We are the monolines now
Before the market in collateralised debt obligations (CDOs) started to implode in 2007, many of these securities constructed out of low-quality subprime loans were sold as AAA investments - the highest quality investments, up there with the sovereign debt of the richest nations - partly because some of these bonds were insured against default by so-called monoline insurers.
However, the insurance turned out to be more or less worthless, because these specialist insurers didn't have sufficient capital to absorb the mind-boggling losses on lending to US home owners with poor credit histories.
So the value of CDOs collapsed, generating about $1tn of losses for banks around the world - and hobbling the likes of Merrill Lynch, UBS, Citigroup, Royal Bank of Scotland, and so on.
This subprime/CDO debacle also led to the almost complete disappearance of important wholesale sources of funds for banks.
And the rest, as they say, is financial market meltdown, credit crunch and global recession.
The provision of credit by banks and other financial institutions was squeezed all over the world, prompting a collapse of consumer spending, business investment and trade from which no economy has been insulated.
Which is why so much of the effort of governments - especially ours and that of the US - has been directed towards shoring up the banks and reinvigorating the supply of credit.
There'll be another initiative with that aim today, when the US Treasury Secretary Timothy Geithner announces a so-called Public-Private Investment Program to purchase between $500bn and $1tn of impaired assets - toxic investments such as CDOs and loans - from America's battered banks.
The US authorities - the Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation - will provide finance to hedge funds and pension funds for the purchase of these assets.
Some of the details can be found in an article by Mr Geithner in this morning's Wall Street Journal, and the minutiae will be disclosed later today.
The aim is to remove as many of these bad assets as possible from banks' balance sheets, so that the banks become less anxious about future write-offs and become more confident that they have the capital resources to restart lending.
It's an alternative approach to that taken by the British Treasury, which has used the public sector's balance sheet to insure Royal Bank of Scotland and Lloyds Banking Group against future losses on some £600bn of poor loans and investments.
But both the UK and the US are trying to avoid more conventional, full nationalisation of the banks.
In the US case, taxpayers will be both providing some of the loan finance to buy the toxic assets and will sharing in the risks of owning them - both losses and profits.
As a public-private solution, it has a snake-eating-its-tail, paradoxical quality to it - since at least some of the finance for the purchase of the impaired assets will presumably come from the very banks that are supposed to be cleansed by the exercise.
It's also important to note - as I've been pointing out for more than a year - that both the US and the UK authorities are simultaneously providing the funds to banks that the banks can no longer obtain in a purely commercial way from wholesale markets.
In America, for example, the Term Asset-Backed Securities Loan Facility (TALF) will lend up to $1tn (£695bn) to private-sector investors to purchase securities manufactured out of new loans to consumers, car buyers, students and small businesses.
Here in the UK, our Treasury is providing hundreds of billions of pounds in guarantees for securities made out of bank debt, mortgage debt, consumer debt and corporate debt. It's providing separating guarantees for bank lending to small business. And, in partnership with the Bank of England, it's purchasing various forms of loans to companies.
The way to see all this is as the public sector - especially in the US and the UK - taking on the risks of lending to the private sector.
And it may have struck you that this is what the monoline insurers were doing on sub-prime lending to US homebuyers with poor credit histories, via their insurance of the securities created out of sub-prime.
Like the monolines, the US and UK authorities are exploiting their AAA ratings.
They are turning risky private-sector loans into the equivalent of sovereign debt, so that private-sector investors will buy these loans.
And the US and UK authorities are also raising money directly from private-sector investors by selling them government bonds which is then recycled into the banking system.
In a classic sense, the British and American governments are exploiting the perceived strength of the public sector to correct the failure of markets to channel finance to where it's needed.
As a strategy, it works for as long as there's a widespread confidence that we as taxpayers have the capacity to make good any potential losses on all this lending.
Or to put it another way, the productive potential of the British and American economies is being mortgaged to prop up the banking system. The banks are being kept alive by our promise to provide an indeterminate proportion of our future economic output to make good the banks' future losses.
How big could the banks' call on us as taxpayers turn out to be?
Support for the UK's banks and for private sector lending in the form of loans, guarantees, insurance and investments is equivalent to just under 100% of GDP, or a bit more than £1.3tn.
