the level of the debt will remain. UNLIKE THE BANKS WHO HAVE GIVEN LIABILITY FOR THEIR LOSSES BACK TO ME AS TAXPAYER.
It SICKENS me to think of all of the future lifesaving schemes that will have to be forgone due to money wasted on bank bailouts, such as leveraging a low carbon economy, support for healthcare & retirement, investment in mass transit infrastructure. Cripes, if we hadnt bought £37bn of bank rubbish, we might even have been able to set up some kind of equitable progressive global trade system.
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Credit,more credit.Throw more taxpayers money at the problem.At least it looks as if they know what they are doing.This bumbling and incompetent government must go down as the worst in history.And to think I actually voted for them, thinking "Things will only get better under Blair"Blair was young and clever but got caught out supporting Bush's Iraq weapons of mass destruction untruth.Now we have Brown who for 11 years was trusted to look after our finances and blew it.We are truly doomed.Other Countries are better prepared than we are and that is a fact.
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But what stops the banks from taking this money and lending it to foreign concerns again, rather than domestic companies? Thus the British taxpayer underwrites foreign activity and not our own economy. In other words what stops the banking duffers from causing irresponsible lending mayhem all over again?
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It seems now that almot the entire UK Banking system is insolvent - serious consequences must follow for those responsible.
It is also clear that last year's world saving rescue was largely ineffective.
Nothing now stands in the way of heavy quantitave easing
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Your last paragrah was fine, but you omitted the words Govt borrowing as part of the binge, and the obfuscation about what was actually being borrowed viz a viz the PFI debt and Nothern Rock etc.
Its an horrendous mess and Gordo is going to be out on his ear. Do we really have to put up with the architect of this mess for another 16 months. Lord help us.
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Listen to Martin Taylor's (former Barclays Bank CEO) interview on World at One on your Iplayer. ( sunday 18 jan 09). Very thought provoking.
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I do not pretend to understand all of this but way the f......... are these r............y bankers being helped again????? I am waiting to hear what Super Gordon is actually going to do to help the unemployed back to work. In any event should bankers who so recklessly lent before be given a second chance. HOW MANY OF THEM HAVE LOST THEIR JOBS like me though NO fault of my own.
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I don't know whether I want this to succeed or not. On one hand things will carry on as we know it, on the other hand if it all goes crash, then we could start again, because i don't believe after all these centuries this is the best there is for this country.
Even if it all goes wrong Gordon et al will have all the money they will ever need, as will the bankers, the spivs and the rest of the motley crew.
Meanwhile like time in memorial the normal person will be shafted again. just like they were rounded up and forced onto the battle fields over time, to going over the top, to living on conservative means whilst the rich got richer, really is this it?
If labours ideas where to address this they have failed, just as they and all previous governments have failed before them.
This is the last throw of the dice Gordon, but either way the plebs will grin and bare it, the enlightened ones can carry on in their ignorant bliss never knowing what it is like, their biggest incovenience, having to avoid the plebs in the street with their begging bowls.
We done this countless times in history, lets try a new way, it cant be any worse can it
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Will Crash Gordon also 'come clean' over his off balance-sheet PFI wheezes and the unfunded public-sector pension liabilities?
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Clearly Gordon has forgotten - or more likely chosen to not think about - Moral Hazard.
Throwing even more massive quantities of good money after bad is clearly not working; and in actual (economic) fact - can't work until the system itself is fixed.
So, unfortunately, the longer they take to actually nationalize the banks - and fix the demonstrably failed system - the longer it will be before we really do start see those Green Shoots.
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And there was I thinking Herr Braun had already saved the banks and the world. Just another empty boast to rank alongside his infamous one about eliminating "boom and bust".
Ah, but then he said he'd only eliminated "Tory" boom and bust - you remember those, they were ones in which the banks survived. I remember them with increasing fondness. We had interest rates high enough so that there was room for cutting them to make a difference and make a difference it did because the banks survived.
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The intention is not to return to credit gluttony but to avoid perishing from a famine of credit. The argument that previous excess in one direction justifies equal excess is in the opposite direction is perverse.
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Hi Robert,
I have been reading your blogs on this crisis for some time. It seems to me that the authorities including the government and indeed the so called "brightest brains" have been bewildered by what has happened to the point of insanity.
Many people like myself who have studied economics for a long time have been saying for many years that things - irresponsible lending, unsustainable levels of debt etc - couldn't go on as they were for much longer. The surprising thing for me is that it went on for as long as it did. But economists know that business activity is cyclical and the further up it goes, then the inevitable downturn will be that much steeper. However, I am a realist and while we can say that it should never have been allowed to come to this, we have to deal with it.
To solve a problem, one must first correctly identify the cause. There is some confusion on this - you have said that the recession is caused by toxic debts; you also say thast the recession is caused by the contraction of lending. The two are connected but the cause of the recession is the irresponsible lending on a massive scale resulting in the toxic debts. It seems to me that until the level of toxic debts are honestly quantified and dealt with together with a reduction in the overall level of debt to a sensible ratio of economic activity we will not come out of this recesion.
So I fail to see how the government increasing lending - in other words pleading with people who are already maxed on their credit to borrow even more - is going to solve the problem!
As a final point I wonder whether businesses who have to rely on borrowing to keep going are really viable as you say. Economic growth built on debt is not sustainable - that must be the first lesson of this mess. The second lesson in my opinion is that financial services are not a value-added economic activity. Real economic wealth comes from industrial production and food production. Financial services merely facilitate that wealth creation.
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and yet again the new labour tinker with the economy, playing with future generations tax liabilities, this is a government with no direction, just jump and react, as many have comented to little to late as always. With all these schemes, there is a cost, to set the scheme up, providing the gaurantee etc, but either way the money has to be paid back... with interest!
Am not an economics speciallist, just a laymen who is prudent and not jumped on the band wagon of easy credit..
so with regards to house prices fallen well, so be it, the market must find its natural fall. in my option, the bottom of the housing market will be reached when average house price is gbp124,000. The sooner the government realise this the better.
the convervative policy about tax free savings for basic tax payers is a fantastic policy.
why is the government called new labour? its old labour! they have been in government for 10 years. An election needs to be called as quick as possible... crash gordon created this mess we are in, and to blame the world is just an excuse for poor government.
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we have to start living within our means , the housing market has to collapse rents are so high now there is very little incentive if any to be in work if you earn under £10 per hour, the housing benifit bill is collossal and is going to get worse as millions are laid off , the dream of home ownership will i am afraid remain a dream for many and it was this policy that is responsible for the mess we are in today.
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All of what you have disclosed is probably just simply what the government has to do- and I think they deserve credit for going the extra mile to stem the pace of the recession.
But we still need a reckoning with the senior executives and directors of these banks and the credit committees- at the very least we should get hold of their pension pots- putting a few in Guantanamo Bay might be useful too - after all BO will almost certainly close it down soon and these bankers have been a far greater threat to us than alleged terrorists.
But we still have to face the issue that people who cannot afford it should not get credit and we do not want to fuel an import driven consumer spend. HMG must start investing in infrastructure and our future manufacturing capacity- but perhaps we need a bit more help to avoid falling over the cliff first. The other issue is that Europe is even worse than we are as their economies are less flexible so I guess it is all down to BO- Tuesday's speech may be the most important moment in my baby boomer lifetime
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No bank, however strong, can survive a run without support from the lender of last resort, the Bank of England.
The Governor of the Bank of England seems to think the FSA did a bad job regulating the banks; resents having the role taken away from the B of E; and wants to charge penalty rates for any last resort lending or injection of preference or ordinary shares.
This has in turn damaged bank performance, share prices and resulted in a further loss of confidence in the banks.
Despite the comments of the politicians and the media, the B of E and BBA statistics show UK bank lending to businesses is still increasing.
Seems to me the government should start supporting banks and instructing the B of E/Treasury to stop charging extortionate fees and interest rates for their loans, capital and guarantees.
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Methinks that there must be someone in the government with a vested interest in all of this. For instance, Alister Darling's large investment in Norther Rock - did this influence the decision to buy the bank?
What has happened to taking responsibility to one's actions. Why can't the banks' investors and 'fat cat' directors cough up some funds?
Or should we just let them put up with the outcome of their greed?
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So let the banks go to the wall its their own fault. If only one big bank is left so be it for the next half dozen years. Then a government can just MAKE it split up like BAA. When they complain we can all laugh in their faces
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does it matter what they do? whatever it is it wont work..because the job is beyond brown he hasnt the ability im afraid...great news the tories are miles ahead in the polls, this is the 1 hope we have.
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Sounds like a house of cards built on sand.
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Funny how Darling always appears to be stricken with laryngitis when big financial anouncements are due to be made, and Gordy is able to step in and do the decent thing. A cynic might think that Gordy revels in hogging the limelight,,,
Does anyone think that he will ever tire of proposing yet another bank bail out, or are his delusions so firmly set in his mind (I use the word very loosely) that we will probably get another in 2 months time? Remember the combined bail outs in the UK is still far short of the US one, and the top UK banks on what was once known as asset value are in the top 20 banks in the world.
I presume that the bits in the German and US bail outs about income tax cuts are deemed as irrelevant by the Glorious leader, who I thought was keen to boost consumer spending. But hey, why cut taxes when you can impose more taxes on us:
http://www.timesonline.co.uk/tol/news/uk/article5537327.ece
At the start of the Bliar period the music played was "It can only get better". With this now discredited and disfuncyional governemnt you just know it will get worse. It is beyond a joke.
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What guarantees does any of this provide that the banks will simply take the money to fulfil their obligations to foreign companies who will simply repatriate the money and thus lose it all from the UK economy?
The government seems to be saying, a return to normality will soon be achieved, but as has been seen before much of their initiatives are complex and take time to work out details and find their way through into "real" life situations, and there is no saying that the banks will then fulfil this lending role given their capital restructuring plans.
Presumable then we'll have Crash and Bankrupt Ali standing at lecterns saying "We saved the banks, now its all their faults that they won't lend"
Playing politics with people's lives and future prospects is not acceptable.
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It is very frightening for all our futures. It would seem that all the Government want to do is make the situation worse and cost eveyone of us a lot of money in future taxation. When we had the last recession, it was stated that we had learned from it and the same things would not happen again.
Our own internal problems were caused by the competition to lend, which forced up house prices, creating equity for even greater lending, beyond the ability of the borrower. The bubble has burst and whatever the interest rate, hundreds of thousands of families, cannot afford to repay their loans. All that additional credit, at this stage, will do is to allow them to borrow to meet some of their existing debt repayments. Making things worse in the long run.
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This has got to stop and NOW!
I don't know enough about the inner workings of the financial markets but I do not trust them.
If this is announced on Monday we need an emergency debate in parliament on Tuesday. If for no other reason than our diminishing national resources are being pledged without any democratic overview. If it did happen then we need everybody to tell our MPs that we do not want to take the risk.
The waves of depression are crashing around us and our government wants to commit us to more debt. This is not only silly it's suicidal.
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Something I do not understand about the current UK borrowing is that the CIA Factbook states that the UK Debt - External is $10.45 trillion as at June 2007. This unfavourably compares with the US Debt – External, which stands at $12.25 trillion. In other words the Debt - External between the two countries is about the same though the US economy is about six times the size of that of the UK (The GDP of the US is about $13.78 trillion against the GDP of the UK which is about $2.13 trillion). The total world Debt - External stands at $51.78 trillion. This means that the UK Debt - External stands at around 20% of the world Debt - External. The CIA Fact book defines Debt - External as 'This entry gives the total public and private debt owed to nonresidents repayable in foreign currency, goods, or services. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.' Surely this level of Debt - External is unsustainable. Further increasing this figure is only going to add to the problem. It does occur to me that at some point no one will lend any more and what happens then? The third in the list is German which stands at $4.489 trillion which is below half that of the UK. Whist this figure is nothing for Germany to be of, it is probably more sustainable than the UK bearing in mind German has a huge manufacturing base.
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Lend, by all means, but to borrowers who can pay it back!
And further that can pay it back at sensible interest rates of at lest 7 percent!
Lending to borrowers who will not pay back the load got us into this crisis in the first place!
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Is there anybody else out there who simply cannot believe what is going on?
Taxpayers injecting money into banks - who not so long ago carried billions upon billions of pounds in their reserves and reported multi-billion pounds profits in their half year reports - in order to get a credit (debt) based economy rolling again?
Surely the situation we find ourselves in is a direct result of the failure of an economy based on credit (debt) and one not based on economic output (the manufacture of products and services for the home and foreign markets).
I firmly believe that what is being proposed by the government is no different to entering a casino and rolling the dice, hoping the numbers will drop your way. They are doing this because we are now in a recession far worse than that of 1990 - 1993, one which could very well turn into a depression (the signs are already there with deflation) and the next general election is around the corner (early 2010).
We should all be very concerned about the measures being proposed as it could lead to total collapse of the UK economy (instead of a painful but necessary 2/3 year recession where debt, pricing and market corrections take place).
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How best can I personally tell the PM how very very angry I fill about him helping those who caused the problems and not the victims. His only worse crime is sending our brave troops on patrol in soft skin Land Rovers. I may be unemployed but at least I am alive.
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#18 "it's far from clear that high levels of debt "caused" the recession."
I think you have misunderstood. The high levels of debt did not cause the recession, they allowed for the boom. However that was a temporary situation that could not be maintained indefinitely. Debt levels could not go on growing at ever faster rates because the cost of servicing the debt was growing equally fast.
The reaching of the tipping point, at which people realised that they could not keep borrowing ever greater amounts (which has coincided with the tightening of credit), is what has caused the recession.
But the term recession gives the impression of an economy dipping below its natural position.
But my view is that we are not in a recession, but that the economy is moving back to a sustainable level of output to meet the affordable demand.
It is called a recession simply because the growth is negative. However once the base has been found, and the economy starts to grow again, even modestly, from its new base, we will no longer refer to the economy as being in recession. That base may be considerably below where we are now.
Trying to re-inflate the economy, before it has found that sustainable base, is likely to just prolong the recession.
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As before the Banks will just sit on any new loans from the Government and keep it to themselves - them seem to interested in self preservation and nothing else.
I would force the banks to start lending money.... hold on didn't Gordon Brown already try that?
What percentage does the taxpayer have to own before the bank is officially State owned?
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My problem with all of this is that whereas when the going was good private initiative made all the profit, now the going is bad, its US, the tax payer, who is (are) picking up all the risk.
In the first place, if I had a bad debt and thought the gov would underwrite my creditor's risk I would probably now just not pay.
How will the risks of default be measured: against the likelihood in the 'good' times, or against the likelihood in these stressed times? Reckon there will be many more folks right now defaulting on debt agreements - has this been factored in to the 'insurance premium'.
I'm not sure that as a UK taxpayer and voter that I ever signed up to underwriting anyone elses debt. This all looks very smelly to me.
Suggestion for Gordon: if you want to nationalise the banks, then do it wholeheartedly. Then the country will benefit from the good times and not just loose out in the bad.
I've been a labour supported all my life, but at this exact moment in time, I'm not sure exactly why we should be baling out big business from the risks it freely entered into. I think a little bit more imagination needs to be displayed: its about time we challenged the way finance is operated in this country rather than just find ways of softening the landing from over greediness.
Support those who are about to lose their homes, yes, but how about doing that by the state buying them and renting them back to the current owners? This would re-establish a stock of state-owned homes that would be a really good investment for the country and its future (and I'm sure it would cost the nation no more than the huge sums of money currently being thrown at this recession).
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38
You talk about having the abilty and then mention the Tories being ahead in the polls..how on earth are these comments related?
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Her indoors keeps on asking me where all the money has gone. "Well" I said "It hasn't gone anywhere because it kind of never existed." "So" she said "why is everybody so worried?"
"They are worried because they might not get any thing from the people that owe them money or that they might not be able to pay their bills" I replied. "So if it doesn't really exist why don't the government print some more non existent money and give it to anybody who has a problem?" I got my coat and went to the pub.
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I really, really hope these people know what theyre doing . The contingent liabilities on cd exposure is unquantifiable - and hugely massive. We can all get blown out on this one. Given this governments track record I wish I could hedge out the risk. ( thats a black joke b.t.w ) Just a ball park figure on the downside is a couple of tens of .... trillions.
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Neither the govt or the banks want to take accept a very painful loss or get in a situation where they are out of business and their books can be examined by someone with no vested interest in protecting them. So they are playing double or quits. They already did this once, and it didn't quite work now they are doing it again.
The problem with double or quits as a strategy to avoid losses is that sooner or later nobody will lend you the money to keep playing. How many more rounds can the UK roll the dice?
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Our politicians (all flavours, the current lot are just unlucky to have been left holding the baby as the bathwater drains away), still haven't got the hang of this. The current crisis is a symptom of a larger problem. A world fixated on growth and until now supplied with seemingly endless cheap energy. The continuous effort to restore the status quo, BAU, growth based economy, call it what you like, simply points up the lack of understanding. Oil production has now reached its peak and will decline. Most of the world is chronically short of water. Food production is based on cheap energy and cheap fertilizer. Commuting many miles to work and to places to shop Etc, etc, etc.
Now is a perfect opportunity while everbody is learning to manage on/with less of everything to start switching to a sustainable economy. So lets replace these failed banks rather than shoreing them up. Providing bankers with cash and/or insurance against their errors will simply make them think they can carry on as before and look where that got us. I could go on ... and on.
Einstein said 'We can't solve problems by using the same kind of thinking we used when we created them' The corollary is that we can't solve the credit crunch using the same brains that created it.
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#44. Glendinning1955 wrote:
In Summary: "UK external debt is unsustainable" (Have you only just noticed?)
Just three thoughts for you to consider:
1. This shows why our Banks are in such a poor and vulnerable condition.
2. It also shows that UK taxpayers money will be paying for foreign debt defaults!!!!!
3. It also highlights why sterling instability may well increase the problem!
In summary: relying of financial service was, and is, a diabolically stupid thing for a country to do! (c.f. Iceland)
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48
So the realisation that the borrowing could not be sustained "coincided" with the tightening of credit then?...wot a twonk!!!!
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But the government promised it had saved the banks in October. They got their sums wrong. Now they are spinning that this time all will be fine. I doubt it, they have form now, don't they?
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Another day, another desperate roll of the dice (with our money). So how, exactly, are the government to value these financial assets that they intend to guarantee ?
The government's track record on knowing what's going on is appalling - it seems they've only just clocked the fact that the city lends to overseas borrowers !
As each massive bail-out scheme layers on top of the previous massive bail-out scheme, there is no hope of the 'authorities' (or anyone else) keeping track of all this. At best the scope for waste is immense. At worst, rampant mis-use of public money.
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I've always wondered why at the height of the so-called boom New Labour was so crazily intent on ensuring that mega casinos of the American variety were built all over the UK.
I think we know the answer now. This lot are completly morally, as well as financially, bankrupt.
So much so that they see taxpayers as the easy get-out option to their, and their mates in the city, greed driven excesses.
We, the people, must strive for complete overhaul of this rotten system.
I emplore all of you to carefully consider what action we must take next.
Be it non-payment of taxes by the self employed to the non payment of mortgages by those who have one, now is the time to stand up and be counted.
Only once we the people have engineered the collapse all of us know must take place, will we ever be able to rebuild this country again.
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"Yesterday I disclosed two other Treasury wheezes.................".
It is official, then - Robert makes Treasury announcements. I am glad that that has been clarified..................
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44. Glendinning1955:
Yes, the CIA Fact Book numbers do look quite different from the official UK ones. This may have something to do with the CIA numbers being accurate.
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Governments have allowed a massive expansion in credit from 1995, interest rates were kept low, regulation went easy - via fractional reserve banking trillions of money was created by the banks from thin air via the process of lending.
As an individual living in London I was affected by this, because surplus credit (easy money sloshing around for the taking) caused house prices to skyrocket. We were priced out.
Those that bought houses had to pay such high rate of repayment that many became slaves to their mortgages, stressed out and working overtime thinking that with house price inflation they were saving for their pensions.
Small shopkeepers were trapped and had to work harder as commercial rents rose.
An important fact of fractional reserve banking is although banks create money by giving loans from thin air - the money that has to be paid back by Joe Public, plus the interest – This is REAL money and has to be earned by us by hard labour, blood, sweat and tears.