And based on out-of-date IMF figures, the equivalent figure for the US is more than 70% of GDP - or not far off $10tn (£6.95tn).
Those are not small numbers. Unfortunately, they don't tell us anything very useful about how much is at risk of being lost, how much could in theory be written off.
That said, even on worst-case projections of the impact of the recession on the ability of borrowers to repay, losses for taxpayers will only be a proportion of the gross sum.
And, everything else being equal, that sum would of course be affordable, even if paying it would be painful for us (in the form of higher taxes or fewer resources for public services).
But everything else is not equal.
The US and UK public finances are in a dreadful state, because of recession-induced collapses in tax revenues and the cost of measures to stimulate our economies.
Which is why there are some economists and analysts who fear that the AAA credit ratings of the US and the UK are not wholly unimpeachable.
It's probably worth remembering that three years ago, no regulator or central bank expressed serious concerns that the monolines could lose their AAA ratings.
What would happen if the AAA rating were lost?
Well, the virtuous interplay of bank bailouts and fiscal stimulus in limiting the severity of the recession could become a vicious simultaneous squeeze on the ability of both the public sector and private sector to obtain credit.
To state the obvious, the US and UK governments have a very delicate balance to strike between supporting the banks and overstretching the public-sector balance sheet.
There's another important implication of the extent to which we've mortgaged our futures to save the banks.
It rationalises the acute anger felt by millions at any bonuses or pay rises going to bankers.
Their argument is that we're all in this together - and that if all taxpayers are making potentially serious financial risks and sacrifices to save the banks, the quid pro quo should probably be profound gratitude on the part of bankers and a joyful willingness to defer any incremental earnings until the foundations of the financial system and the economy have been rebuilt.
I'm 
© MMX~RS~q~RS~~RS~z~RS~42~RS~)
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who cares about this AAA rating at this stage - the guys who give the ratings should be in jail not just the bankers
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Or to put it another way, the productive potential of the British and American economies is being mortgaged to prop up the banking system
Surely we are propping up confidence in the insurance market? Or am I missing something in your text?
By virtue of the insurance companies being unable to actually value the risk, a failure of regulators and probably some people who took advantage of the whole system we now have our present situation.
Confidence will only fully return to the market once we know everything and the actions taken bring about a different system of risk
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The Turner Review of last week has raised some interesting questions on whether 'risk socialization' is the "optimal and only defence against system failure" in certain circumstances.
'Optimal' and 'only' are strong words, and that would be a ghastly conclusion. I would also say that it is by no means proven, and certainly not by Turner. His document is tantalising, but deficient in many regards.
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Robert, we are going to have to start looking beyond the credit crunch, otherwise we will all become suicidally depressed.
http://moneyistheway.blogspot.com/2008/07/beyond-credit-crunch.html
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The mortgage-backed securities that are at the root of the financial crisis are still working against the recovery and banks are still having to hold back on providing credit because of them. The kind of Public-Private Programme announced by the US Treasury Secretary to purchase these securities is just what the doctor ordered. It's about six months late, and untold damage could have been avoided if it had been enacted with the first couple of months, but it will help to raise banks' lending capacity and reduce uncertainty about the scale of the problem on bank balance sheets. Robert, I would like you to ask around how the FBI is going with its investigation into the causes. Cheers
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So, what you're saying is that not only are the insurance companies incompetent because they simply don't understand risk (Doh!), but also the bankers because they didn't bother to do any due diligence on whether the insurance companies could handle the losses.
And these guys consider themselves talented? Talented at what? My question is why do they still have jobs at all? Why haven't they been sued to homelessness?
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Surely these oft quoted figures for banks' potential losses are too high. Even if all the US/UK sub-prime mortgages go bad, they can go bust only once. If they have been parcelled up and sold on and on, every participant will have a piece of the loss (or perhaps one will have the whole lot). The amount lost remains the amount intially lent. I think that in the atmosphere of panic that prevails we are in danger of multiple counting these bad debts and talking ourselves into thinking the crisis is evn worse than it is.