Credit cannot go on expanding and there comes a limit - The whole thing begins to unwind.
THE UNWINDING OF THE CREDIT EXPANSION IS WHAT WE ARE ALL SEEING TAKING PLACE - NOTHING CAN PREVENT THE DEFLATION OF THE MONEY AROUND US BY THE CREDIT CONTRACTION. HUGE AMOUNTS HAVE ARE BEING SUCKED OUT OF THE SYSTEM AND NO GOVERNMENT HAS ENOUGH MONEY TO STOP IT. POLICIES OF BROWN OR OBAMA WILL IF CARRIED TOO FAR WILL LEAD ONY TO A MONETRY COLLAPSE -
AS OMAR KHAYAM ONCE WROTE.
THE MOVING FINGER (OF CREDIT EXPANSION AND CONTRACTION UNDER OUR FRACTIONAL RESERVE BANKING SYSTEM) HAVING WRITTEN MOVES ON.
NO AMOUNT OF PIETY - NOR ALL YOUR WIT SHALL LURE IT BACK TO CANCEL HALF A LINE.
NOR ALL YOUR TEARS WASH OUT A WORD OF IT.
TAKE HEED BROWN RESISTANCE IS FUTILE AND COULD LEAD TO THE POUND COLLAPE. IGNORANT PEOPLE ARE IN CHARGE OF SOLVING THIS CRISIS - BE AFRAID VERY AFRAID.
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Saving the country again and it just took a week to come up with it.
Sounds just too good to be true.
And it is.
The more complicated it sounds the less effective it will be.
There are too many anomolies that haven't been thought through. Just like everything else they've tried.
These only come out when they try to put it into practice. Then it will be reverse gear again and more billions down the pan.
Nothing is ever what it seems
At some point not all of these banks will survive and there will probably not even be enough business to enable them to do so.
Those that are left will be able to cherry pick the business but how many billions will have been thrown down the tubes before this comes home to somebody.
The housing market is done for in the short term but will still be there for those who can hold on somewhere in the future.
A fire sale of empty properties should be available to first time buyers with a clause to stop speculators cashing in.
Better than leaving them to rot or be vandalised.
There are many young people who will still have secure jobs throughout this and finance should be made a priority for them.
After all they are the ones who will have to pay the bill in the long term.
We have not yet seen the small print of these new proposals but know already the amount of bad dept is astronomical
So is the governments proposal to guarantee the banks debt retrospective?
It was surely this governments policy to reduce the time limit for a person to make themselves bankrupt and be discharged from two years to only one.
Making it much easier for some to run up as much debt as they could knowing they could walk away from it.
How can anyone sort this out until the full extent of the fall out has settled without making things ten times worse?.
How can anyone guarantee something they don't even know?
Only this government.
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Rather than keep pouring money into the banks in the vain hope that they will do the right thing for the wider economy and not for their shareholders the government should use Northern Rock as a vehicle for a state lender.
By providing cash directly to good businesses the Government could get the economy going while sidestepping the risks involved with underwriting an unknown amount of toxic debt on the balance sheets of the big banks
Is this a viable option that is just to Socialist for Gordon Brown or is my idea flawed?
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At the least, shareholders in the failing banks should be liable up to the limit of their holdings, that is, government to take 100% ownership of the banks without compensation to the shareholders.
Any bank that does not accept this should be allowed to fail, and the government should announce in advance it will not underwrite any depositors money lost in that bank.
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I'm with Vince Cable, where did the original money go? Weren't bonuses paid by some of the institutions in spite of their failures?
Now that these overpaid cowboys receive taxpayers money, surely they should be a little more accountable.
#38, rvpisneverinjureds, do you seriously think that the conservatives will get us out of this mess? Although I can't stand New Labour, I think the economy is too far gone for any magic wands.
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#57 tommyboay
"What a twonk"
Please explain, because just throwing insults does not add to the sum of knowledge.
I think you will find that most people now realise that they cannot go on borrowing ever increasing amounts, and this has coincided with the credit crunch...
Unless you disagree that people have reached that conclusion, or you believe that they happened at different times and are not related.
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67. extremesense:
Yes, it is indeed by no means clear that the Conservatives - or the LibDems, for that matter - can get us out of this mess. It may, indeed, already have gone too far. In the words of the old song, "beyond the point of rescue".
But at least the Tories, unlike Labour, might remember the old adage - "when you are in a hole, stop digging".
In this context, "when you are up to your neck in debt, more borrowing is not the answer".
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#57 Actually " tommyboay"
I just clicked on your name and read your previous inputs. I see throwing insults is all you do!
What a twonk!
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Roberts last 2 sentences sum up why this will not work, buy a bit of time maybe..that is about it.
The injustice
Such a bailout of the banks by taking all the risk on previous and future lending using taxpayers future endeavours as in effect 'guarantors' (as I understand it anyway)will never be accepted by the electorate unless it is balanced by some say in the running of them and renumeration of its staff, especially key decision making staff. In other words if you are going to do this you may as well nationalise them and have done with it?
Public spirited leaders in the financial services industry (anyone who has been knighted or has an OBE certainly) should, instead of apologising do a 'Steve Jobs' and put their ethics where their mouths are and work for free until this is sorted donating their salaries to soem wealth creation scheme instead.
Let us not pretend that they could not afford to, they may have to give up that second yaght though...The people will not wear it any other way. The public will be looking for some descency and humility from the fallen 'masters of the universe'.
The paradox
Suggests it will not work anyway, the idea that the markets will see UK plc as unlikely to default and is a good 'guarantor' of the loans of others is increasingly tenuous.
Good guarantors usually have something in the locker as security. What does UK plc have in the locker exactly, except possibly a good previous track record for re-invention and wealth creation.
I wonder what my local bank manager would make of it if I brought a magician into his office with me and introduced them as the guarantor of the loan I was asking for.
The bank manager would look him up and down and ask
'what does he have as assests then'
my answer
' Nothing but he has a good track record in pulling rabbits out of a hat''
We dont have natural resources to sell.
We dont have enough manufactured goods to sell.
Soon we wont have financial services to sell.
We have a well educated workforce to sell in part but I am not sure how long that will last with 5 million university graduates a year coming out of china and another few million out of india. Services industry is even easier to copy than manufacturing.
We dont even have enough food and energy to feed and warm ourselves in a self sufficient way.
I hope I am totally wrong, I really do.
PLEASE someone tell me I am TOTALLY wrong and why.
Jericoa
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I live in Castleford as does Viv Nicholson, the pools winner, who coined the words "spend, spend spend". The heading of this section of the blog prompted me to comment as well as a visit to London last week.
My wife and I went to a play (it was packed) and two restaurants for diner on each of the three evenings we were there. On Wednesday we dined at Vasco and Piero's Pavillian restaurant where Gordon Brown Spent his stag night. It was buzzing and there was no sign of any credit crunch. Neither was there at Gaucho, Sloane Avenue.
There are plenty of lucky people like us who will see hardly any effect of all this personally because we have been careful and have good state pensions and savings.
The banks will never be trusted again unless there is an Obama type radical change that frowns on greed.
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I am confident that this will solve the problem and this is what should have happened back in June 07 when the interbank funds first froze up.
As your blog explains it is not really tax payers money but money borrowed from investors that is guaranteed by taxpayers. There is a massive difference.
There is little risk to taxpayers with these loans and the risk for any bad debts or toxic assets stays with the banks.
The idea that you can punish a bank without it affecting the wider economy has been proven to be false and attempts to do so have been like cutting of your nose to spite your face.
So please no more interference, recapitalisation, penal rates of interest etc and let the banks get on with sorting out the problems.
I am fairly sure that banks will be keen to reverse previous policies and limit their dependence on wholesale markets but it can be done in a controlled manner over a number of years instead of the break neck speed of the last six months that has done such damage to the economy.
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I think it is about time that Gordon Brown did a lot more for Savers and the over 50's. I and many others who had a Mortgage from the 60's with high interest managed to pay the repayments and clear the Mortgage. We were being prudent with our savings and looking to the future and are now being cheated out of decent interest rates.It is always the middle class who seem to be punished for being to careful and looking to the future. Iam 58 and my husband died recently and am looking to trying to safeguard my furture with little help from the goverment.The banks do not seem to have the right people sat at the top of the table if they did they may not be in the mess that they are in. I think it is called being to greedy with the salary that they are on. Maybe they should come down to earth and take one hugh pay cut
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The Item club has published an interesting report, which seems to demolish the PBR assumption of resumed growth in 2H 2009.
GDP is expected to fall by 2.7% this year and a further 0.5% in 2010. Unemployment will reach 3.25 m by end-2009 and 3.4 m by end-2010. If they are right, how much does AD now need to borrow?
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I had always thought that the boards and executive management of the major tobacco companies deserved the title of the biggest liars in big business (with an absolutely outstanding record over many many decades of dissembling, distortion and indeed fraud covering up the terrible health hazards of smoking, in order to "protect" their shareholders interests).
But I think the prize must now be handed over to the bankers.
Maybe you can understand their positions just a little bit, what with banking "all being about confidence" and the rather tough bind they find themselves in ("the more we have to write off on bad loans the more we have to shrink our book of good loans"), but they are subject to just the same company laws as the rest of us (who run non-banking types of businesses), including the need to discharge their 'fiduciary duty' etc etc.
These obligations include one that relates to not trading when insolvent.
One has to suspect that the whole lot of them are doing exactly this at the moment in fact.
But of course they all continue to lie through their teeth to put off this evil day.... rather like King Canute.
The amazing thing is that Gordon Brown has only just clocked this (and appears to have become a bit annoyed!). Maybe he has not really dealt with bankers before.
So yes, Robert, there may be a further 'banking bail out', and from what you say this may be a rather complicated set of measures.
But....
... it's not going to be the last one.
The extent of the problems in banks are just so huge that the next bail out is only another four to five months away.
I think Vince Cable is heading in the right direction.
It is only when the major clearing banks are fully nationalised that we will really be able to believe anything the banks say.
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If banks are so vital to our economy, surely they should be safely nationalised.
Or put another way:
Would you think it wise to allow money lenders to create and destroy our supply of money?
Or how about:
The taxes of the poor insuring the profits of the rich?
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why does brown go on about israel? who really gives a stuff..he should be concentrating on sorting the mess out that he has help create.I mean can we really tell israel how to run their country? we cant even run our own!!!
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Another bank bail out, and whose money is really being used again - that's right us poor taxpayers. What happened to the last £30 odd million that was used?
Throwing more money at the Banks to get them to lend is not going to work, cutting the VAT rate has not worked, lowering interest rates has not helped the majority of mortgage holders in this country. The Government are just throwing good money after bad. How about cutting the rate of tax and NI, that would at least give us some more money in our pockets.
But it seems that whilst this country has been brought to its knees, our great Government can find £20 million to send to Gazza.
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The Scottish press have reported that a flamboyant 83 year old QC is taking legal action against the Royal Bank of Scotland claiming it was technically insolvent when it offered shares by rights issue to shareholders last year. The proceedings have been raised as a small claim in Oban Sheriff Court.
If this case is proved and a finding made against the Royal Bank of Scotland and then proceedings brought by other shareholders who took up the £ 12 billion rights offer where does that leave the taxpayers investment ?
Have similar proceedings been raised in other courts throughout the UK ?
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Robert,
Will the swapping of preference shares for ordinary shares be accompanied by a lifting of the ban on paying dividends to ordinary investors?
That was the biggest failing of the Government's initial recapitalisation plan - the desire to penalise ordinary investors as well as bank executives, short-sellers and speculators.
Until that ban is lifted there is no prospect of full confidence being restored to the banking system and the return of genuine investors to the fold. The restoration of dividend payments would also ensure a better return for the tax payer shareholders.
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#67 im not sure about the tories...but ..who else is there?vince cable has about as much ability as me...so we are left with cameron...im sure he has a bit more ability than brown..so there we have it...brown is so pompous he just totally irritates me.
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"60. At 5:56pm on 18 Jan 2009, sirsevernbanks wrote:
I've always wondered why at the height of the so-called boom New Labour was so crazily intent on ensuring that mega casinos of the American variety were built all over the UK."
Circuses of course... To keep you morally outraged while the really important stuff is happening.
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" ... to prevent this recession turning into something even more prolonged and painful".
So now, we must avoid at all costs using the word "depression" rather like we (the BBC) couldn't use the word "recession" until the pressure (to state the blindingly obvious, but politically incorrect) became too much.
Some of us have been saying for months that this unprecedented and unholy mess, predominantly of Gordon Brown's making in the UK remember, was always worse than polite, mainstream commentators were trying to have us believe.
I own and run small business. I can tell you that here on the front line the situation is bad; really bad. But rather like during the First World War, the officers at the rear (lets call them General Brown and Captain Darling) haven't the first idea of what life is like here in the trenches.
As I've said before on this blog and others, our politicians simply don't know what to do about this mess. More to the point, they don't understand the problem and so their solutions are panic-stricken, pointless and useless.
We - all of us - are now at the mercy of the fundamental laws of supply and demand, normal lending and borrowing (not the nonsense we've experienced in the past decade), true asset values (not the fantasy values we've seen in the past decade, fuelled by the corruption of borrowing/lending) and natural resource constraints (primarily the end of mankind's era of cheap energy). Our politicians don't even begin to understand this stuff; at best, they can't bring themselves to acknowledge and, therefore, deal with it.
So, Mr Peston, my money is firmly on this recession turning into something more prolonged and painful. And for that we can thank our glorious political elite (ha!).
Power to the middle-classes I say; it's about time we rose up and taught our politicians the lessons of a lifetime.
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May I refer the Prime Minister to the attached website. Maybe then he will stop.....
http://www.gambleaware.co.uk/
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#60 what boom?did we have one.?.we had house prices rip up....is that a boom? browns getting so fat(if you have noticed) 1 pin and he will go bust (with a bit of luck).
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All this discussion is ok but when is the real problem going to be addressed - thats the pervading greed in the institutions supported by devious means to achieve those aims; and why are we still supporting those institutions and their management which got us into this mess. Greed is what brought us to this position and yet those who took us there are being encouraged and supported by using taxpayers money. I really dont get it!
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Naive question I am sure, but why on earth would the banks lend when the base rate is 1.5%? Where is the profit in it for them?
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Why, with the government holding such high percentages of these banks, are they not obliged to make a formal takeover bid in accordance with stock exchange regulations?
Let me guess.
The rules do not apply to THEM.
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I suspect this plan is hot air rather than substance.
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We need a natural price crash of housing pyramid, build five million council houses to kill the astronomical benefit paid private rent schemes nationwide.
No more bailouts. The Zanupound is coming.
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Someone needs to take Broon into a backroom and tell that all he is doing is saddling the UK taxpayers into decades of slavery. No amount of money will make these banks solvent in the near future.
Face facts "Gordy" the whole UK economy is shattered beyond belief by spending the same pound 10 times over for the last 11 years, our economy will decrease by 2% annually for a decade or more. Wake up and admit defeat.
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This is madness.
The government does not, nor never has had, any money. It merely takes from one part of the economy (tax and borrowing) and gives to another (bankers).
Governments should never be involved in private business, it has neither the right, the funds nor the competance. Bad companies have to be liquidated, bad debts and malinvestment written off. Until this happens the economy cannot recover.
We have lived too long on borrowed money and fake wealth from the Ponzi housing scheme.
Goverment should cut taxes and let the market sort out this issue. We have all been the victims of a massive fraud, maybe the biggest in history and yet we continue to be robbed before our eyes.
Buy gold and silver to protect your wealth. Fiat currencies are going to fall.
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Robert, you are continuing to use hindsight to prove that the way forward has aways been gloomy.
"Also - as I pointed out yesterday - we as taxpayers will be insuring some of the bad loans made by our biggest banks, to limit their future losses from their reckless lending" quote from your blog.
Sorry, are you absolutely sure that these loans were bad when they were taken out in the economic conditions of 18 months ago? Some may have been, but would you have thought then that the merchant bankers would not get bonuses this year and therefore not be able to repay their mortgages, would you have thought that the car industry would be on a 4 month shut down and therefore be coming up to delaying payments on their loans? etc, etc.
No you would not have had any of those thoughts. The City was generating huge cash flows, the car industry was selling stable levels of cars and generating good cash: not always profits, and China was preparing for the Olympics, pushing up commodity, fuel and food prices.
Would you have thought that on top of this the regulators in the US and the UK had gone to sleep and lending to high risk individuals was reaching a peak? But would you believe it, the regulators did push through accounting changes to asset valuations which means that paper losses are booked to the profit and loss account immediately and we create an imploding series of events that cannot stop. In weather terms a tornado.
The pricking of lending bubbles is hard; the rough and ready instrument of Central Banks choice: raise interest rates, seems to bring about hard landings, this one very hard. We must use earlier and more gradual methods: asking Banks to slowly raise their captial ratios.
Lastly, stop the short selling, the casino of the stock market. Markets should be for investing in; so place a delay on selling shares: you must own them for at least 15 days, and you must have fully paid for them.
That should stop the speculators of doom.
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This is indeed a momentous time.
It is becoming clear that our banks have created the biggest losses in world history, exceeding even those created by the Second World War.
It took us 40 years to pay off the war debt.
Now we have it all again, for no reason other than a bunch of out-of-control bankers.
You have to wonder what G. Brown, M.King, T. Blair and others were doing while the bankers were racking up this wreck.
Cameron has one spot-on policy....most of these bankers should be in jail.
We await future budget days with fear.
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Another non starter; pay the government through the nose, so you can lend money on which you can charge very little interest to businesses that are on their way under; so you might lose your shirt. Is there a point to this? Better investing the money in a safe haven (if you can find one) than backing a dead horse and paying for the privilege. Maybe it would be better to just toss it all down the throats of the Gaza bound arms dealers along with the other 20 million big hearted Brown is tossing away. I wouldn't pretend to understand high finance but I can see a bum steer here. ( that rhymes )
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As always the devil will be in the detail however:
1 Well run and capitalised companies will not have had their credit pulled by the banks so who does that leave to be bailed out?
2 Providing short term liquidity for a business geared up for ever growing sales and prices doesn't address the root cause of their problem e.g. too much debt, a lost/shrunken market and no cash flow
3 Basel 2 and the loss of billions in wholesale funding from the market (remember RBS was alone £60billion short) means that the housing market still has a ways to fall this year. Is it responsible lending to encourage the banks to lend and people to buy now at 90/95% only to see them in negative equity by the years end?
Years of Government turning a blind eye to suit their political ends has made the problems of this recession far worse (remember "I have put an end to boom and bust" anyone?) and this profligate spraying around of our money and racking up of debt will surely come to bite all of us fortunate to remain in work and paying taxes/not living off the State, on the bum. Often the best way is to do nothing and let nature take her course, weeding out the weak and creating new opportunities for others to fill the vacuum left by the failures.
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When will this complete and utter dependance on credit end?
What will be the result of yet more lending?
Oh how we look forward to paying more tax, to bail out irresponsible lending to those who may not have been credit worthy in the first instance.
Is the provision of bonds to secure poor mortgages not a little like 'mortgage backed securities' issued in the US system?
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Nobody in government is putting forward any concept of what the outcome might be for the Country. Here is one scenario for 2009/2010 :
By April 09, say another £500 billion in bad debt is uncovered.
By June 09, all major banks are nationalised.
By August 09, 3 or 4 million are unemployed and thousands of businesses collapse.
By October 09, Imported food costs rise and becomes scarce. Local Government jobs are slashed.
By December 09, another 2 million are unemployed. Unrest seen in inner cities.
Early 2010, martial law initiated.
etc etc etc
Considering the speed at which things have developed to date, perhaps my timscales are too optimistic.
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When will we stop bailing out the banks and start bailing out the people.
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As Greg Mankin (Harvard) and others show, the M1 multiplier for banks has been shrinking for years from 3-4 down to under 1. T|Whilst most of this data is US driven, he UK is much the same in this respect. Large corporates and major Institutions do not borrow from banks and have not done so for some time - they borrow(ed) from non-bank financial intermediaries ... most of whom have been allowed to fail. Most of whom should have had light regulation (as opposed to non) and none of whom should have had 30:1 equity leverage. The reason banks do not do the bulk of lending, is that they are expensive and inefficient and so only tend to lend to Retail - or us the tax payer via home loans, credit cards etc. Retail has few choices and so banks can remain inefficient and charge massive intermediary fees with the protection of the State via the FSA.