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I like the US approach better than that of UK At least they will have some transparency into the toxic deb tbeing takne on and the risk profile
Thwe Treasury does not seem to have a risk profile to publish to the British People so far as I can see. They are playing Master of the Universe, but in the dark. The Sun has yet to shown never mind shine for us in the UK
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Banking as we knew it, is finished.
They're going to be viewed (for a long time) in the same light as timeshare sellers.
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The UK and US tax payers are bailing out and insuring the banks. However, some of those mega-rich who took the money and ran have not even paid tax in the UK and the US. To make it very clear: they want to take their untaxed profits and want to be bailed out by the UK and US tax payers. How convenient for them, what a bad deal for tax payers!
You can read more of these shocking details on the following, now updated blog:
http://globalinsights.wordpress.com/
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So we are still building castles made of sand. How much worse could it be to let it all get washed clean by the tide and for everyone to get used to living life with a lot less debt?
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Paul Krugman, a Nobel laureate - writing in the New York Times, picks all the holes in this plan that Robert fails to mention or glosses over. Rare that an American columnist is easier to comprehend than a Brit...
http://www.businessinsider.com/henry-blodget-krugman-trashes-geithners-bank-plan-2009-3
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Does anyone actually know how much the US & UK government have now put up to bail out or re capitalise or take over dodgy loans for banks?
It just seems to me, and no doubt many others who have lived within their means, that there seems no end to money available to bail out stupid bankers.
Is this more good money against bad rubbish?
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The macro figures are so too big to really understand but they do produce fear and worry that the global economy may enter into a depression for at least a decade.
On a micro subject, there has been talk about the mutuals taking a bigger role in our financial system but with the news of the Dunfermline Building Society suffering from a liquidity problem is there any institution in the UK that does not need to be bailed out?
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The glossary on monoline insurers states: "they pay a fee to a monoline to insure their debt that in turn helps to raise the credit rating of the bond which in turn means the institutions can raise the money more cheaply."
Surely what is happening is that when someone buys a bond then they are taking a risk with the company that issues the bond. If a monoline insurer takes that risk instead, then the only way it can "raise the money more cheaply" is if the monoline insurer is evaluating the risk incorrectly!?
At the end of the day, if you do not want some risk, then you should not be buying bonds in private companies. All this smoke and mirrors to conceal the risk is what caused the problems, and the companies and individuals that partook in these schemes should be made to feel the pinch rather than the taxpayer.
If the government does give bailouts then it should be with the condition that the recipient winds up these problematic financial deals and does not go on issuing more. However, judging by Northern Rock's 125% mortgages for 6 months under Government ownership, that is hardly likely to happen!
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Re my 14 post, I have been posting on RP's blog for months so can the moderator tell me when I do not have to suffer from being pre-moderated as a 'NEW' member?
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So Great Britain has become the new AIG?
Good morning, rest of the world. Anyone interested in buying long-term British bonds, with an attractive yield?
No? Why ever not?
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Ah yes, the unimpeachable AAA credit rating of the UK. Perhaps this statement should come with the caveat, "Credit ratings can go down as well as up". Let's not forget that the dodgy financial instruments which were rated as AAA were done so only because the sellers paid the credit ratings agencies to do so. This also begs the question about whether the UK actually has an AAA rating in the eyes of other nations with cash to lend. With GB at the helm, I doubt it...
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Post 2 an interesting point but flawed re the insurance market. I imagine the insurers would seek to cancel the covers ab initio due to non disclosure and misrepresentation of the risk had push come to shove. Also this area of insurance was dominated by a very small number of generally American companies.
There is a very valid point though that the "boom" was allowed to go on for far too long due to banks inadequate understanding of the risk they faced allied to a fatally flawed reliance on two factors that allowed them to think that they had cleansed these risks from their books.
By cleansing the risk this allowed the banks to lend again with the same capital and consequently greatly over leverage themselves.
The two factors were
1) That the risk was passed on and as such did not need to concern them anymore. As any business person should know any contract has a potential for failure and contingencies have to be planned for and allowances made for the other party to not be able to effectively hold up their end of the bargain.
For example,Zavvi went bust amongst other reasons because their sole supplier (Woolworths) went into administration and they could not get stock in their stores at the key time of the year. Once this was known no one could buy from their website or trust them. Confidence once lost is very difficult to regain.