Retail, however, is politically explosive which is no doubt why the Treasury (who should not think politics) focus on it. Whether giving banks greater access to credit will actually grow this M1 multiplier (by banks lending more to corporates who they tend to lend little to now) is dubious at best in the short term - although in the medium to long term anything can happen. It may however mean they (the commercial banks)give more time before foreclosing on defaulting retail ... in exchange for the kings shilling .... hardly productive but politically appealing.
The danger is letting Treasury officials - who have never succeded in running or managing any business - loose with our money. Lets face it - as Preston eloquently pointed out some time ago - the debt issue in the UK is only 50-60% a Retail, Corporate or Institutional problem. Half the IOU's we have in the country (which add massively to our issues as we have to pay interest on them which in term reduces consumer demand) - come from a profligerate Treasury who have borrowed outright, who have borrowed indirectly via the PPFI and who have feathered their own nests via massive unfunded forward inlation linked guaranteed pensions
So don't rely on the Treasury or their political masters to bail you out with desperation trades. All these desperation trades will do is stem the immediate pain (which is politically convenient but perhaps not sufficient this time) and leave us in more muted pain for far far longer. We have to write off 20-40% of our GDP and write down massively our inflated asset values which makes people feel far poorer. Maybe this 20-40% is understated now that confidence is so low. The sooner we realise that this write off and write down has to happen - the better. And no it is not the Treasury officials who will pay for it - they are gilted edged. It is not the politicians - they are temporary. It is not the poor and unemployed - they are on benefits and have few assets - and it is not the super rich - they have choices do not need to pay tax and can leave us the bill. It is the 60-70% of families who go to work and pay excessive taxes for appalling public services, a war they care little about and a state which spends a fortune on monitoring their every move. Don't just blame the bankers - they were greedy, short term and stupid and yes they should take 25% of the blame .. but lets not forget the other 75% Blame us - the population as a whole for thinking ridiculous house price increases could continue forever - and for using this belief to fund excessive consumption which had not really been earned - another 25% of the blame. Blame our civil Servants for failing us so appallingly in not even regulating lightly - god forbid if we let them regulate fully which is what they want now - but they failed even in the big picture - and squandering our money ... by appalling implementation of political instructions .. say another 30-40% of blame. And yes blame our politicians for wasting 15-20% of everything that we made each year .... but then we knew politicians were both greedy and stupid so we should blame the civil servants for letting them.... and us for allowing the party and whip system to corrupt democracy and stiffle opposition and debate .. And yes - the conservatives would be little better.
So after the blame game we need the solution. There is onloy one - create real new GDP to fund the losses and reduce the debt burden. As we (the UK) have no capacity to buy this real new GDP we need to sell, sell, sell and drag ourselves out by undercutting all our competitor countries by being more efficient. That is the only way to produce more real GDP and only real GDP will pay back the inflated asset values and the loans they supported. Real GDP is not health and safety officers, it is not massive databases to monitor citizens it is not quangos who add nothing, it is not planning committes or an inflated military who buys equipment from abroad which we borrow to get and then blow it up in some far country. It is not big gas guzzlers for our police or new offices for our civil servants. Real GDP is goods and services people will actually pay for in a real market - the overseas market or, with free choice, the home market consumers (non state). For that we need something and someone radical again who can wipe out the "users of resources" who provide no real GDP. Thatcher worked in her time but she had faults. Something new and certainly a breakup of the whip and party system which has destroyed all reasonable debate on issues.
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For 'lending binge' by the banks, read also 'spending binge' by those who should have known better, and those who knew no better.
So now we have to have a period of austerity to catch up. Principally I would suggest massive tax rises for all over the national average wage - which includes myself.
Foolishness always has to be paid for!
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Can someone explain why the government wants to get everyone lending again when lending was the thing that caused this situation in the first place. Has anyone actually conducted a calm inquiry into this financial crisis so that we can stop it happening again? I have visions of Homer Simpson desperately trying to start the car on the side of the road
Marge: "Don't you think we should call the garage dear?",
Homer: "Will you just listen, I know what I'm doing".
Bart: "Oh boy"
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#79 - £20m to Gaza I guarantee will not be additional money being given to them; rather, it will be £20m allocated from the aid budget that was probably ear-marked for someone else being transferred.
Gordie will be using his usual sleight of hand tricks here. I'd be surprised if that amount was not already being given to them in earlier years anyway and he has just repeated a figure (which is his other trick).
Still, I feel sorry for the Gazans, I expect they'd rather have €20 Euros!
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PLEASE remove the 'Complain about this comment' notice accompanying every post.
The posts are all moderated, so it should be completely unnecessary.
Or, if you have to have it for some politically correct reason, at least add a matching 'Endorse this comment'!
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If the new Loyds Banking Group ends up being nationalised what is the position of the original LloydsTSB shareholders?
It would seem from what is being said at present that GB and HBOS sold Victor Blank a pup! Hidden or incorrectly valued toxic assets!
If this is the case can this merger be scrapped by the courts and LloydsTSB shareholders be compensated?
It appears that a very large proportion of "private shareholders" were against the merger but overridden by Institutions who again did not do their research, or is there a more sinister issue?
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I don't deny that this bailing out is neccessary but surely there should be some pretty stringent terms? If the banks are bust, then they are bust because of their own greed and stupidity. By all means bail them out, but only in exchange for public ownership of the bank, and agreements committing them to pay back every penny they have borrowed with interest. I don't care if it takes them 20 years or 100 years to do this and I don't care if the banks never again make one penny in profit. Why should the tax-payer be in hoc for a generation to come because of the greed and stupidity of individuals who run these institutions?
The same applies to the greedy buy-to-let mob. They shouldn't be permitted to declare themselves bankrupt, thereby dumping their losses onto the taxpayer. They should have to pay back every penny they owe, no matter how long it takes.
Many people in society have been living well beyond their means for many years. Others have quietly scrimped and saved to look after themselves and their families. Now, the careful ones are being expected to foot the bill for the profligate ones. I say no. Make the greedy b*gg*rs pay. If it takes them the rest of their lives to pay off their debts, then so be it. It's the one thing that will stop this happening again.
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I've read about 50 comments, all critical of the govt. Not one suggests a helpful alternative which would avoid massive (4million +) unemployment and the bankruptsy of a significant proportion of British industry.
Simply waiting for the bad loans to unravel would end up in this and it waould take more than a few years to turn it around, let alone get back to the affluence of the last 10 years.
So please... more helpful comments: I thing the govt. is responding pretty well in dire circumstances.
Nix
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Robert Peston said, "banks are being sheltered from the full consequences of their own fecklessness".
I'm thinking like this:
Q: What is the problem with lack of credit?
A: Companies are going bust & putting people out of work.
Q: Who decides how much risk to take when giving loans?
A: The bankers.
Q: How do we overcome there over-aversion to loaning to even sound business?
A: Make them feel pain in relation to the level of unemployment.
Q: How do we make our unemployment hurt them?
A: Create a special income-tax code which will increase their income-tax with the unemployment rate. With no upper limit, the prospect of 100% income-tax will hurt the bankers enough to make them give credit to keep afloat viable businesses.
======================
This will not cost the tax-payer anything, and keep tax-payers as tax-payers, not Jobseekers.
Even if it doesn't work, it will hurt no-one (except bankers - which doesn't count), and we can try something else.
We could include the hedge-fund managers and the like who made these famous one-way bets knowing they were too big to fail.
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Again flying by the seat of the pants.
Just by way of information. I'm blogging from Germany.
The situation in UK is currently mega-worse in its effect on people because of the level of debt allowed by the supra-national banks channelling Far Eastern surpluses onto the British High StreeT.
Germany is in a different position. Efficient highly productive industry and innovation has produced a giant export surplus. Germany is not in debt. Pensioners have large pensions and and most people (except recent arrivals about 10% of the population) have high levels of savings. The Banks are sound because they resisted the Anglo-American pressure to privatise. The Investment Banks (supra-nationals) like Deutsche are in trouble but are not seen as 'German' but global banks without nationality- like all British Banks except the Co_op. But Germany benefitted as the supplier (Like China) of the goods Brits bought on tic and remortgaged for. Germany produced the high goods, China the low tec trainers etc for 50p sold in UK for 50 quid.
In the global Anglo-American financial architecture the fundamentals were simply forgotten. It was a greed stampede which evolved into what is effectively a giant Ponzi. It had to correct. Inevitable.
Now order books have crumbled (-27%) and the unions have foregone agreed pay rises. Porsche and Co. are on 'Kurzarbeit' effectively a three day week. The world market has collapsed.
Germany has a cushion. High unemployment pay for a year and a dirigist tradition in the Mittelstand. (Family firms which didn't abandon their workers to hedge funds (called Heuschrecken or Locusts). The Heuschreckenzentrale was always identified as London, Jersey, Isle of Man and the Bahamas or New York.
But it will be painful here too.
Alternative energy and massive insultion programmes with other public works are being accelerated with planning delays cancelled. You can set home improvements against tax.
Investment which provides work NOW and value in the future is the BEST way to stabilise and build future value.
If Deutsche goes it will be stripped as an entity, anything of value taken out and given a new home.
Britain has an awful set of cards.
Blame Mrs T and her mates. That's where it started.
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just announced RBS coverting preference shares into ordinary shares....UK taxpayer now owns over 70%.........!
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Well, there is now no doubt about it, Gordon Brown has quite definately taken us from boom to bust in spectacular fashion.
Our children will have to pick up the pieces for years to come and it will not be easy.
He argues that this is a world wide problem therefore not his fault. Well it may well be a world wide problem but it is his fault that we are so ill prepared, it is his fault that he failed to address the issue of spiralling debt, the lack of regulation, the fact that he was also allowing massive government spending before this mess started.
Hopefully one day soon we will get rid of his rotten government of incompetants and fools. Britain deserves better.
The only sound way forward i.m.o is a Government of National Unity chaired by Vince Cable but I doubt if it will happen unless we take to the streets.
So bring on the election!
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Supply and demand is just what it says.
The real culprit is inflated asset prices. For the past decade, bankers and investors with a blind government and regulator eye overseeing, has massively "bet their ranches" and therefore the "UK ranch" on ever rising asset prices.
Who loses?
The man and woman in the street.
Ask yourself some basic questions - forget the macro economic assessment - just some basics.
1. How can people afford to buy homes that are often priced 10 times or more above the average UK salary (£20k according to OECD)? Not too many.
2. How can the UK sustain the current levels of consumption of basic, defensive items like food, heat, water, clothes? The debt accumulated to buy "inflated assets" such as luxury goods, cars, holidays, as well as the roof over their heads is submerging many and making the rest of us learn to swim faster.
3. What does UK Plc make or export? Niche manufactured goods (with just 3 million employed in "making industries") and the rest in service industries or the public sector none of which generates export revenue for the UK (except the City - 20% GDP in 2007) and that's shot to pieces.
4. Does the tax payer (and therefore voter) get a say in the remedies government is cobbling together to get us out of this mess? No. Instead, the Government is saddling us with even MORE debt which will take a generation (or two) to pay off. The debt the UK took on from the US after WW2 took 50 years to pay off, but we did pay it off. How long for this current debt binge to be repaid. I'll long be dead before then I dare say!
The banks have not shown one ounce of contrition since this whole sorry charade burst open in August 2007. Neither has this (or any Western) Government. No one has really said they are sorry (including the RBS and HBoS directors who resigned - as they did so under extreme duress). Instead, we get people losing their jobs, and some good businesses starved of credit to help their business survive.
If KPMG is considering short timing its staff to reduce costs (and when there is trouble, accountants ALWAYS do well with fees from the rubble)... you know there is a REALLY BIG PROBLEM.
The banks are, in the main, technically insolvant. Their capital and reserves has been swallowed up by bad debt provision recognition. The current crop of banking results will mask the truth, through the black art of accounting. The real truth is neither they nor their auditors really know how deep the losses go, and where they are, unless they unwind EVERY SINGLE TRANSACTION. That would take years.
We should be grateful for Madoff and Lehman. At least their failures allow everyone else to find out the true extent of their asset values and wealth.
Which brings me back onto my original point. What are all of our assets and cash worth? Who knows. As long as there is confidence in cash, we can use this to buy goods and services. There will always be a demand to buy. It is taking time out at the moment whilst we count our losses and regroup. The key truth is that all of us thought our assets were / are worth far more than they really are. Only when we can make all assets affordable around the globe, will the recovery start. There is a massive asset pricing correction now in progress. Only time will see how this evolves.
Finally, the main reason to protect the global banks is the lesser of all evils. If we did not, Governments would be faced with real insurgency risk and more bseides. The price we are all paying is to support feckless bankers, politicians and regulators to save our and other nations.
Britain is a liberterian society and is very tolerant. For how long after this jolt?
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#110. U4860383
"So please... more helpful comments: I thing the govt. is responding pretty well in dire circumstances.
Nix"
Like a general election now and an opening of the treasury books so we can all see what has been wasted on illegal wars etc.
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That was the strategy before wasn't it? We can't make anything so we defraud the world with dodgy debt bonds. Filled the Treasury coffers a treat. It's a wonder we haven't been nuked for it!
We have still not learnt the lesson. We are in this predicament because of the banks desire to generate more than one concurrent account from a single debt obligation, its as simple as that.
A used car salesmen taking the purchase price from two customers for one car would be called fraudulent.
So how can you sell a loan to a customer, then, at the same time sell the loan to a finance company (that then creates investment bonds on the 'asset')? You call it securitisation, that's how...and then pretend it's terribly complex (because it's not the debt per se but the future income stream ....) and brilliant (so we couldn't possibly understand it) to 'smoke' the regulators....and the courts too I might add.
And I do mean sell, the whole debt being transfered to a third party, the debt asset removed from the bank to then appear in the third party's asset sheet. That is called assignment. But the bank then goes on to collect payments from the original borrower having received more than it lent out from the third party.
They've got away with it so far, some £3 trillion pounds worth of fraudulent currency, in the form of debt based paper, which has now...vaporised.
Securitisation is the root cause. The lending to non credit worthy people was a symptom that followed later. If you have a good scam going and the regulators are thick and you pump up the traders with exotic earnings then everybody is fair game to load up with debt.
We can mess about trying to pretend that financial security blah blah must be maintained but it's too late for that. If we want confidence to return we had better get round to admitting what really went on....except that would make a lot of sovereign funds very angry at this very western con and indeed we may well be nuked yet!
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#71 Jericoa
I wish I could disagree with you but I can't
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I see the censors don't like the truth.
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Having spent some time looking into the workings of our current banking system, based on banks being able to lend relatively high proportions of deposits, I conclude that the success of such a system can only be maintained by a high level of total recycle of loans back to the bank. When this happens the banks can generate very large incomes, as long as interest rates on loans are sufficiently higher that the rates bank pays on deposits, even when, by definition, levels of deposits must be higher than of loans.
I have not seen any comments suggesting that a failure to maintain this high level of recycle is a more likely reason for the apparent reluctance of the banks to lend, but it would not be surprising that people already in debt up to their chins might be less likely to keep the money-go-round turning. So the current credit problems may not all be the banks@ fault. Both the possibility of defaults on interest payments by "dodgy" borrowers, and the lack of recycle to the banks can easily prevent banks form making any profit at all.
The fractional reserve banking system can only appear to be working during the growth of bubbles, when the banks appear to be doing very well. As soon as the bubble bursts, the hugely negative feature of this system cuts in and leads to a catastrophic decline in the fortunes of the banks.
Encouraging banks to lend more and borrowers to spend more cannot possibly result in anything but tears. We often hear that doing this is the only way to shorten the recession, but we are expected to accept that unquestioningly because the outcome of any alternative cannot be put to the test.
The truth is that the fractional reserve banking system is always ultimately doomed to failure even although it can apparently generate money from thin air every time a loan is granted.
When the penny drops that year on year sustainable growth of GDP is theoretically and practically an impossible dream in a finite world, as is continuous population expansion, maybe a new breed of intellegent political leaders will replace the current Globally minded and short sighted lot and be able to persuade the British public that we need to move towards a more balanced situation where people live within their means and get rid of the "spendaholic "genes we seem to have got used to.
This could take generations to achieve but would be a long term goal worth aiming at.
The alternative of staying on the path we are on and trying to restart a broken engine to keep going on the same track may appear to shorten the depression, but it will inevitably hasten the demise of human life as we know it today in the longer term, which may not be all that long!
The lesson we all need to learn is that we need to stop using the words sustainable and growth together because it makes a good sound bite. There is no such thing as sustainable growth of any system which has finite boundaries.
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This has to stop…its ridiculous…these institutions MUST be accountable for
their bad business practices.
They are surely having a quiet giggle at us in their city Sushi bars.
They are using their supposedly indispensable position to cheat us again.
BEWARE they aren’t daft just greedy. Don’t let them do it.
As for Gordon Brown….well make the best of it me old mucker !
We didn’t elect you, lots of us don’t like you and your time in power is only as long as your ego lets you stay.
Why not put your popularity to the vote?
Oh sorry, maybe the gravy train isn’t quite dry yet.
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Robert,
Why do you keep using 'words' like 'wonga'?
Most people reading this are pretty intelligent - as are you. Such language demeans us and you.
I haven't got a problem with those words in common usage but you are providing a service that we are paying for and I, for one, expect better.
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Will Lord Ilay's picture on RBS notes be replaced with pictures of GB & AD?
Mind you the Tories down south will be frothing when they realise that HMG is essentially issuing Banknotes with bridges on them ! (The new BOS notes
see scotbanks dot org dot uk)
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#94 truths33k3r
Yep; spot on. Read in conjunction with my post at # 84 and you have the full picture.
I don't know about other bloggers here, but I am getting really angry at the crass incompetence being displayed by this government and the equally crass incompetence of the so-called opposition (otherwise known as The Lets-Look-Like-Labour-To-Win-Votes Party).
Oh boy, oh boy are we in a mess. I've been buying gold coins these past few months, stocking up on fuel and food, buying hens, creating planting beds, stashing cash in my home safe, cleaning my shotgun, buying more ammo and waiting for the moment when the UK economy crashes and burns.
Not long to go now guys. Whoa, I'll bet Gordon Brown never thought he'd be presiding over the mother of all economic and social collapses - all thanks to his own deft economic and political skills: how sweet is that, eh?
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So if these are true:
"The seeming unfairness is that banks are being sheltered from the full consequences of their own fecklessness - for the supposed wider good.
"And the paradox is that the Government wants to make more credit available to reduce the severity of a recession that was caused by a decade-long, crazy lending binge."
... then the big question is how can these two important directions ensure this recessionary time will improve? Won't doing these two things lead to more problems up ahead?? Seems like the politics of the madhouse maybe? Don't know.
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#110 U4864303
Brave chap backing the govenment. Expect lots of responses!
I do support you on the sentiment that more helpful comments / positive suggestions would be welcome on here.
There is a lot of fear, anger and outrage out there (including myself).
Maybe what the government is doing is 'better than nothing' but which ever way you cut it, even if their proposals are as successful as they can be, it will still not stop a huge correction and unemployment taking place or the heavy defeat (at best) of labour at the next election. there is a lot of mementum behind corporate failures and consumer confidence at the moment, history tells us that will never turn around overnight.
look out !
Here comes a helpful comment, lets start concentrating on the real economy and what we need to do to become as self sufficient as we can in food and energy. That would be a good starting point to build back up from.
Sound foundations are always a good idea for building anything...believe me I should know..I design them.
Jericoa.
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My company has decided this weekend that as from tomorrow we will no longer accept credit cards as payment for our services.
Bank charges have increased (which we swallowed) but now we find we are being paid later and later by the processing bank, minimum 30 days but sometimes lately much longer. This includes payments made by debit card where our clients are debited immediately. We provide a service not goods so therefor there is no clawback risk to the bank. If our clients are not happy with the service they do not pay us.