2) The insurers would be able to pay the losses. As we have found even the biggest insurer in this area (AIG) couldn't pay its losses and had the US government not have stepped in on AIG's behalf there would be many more banks and financial services compnaies in the deep doo doo now.
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That's rather a long winded explanation there, Robert.
Although I'm please to see that you've been able to state the obvious for once without 'stating the bloomin obvious'.
This massive financial heist perpetrated on society by the privileged class of bankers, dealers and money men has led to perhaps the greatest transfer of wealth from the masses to the few ever known.
So, as you're saying, at the same time as digging us out of this hole, the people want some of the 'moolah' (to use a further expression of yours) back.
I agree.
I think we should learn from the US and implement a special tax on all those who work for any of the institutions benefiting in any way at all from Govt guarantees or funding, who earn over £200,000 per annum.
These guys are really really lucky to have any job at all any more, but they don't seem to get it.
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This madness will only stop when the very people that sat by and let it happen are disgraced and stripped of any wealth and power. Politicians, bankers and media lickspittles.
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Robert
We're overstretched already. Why should I be paying for the dollar debt of American banks owned by RBS. Over 60% of the toxic RBS loans underwritten by the taxpayers are in foreign currencies. Why are we the underwriters to the world?
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At present, the global economy is like a snake eating its own tale.
Mainstream analysis contends that, by a sleight of hand, Geitner will make everything ok a few months down the line. This is nonsense and, looking around the forums, people aren't in the mood to buy it.
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Robert,
Thank you for that article.
It sadly reaffirms the view that we are - despite some people's optimism and confidence - still very deeply in the economire.
And that the 'insurances' that people may think they have against further socio-economic insecurity, might turn out to be worthless when called upon. (A bit like the ship going down and when you run to the lifeboat, you find it's got a big hole in it).
Basically, the real question is, what if the world bluffs the UK trump card of 'we're a big government, so, of course your money is safe with us'? We don't seem to have any other cards to play other than devaluation in one form or another.
Or do we play it the Iceland way and have huge interest rates in order to desperately try to attract any global money we can as a nation?
It perhaps underscores why I've found significant numbers of people - even though they've moved money around accordingly - who just don't really trust that if the mucky stuff really did hit the fan, the depositor protection scheme would be capable of paying every claimant their £50K.
As well as getting used to not dining our on excessive credit, it looks like we're all going to have to learn to better scrutinise the realities of the financial promises and guarantees we receive from bankers and government.
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A key point here, which I haven't seen discussed, is that the UK and US Governments will be desperate to prop up property prices, because if these collapse then they will have a massive bill to pick up on loan losses.
The result is that property prices are being kept artificially high by very low borrowing rates, and as we have seen from constant Government efforts to increase the level of home loans.
As property prices are still well above the long-term average of the earnings multiple (and in a recession they should be well below that), then the Government must be crossing everything it has that the economy will soon pick up. Because if it doesn't, and house prices slide, then we taxpayers will be looking at a massive loan default bill.
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Robert,
You`re not telling us anything new here as we have all known for a while now that taxpayers on both sides of the Atlantic will be left holding the can for all of these bailouts and plans.
Futures in the US are up signicantly this morning but on the whole there is nothing that Geithner has done up to date that has instilled confidence.
"The Geithner Plan FAQ"
http://creditcrunchedoutinuk.blogspot.com/
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RP, your last two paragraphs hide a serious and sinister truth.
Public anger against the City banking community is so great it may spill out onto the streets.
Also, there are some very extreme parties to vote for.
The government needs to act against these bankers.
The 90% tax on bonuses in the USA is a good start.
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This action (US and UK govmnt toxic swaps) is just diluting financial sewage. The quantity of sewage still remains and the cost has to be bourne by the public either via increased service or product costs as customers or as taxes on the public.
There will be some limited costs absorbed by the banks and financial outfits and their employees but the bulk of the costs will be bourne by public. It is difficult to understand the arguement for not taking some financial processing out of the private sector at this stage.
Either financial processing is a fundimental infrastructure in a modern economy or it is not. The argument for intervention was effectively that we could not function as a economy without the banks. That points to the banks being infrastructure.