We have decided that this ridiculous time lag in being paid is an example of the total lack of liquidity within the system and we are opting out. How long before other businesses realise how volatile the situation is ? Take a credit card payment today and wait 30 days to get paid.............will the bank still be in business by then and if so will the rules have changed ?
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As someone with a substantial part of my savings in Lloyds TSB shares I am more and more dismayed that HMG has railroaded my more cautious Bank into the arms of the profligate HBOS with all the toxic assets referred to in Robert's blog. This seems to be yet another indication of things made up on the hoof by GB and his henchmen just so as to be able to claim to be doing something.
I can only agree wholeheartedly with all those who have said that it is the feckless and the imprudent who are now being bailed out by the thrifty and the cautious.
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Why are so many of the directors and senior management still in place at all of the major banks ?
They should be removed and active steps taken for prosecution over all those involved, internal and external to the banks in signing off very recent balance sheets.
The government must act, as it is doing to support the banking system, but must also remove so many of those involved in creating this mess and replace them.
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BBC stating that the conversion of the RBS preference shares with 12% coupon, generating £600 million per year, into ordinary shares will increase the taxpayers holding in RBS from 58% to 70%.
So some simple maths.
The investment in the Prefs was £5 billion (£5bn x 12% = £600m)
The £5bn investment will buy 12% of RBS
This puts a market value on RBS of £41.6 bn.
Is that really the present market value of RBS - or are the UK taxpayers overpaying?
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#120 angloscotty
You have hit the nail on the head.
But there is more.
Why do you think politicians like to use the banks to provide us all with money?
Stealth tax. What better way of stealthily taxing us all? The productive folk unwittingly pay stealth tax to the bankers.
We all drag the bankers ball and chain. The governments additional stealth taxes pale into insignificance.
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No 121 the gravy train won't stop rolling for Gordon the Golem. No doubt secret protocols in the bail-outs contain cast iron guarantees of non-executive directorships for the Golem and his street-walker Darling when they're ejected from Downing Street.
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These are the two figures which should absolutely terrify us; External Debt:
United Kingdom $10.45 trillion (30 June 2007)
United States $12.25 trillion (30 June 2007)
You can be sure GB will not be mentioning the UK figure too loudly.
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markus_ukTo put it another way: 1.5 years into the burst of the debt bubble the only response we can hear is "lend, lend, lend". I have yet to read an analysis, be it from Peston or anybody else, that states that the only cure from debt-addiction is productive work, the return to real economy. There is not the slightest hint in British politics or media as to how the UK will change its ways. To me it all looks frighteningly similar to a hopeless case of alcoholism, where the ill doesn't even understand he's ill. Until this self-diagnosis is made, there is no such thing as a future.
This just about hits the nail on the head.
The whole debt question has become a game of pass the parcel. Each government is too afraid to tell the public the truth of our plight. So they take short term measures and hope matters don't come to a head while they are in charge. The sell-offs of public utilities in the 80s and 90s was the last effort to raise cash. We have little left, so all we can do is borrow. We don't manufacture enough, grow enough food, or have enough natural resources to support ourselves. Our government have known for decades, but the cure, spend less, work harder and live within your means, was not palatable. So they engineered a credit booms and buried their heads in the sand.
Now the chickens have come home to roost.
The worst part of this is, the responsible people, the savers, are being penalised to subsidise the irresponsible. This will mean in the next recession, there will be fewer of them to bail the banks out.
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I am most impressed by the calmness of the British people who have been financialy responsible. Their pockets are now being emptied by the the First Lord of the Treasury in a hopeless attempt to delay the revelation that he has been one of the most incompetent First Lords since 1694.
To restore desperately needed confidence in such a crisis we urgently need a First Lord of the Treasury who is of Pitt the Younger status. Cometh the time cometh the man so they say. Dunkirk put Churchill in place.
Robert in your opinion who should we be hoping is given the helm? Clearly this calmness will not last for ever.
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How is it the short sellers still have cash to gamble but the rest of the economy is cash starved?
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If you get shot by an arrow you don't try and work out where it came from, who shot you and why. You try and pull the darn thing out.
We all know what the cause was - massive system crash in the Anglo-American financial architecture. Hubris is followed by nemesis.
The average Brit is a victim. Not everyone was reckless, lied, lived beyond their means. Many did but a roof over ones head is a need and you just sign up to debt slavery to pay for that.
But about 2 to 3 million Brits benefitted big-time. I saw some of them in Tuscany two years ago. They are merely the small fry.The couple of million quid types. Former estate agents and associated shysters. Locals hate 'em but flog them overpriced Chianti. These expats knew but didn't care because they were 'loads a money'.
The froth economy said buy now, prices will always go up, get on the ladder or miss out FOREVER. No cash. No problem.
The financiers in Wall Street and the City thought they could defy the laws of gravity.
What goes up too fast must correct. Growth in the world was 1,5% yet houses were rising double digit. Should have been spotted.
The Banks and hundreds of finance entities linked to and owning the banks used the inflated asset debt to create more instruments. Russian oligarchs, the mafia found speculating in london property made more profits than crime. The banks enabled this all.
The global players toxic debt is world wide. Much investment in America was fictitious. Money lent to front companies which have disappeared. These debts have accumulated but were chopped up and sold with triple A ratings.
Nationalise the British Assets, mortgage books and let the foreign and rich Brit shareholders whistle.
British debt is a small fraction of the global banks bad debt issues. Brown is on a hiding to nothing.
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I am a taxpayer. I believe that covering the debts of banks is a good way to use our money, for a suitable commercial price, of course. I believe that we should encourage people to buy their own houses.
I believe that banks should be obliged by us to extend credit to businesses and should be nationalised if they fail to do so. I believe we should run these banks for a limited period and then sell them off again.
I believe that many of the current banking community should be barred from ever working in a bank again.
I also believe that there are many people in banking who have taken home or "put away" huge sums of money from running a system of banking that they knew could not be sustained. I want to see these people prosecuted. Tell me why it has not happened.
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So far £600 BILLION has been spent saving the banks from their own folly.
Now let's be clear. This is our money... our taxes. Is this how we want it spent? Are we prepared for the day when we will have to repay what has been spent in our name? As a rough rule of thumb every £3billion spent represents a penny on income tax. Therefore we are currently up to 200 pence on income tax! UK debt default anyone?
The man in charge is unelected to the position of Prime Minister. He is unelected to the position of leader of his own party. He is directly or indirectly partly reponsible for the mess we now find our selves in. He is not spending the money on high speed TGV style rail links between London and Scotland. He is not proposing to spend money on new drug research for the NHS. His solution to a debt-binge induced rescession is borrow Borrow BORROW. SPEND Spend spend.
Before anymore is spent in my name. Before anymore is spent such as will be a debt burden round the necks of my children and my childrens' children I demand now the right to agree or disagree with current policy at the ballot box. With no democratic mandate to continue on this extrodinary economic path this government and it's undemocratic leader risk civil disobediance from the people and the very real possibility sovereign debt default in the near future. Gordon Brown must now, immediately, seek the authorisation of the People for what he does and proposes to do, in our name.
It goes without saying that I for one do not wish him to continue on the path he currently travels both in terms of the economy nor in government in general.
Parliament must seek an immediate vote of confidence. It is both a dereliction of dutyand cowardice in the extreme for both the Tories and the Liberals not to do so.
God help this country... it seems no one else will.
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Who would vote for a zero growth government which prevented house price inflation?
Who would vote for a party that confirmed that it would have to raise taxes and reduce public services?
Don't just blame the government.
If we want european public services we will have to pay european tax rates.
It would be possible to have a shrinking economy and rising living standards by smart buying.
Time for fresh economic thinking. Time for zero growth economics. Time to pay off our debts.
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To The Manager
HBOS HSBC Lloyds RBS Etc
I'm not sure enough people say this, so let me start by thanking you for all for your great work over the last few years. You invested in whatever your mates were selling without researching anything. And at a time where everything was going up in value, miraculously, the rubbish you invested my pension in went up in value too.
As they say: what goes up must come down. That's gravity for you. Nothing to do with you making bad decisions.
I am very sorry to learn that the £500 Billion that has been given to you so far is not enough. I really feel like a cheap-skate being a citizen of a Country that has offered you so little.
Also, it is terrible that the Government wants to see a return on this money. How dare they? I am ashamed. Of course we converted the money given to you to no strings attached so that you don't have to pay for it.
I am so pleased that the Government is now giving you an extra £200 Billion. You deserve at least this for all your hard work. Please feel free to ask for more when you run out.
Finally, I am very sorry that I asked you if I could borrow an extra £10,000 on my mortgage to help me through. I was very wrong to say that 5.5% is unreasonable when interest rates are an astronomical 1.5%. Also, a £4,250 set up fee is totally justifiable. Why would I even think it should be less.
Yours humbly.........
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Election time!
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If this works, we are still likely to end up in the same mess again a few years down the line. There is no fix, but going into recession and picking up the pieces instead of borrowing our way our of it.
Is there any other way or is the government is planning or are they just buying time and if so at what price?
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If you want European Services pay European Tax rates.
Bargain.
Low house prices, more disposable income not servicing impossible mortgage debt.
High taxes are paid by the rich.
Those who earn 80,000 and more.
60% of Germans pay no income tax at all.
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#110 U4864303
OK, here goes on some ideas to sort out this mess.
1. Polticians to fess up that the situation is now beyond-crisis: we're at the economic equivalent of declaring war.
2. Point 1 will mean calling a General Election now.
3. Point 2 means that Labour will be chucked out on its ear. Gordon Brown will go down in history as the worst (unelected) Prime Minister this country has seen. So, good riddance to him.
4. Point 3 means that the Tories either have to get their act together around Cameron or find someone who knows what they're doing: Hague is the best bet. Hague needs to be positioned for what he is: an ordinary bloke, from an ordinary background, with an ordinary schooling, with a regional accent, but who's really smart. We didn't accept him the first time round; now, however, he's just like you and me and, strangely enough, we need an ordinary bloke for extraordinary times. The British people are fed up with other-worldly politicians: be it Brown (who seems to come from some other weird planet) or Cameron (perceived as a "toff", which is a daft and unhelpful perception, but it's marking down his currency nonetheless).
5. In any case, the British people need to be steeled for at least 5 years of austerity; probably longer. The end of mankind's era of cheap energy will kick in over that time frame and make things even worse than most of the gloomiest commentators are predicting now.
6. Government policy must be focused on the single most important task of organising a massive shift of resources away from Gordon Brown's ludicrously bloated, inefficient and wasteful public sector (his client state) and towards the wealth-creating, private sector. This will hurt real bad, hence Point # 5.
7. Government must make contingency plans to deal with social unrest, possibly (but not probably) on a big scale. When told the truth (not something with which the Labour Party is at all familiar) the British people are remarkably cooperative and stoic. When lied to - like we have been for the past decade of Blair/Brown spin - the British people eventually turn ugly. This is what the Government fears now and is desparate to avoid: hence all the panic-stricken measures currently being taken, the main purpose of which is to save Gordon's skin.
8. Slash the nation's benefit systems and make welfare benefits absolutely the last resort for saving souls. Make it far, far more attractive for people to work rather than sit on their ar**s all day watching TV, drinking beer, smoking pot, eating pizza and sticking up two fingers to decent, hardworking people (taxpayers).
9. Resolve to make the state "small". Get rid of quangos; get rid of "Real Nappy Coordinators" and "Street Football Champions" on £25,000 per year (these non-jobs really do exist) and, as per Point 8, make it more attractive for people to do productive work (ie work in the private sector). Repeal laws (rather than make them); roll back health and safety legislation; roll back business red tape; generally make the state "get out of the way" of citizens so that those same citizens can spread their wings, be creative, make money, better themselves.
10. Finally, the government of the day and the Prime Minister in particular must LEAD the country, not pander to it. For too long now our politicians have been obsessed with ingratiating themselves to the public because they have no other means of earning a living (the scurge of the "professional politician"). So, we need a government that sets the agenda and does what's right for the country, however unpalatable, and then leads us through the difficult times ahead characterised by decency, honesty, hard work, good humour and compassion. I reckon Obama is up for this. I'm not sure who has the skills to do this in the UK, but we need that man or woman to step up to the plate soon.
Think that might work?
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If a genuine attempt was made to sort this problem out (instead of GB seeking re-election) we'd have a cross-party consensus plan to turn this country around over the next 10 years or so and not this sort of sticking-plaster type solution repeated endlessly!
I hate to agree with Peter Mandelson but why were we so dependent on the finance industry to begin with?-probably because we can't manufacture/export anything competitively in the world any more! It would seem from rece nt events that without absurd consumer credit levels this country is bust! Too many eggs in one basket I say-a disaster!
Apparently another round of recapitalization is needed "because the banks weren't honest about the scale of their losses before"-i.e. in October when chaos was reigning! If they will not be honest even then, then when can they be? Could any other branch of British society behave as they have done and be treated this way? It would be governmental committees, closures, salary reviews, sackings, public humiliation and inquests etc, but they are to get more cash! I hope this works for the country's sake and for the sake of the vast majority of decent (and honest) people in this country, but nobody should ever forget this moment! We will surely be paying the debt off for many years and labour have met their political demise in this issue, even if they do eventually mange to turn the matter around.
On one hand increased credit lines for businesses will do a good job as they will hopefully think twice about increasing redundancies beyond the already rising unemployment levels! I would however hope that the British public won't go down the same route again so fast if credit availability increases i.e. no more property TV shows, INSANE property prices, gazumping practices in house buying (looking at an already over-valued property and actually offering more), credit bingeing, living above your means, "buy-now-pay-tomorrow" 0% balance transfers-lifestyle! Is anyone really made happy by that sort of society?, apart form the credit providers/estate agents/financiers of course?
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''Unemployment will soar to 3.4 million as the financial crisis deepens, say forecasters ''
When will the headline writers and forcasters wake up to the fact that the 'financial crisis' should no longer be getting the headlines.
This is a real crisis where real companies who make real stuff are collapsing and real people are on short time or losing their jobs.
They can tinker with the banks further (and they will) print money, nationalise banks and they will have to do most if not all of that as part of a package of solutions in the world of finance.
My point is at what point do we wake up and see the headline 'unemployment crisis' or 're-possession crisis'.
Using the headline 'financial crisis' kind of implies it is all still in the world of high finance and can be solved in the world of high finance and if everything is sorted in the world of high finance it will all be ok.
Sorry BBC that is simply NOT true and is in fact misleading to the people.
It can no longer be solved in the world of high finance, that is only part of the solution, the wave of 'correction' has moved on and is firmly causing havoc in the real world now and will continue to do so. It is time you moved with it and in so doing you could help the nation to recover alittle bit quicker than it otherwise would.
For goodness sake journalists wake up, get the message out there. The sooner you do the sooner people will realise and the sooner we can start working on the real solutions. We dont have time for political correctness or risking upsetting the government with 'risque' headlines close to an election.
Isnt that what journalism is supposed to be all about? If we can not trust the BBC to do it who can we trust? The Daily Mail?
Labour will be out soon anyway..take off the shackles, you have got nothing to lose now.
Jericoa
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RP,
Do we really believe that the bilout cash will be used to increase lending and stimulate the economy, and not line the pockets of the bankers?
What guarantee do we have that taxpayer cash is being used to service the purpose that the government have advocated?
It is coming up to bonus time do we have a cast iron statement from any of hte banks that NO ie 0% bonuses will be paid to all eligible Managers, Senior Managers and Executives whom have decretionary bonus schemes linig their pockets. I suspect not. It will be a national disgrace if the likes of RBS pay even £1 in bonus to ANY employee.
Along the smae lines do we know how much of the tax payers cash is going to support annual pay rises - hopefully none - but again I bet the we the public are getting hte short end of hte stick.
On a slightly different note, RP, why dont we force RBS into a fire sale after all we do live in a market economy? Please post an insight into the pro/cos of this approach.
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126 jericoa
What you are seeing is a economic landslip
The fault line lay with the banks. Shake the ground and the problems became clear. The removal of credit in the pipeline cystalises debt. Whilst too much debt was in the system to shut it off completely was bound to cause problems. This is why Paulson was on his knees to Nancy Pelosi in the US HoR. He knew the consquences.
To return to the landslip. It has started and is in process and nothing can be done.
The UK government has to get credit back into the system. Perhaps all who argue that no credit should be reintroduced now understand what in process and will be glad to see credit return.
There is I am afraid no point in listening to economic forecasts. In my opinion their model has broken down. Every week the forecast gets worse and we are only 3 weeks into the year.
As the fundimental problem is confidence, an emotion, it ia worth returning to the start.
Late 2008 - Failures indicted in the US banking system. Bail-out, actually not a bail-out, a rescue plan floated by Paulson. Disasterous misname.
Shock horror outrage from the public. No bail-out for banks. Righteous indignation. Sorry no choice it is infrastructure, society cannot function without a banking system. Politicans gutless, driven on by public say No.
So the problem has to escalate. Fear has to become terror. The public have to be driven to the point of saying we are so terrified please bail the bankers. That is why LB was left to fall.
So politicans move to position of saying okay we will be your saviour, we are comfortable with that, just as long as you think it is not our fault. More posture, bail nearly fails. More terror to drive it forward.
Problem is terror cannot be controlled once unleashed. Emotion. Similar here, just a bit behind because waited for US developments. Next step politicans say problem is external. I am the tribal leader huddle around me. History says this works in time of crisis people support the tribal leader. Leader says okay soon, makes unsound promises. Be over soon.
Polls say good move, so milked a bit more. problem is cannot be sustained. Emotion cannot be held. So, next step, the one we are in is people get angry. In parallel the landslip gets underway. Delay due to takes time to show up on order books.
Angry people also now frightened. Loss of faith in system. Loss of faith in leader due. Unsound promises look lacking. More anger, you said do this and it would be ok.
None of it stops the landslip, landslip initiated sometime ago.
Makes no difference who is in charge responses constrained by event.
Landslip due to settle in little while, some follow on due to other destablised ground giving way.
No help to those affected. No quick return. Industry propped up by good time spend have to downsize, no choice, spreads impact. Other businesses hit by this or near to it adopt 'sit on hands and wait' approach to order book. Spreads. Problem is survival until situation reaches new 'normality'. business pending, just on hold. Not as bad as seems for some. Time delay problem.
Key problem is where you are in economy, how you are affected. So thing is to sit down and play consequences to judge where you are. Emotion understandable but no help fella. Go walkabout bit.
Underlying ie residual economy probably not too bad. Old school customers say walk on by a bit wont buy yet, makes it worse. Wont buy if think business go bust. Wont buy if uncertain. So more money delayed in system.
Problem is getting credit back in system, attempts underway. Takes time. Longer to get in system then more businesses fail. Same terror loop as first time around. Public say no, no bail. So terror has to rise, failures rise, poor feedback loop, ie delay, so overshoot, just as before. HMG too slow. Moved fast but not fast enough, so 2009 no hope. So back to survival. Credit to filter thru slowly. Confidence with consumers very slow return. Politicans games and posture have damaged more. Sorry all very predictable.
Businesses hang on as long as poss then fail. or shed staff suddenly without warning. More emotion and fear.
Money in system on hold. Perhaps those worthies who have screamed no more mortgages now understand. Key is recovery in housing. HMG will have to move to US 1930s long term fixed low rate mortgages al la Freddie Mac and Fanny Mae. Wasted time. Reluctance to invest held back by spectre of high interest rates and unstable housing market. No prob with the 1930s solution in US until deregulated 50+ years later. All other routes less productive. Problem is HMG waited too long. Propaganda now - house prices fixed to drop 2009 so there is no possible effective intervention till 2010. House prices have to fall, expected so will happen.
Sorry emotion no help. All not lost. Much underlying mess sound, much delayed money sound. Some variables inevitably.
Somebody has said HMG doing okay in difficult circumstances since crisis struck. Up to point would agree, political posturing aside. Problem was manufacture of mess.
Makes no difference who is in charge at present. After event new broom. Inevitable. Problem is making sure new broom is sound.
So - Sorry not a lot to change point of view here. Still much as per expected. No help if caught up in it.
Could be much worse. Main problem is the destruction of expectations with public. Death of the American Dream, exported around the world. Cultural shift likely.
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It's alright saying lend, lend lend..... , lending has to have a goal. The goal should be not to end up in the same mess as we are in now. The organisations doing the lending should have learned some salutary lessons. I do not think this will have happened. there are too many of the same people around in the system.
The goverment and it's control of the Bank of England and the FSA have a lot to answer for.
To my mind the housing market is a false one. When a house has been built and sold for some price, in the poast, paid for with money raised from some source, be it a building society or bank or whatever under a sensible rule of lending. The following on sales of that single property appear now to be carried on supported by the ability of these bodies to supply money at a rate and a multiple of the earnings of the purchaser/s and some other induditious rule that does not bear any relationship to the rules of previous times. For example when we bought our house the limit was 1.5 x MY earnings only, now it seems it can be up to 6? x both parties. All this does is encourages ridiculous house price inflation, probably to people that cannot really afford the loan when the worst happens. A similar situation exists with credit cards where people have the ability to borrow and move money around paying one card with another, 0% deals etc. Listening to Martin Lewis's advice gives you a good idea of the problems that happen when money is treated as a consumer item such a bag of frozen peas.
In years gone by this business would be more tightly controlled by the B of E by methods such as laying down the minimum amount of the balance that had to be repaid had to be paid each month e.g. up to 15 or 20%. Getting these into sensible numbers would bring a sense of realism into the area, it needs a strong B of E to do it, and a government to back it up.
The idea of the taxpayer now owning large swathes of the banking business seems to me a way of the current government achieving in one fell swoop what other Labour governments in the past would have loved to have done but didn't have the guts or wherewithall to do in the 60's/70's i.e. nationalising the banks and controlling finance in the economy.
Communiism hear we come.
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#135
There is no ready answer but considerable insight and intelligence will be apllied to the problem when we send for Vince Cable.
This is long overdue.
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No 136 short-sellers don't necessarily have the money - they borrow shares from institutions, sell them, buy them back when the price falls and then give them back to the institution.
I guess they pay a fee for borrowing the shares, but it's not immediately clear why an institution - such as your pension fund - should go along with a scheme that sees a fundamental fall in the price of their investments.
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I see a number of 'social unrest' type predictions on this blog and in other places.
My own feeling is we are liable to see grandparents selling the home and moving back with the kids.... with just-left-homers flogging the falts and moving back into the family home....
What this means of coiurse is that some of the 'fundementals' underpinning the housing market/construction and retail are perhaps liable to prove flimsy.
The recession has moved from the financial sphere to the real world and it'll be real world actions that provide the remedy...such as us all heading back to the 1950's....!!
Bye bye!! To families spread across 5 homes and (even) different countries ....and hello sharing bathrooms?
One good thing is that the shock to the Soviet Union that brought it down...and the shocks to the traditional 'Western Capitalist system' ususally follow full scale wars.
Maybe it's progress after all that we are getting the 'shock' but happily missing out the bit that involves tens of millions of people getting killed first??
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AS A MATTER OF SOME URGENCY could Robert Peston provide us poor taxpayers, who seem to be propping up the whole finacial system, with some understandable detailed examples of so called "toxic debts" Who lent what and how much to whom and why these transactions are now "toxic".
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Do you remember 1997. New Labour. Cool Britannia.
The 80's had been hell for Britain. Empire gone. Commonwealth gone. The British way no longer delivered. Yes we had won the war but lost the peace.
15 years of pain but fit and lean. John Major (I'm afraid) left the country ready to go in the sense that the Americans had been paid off and the National Debt virtually cleared. The Tory nervous breakdown.
New Labour had all the advantages and could have started the modernisation and diversification of Britain. BUT THEY DIDNT. Son of Thatcher is true. With a stupid grin.
No new ideas just spend what had been created on pointlessness. Independence of the BoE on the Bundesbank model. No. Greenspan's Federal Reserve.
Britain was doomed on day one of new Labour.
Thatcherism was nasty. Like Mao's great leap forward. But it insisted on balanced budgets and paying debt. Nulabor was too intellectually challenged to see what had to be done.
It chose the American Atlanticist road without the Chutzpah. The easy non confrontational route but deadly.
You should choose your friends more carefully.
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A lot of this debit is outside the UK, so how will this work will the government control who gets new loans due to the fact its UK taxpayer paying for it.
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It is time the Government returned to taxpayers some of their own money, to spend, save or pay off debts. They should put UP interest rates to encourage savings to go into banks and financial institutions, and force bankers to pay back every penny of the bonuses they received over the past 10 years for actions which have ruined the economy of this country.
No more taxpayers money should go to banks. Their shareholders should pay - that's what the market is all about, not taking money while in profit and running to the Government immediately they make losses.
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Well said 108 rapid retiredbanker, LTSB has been sold a sucker punch and must reject GB's offensive desire to nationalise the new Group. LTSB bailed out the govt with its willingness to shore up HBOS and all the evidence now confirms to all that GB is totally untrustworthy - even more than Fred the Shred and the way he demolished the once cautious RBS. If Victor Blank concedes then LTSB shareholders should revolt as there is not much to be lost after GB allowed the shortselling to return as a way of reducing bank share capital.
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The credit crunch is simple, but the politicians still don't get it. It's caused by there being not enough money ("cash" if you like) in the economy to pay all the interest on the huge mountain of outstanding debt. That's it. Trivial.
Unfortunately solving the problem will be very hard, because land prices are astronomically too high in Britain. Japan has had the same problem for the last 18 years.
Residential land is the biggest Ponzi scheme in the world. Why would any sane person pay 200x more for a piece of land just because it's deemed "residential" rather than "agricultural"?? Land values have to fall much much much further and this will take a long time.
The process will be long and painful. Trying to "kick start" the economy is naive and shows a lack of understanding of the basic underlying problem.
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Problem = irresponsible lending.
Solution = further irresponsible lending with the State acting as guarantor?
Bank directors have a duty "to promote the success of their company (bank) for the benefit of its members as a whole." (Companies Act 2006)
How is lending more money to borrowers with little/no assets promoting the success of that bank for the benefit of its members as a whole?
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This is just daft ....
It would be interesting to know a little more about how these vast sums of money that are being thrown desperately at the banks are actually being raised - and on what terms.
Who is buying these government IOUs? The current situation is plain madness.
Business failure is being rewarded. Those responsible (the Spiv boards and senior officers of the banks and financial institutions) are largely still in their jobs.
Those who have borrowed beyond their means are being bailed out, and those who have prudently saved now find their return interest rates approaching zero.
The criminally incompetent government that has presided for the last decade over the the country's financial affairs is still in place, and the bungler-in-chief Gordon Brown who was Chancellor of the Exchequor for most of the time has actually become Prime Minister! Are we mad?
When people screw up in their jobs you fire them. If they have the gall to say "nothing to do with me guv, I'm just the bloke in charge", you laugh and have them immediately escorted from the building.
And if the ballsup has resulted in large sums of money going missing, you call the police. Then, if the disaster is of such a scale that the business is insolvent as a result, you or your creditors summon the receiver.
That the present financial catastrophe is so large is not a reason for ignoring the well established bankruptcy procedures - it is a solid reason for applying them more ruthlessly.
What's the matter with us? Where are the grownups? Has anyone had a word with young Brown's mum to let her know what her idiot boy has done?
Please - will the gang of spivs and crooks responsible for all this kindly bugger off.
Yours, etc
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Robert, instead of your throw away "paradox" final para why don't you go on the public offensive and really use the BBC news and your blog to debunk the govt on the nonsense of reviving consumer lending. If you don't, is it because you won't get access to the govt leaks?? It is an absolute farce to think that any sensible lending institution will lend anything more than 90% LTV when all the analysts predict at least another 10% price reduction. No wonder govt ministers are trying to suggest green shoots are in sight for house price stability. Until people start to believe and have confidence then there is no value in the govt trying to kickstart lending other than GB propaganda to divert criticism from himself.
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Treasury initiatives are as much use as yesterdays toilet paper or the UN requests for appeasment.
Anything that HM gov does in relation to the present financial crisis is hamstrung by a lack of resolve and direction and a tendency to look back to past financial crises which have no common denominators with this one.
The so called guaranteed loan schemes and other initiatives dreamt up by Whitehall are so hide bound in red tape that no one can make sense of them and therefore banks simply do what they want which is to accumulate cash on behalf of its investors regardless of how it gets that cash.
Some say the Banking sytem has failed.
I say that THE MONETARY SYSTEM HAS FAILED.
This is the first time in history where so many people have been given or allowed or held financial power.
The banking system has collapsed as it cannot cope with the many financial demands society has put upon it.It has also been unregulated and allowed sharp con men to create an industry, and many cons from money.
MONEY IS THE OIL THAT LUBRICATES BUSINESS THAT CREATES WEALTH; IT IS NOT A BUSINESS IN IT'S OWN RIGHT.
The present financial system we all work to was derived from a system where only a very small percentage of people could influence it.....................................in the 21st century; it is obvious that that financial system is inadequate and downright dangerous.
Now is the time for new values.....................do we need money?
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If all these UK banks have so much bad dept what has the Gordon Browns FSA being doing all these years.
Surly this amount of toxic poo as Robert Peston calls it cannot have gone unnoticed.
Only answer that makes sense to me Gordon Brown ripped apart the regulators and replaced them with the fsa.
A under funded, under talented not fit for purpose on the cheap body.
That makes Brown directly responsible for fair amount of the mess we are in not the just the USA.
I think its fair to now say Gordon Brown failed in his responsibility during the first bail out to demand full disclosure of the amounts of debts the UK banks hold, he threw money at them blindly without a clear understanding of what the situation was.
Then he ran around like a headless chicken patching up the economy with mortgage initiatives interest rate cuts, vat cuts while the real problem was still with the banks.
So where is all that money we injected into the banks gone?
Now Gordon and Darling wants to do it again – they want the taxpayer to essentially insure the bad debts these banks incurred, that makes me nervous for the future of my tax bills.
I don’t think Brown and Darling are competent enough to be allowed continue.
Brown and Darling should resign immediately, and an emergency cabinet of the top minds in economics appointed until the next election.
So much for Browns statement the uk is best placed to ride out the downturn.
Peston fancy a new job.
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The net effect of all this is that the prudent are bailing out the imprudent, but without our consent, as a way to keep Brown in power.
Note that the money we are putting up is not just to help beleaguered British homeowners and businesses, but effectively those in america, plus a russian oligarch.
When you think about it this is outrageous. The government are effectively throwing my money down the drain.
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158 - just think who these shareholders are. Millions of taxpayers and savers - and guess what - they are all taxpayers as well. Its the pensioners who own most of these banks and as citizens of this country they are also taxpayers. A system with no banks is too terrible to contemplate - have another think.
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Dear Robert,
I have been following your blog throughout this crisis, it has been excellent. What has become clear through this crisis is the government's complete lack of motivation to hold anyone to account.
Only 6 months ago we were hearing that cancer drugs available in most European countries were not cost effective in the management of kidney cancer in the NHS and might not be supported by NICE. Surprisingly though, we didn't hear Labour discuss cost effectiveness when they offered their first generous £37 billion to banks in October last year, a figure equivalent to 6 months NHS spending.
On Monday as you and others have discussed, we will hear of another £200 billion being guaranteed by the government on behalf of tax payers to mitigate against losses resulting from irresponsible and reckless lending, a figure equivalent to 2 years NHS spending.
In any other walk of life, those responsible would be held to account. Why are Labour not calling for this now?
I find it intriguing that city bonuses over the last 5 years in the UK totalled £40 billion, only slightly more than the first Labour bank rescue of £37 billion so generously offered on behalf of the tax payer. But where have those bonuses gone? Arguably we have witnessed an astonishing transfer of wealth to the super rich, underwritten by the tax payer, all supervised and sanctioned by a Labour government.
A national call for a windfall tax on all city bonuses given between 1997-2007 to help offset some of the damage to the tax payer, pensioners and the unemployed would be perfectly justified. This would be no less indiscriminate than expecting Britain's working classes to pay for financial negligence on a corporate scale and might stand a fighting chance of targeting those responsible for the current crisis.
Instead, Labour fiddle whilst Rome burns, supporting the failing financial industry, mortgaging future generations into oblivion and encouraging more reckless lending.
Cuts in public services including the NHS will be the least of our worries. I am more concerned about the real possibility of civil unrest as the public wake up to the true scale of financial armageddon as the economy collapses because of city greed and corporate failure.
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With the latest news (#130) 12% interest on original bail-out terms now converted to painless shares........ are the banks writing their own ticket?
Or are the poachers turned gamekeepers still poachers in disguise?
Dont be surprised if all the documentation relating to this whole debacle (that should be in the public domain) ends-up deep-sixed til we're all dead and gone, within the 100-year rule...
like other very bad news which might shake the system to its roots.
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I am a shareholder in LLoyds TSB
It was a carefully run bank managed by, some would say, an overly cautious Mr Daniels
Whilst it probably would have had some Toxic debt it is doubtfull that it would have been over damaging.
GordonB discovers that he has several banks that are in the mire and calls all the bankers to No 10.
He persuades Mr Daniels and Sir Victor Blank that it is their public duty to take on HBOS, and anyway they will have the biggest bank in Britain after they have done the deed.
The next day he proudly proclaims that he has single handledly rescued HBOS.
It is now clear that what he has in fact done, is fatally infect Lloyds with the HBOS disease.
Mr D and Sir Victor have entered a Faustian pact with GB only to dicover that, like old Nick, he rarely delivers on his promises.
Mr Daniels and Sir Victor have allowed years of care and attention to be swept away by one night of glamour.
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LEND LEND LEND???????????????????
FISCAL
SUICIDE!
SUICIDE!
SUICIDE!
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Who cares about shareholders? The Banks are INSOLVENT therefore their shares are zilchzero. Let the market work and the whole Augean stable will crash in 48 hrs.
I am concerned about depositers and decent businesses credit lines. Shareholders had a feast between dotcom and the current tailspin. Party is over.
Shares are risk in second hand company debt. If shareholders bought shares not knowing the true state of the assets of the company and believing the financial advisers MORE FOOL THEM
.
CAVEAT EMPTOR as my old latin master used to intone!
Nationalise now. End of story.
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Ref 108
I believe the reason that the institutions backed the Lloyds HBOS merger was that they had shares in both banks and if they did nothing they would loose all their HBOS money.
However if there was a merger they might come out of it all with something.
Lesser of two evils
It looks as if they were wrong
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Why, Rob do you persist with this ridiculous "we" the taxpayer? As if "we" had any choice in the matter. It's rubbish, as well you know. Stop selling Gordon's line.
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Aren't politicians and servants generous with our savings and our lives?
It is easier to have sins forgiven by God than one penny of debt reduced by the moneylenders.
We received no ill-gotten bonuses. We who suffered their arrogance, greed and incompetence are now being forced to turn the other cheek with handouts, now we had to shoulder all the risks into next generation to give the guilty a fresh start !
In his interview with Jon on channel 4 last week, Varley was sorry to customers, shareholders and, after a few seconds, mumbled, "government". .... How about the public, the country and the little guys ???
How about financiers (banks, hedge funds, etc) returning all their bonuses from the last 7 years? It is only fair. Politicians won't make it happen because they only pick on the little public.
Preventing this from happening again is not good enough any more. Retails banks probably only stooges. We must go after the gold taken by swindlers who sold the emperor his new clothes.
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166 wykhamist:
"The net effect of all this is that the prudent are bailing out the imprudent"
Yes, very true, but this is nothing new - 'the prudent should bail out the imprudent' is hard-wired into the Labour Party's political genes; always has been.
A lot of very intelligent and insightful comment here, as usual; and most contributors seem to believe that UK plc is finished.
So, how many are leaving, and where do you recommend as a sane destination? (This is intended as a serious question, and not as a frivolous one, BTW).
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I wonder if anyone thought of selling the pref in the open market. On a 3% yield they would have made "we" the taxpayer a lot of money !
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Last comment and then goodnight.
Banks are good servants but bad masters.
They never create wealth but enable others to make it in the real economy.
They should take money from savers, prudently lend and let others create wealth by making good cars, reliable attractive environmentally friendly products that people want to buy.
What happened was they abscondoned to the casino and cooked the books.
QED
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Robert,
I think your editors at the BBC have to take a good look at their performance to date on the earth-shifting economic event that is unfolding.
The world- or at least the UK -is really NOT going to be the same again. This is not just a mortgage, house-price, savings, pensions, company-liquidity, unemployment issue. This is heading for meltdown if precise, decisive, and courageous action is not taken. (and it most definitely not, at this point)
As the main voice for the people, the BBC has a duty to question an irresponsible legislature, expose the future that is unfolding, and hold those responsible to account, including those destroying any chance of recovery.
If you didn't read the blogs, or searched the professional outsider websites, you would not have a clue how big this tsumani really is.
60 million people in this country are going to be affected, and they are not being given the whole picture.
Surely the BBC has standards in its charter that mean you must stand up and be counted.
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Instead of giving our hard earned tax money to the banks so they can hoard it, why not use this money to pay off individuals' debt? This way people will have more money to spend on keeping real businesses afloat, and the banks will get their money anyway... Granted this isn't fair for those with no debt, but they can rest easy knowing their tax contributions will actually be helping the economy, rather just used to prop up some failing bank's balance sheet.
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I work for a major UK bank and was interested to see our branch mortgage adviser reviewing the latest set of guidelines her customers have to meet in order to gain a mortgage with us. A minimum of £600 disposable income per month is now what must be reflected on the budget planner! Think we have a long way to go yet!
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Your Majesty ...
I have the honour to address you in the matter of your realm's insolvency.
May I humbly request that you dissolve Parliament and appoint a new first minister.
Further, that an arrest warrent be issued for the current incumbent of this office, and that he be taken to the Tower and put to death.
Respectfully,
Your obedient subject
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#150 glenafon
I know a lot about landslips, to use that analogy is useful to me.
Some landslips are fast some are slow, the slow ones especially are often too big to stop and involve huge forces which become mobilised.
In such situations we may recommend emergency measures to help slow it down a bit (but can not stop it) and in the meantime we use that time to get everything that is important that is in the path of the landslip out of the way, then start to think about what to do with it in the long term once it has reached its natural point of equilibrium again.
I can see the emergency measures to slow it down but noboddy is using that time to shift the important stuff out of its path...except for the banks who get special treatment it seems.
Jericoa
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What if the anticipated Government announcement is, in fact, that all the major UK banks are being nationalised without notice? Share dealing stopped with immediate effect. And all their shareholders lose everything!
And if not this week, then soon, perhaps?
It wouldn't surprise me.
(And no, I'm not a shorter or a shareholder and I don't have any inside information.)
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Scheme for the Re-Arrangement of UK Banks
1. Set up a National Bank funded by the Taxpayer
2. Transfer all UK deposits and loans to this Bank
3. Let the existing Banks sink or swim on their foreign dealings with no more support
Virtues of this scheme.
1. UK Taxpayers will rescue themselves.
2. UK Taxpayers will not have to rescue foreigners.
3. The New UK National Bank can get back to taking deposits and making loans in the UK, funded by the UK Taxpayer
Compare and contrast this with that which the Treasury are proposing- with special consideration of the political aspects of giving loans to or supporting fat-cats who have lost all of their(OUR) money overseas and whose businesses are largely based overseas.
OK, this is not terribly practical, but I hope it serves to remind those supporters of the big banks who want our money that they are but humble bankrupt beggars!
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#176 Friendlycard "UK plc is finished"
No, UK plc is not finished and we don't want it to be finished.
Sane and safe countries are sane and safe because their citizens collectively care about their countries. They don't become ex-doms, they don't move jobs off-shore, they don't bled the country dry. Who will they welcome, if any?
UK should scrap Bank Holidays, or at least renamed it to Villain-Reminder-Day.
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@145
Form a party. I'm ready to vote.
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Who else is left to be punished for the banks' recklessness, aided and encouraged of course by the Government and BoE (the latter until it was too late when it tried to shift blame by crying moral hazard).
The non-government shareholders (mainly taxpayers' pension funds (excluding of course public sector funds) and taxpayers' other investments) have been wiped out by the incompetent handling of the crisis by the BoE and Government.
Taxpayers at Friday's closing prices have also already lost about 45% of their equity investment - some £11b, again due largely to incompetent handling of the banks and further destruction in confidence in them by the government and BoE.
The senior management who presided over the reckless lending have been sacked and disgraced.
Perhaps it's time the remaining people at fault paid a price namely the politicians, BoE and FSA staff, banks' auditors, other bank "professional" advisers, and of course the media who have made the crisis worse also by their irresponsible, ill-judged and/or inaccurate reporting, often giving not thought out opinions and views simply to grab a headline and perhaps make a reputation for themselves.
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185 John:
Nice idea, but it would tend to cut the UK adrift from foreign trade and foreign investment. The banks, if required to live on foreign business alone, might as well leave, and probably would. The domestic, nationalised bank would be something of a monopoly (bad), and run by civil servants (worse).
Can we be sufficiently self-supporting? I doubt it. Last year, we needed GBP 625bn of foreign lending; our net external debt now exceeds $10 trillion. A project like this would force us to rely on our internal resources; what resources? How many weeks before UK plc goes into administration?
We are debt junkies. Cutting the supply makes great practical sense, but would amount to financial cold turkey. OK, we have to face the pain sometime, true; but govt policy centres on deferring the pain till after an election.
So it's a nice idea, and better than anything coming out of Downing Street. But I don't think there's any fix, neat, quick, or untidy, slow. We are, very probably, "beyond the point of rescue".
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#185
Yes, Yes, Yes!
For five to ten years.
My only fear is that the banks have bosses ie global players who were the cream of the worlds financial talent and were compensated for the valuable two hours at the office and the teenagers in the branches who were disciplined if they didnt run up business ie push consumer debt.
Middle management ie the NCOs were got rid of years ago.
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If you moderate me please send me an email to explain why this is the second time and I’ve had no explanation.
Is this the BBC or Government moderation system?
You state
If one of your messages is removed you will be sent an email explaining why. If you feel one of your messages has been removed unjustly, please reply to that email. Anyone who regularly breaks the House Rules may:
Blaaaaaa
I don't believe I have broken any rules?
The1beard
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if you don't have my email it is [Personal details removed by Moderator]
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Pesto, the comments on your blog are getting ludicrous and short or inconsequentially long.
I have not ever been a fan of GB, however, I think he deserves a break this time.
An owner of £1bn is actually less powerful than one who owes £1bn. After all, the latter can't lose his billion but his creditors can. So they have to kow-tow and lend more in the hope of getting some return. At this level, physical threats are meaningless to the individuals concerned.
At Government level, multiply this. The UK Government is so indebted that our creditors will have to keep playing ball with Gordon. I applaud you, Sir, rack up the debts. After all, we are a nation of nuclear capability. If the Yanks gave us 'terrorist status' they'd really have something to worry about.
All right, enough of the ludicrous.
Gord you can out borrow them and end up owning their banking system and a large slice of their economy.
I think I may have blown the game: my Mac is giving me small electric shocks; wasn't it made in Taiwan?
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hmmm well I must warn you all that Blue Monday (the day which is meant to be the most depressing in the year) started about 15 minutes ago
Robert you are going to have to try to go easy on people tomorrow, otherwise the Samaritans won't be able to cope
The rest of us all need to make an extra effort to smile; apparently the Optomists Society are organising a few events
Getting back to the topic at hand, I have scanned both yesterday's and today's posts just now, though there are far too many comments to read properly. The latest manoeuvres and initiatives are proving a real test of my Economics 101 course, taken at uni over 20 years ago, and also run against my idea of logical behaviour. I don't usually care for conspiracy theories but am beginning to wonder about Bernankes recent visit to these shores and the increasingly frantic moves towards a 2nd bank bailout just before the Obama administration takes over
coincidence? maybe; or maybe some of our economic masters are a little bit worried about what could come out and want to squeeze as much out of their old friends in the Bush and Brown administrations whilst they can....
all these latest GB initiatives are light on detail and I can't see how they could help at this stage anyway, but they do buy him time I suppose and allow both the govt and the banks to do the dance of a hundred veils and continue exposing the bad news a bit at a time; we now have not only a collapse in available credit but an equally serious loss of confidence and rapidly declining demand for a wide variety of goods; the banks will take bail out money but will clearly try to hoard it and will hypocritically claim that they are justified to do that as newly PRUDENT institutions; so we really should either nationalise some or all of them, or let some go to the wall...
have to agree with what #148 lambellbanker says about the banker's bonuses
if anyone else still needs convincing about the banks and their behaviour have a look at this:
http://www.nytimes.com/2009/01/18/business/18bank.html?hp
but after you read it remember to smile, at least ruefully!
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The seismic fault in parts of the financial services 'lies' with the bonus system.
There can be no greater corrupting force than the normalisation of payments to an individual of the scale equal to the profits of a mid size business employing 100's of people.
Is it any wonder this service sector is in crisis?
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"What's more, there'll be a new Bank of England scheme to allow banks to swap assorted loans for Treasury bills - which in effect gives them access to a vast pool of cash to facilitate the provision of more credit." - Robert Peston
Good luck with that.
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I used to think that 2009 was going to be bloody and difficult. I now think that it will be worse than that. If the latest forecasts are for 3 million unemployed then I now think that we can expect 4/4.5 million.
That will mean that all but the healthiest or most protected parts of our economy will fail. Political and financial unrest will become the order of the day.
I had hoped that we would wake-up in time to develop some form of strategic strategy to cope. I now think that it is too late!
It won't just be UK that suffers. All of the developed economies will share the pain. it will be no better in France, Germany or the USA - just different. There will be collapse and social unrest.
We really shouldn't be propping up the banks anymore. We really shouldn't be trying to encourage households to increase their indebtedness. We really shouldn't be offering debt ridden firms more string with which to hang themselves. But we should go the whole hog develop a national bank, leaving the existing banks with their toxic debts and foreign debts to perish on the vine.
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Financial institutions should be required to publish details of loans written off or toxic that are £1m or more. The list should be made available in electronic form on public domain for 20 years. The details should include date lend, date written of, name of borrower, nationality of borrower, currency, amount.
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This moderation is awaiting a comment. No explanation required.
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Let them fall.
This whole mess is due to fractional reserve banking coupled with fiat money.
If these banks were allowed to fall then yes a lot of people will be angry and upset, however it will totally reduce the public's confidence in the banking system, this would therefore mean that the banks would have to become more transparent in order to keep their customers - it's as simple as that.
Yes there would be a good deal of hardships but the fall will be short and sharp.
Bailing the banks out on the other hand will not only elongate this depression, but will also lead inflation which is the worst kind of income tax. (where else do you think the Goverment will find the money for this other than the printing press?)
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As`at 22.13 Friday 16th January on Robert Prestons' Blog,
Referring to the crash in Barclays Bank shares values.
QUOTE -
'We know of no justification for the fall in share price' - Barclays spokesman
At the weekend it came to my attention through a contact within the tiers of Barclays Bank management that the Bank is in no trouble at all, indeed is one of the only banks NOT to have borrowed at all during this 'so called crisis'
They were adamant that the panic was instigated in the markets from our government itself, the plan being that they could step in and buy out a substantial share in another 'ailing' bank.
They also relayed concern as to the sinister path this Government nationalisation in all areas is taking and I quote,
"All this money in so few hands. This is a blatent move to sieze the assets of every man woman and child in this country. I fear the worst"
They went on to say,
"THERE IS NO CREDIT CRUNCH".. and that, "This is an orchestrated scenario of the greatest magnitude designed (they feel) to ultimately streamline the global finacial markets into a single process commanding complete monetary control", and that
"A unification of the financal European, African, Asian and the anticipated North American Union markets (a treaty G. Bush, Canadian & Mexican leaderships recently signed to create a new North American currency, the 'Amuro' replacing U.S, Canadian and Mexican currencies.) is on the agenda."
A few quotes by Albert Einstein -
"We can't solve problems by using the same kind of thinking we used when we created them."
"Sometimes one pays most for the things one gets for nothing."
"The important thing is not to stop questioning. Curiosity has its own reason for existing."
"A human being is a part of a whole, called by us _universe_, a part limited in time and space. He experiences himself, his thoughts and feelings as something separated from the rest... a kind of optical delusion of his consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest to us. Our task must be to free ourselves from this prison by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty."
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#110 U4850383
That's because we started with positive suggestions three or four months ago. Then, the Government had reserves and time on its side. As of now, it's frittered both away and caused the economic meltdown to accelerate towards us into the bargain, by concentrating on the banks and not on the economy they were meant to serve. The banks then failed to deliver to business as asked and now it's too late to put any alternatives into place. That's why there's no positive suggestions, we're now in run-for-cover-the-sky's-falling mode because HMG suggested this was about three weeks away in the middle of last week.
There's one other piece of evidence that HMG is now in a blind panic - no sooner is one initiative launched (Thursday) than it's overtaken by another one (Sunday), before the first one had any conceivable chance of having even the most immediate, short-term effect. They're like Corporal Jones, tottering around screaming "don't panic" while Captain Mainwaring does it by the book, which he's holding upside down and making it up as he goes along.
And if you have any good ideas, feel free to air them here yourself. Just don't try saying, "be confident" because we'll ask you why and you'll say because it's patriotic, which isn't much of an argument when it supports a government whose lack of mandate is only exceeded by their fear, translated as ignorance and bullying.
And in the mean time, we're saving our resources to rebuild the wreckage. HMG's now at the point we were discussing in early September, but doesn't have the time left to effect it, which will leave the banks and thence the rest of the economy hung out to dry when the tsunami hits.
#134
Well, you haven't been following this blog long, then.
#145
Hate to say so, but an election means the government's out of action for a minimum of four weeks, and we can't afford it now. The next step will have to be a coalition, with Vince in the Chancellor's seat, DC as PM and Lucy Ewing (cast as a certain defective red-head) as Gnome Secretary, also in charge of Gnomeland Security (the former MOD).
There's a further reason why. Although we have reason enough to dislike the incombent bunch, there's little enough reason to trust the Conservatives either. For example, DC's probably thanking his lucky stars we were focused on this while the Conservative Treasurer, Michael Spencer, and another donor, David Ross (founder of Carpet Warehouse) got into trouble over Christmas for collateralising shareholdings without informing the companies in question.
#153
Ever heard of contango?
#156
It's just possible NuLab was snookered by the Civil Service. After 15 years of Conservatism, there was only one Labour minister from the Old Guard left, plus Wedgie. TB did his one intelligent move, got his shadows to sit by Nellie in the Ministries to learn how things were done ahead of time.
#157
They won't. Like I said at least five times here before including yesterday, it's been used to pay off the banks losses, which means paying off the foreign banks. That opens an entire can of worms from loss valuation to misattribution - after all, that money was supposed to bail out UK business and housing, not US business and Housing, nor any of the miriad other accounts in odd places like Zurich they may have paid. And don't doubt that for a second, whyever else did HMG place a UBS stooge in the FSA?
#165
Lesson #1 to all students of Rahere - research your contacts. If writing about the FSA, find out all you can about the antecedents of the staff first, then examine their motives, and you'll answer your own question. Also click on my name, look back on the posts for the last couple of days and look for what GB just did to the regulatory system as a whole last year.
#183
Can you update us on Las Palmas, then, please? Has anything been done to stabilise it?
AC
I'm writing to you privately on the subject, please ask your staff not to junk it as insane - there's a lot of hard fact verified by the relevant specialists, and what you just said is a subdomain of my apocalyptic indications.
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I am normally a calm still and cautious voice in the out-of-blog world. I am a wife, mother, have a mortgage, have been (at various times in my life) a bank manager in charge of lending, a teacher and now a director and owner of soon to be 5 companies. I am also a good musician.
I have always worked bloomin' hard, and had times when I've had to reinvent myself because of a catastrophic event. I believe myself to be reasonably intelligent.
However, I'm no rocket scientist. I see things simply, and I'm not given to emotional outbursts, but.....
FOR GOODNESS' SAKE! (would say something fouler, but my Grandmother always said foul language is used by those with a limited vocabulary!)
Phew! Feel a little better.
Now then, what part did you not get in the last 2 months Gordon?
Was it:
1. The VAT cut not working cos people don't have enough non-credit money to spend?
2. The lowering bank rate means nothing if you have no job and can't pay your mortgage anyway.
3. Noone wants to invest in this country cos our low interest rates and overdependence on financial industry makes us undesirable?
4. Fiscal stimulus is only an option for countries which can afford it?
I could go on, but it's a waste of time. It appears that our Gordy only listens to himself. What's worse is that it seems that noone in his inner circle is telling him the truth-are they just pandering to his ego?
Bailing out the banks AGAIN?!
This includes RBS who lent £2bn to a Russian for business ventures-now bust, and Lloyds TSB wiring money to USA in such a way to get through the sanctions radar-anyone who doesn't know who this was done for needs to check it out. (can't say, I'll get murderated!)
Both of these actions are, without doubt, a result of greed.
Frankly, I'm appalled we taxpayers are helping them at all!
Gordon, we cannot service the debt we have as a nation-why lend against our future taxes to help these blasted banks AGAIN?! I demand to know how the previous £600 bn was spent.
£600bn plus this latest 'tranche' would have been far better spent on massive tax cuts. Would have helped businesses and workers instantly.
Get out, call the national guard out, and stay out!
Yours sincerely
Mrs Extremely Angry
PS-at this rate I'm going to run for Prime Minister-a six year old could do a better job!
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#44 and #133 re: external debt. This external debt is simply because our financial sector is (still) one of the biggest in the world.
It means that foreign companies have entered into $10 trillion of swap, investment, loan or insurance contracts with us; in exchange we have almost $10 trillion in corresponding foreign assets.
The UK still does have net external debt but it's far smaller than this: about £300 bn or around 20% of GDP. And, amazingly, we are not paying interest on this - we actually make a profit on this, because our assets earn more money than our liabilities cost.
A detailed explanation is at http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2008/12/uk-overseas-debt-scare.html
In short, this is really nothing to worry about.
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# 201 daring
I think someone may have been pulling your leg; either that or we could all use some of what you're smoking
# 202 rahere
Yes I think so. I see that Ken Clarke is back on the front bench to shadow Mandy, so when GB returns from parting the Red Sea they will all presumably carry on with the counter-productive party political bickering when we need some grown-up cross-party cooperation, including Vince Cable. It seems that Obama is trying to build some consensus politics in the Senate etc, though it won't be easy. At least the Americans have a relatively transparent system and a tendency to be more positive, which when combined with the new administration coming in, gives them a bit of hope to tackle their terrible mistakes over the past decade.
Probably the most we can hope for here is to ride on the coat-tails of a reforming US administration and hope that when they eventually pull out of their dive we will be able to follow; and that we will never return to the failed Anglo-American free market version of capitalism but move to a version of the Franco-German social market. As #112 blefescu said, the Germans appear to be much better placed than us and taking a more measured approach to reacting to the challenges (which is hardly surprising).
The Germans
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And another thing...(sorry I'm just so very frustrated and cross)
Re banks assessing risk-why on earth did they get Rocket Scientists to produce a model for making money? Would you ask a banker to design a rocket engine?! Can it be that noone knows how to do it properly?
Banking and lending ISN'T rocket science. In fact, lending risk isn't assessed by people-it's assessed by computers and credit reference agencies. Bank managers have no say in the matter. If the computer says no, there's nothing anyone can so about it!
You don't need an economics degree to know you can't spend money you don't have. It's not hard-income must be more than outgoings to make any kind of profit. Breaking even is still better than running a company in deficit.
Prudence in government? When was that exactly Gordon? Do tell!
And I would never refuse humanitarian aid to anyone. However bad we think it is here, we are rich in many things that Gazan people aren't. How can anyone in this country moan about helping another country with simple basic human needs of food, water, clothing and medical supplies.
In spite of all we are enduring financially, we are so much better off than them. I care not a jot what politics are in play. Our plight is nothing compared to theirs.
Don't help the banks anymore Gordon, help your electorate instead.
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Reality is lacking from the press' discussions of the UKs predictament. So here goes, all figures are for 2007 from the CIA World Factbook web site.
The amount of foreign currency, goods and services outstanding to foreign investors etc was $10.45 trillion (on 30/6/07) which was 3.7 x GDP at $2.773 trillion (est for 2007)
The US , Argentina, France, Italy, Japan, all owe less than one years GDP.
The country with the next highest ratio was Switzerland at 3.1. Hong Kong stood at 2.9. Swedan at 1.3.
Save the 3 above I couldn't find a developed economy where the factor was over 1. For most it was closer to 0.5
Given the fall in stirling from an average of $2/£1 to $1.5/£1, it would be conservative to add another $2 trillion to the UK outstanding debt for year end 2008. Thats a ratio of 4.5.
Government keeps talking about confidence. I think they mean ignorance.
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what now?!
Murderated again?
I only said I was angry and didn't swear!
Nor did I defame anyone!
Too close to the mark?
Really Moderators, song lyrics are fine, even when they are off topic, but a sensible, justified blog is not?!
Or was it me saying I was in a good mind to run for Prime Minister?
Hardly a reason to pull my post-I'd be grateful if you'd put it back now. Thankyou.
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202 rahere
Thanks read up on the previous posts it did answer my question and made the fsa role clearer.
I am the first to admit when it comes to the economy I am still learning.
This blog plus ppl like yourself, robert peston and other resources have been a fascinating insight, and i have learnt a lot.
Problem is the more I learn especially about the current situation the more annoyed I get.
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Moderators-a suggestion....
When you pull a post, if it stays pulled, then at least have the opportunity to reply to the email and challenge the decision directly.
Oh, I forgot.
If we are expected to meekly accept a further bank bailout, we should also meekly accept moderated posts.
Very democratic I must say!
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CREDIT CREDIT CREDIT
LOAN LOAN LOAN
BOOM BOOM BOOM
BUST BUST BUST
Why does it happen?
Who is to blame?
Read the Emperors New Cloths by Hans Christian Andersen
Then take a good look at yourself, see if you can identify which character you are.
99.99999999999 % of the characters are to blame
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9 Predictions for 2009
1. 2008 will prove to be a “DRESS-REHEARSAL” for 2009
2. Money and Food “hoarding” will take on new dimensions
3. Within 60 – 90 days (March-April) will see economies falling apart
4. Global Depression 2 is imminent
5. Unemployment levels will rise to between 10% - 20%
6. Unstoppable chain of personal & corporate bankruptcies
7. Governments give up trying to rescue large, failed corporations
8. The Dow will plunge to 5500 and the FTSE to below 3000
9. Real estate will collapse to an even greater phase
The coming attractions of the second decade of this new millennium will begin with unprecedented hardships not seen since the Great Depression.
2009 will be the year of the great financial dust-bowl, striking all forms of income to such an extent that millionaires will be reduced to beggars and the concept of the suburban middle-class will be relegated to the dustbin of postmodern history.
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#130 egrid1
"BBC stating that the conversion of the RBS preference shares with 12% coupon, generating ?600 million per year, into ordinary shares will increase the taxpayers holding in RBS from 58% to 70%.
So some simple maths.
The investment in the Prefs was ?5 billion (?5bn x 12% = ?600m)
The ?5bn investment will buy 12% of RBS
This puts a market value on RBS of ?41.6 bn.
Is that really the present market value of RBS - or are the UK taxpayers overpaying?"
Good point egrid1, the market Cap of RBS is currently GBP 13.6 billion!
(however HMG investment was 15billion).
Just like the Government overpaid for the original shares by 3 Billion pounds cf the market price......something fishy going on here methinks (ah no wait, that was Denmark!).
But on a lighter note (pound).
Has it occurred to the readers of this blog what is going on within the car industry?
If production is being scaled down in every factory and some factories are being shut for 4 months then the suppliers to these manufacturers will also have to decrease production by the same amount (thanks to the jit philosophy).
I can't remember the ratios of supply workers to factory workers but I think it's about 20:1.
So in this one industry the deleveraging is going to be savage.
I think that it's about time that Mr Peston wrote some articles about real people and real (value enhancing) jobs and stop writing about the tips that he has been given by his contacts at the Treasury. After all this injecting money, providing insurance, recapitalising banks is just smoke and mirrors---isn't it?
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The guys that won't reduce Credit Card interest rates of over 20%, that got us in this mess by being stupid, are being given yet more of money borrowed in OUR name ... You don't have to be mad to be a Socialist Chancellor but it helps...I wonder what Bank him and Flash will be joining when they leave office????
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#12_graham
Where's the justice?
There is none, and none intended.
Neither the UK govt, nor the US federal govt., has much interest in that idea.
They are so focused on buying the votes of so many of us above the age of 50 or so(and I'm one of them) that they will sacrifice your future, and that of your children, to maintain the illusion that Something for Nothing(that housing prices can only go up, along with the stock market, and the money supply) is our Boomer Birthright.
I hope you get to have an election soon, and choose more wisely than we have here. As bright and well-meaning as Mr. Obama appears to be, he cannot part the waters and repeal the certainties of mathematics.
Here are thoughts from one of your generation on our side of the pond:
http://tinyurl.com/ytn8ru
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And, #13, topmarque
Right on point! What sort of ethic do we have that says the prosperity of the nation depends upon the debt-enslavement of those least able to handle debt?
No one on either side of the ocean, save a few, are asking the Moral Hazard question.
And it is one of the basic questions, the veritable 'Elephant in the Room' that all work hard to ignore.
(There is one saner voice here, name of Dave Ramsey, who has been to Purgatory and back, and offers hope to a lot of people.)
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What a shame the Govt can't give us some kind of conditional tax rebate. With the cost per tax payer into £10k's why not give us our tax dollars back, with bad debters being forced to pay it off what they owe. The majority of us (who actually play by the rules) would then have extra money to reduce mortgages, credit cards or other debts; save money; or make that new purchase or home improvement - all off which might stimulate the economy and free bank's capital up. Well it was nice to dream :(
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I think this 100 billion mortgage guarantee idea was first proposed by Sir James Crosby, the former HBOS chief executive and he has sold it to the Government.
He also went on to say this would mean minimal risk to the taxpayer and could result in a profit.
With House prices dropping and will continue with the vicious circle of unemployment this is just another case of more poor risk management from our clever top Bankers which created this "crunch" in the first place
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But wait a mo here....
Aren't these bastards who have run the country close to ruin through greed and stupidity, the self same ones who were robbing us blind with overdraft and excessive interest charges ???
I don't want to give them my hard earned money, I want to see their heads spiked on poles along Westminster Bridge.
And I don't buy the nobody is to blame game. Nobody is to blame more that he who has had charge of the British economy for more than ten years.
Brown first - Off with his head !
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Ladies and gentlemen
Rahere is discussing with AC the very serious implication of AC's moderated 131 on the previous thread. This does not have anything particularly to do with the overt implication of the acts concerned, but their motivation, and it bears on Rahere's more apocalyptic postings here: it is now entirely possible that members of this Government may literally be the subject of some Divine wrath.
Please rest assured that Rahere has not flipped, but has a wealth of data concerning the background to AC's accusation which is demonstrably associated with diabolical causes. The Conservatives election poster of Blair's eyes may have been prophetic, in a word.
I will post more once this has been discussed.
However, Mr Moderator, please be aware that as usual, you suppressed something critical on a World scale, in my opinion, out of your sheer and total ignorance.
For this reason, unless there is something of great importance, Rahere will not devote much time to this blog for the next few days. The current phase we have all discussed and it's my opinion, too late, mate.
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Robert Peston is a Gordon Brown. He is in his pocket and has no credibility whatsoever ! BBC on an ever downward spiral
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On the most depressing day of the year, Blue Monday, where we still have two full weeks before payday, it is wet, windy and the pockets are empty.
In all of this seven months I have not seen one security van filled with billions being sent from one bank to another. I guess this means its all being done on computer - this fakey fakey money.
So I have set up 2 excel spreadsheets this morning and added a balance in each. Ones my bank balance and the other is my governments. I transferred 20 billion to my account.
But hold on, my pockets are still empty.
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Time to go home
Time to go home
la la la la la
Time to go home
To dig over the garden and plant some spuds.
The situation just gets worse and worse. RBS announce £7-8bn in losses this year (and that's just what they admit on the books!) Plus that Big Beast, Ken Clarke, returns to the Conservatives front bench (and he is totally associated with Monetarist policies that started this whole mess off) Finally, The Treasury announce that the BoE has £50bn to invest in private organisations - but no strategic plan by which to identify which organisations should be invested in!
All this and not a mention of the rate at which the global recession is developing. At number 212 dreamstaragents suggests economic collapse in national economies in between 60-90 days. At first sight I thought that was too soon: now I'm not so sure.
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The short sellers are back in town, pick up a bargain Barclay's shares at 5p.
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STOP PRESS________________
BoE given go ahead to print 50billion
Quantative easing of someones bowels when they heard the extent of the banks debts so far me thinks
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Robert Peston 2009
"The seeming unfairness is that banks are being sheltered from the full consequences of their own fecklessness - for the supposed wider good."
Paul Valery 1943,
“Politics is the art of preventing people from taking part in affairs which properly concern them.”
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What a mess. I cannot beleive that this government continues to pour good money after bad. Firstly, the banks MUST come clean about their debts.
The reality is a "real" loan has been packaged into bonds and the bonds into new bonds, etc etc so many times that no-one knows what they really own. This needs to be documented now. You can't cure a patient unless you know what is wrong with them.
All to earn a 0.1% commission reselling the bloody things. Then bring in two business tax rates... 20% on profits from real loans and 80% on profits from commissions; incentivise the behaviour you need!
Step 2 is to strip out all redundant staff who only exist to re-package the loans in the first place.
Step 3 is let those banks with fundamentally sound business stay and close the ones who are just leeches on the system
It will take 3 years but until we do, we are well and truly stuffed!
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RBS:
"...The first stage is to 'fess up..."
This is the first stage?
So much for progress.
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The end game is when the IMF come to the aid of the UK and buy up its toxic Bonds!!!
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Robert,
The banks are combinations of speculative arms and more prosaic retail sides (to grossly simplify). Why not break up RBS et al and let the credit worthy parts (like, I imagine, NatWest) remain afloat and let the shoddy businesses go to the wall? Then you end up with a leaner, more effective organisation that should need far less support from the taxpayer to maintain its capital adequacy.
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Who can keep pace of the spin spin spin!
What we must all do to continue the stream of lending to the ROTTEN BORROWERS?
This all needs to be a controlled slow down in the lending agreed.
Our biggest worry is still when we come out of this what will happen to INFLATION!
And I don’t see the government implementing any system, which will stop ROTTEN BORROWERS from getting 29% credit cards and 100% mortgages.
The Government SHOULD try to fix the causes as well as fix the effects.
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BUT surely lending more is what got us into the mess we find ourselves in now, so should the Goverment not be telling the banks to not lend.....the banks have had billions of profit for the last five years or so, so it does not really matter if they are to make huge losses now as they must have savings to tide them over, surely people were preparing companies for the bust after every boom.
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Quantitive easing is here
£50bn to buy up assets, so presumably the inflation will now transfer itself to the whole economy?
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Well, it all makes super rocket-science reading for budding University students but frankly it's way above most of the people's heads. And that then leads me to the question of "what" are we protecting? Banks, Institutions and Government have all become to look more and more like one big Gentleman's club, protecting each others investments, viability and therefore 'their' futures. Frankly, if any of them had one ounce of care about protecting the society in which we all live then none of this careless, even criminal, behaviour would have ever happened.
I hope the Hague will open some new departments for 'Financial and Political Crimes' - but that will never be, hmmm? Oh well, onto the next the life!!!
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Robert -- you say:
"I hope by now you spot the pattern. It's all about making sure that enough loans are being made to keep afloat viable businesses and to prevent the contraction of the housing market becoming devastatingly savage."
Many would actually say -- Brown and Darling are taking these steps to avoid things getting messy as we move toward an election and equally to BUY VOTES.
Our question is how do we move from a Labour controlled bank [NatWest] were nosey little civil servants can potentially check out personal payments and bank accounts. Certainly won't need a search warrant when they own the company.
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OK, I called RBS, I am in debt upto my neck, my assets have evaporated and my job is on the line, but your're "legally obliged" now to lend me money (q. Chancellor Darling).
Can I have 5000 to help me out please?
Answer: Sorry, no.
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Lend lend lend will not in any way encourage people to spend spend spend. Unless the government can take full control of our banks and by that I mean nationalise them and call the shots I fear that they will continue to hoard cash and attempt to recoup their losses or outstanding debts. I still wonder where all this money is coming from, (never mind that we poor takpayers, and I mean poor, ) and how the government is managing to raise such vast amounts of cash against what type of worthless securities and bonds it is issuing. Where will it end?......full nationalisation of the banking industry is inevitable. The banks and their very senior management and board have acted in such an irresoponsible manner that they should all be fired, disqualified from acting in this capacity and named and shamed. Come on Alistair, have the guts to do this!
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#210
I agree to rational moderation, it's necessary in a field like this.
However, when one blog's moderators post what another blog's won't, then one or the other is at fault, and I greatly regret to have to say that after consulting their remit and referring the question to their management, I have written acceptance that this Blog's moderators have been grossly so, and sadly have reverted to their old habits, which is why I've escalated the question.
They are superficial in the extreme, and appear not to be specialists in economics. For example, AC's post the other day is extremely important in a way they'll never in a month of Sundays understand, and they edited it because it repeated an accusation posted, amongst others, in the Times blog. It did not m
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Three things Gordon..
1. Handing over billions of taxpayers funds to armed robbers will not solve this crisis.
Temporary nationalisation (for at least three years) needs to take place. Whist civil servants may have a more pedestrian approach to commerce than the "management" in banks at the moment I think the time has come to give up on what has clearly not worked and at least have some control of our billions.
When Gordon has contol of the banks he can start making more certain predictions, not before.
2. We have to let some businesses fail. Did we keep propping up De-Lorean, Laker and all the dotcom businesses in the nineties because they ran out of money? Get real. The strong survive in business, thats how it works. We evolve.
3. What's in it for us?
When do find out what we, the taxpayer get in return for this dawn raid on our future earnings?
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#210
Pending AC's reply.
I agree to rational moderation, it's very necessary in a field like this.
However, when one blog's moderators post what another blog's won't, then one or the other is at fault, and I greatly regret to have to say that after consulting their remit and referring the question to their management, I have written acceptance that this Blog's moderators have been grossly so, and sadly have reverted to their old habits, which is why I've escalated the question.
They are superficial in the extreme, and appear not to be specialists in economics. For example, AC's post the other day is extremely important in a way they'll never in a month of Sundays understand, and they barred it because it repeated an accusation posted, amongst others, in the Times blog. It did not make the accusation, but refered us to it, which is not in itself against the House Rules: the BBC does not have responsibility for pointing out other peoples' ideas, as they may be held up for ridicule as well as praise.
In this instance, if there was one thing designed to push every alarm button on Rahere's board, it was that. Rahere has chapter and verse on what AC was on about, data which has been verified with the top world experts in their fields. AC's information speaks volumes about certain activities and adds an extra viewpoint to a serious legal dossier. This is why we're talking privately, as there may be subjudice implications.
If the Moderators wish to improve their service, they should expand their anodyne reference to the House Rules which we know by a more detailed explanation of exactly which Rule(s) they consider have been infringed, if only to allow the author to consider whether to resubmit his text appropriately edited. They take far too long notifying us privately for the notification to have any value other than as a warning shot that they'll ban us from the blog, which would infringe certain commitments under the putative Fundamental Rights legislation.
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rahere
I fully endorse your discussions with AC-very dark situation. I hope to hear from him with further comment (did try to email AC but it bounced back). If you could, pass him ony regards.
Peterskitchen
I'm not holding my breath for the IMF bailout on this occasion-I doubt very much that it will have sufficient funds left to help anyone very much as they are supporting economies which are more drastically effected than us in the credit crunch. I fear our only hope will be the central bank, who have been very quiet so far.
But, to play devil's advocate, the Uk policies have, in part, been derided by our European meighbours. What if they turn around and tell us to go cold turkey?
IMHO, we are well amd truly up the proverbial creek without our paddles, and we've sprung some pretty serious leaks! The time for intervention to be effective has gone. Borrowing all that money would have been fat more effective given as a massive tax rebate and tax cuts for those working, Back in October.
It's all too late.
We've just got to manage day to day the best we can. Hopefully, we will emerge stronger, leaner and more competitive on the other side of the storm.
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Fawltypowers
Following your line of thinking, we move into the conspiracy theories floated some time ago on these blogs.
All this has been engineered.
Very scary.
No matter how much we all rant, rave and get murderated about the lending to banks and individuals, we won't be heeded as the master plan of the Amero will succeed.
Lambs to the slaughter!
But in the meantime, we'll keep going. It's the one thing Brits can do better than anyone else (apart from queue of course).
Whatever happens, we'll hold our heads up and get on with it. Shame we can't export our stoicism and true grit.
Happy Blu Monday everyone.
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#234 - "Financial and Political Crimes"
Excellent suggestion but where would we start -- Tony Blair (Iraq, David Kelly, Cash for Peers), Mandelson (X3), Brown (10+ Budgets), Tessa Jowell (2012 lies), Jackie Smith (Police interference) . . and so the list would go on.
UK needs an election NOW !
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Fawltypowers
Following your line of thinking, we move into the conspiracy theories floated some time ago on these blogs.
All this has been engineered.
Very scary.
No matter how much we all rant, rave and get murderated about the lending to banks and individuals, we won't be heeded as the master plan of the Amero will succeed.
Lambs to the slaughter!
But in the meantime, we'll keep going. It's the one thing Brits can do better than anyone else (apart from queue of course).
Whatever happens, we'll hold our heads up and get on with it. Shame we can't export our stoicism and true grit.
Happy Blue Monday everyone.
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ELEPHANTS AND STRING
“BANKERS, NO ETHICAL GOVERNANCE OR MASTER PLAN”
The major tactical failure of the worldwide central banking structure, is that NOT ONE of these “so-called expert central bank regulators” ever demanded of their ” financial engineers” developing new financial instruments (products), that such fiscal products be capable of passing the first rule of “Engineering 101? — the ability to successfully dismantle their construct if it became necessary.
Nor did ANY ONE of those Regulators, ensure that all/any new product constructs, meet the necessary risk management standards to protect public interests. Dereliction in Duty of Care..!!!
IT’S NOW BLOODY NECESSARY.
What they built to gain excessive profits, spreading greed in their trail in the Bond Insurance markets, sanctioned by inept rating institutions, followed blindly by the Financial Accounting Standards Board (FASB), has been useless and deemed uncontrollable financial cobbling.
No “sane person” would ever set sail for the open seas in any one of the devices they built. Nor should the worlds’ citizens ever again, have to endure the pain these charlatans have created and inflicted upon open money markets.
The US “Wall Street” Bernanke-Paulson-Geithner troika is similarly using devices with the general effect to date, of pulling on a string attached to an elephant. The huge infusions of cash equivalents without strict governmental regulatory control may assist to avoid uncomfortable deflation and provide comfortable living for those at the institutions they have so generously assisted. Unfortunately, as inflation comes back on the scene, none has the knowledge or holds a key to any world banking structural plan, to undo the uncontrolled effects they have created.
Governments and their taxpayers must retake control of the issuance of currency, and fully utilise the expertise of professional ethicists i.e. Such as “The Certified Financial Analysts Institute” (CFA) in oversighting all new regulations for any proposed new future worldwide monetary system in protection of their citizens.
— Lewis Louthean - Australia
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borrow short lend long - how the banks need to work although the intial bit has been hit severely by the market
I think the gov doing the right thing here
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The government plan is for everybody to buy everything on credit for a couple of years. We have a slow puncture that needs re-inflating and can not replace the tyre because we don't have a spare one.
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It looks like the government are now following the advice of John Major. They find themselves with their backs to the wall, so what do they do? They turn and fight!
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Tigerjayj,
I agree, the only way out of the other side is for debts to be either repaid or defaulted and the strongest only survive. This means that any business in the new era will have to built on strong financial foundations and this stupid fake economy built on lending fake money to weak entities dies with New Labour
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This is all about an attempt at saving jobs .......those of Broon, Darling and the rest of the Labour no-hopers.
Why prop up these bloated untenable banks? We don't need lots of banks, Nationalisation would be quicker and cheaper and would give control on what is done. The most likely outcome now is that the money is poured in and then the banks want yet more or they still need nationalising.
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watching the shares-wonder if any will be suspended this morning? Barclays looking good, RBS look very sick.
Glad I moved my money elsewhere sometime ago.
Today is going to be a bizarre ride on the stock markets methinks.
Also going to get a new phone-this one makes some really odd mistakes in predictive text!
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on FTSE opening RBS down 30% looks like alistair can now nationalise on the cheap!
I see GB dumped the John humphries interview on AD....another stuttering nervous performance which really gave everyone confidence that he knows what he is doing...!
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Why would I want to borrow more money - if I could be loosing my job the next day? And so, the economy will not be kick-started by borrowing.
How about, instead, of using this money to do a 'New Green Deal'? Not simply because of eco fanatics, but because going green, ie. building windmills, insulating homes, building new green buses etc create jobs - and so create confidence. With the added bonus of us becoming less dependent on oil/gas imports/prices.
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What government doing is right but needs to do more like; force banks to cut rates, tax the supper rich, cut tax for normal people, cut tax for people investing in manufacturing, build infrastructure.
We have to get bring back the jobs lost to China, India and the rest. Only way to do it cut tax, including on fuel and make China float its currency free.
Also reduction in planing restrictions will help as this will reduce rent paid by retailers, which could be passed on to customers.
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Just watch the Stock Market folks. RBS down 26 percent at 9 am, after one hours trading. They are reporting a GBP 28 Billion loss for 2008, and that is before you start looking at the complicated stuff. And the Gov wants more lending!!!!
At this rate we will see a second bail out on the same day!
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139. At 9:18pm on 18 Jan 2009, fingerbob69 wrote:
"So far ?600 BILLION has been spent saving the banks from their own folly.
Now let's be clear. This is our money... our taxes. "
Don't worry about it, fingerbob69, it is easily written off. And don't you know that it is only a paper exercise to brainwash the restless masses into thinking that they are indebted to government rather than the government realising that they are supposed to be the servants providing the needs of the population...... and that, in the Capitalist System of Control, would necessarily have them having to provide currency for spending rather than collecting it for lending and then also charging a fee for the pleasure.
At least Dick Turpin wore a mask, but these buffoons are not even bright enough to conceal their thieving actions, which are designed to subjugate emerging talent in order to enrich the status quo, who would not wish to risk their legacy riches.
However, such Stagnations, which were common enough before the Age of Instant Global Communication, are a thing of the Past and the Present Dinosaurs in Government and Banking, who live the High Life on other peoples monies, have that Change/Paradigm Shift to deal with every new day, all day long and to deny it, and to propose wasting more invented cash ponzi schemes on saving a Corrupt System, which is geared to creating a Debt Society with the Forced Introduction of it disguised as Credit, is a Despicable and Deceitful Criminal Act, and if it is not, then it should be.
It is certainly immoral and amoral and from any in a Conspiracy to Lead, a Monumental and Catastrophic Failing which nobody has any Right to Endure with their Compliance.
Kick the Shower of Rotters out of their Feathered Nests, ......for they are Traitors to the TaxPayer and the Nation.
I Trust that is not Ambiguous nor can it be Offensive whenever True.
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"But you'll also identify an apparent injustice and a paradox.
The seeming unfairness is that banks are being sheltered from the full consequences of their own fecklessness" R. Peston
It is not an 'apparent' injustice. It's an actual injustice. Likewise, it's not 'seeming' unfairness but actual unfairness.
My subconscious will not accept that trick Robert.
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Tax, tax and more tax...
This is what it is going to lead to. The taxpayer will pay for this in future years. Have we got any projections what this is going to be like in the future.
This will be our legacy from New Labour.
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Aren't Northern Rock about to pay bonuses?
God knows what for...
The staff should be taking paycuts not getting bonuses.
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You couldn't make it up. Did you see Gordon on TV this morning.
"We should work together to support countries like Britain which are reforming their banking system....if they don't there will be a downward spiral..." etc etc
What he is saying is that the British Taxpayer is no longer able to provide the funding base and that he wants the Germans to extend credit lines to the UK based globalised banks.
If they don't the world will spiral downwards, he suggests. Blackmail.
It ain't going to happen.
The management of thegerman toxic bank who lied to Steinbrück about the extent of their liabilities and SIV activities in London and Dublin are being prosecuted as we speak. The banks vaults are full of derivative products from .......... a well known British Banking institution.' The bank had traded in London to avoid regulators. Running parallel books ie off-balance.
Where did this bank get the idea?.
The City players.
Where did the City get the idea?.
Enron.
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So we see the last desperate throw of the dice by this Government. I cannot see it working but hope it does. Now the Government is back to its usual stance its all Global and America is to blame.So we did not have a credit bubble then.
The question should be how many generations will it take to pay back this Government debt.Giving the banks a blank cheque of tax payers money just because the Governments slow action, and lack of regulation go us into this mess is just crazy.
The next step is to print money and probably the country is heading for bankrupcy.
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I'm sick of hearing how this is all due to irresponsible bankers.
It was Bill Clinton forcing Fannie Mae and Freddie Mac to lend to disadvantaged people which caused this and the bankers only contribution was to find a way of hiding these toxic loans in packages and sell them to our banks.
Political interference in the banking system will always end in tears - and today's efforts will be no different.
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No wonder UK is in recession judging by the gloomy shower of Little Englanders whining in this blog.What a miserable pathetic bunch of soandsos! Who do you expect is going to pay your pensions? Who is going to pay for your hospital admissions?
That 's right, the young people, and they need those mortgages . Your Tories have taken away their student grants, you have privatised all the state assets, you Tories demolished our industries .....and now you have the barefaced cheek to girn away.
Where did you all make your cash? Most of you got a mortgage when you were young, with the interest on it subsidised by the taxpayer.And now you've paid it off you are all so high and mighty.
Gordon Brown is doing what has to be done, it is wise and it is brave. So you lot want what the Toriers are offering......but the whole economy will go down the swannees if that lot get the chance to wreck it again.
I despair of the people in this country complaining.......you would all be complaining a lot more if thie action we have seen over the past few months had not been taken.
Carry on Gordon, ot might not be popular , but it has to be done.Ignore the pusillanimous Tory moans in the background!
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Re Today's Measures
On Providing Insurance
It is all very well to offer insurance to the banks - but at what rate? Normally insurance is priced on the chance or expectation of the insured event happening.
If the debts are already non-performing under normal circumstances the insurance premium will be huge. Who will pay this premium? Under normal circumstances the borrower whose loan is being insured will pay.
So we now have the situation that borrowers who are not being able to repay a debt being asked to pay even more to cover the additional insurance premium.
The biblical epithet of getting blood from a stone comes to mind!
Another question is how to manage the aggregate profit/loss on the governments debt insurance business?
Should we the taxpayer not require the government to act professionally and commercially and to manager their insurance business in the way that all insurance businesses are managed? Should the insured liability be sold on into the commercial insurance market for example?
Has anyone seen any proposals about this aspect?
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Ok its bad! I've always believed look after the pennies and etc.
So surely in these times of complete lack of cash and 70% ownership by the govt then RBS should not be sponsoring the 6 nations championship but saving the cash.
'Barclays' premiership??? How much does that cost - they should pull out and this might (should) stop some of the ludicrous amounts sportsmen are being paid in these troubled times.
etc etc
My childs primary school has just rec'd sponsorship of £750 for something - the newsletter told me that Barclays had kindly matched that £750 with £750 of their own as a donation! Multiply that across all the primary schools in UK - the 'pennies' soon mount up!
But then I think of the bigger picture - the schools are short of funding from the govt (or so they tell me) - so they raise sponsorship from us (the taxpayers) - which is matched by donation from the bank - who are currently being funded by the government - who need funding from the taxpayers???
Can money get dizzy?
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Let me get this straight. The support is needed because banks have lent irresponsibly.
Now, as the price for all this support, they must mend their ways and ... lend even more irresponsibly?
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If we the taxpayers are ultimately responsible for covering anything that goes wrong, then where on earth does the motivation come from, for the banks to act responsibly in future??? They have nothing to lose at the end of the day. I fear the worst...... it's a shambles.
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Wow this has really got us going!
Mint Mr Mint (post 145); especially points 9 and 10.
Since the introduction of working/child tax credits, think how many households upgraded to owning two cars (which they can't even afford to run and service properly), and changed their television sets more often than their pants!
I agree: cut welfare benefits as most of it gets spent on discretionary rubbish, instead of intellectual and social development.
Roll on quantitive easing.......
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Robert -- from today's Daily Telegraph:
"Senior Government figures are said to have been infuriated to learn that RBS [via ABN Amro] was part of a group of banks that offered a £2.8billion loan to a firm owned by Oleg Deripaska, a Russian billionaire who last year hosted Peter Mandelson on holiday in Corfu.
The apparent loan to Mr Blavatnik has now brought the 51-year-old, who divides his time between America, Russia and Britain – where he resides in a £41million home in Kensington Palace Gardens –into the spotlight."
Think it is time to re-open the discussion regarding Mandelson's true involvement with Blavatnik. Excellent project for Ken Clarke don't you think.
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And this is a tale which the captain and the bridge of HMS Britannic Titanic would do well to heed ...... http://bigoil.gnn.tv/blogs/6607/Ship_of_Fools_by_Ted_Kaczynski ...... as would the BBC and all who would post here and do nothing else but vent their frustration like good little armchair heroes/couch potatoes.
But the tale is an old one and there are much more appropriate and popular endings available now, where everyone gets what they really deserve according to the Rules of Hoyle and Natural Justice.
And I couldn't help but think of the smirking Bush flying shoes pantomime whenever I read .... "They ranted and raved and brandished their fists, and they even threw a rotten egg at the captain (which he skillfully dodged). " :-)
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Nice morning to launch the latest Formula One car - the Williams FW31, with RBS logos all over it. Check out pitpass.com.
Winter livery, they say. Taxpayer's money, I say!
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Isn't it a good job Scotland didn't get its independence - how could they have absorbed the losses of RBS and HBOS? It would have been another Iceland.
Or maybe we should have cut Scotland loose some time back, then we wouldn't be bailing out their banks!
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I see GB's plan now... Genius!
This World recession has been caused by the World Banking crisis and the slowdown of credit in the World markets... what is needed is a World leader to make World class decisions.
So prepare for the impact of this World record breaking bail out and World record breaking national debt....... your country needs you, go out into the high street and SPEND..... on those goods make in China! He is truly a World leader....
Keynesian economics MAY work in a closed economy.......... they don't in ours....
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Having read all of the responses to the Blog, the one option that has not been considered is massive inflation. By that I mean 30% each year for the next three years. This would cause ‘the pound in your pocket to become worth 33p in three years time’. At present this is possibly thinking the unthinkable. If it were to occur everyone who has saved or purchased any fixed annuities would find their investments approaching being worthless. However, the plus side would be that the massive debt that has been incurred by Government would effectively be written off or reduced to a manageable level. Now if I were Government faced with paying-off my debt and I had two options, one being actually paying-off the debt with the repercussions of higher taxation etc and the other being creating massive inflation so that my debt is reduced to a fraction of what was borrowed, I think I just might take the latter option. I just sit and ask myself the question ‘What would I do if I were Government?’. An honourable person would pay-off their debts pound for pound. None of the comments are suggesting that the Government is in any way being honourable. This leaves me with the feeling that the Government may take the option of paying-off its debts in a way that is not honourable and that is by creating massive inflation. Is there anyone who is convinced that the Government will pay-off its debts pound for pound? Interestingly the Government is seeking further equity involvement in the banks by offering to convert its loans. One can only wonder whether this is a move to protect themselves against the massive inflation they are about to cause. Clearly this is very good news for the taxpayer though not so hot for anyone who has saved or purchased fixed annuities.
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As I hear and read this current news, one thing is springing to mind, modified windfall tax !!
Some politicians are keen on a windfall tax for utility companies, so how about turning our attentions to banks, and more importantly, individuals who have profited in recent years. Despite, bailouts from governments worldwide, some bankers will or have received bonuses for what is rapidly becoming a disaster (some may say, it already is!)
Individuals have received very generous bonuses, fuelling a self-fulfilling monster (the housing bubble) - this is modern day parable of Jason and the argonauts and the hydra. We have all benefitted from this, from improved pension pots, to house sales etc, so we must take some responsibility for this fiasco, and it now appears, that collectively, we will be paying for this for many years.
I appreciate that the bottom line of business is money and more importantly, profit. Business provides a service to consumers, in return for our money. But, when individuals who directly benefitted from this fiasco, those individuals have retired early and/or refuse to take responsibility, but still have comfortable lifestyle, built on early and recent bonuses, should they be allowed to walk away?
Currently, that does appear to be the case, so how about a retrospective windfall tax on these individuals, how about 100% tax on last years bonus, decreasing by 10% each year from when the securities became common practice, to a minimum of 50%. This may seem harsh, but to put this into perspective, if you make a mistake in the NHS, you are severely punished, hence by and large, mistakes are few and far between. Failures in the NHS have happened, i.e Bristol heart surgery 1991-95, where 35 children were said to have died unnecessarily, but not on this magnitude.
So I don't think we should feel unnecessarily sorry for these individuals, let them pay for their failure not to avert this "greek tragedy", and let them understand, personally what many individuals are already suffering from. Some may argue that this is unnecessary, a proverbial pi....g in the wind, but this is making an example of these people, and serves as a reminder to current city bankers, that their failures will not go unpunished!!
Inland revenue have their tax returns, bank details etc .....
So lets have that retrospective windfall tax!!!!
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We need a fundamental change in the way the economy is structured and indeed the way society is set up. Profit and stock price increase can't be the only motive for a company...these terrible times we are going through were basically the result of short-term profit motive.
Banks should not be allowed to invest their deposits in anything other than high-grade government bonds.
More regulation must be brought in for ALL industries which will set rigid limits to what they can do with their finances.
Consumerism must be pared down....we shouldn't have to keep spending what we don't have.
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The spectacularly bad management by our leading banks beggars belief, and the people responsible seem answerable to nobody. How about Robert Peston getting a TV interview with one or two CEO's of the major banks and grilling them on our behalf as to how they managed to run their business so appalingly.
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Is anyone else sick of how much trouble the supposed "big banks" have got us into. since we didnt have a say how our taxes were used to keep them going i think we should vote with our feet and take your deposits far far away. im disgusted with anyone who still banks with these reckless companys which have ruined our economy and put companies out of business and so many people out of a job. i now bank witht the co-operative bank a bank that isnt traded on the markets, has a strong balance sheet and has had an etihcal policy in place since 1992 which give a say in where funds can be invested. they wouldnt have leant money to mugabes regeme like barclay. and if all banks were as responsible as them then we would certainly bee avoiding this mess
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Joanh Brown and his team are indulging in wish-fantasies that the clock can be turned back to 2007 and everying that happened since was just a bad dream.
Instead of wholesale markets we now have HMG instead. But politicians want votes and they have been deluded into believing their own hype. With each twist and turn trying to bring back the 'feel good factor' they are simply digging a deeper and deeper hole for everyone.
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It must be Groundhog day as I am positive we were told the exact same thing in October.
Clearly we are being led by the Blind as the Government appears not to know where we are going.
Some people are making a fortune and the Government is doing nothing to stop them.
The ban on the short-selling of 34 UK financial stocks was lifted a few days ago
and just you watch them all selling short.
do they never learn ?
its time for a Change as after all we will not be any worse off.
The UK is sinking faster than the Titanic and we are running out of Lifeboats.
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RE deleted post
Its not homophobic racist etc to refer
to Dorney Wood (darlings grace & favour residence) at Burnham Beeches.
NOR:GOOGLE D NOTICE DUNBLANE
Times on line
re an Opinion poll from 2007.
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As I see it there are plenty of personal mortgages available to people who can provide a 10-15%+ deposit. So what is the problem?
We are still being told the banks are not lending, but what we are really being told is that Banks are not lending to individuals who dont have sufficient security - as they were, to a large extent, in the 5 years prior to 2007. So it seems they are still trying to recreate 2007 lending levels, as AD stated in October, therefore trying to reinflate the bubble.
How can this stimulate the economy? This stimulus can only be done by increasing consumer confidence. Consumer confidence can only be increased by a)improving Job Security and b)increasing personal wealth.
Increasing the levels of debt in our Country cannot have any positive impact on consumer confidence, unless it is combined with targeted tax cuts (at middle income working families and SME's - the two groups that generate the wealth in our economy). Other than the pathetic VAT cut I have seen no evidence of any other tax cuts, only increases. The paradox is we cant afford any tax cuts because our taxes are desperately needed to fund the loans the Govt. says we need to boost the economy.
Resuming lending to failing business or individuals without savings is not in the public interest, it is in The Labour Party's interest.
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#111
I thought this was a briliant suggestion!
Tax the bankers in proportion to unemployment levels!
100% income-tax Revenge!
But then I would tink it was good, but I was impresse with my own idea!
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I'm thinking like this:
Q: What is the problem with lack of credit?
A: Companies are going bust & putting people out of work.
Q: Who decides how much risk to take when giving loans?
A: The bankers.
Q: How do we overcome there over-aversion to loaning to even sound business?
A: Make them feel pain in relation to the level of unemployment.
Q: How do we make our unemployment hurt them?
A: Create a special income-tax code which will increase their income-tax with the unemployment rate. With no upper limit, the prospect of 100% income-tax will hurt the bankers enough to make them give credit to keep afloat viable businesses.
======================
This will not cost the tax-payer anything, and keep tax-payers as tax-payers, not Jobseekers.
Even if it doesn't work, it will hurt no-one (except bankers - which doesn't count), and we can try something else.
We could include the hedge-fund managers and the like who made these famous one-way bets knowing they were too big to fail.
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OK, the government wants to 'improve the supply of credit to the economy' (= make it easier to borrow money) - but in order for there to be money available to BORROW somebody has to LEND it.
Does it really surprise anyone that after some years in which interest-rates were kept artificially low (the US government being the chief culprit, but it was aided and abetted by that of the UK) there's a dearth of willing lenders - who are now being invited to put their savings etc at not-inconsiderable risk for a very meagre return. Robert Peston writes of 'yet more commitments of taxpayers' money', but doesn't emphasise strongly enough that it's only 'taxpayer's' money in that if the government does succeed in borrowing zillions of pounds it's UK-taxpayers who'll eventually have to repay it. The money the government actually wants now or in the near future won't be coming from the 'taxpayer', by and large, but from savers/lenders - who in the current circumstances are understandably nervous of lending to anyone in the so-called 'Anglosphere'.
Instead of parroting the thoroughly-discredited (Pardon the Pun!) line that Capitalism can only be saved by keeping interest-rates at minimal levels, when is Robert Peston going to remind anyone who cares to listen (that doesn't include the current UK government, whose 'economic policy' makes Harold Wilson's quip 'A week is a long time in politics' look positively far-sighted) that the foundation-stone of Capitalism has always been the willingness to pay a sufficient return to make investment attractive. Without that understanding our government can talk all it likes about making ever-increasing sums 'available' - but the only way to do so will be to print it (the 'Mugabe Solution').
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There is an obvious reason. If the UK PLC buys the bonds then it has to mark them to market and also it needs to come up with the money to buy them. If it "insures" them then it doesn't need to come up with the money - but almost certainly will but hopefully after an election - and also it can monkey around with the accounting to make it look less of a liability on the gov balance sheet...
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We are fortunate we MANUFACTURE V little.
The SERVICE ECONOMY is likely to be more RESILIENT than any manufacturing economy.
ONCE we put the BANK losses behind us we should return to stability and NOT have as much pain as MANUFACTURING economies.
GLOBAL problems fooweee.
We have a great buffer and we are an Island has helped us before will help us again.
Only our reliance on Foreign GAS and OIL could be a problem.
This will be the Island the GLOBAL wealthy will fly to, to lie low and stay safe.
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All too late I’m afraid, Joe ‘Average’ consumer has long since lost his appetite for credit (or DEBT as I call it). Add to that the swathe of job losses and corporate bankruptcies, the underlying economy can no longer support a desire for new debt.
We are all going to get stuffed royally here.
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The government has announced a second package of measures to encourage banks to lend to individuals and businesses.
another "ooops we got that wrong" confession!
"We have decided it is not appropriate for Northern Rock to continue to shrink its activities " said Chancellor Alistair Darling.
another "ooops we got that wrong" confession!
In another announcement, RBS said it had agreed with the Treasury to swap the £5bn of preference shares the government holds for new ordinary shares.
...and another!
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it is only when the major clearing banks are fully nationalised that we will really be able to believe anything the banks say.
Post 76.
Whatever makes you think that? Government has been and continues to be just as dishonest as their friends the bankers. If anything it is government dishonesty about inflation which has caused all this. If interest rates had been pegged to real inflation figures rather than politically expedient ones, much of this bad debt would not have been issued in the first place.
Anyway, when exactly was it that the so- called pluralist institutions ceased to accept responsibility for their impacts?
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#287 1 beard.
5 million graduates from higher education a year now in hCina, millions more in india.
Our reputation for 'fiscal prudence and good management shot'
How exactly do you think the services industry is going to save us?
Jericoa
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Jericoa 291
Quite right-anyone who believes a country can 'run' on service alone is crackers.
It wouldn't be so bad if the service was any good, but the next time I buy a coffee for £2.50 which has been made by someone who hasn't a clue what coffee is supposed to be, I am going to abandon the so-called service industry altogether.
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Although I don't agree that debts should just be written off, it would appear that defaulting US sub prime mortgages might be written off (or most likley to be written off) from UK bank balance sheets (or at least ensured against it) through the rescue plan rather than UK based debts from people struggling to pay their mortgages and personal debts here in the UK. Surely, if the UK Government was going to write off debts (or insure debts) then it should be focused on defaulting UK customers rather than US. Maybe then, banks will get their money and more importantly, struggling UK tax payers can benefit and may actually have something to spend to reinvigorate the UK economy once again!
I am not an expert but that is the message i am getting (US sub prime mortgages most likley to be insured against and hence written off when defaulted and paid for by the humble UK Tax payer!!!) - can someone clarify because this just seems so bizzare that our money is focused on writing off US consumer debt rather than that of UK consumers? Surely there should be some restrictions?
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Will the banks stop the inappropriate charges every time we go £1 overdrawn?
As a kind of "thank you tax payer"??
Unlikely.....
Its all a bit one way isn't it...
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RBS now down 66%! Lloyds down 30% lack of confidence in the new measures, or are the short sellers to blame?
What are the odds RBS nationalised before the week is out....?
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Things are pretty wobbly. I get the feeling that the government's effort is just a drop in the ocean. I feel the UK government, and we as taxpayers, will soon be swamped.
Has the government any idea about the exposure of UK banks to the Credit Default Swap market? Apparently this is worth many trillions of dollars. Trillions.
According to this clip, the CDS market is worth about US$60 trillion. And the government is piddling about throwing a couple of hundred billion here and there? A couple of hundred billion is a drop in a 60 trillion pond.
http://www.cbsnews.com/video/watch/?id=4502673n
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#296 what is really frightening is the UK tax payer now owns 70% of(and is therefore liable) RBS, which has a balance sheet bigger than the whole UK economy! if that goes wrong not even the IMF could bail out UK Plc...!
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Judging by the economic numbers from Ireland, this sort of thing is not working over there. Don't we want to see how it works out before committing ourselves? Sovereign guarantees are tricky things to revoke once they are taken for granted.
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Now we all know what a battery hen feels like...
we stand shoulder to shoulder..
within a financial cage...
we all know whats coming..
Oh Gordy Darling..why dont you both get on with it and put us out of our misery !! we cant take it any more...
Aaarghhh!
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19: "I am SICK of knowing that I may lose my job because of an economy built on debt is contracting and if this causes me to default on my mortgage, I may lose my home but the level of the debt will remain. UNLIKE THE BANKS WHO HAVE GIVEN LIABILITY FOR THEIR LOSSES BACK TO ME AS TAXPAYER."
Ironically it seems like socialism for the banks and others deemed too important to fail, but ruthless capitalism for the rest of us.
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Dead easy to criticize? A shade harder to sort it out? reporting is fun!!
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