The presumed objection to keeping day to day financial processing in a psuedo private sector is the desire to keep PSBR or national debt lower than the public ownership option. This is a load of baloney as usual. As has been shown by PFI and PPPs cutting these sort of deals and sidways movements to move liabilities into a supposed safe zone does not in anyway diminish public liabilities. In fact what pseudo private risk does is put total project life costs up because shareholders require a dividend and so private businesses demand a profit. At the slightest risk or difficulty the downside is flipped back onto the public.
We appear to be being suckered again without any real argument from the media or alternative proposal from any politians. The opposition parties have been largely ineffective in this area. The current strategy remains capitalism on the up side and socialism on the downside and is being institutionalsied into the economic fabric. It is highly dubious and the whole basis of the action is shorttermism, the very motive that gave birth to the current problem.
The banks have repeatedly given the message that they have no intention of listening to customers, working with due diligence towards shareholders, or responding to government policy, or even paying UK corporate tax. In what way does the FSA or any other serial failing body really think they have a working solution now which is any different to previous protestations of skilled control. All we have is assurances and projections of sucess.
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Its a shame this was never done as a commercial venture by the state.
Providing insurance based on a realistic valuation of the assets, for a profit.
i.e. making the banks and bankers pay for being supported.
No doubt assets are being insured at overvalued rates (the banks being "unable to calculate the risk properly" to acheive a proper valuation that would crystalise the losses); meaning yet another hand out to the banks.
the US and UK are now over-committed to the bail out approach; too tied into the banks, so they're forced to pump more and more money in or lose a large proportion of the finance they've already unwisely put on the line.
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A very fair and balanced comment Robert.
The political and social fallout is going to be a whole lot more extensive than the simple bailing out of the banks through capital support and insurance.
The reality that the credit crunch has decimated whole areas of the economy other than the banking system is begining to generate some very angry people who are going to express their feelings in the ballot box at the earliest opportunity.
Politics has at long last taken on a reality grounded in the objective conditions of society at large. People are going to be looking for solutions to their unemployment, their inability to pay their way, their lack of prospects and their dispossession. The subsequent political expression of this anger could become very ugly. There has been a fundamental failure of the financial system and the authorities must identify and prosecute those responsible. Nothing else will do.
I do not think the British state is intellectually, emotionally and socially aware of the future we all face. I see over time a significant and critical change in the nature and content of the political class. I see a greater demand for equality, austerity in public affairs and fair shares for all.
For this to be an easy process all depends on how ready the great and good are for accepting these inevitable changes. So far all I see from them is a bland refusal to face up to the stark and harsh reality of our economic circumstances. For as long as there is this continued denial matters will not improve, they will only continue to worsen.
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Don't you just love all this macroeconomics, grand jestures and big numbers.
Down here in the duck pond we are bobbing up and down. Turnover is currently 50% of what it should be. I have a member of staff leaving that I will not replace. We keep chipping away at our late accounts with suppliers. There is still too much too late.
To move things on we asked the bank for a few pounds extra for just a few weeks on a reducing balance to help maintain business relations and facilitate trade.
Unfortunately the bank is unable to help. The referral to head office brings no response. (I mean no response, not even no.)
I think our committed overdraft guarantee gets in the way. We are just not toxic enough. None of the government schemes appear to "... match a company in your scenario....".
Just going to have to wait............ and generate our own rescue; but it takes time under these circumstances with overheads chewing your working capital.
The current commercial lending gridlock is real, persistently surviving these big schemes vaunted to save us in commerce. Clearly the banks do not feel fixed just yet.
Not all bad news though. This quarter's interest charge from the bank is also 50% of the last one! Good.
For us, a three month lag to see the first positive effect of falling interest rates in our business.
Just need it on the customer side now.
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In fact, just "posh" fraud.
Similar to the "posh" fraud on MP expenses.
Can anyone else detect a "less than posh" social uprising on its way?
If I hear another politician supposedly acting on behalf of "hard working families" I will scream!
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This is the economics of the madhouse. Each new initiative is gravely discussed as though it is a stand-alone and neatly compartmentalised effort. Nobody seems to be saying: "Yes, but what is the cumulative effect of all these initiatives?" And the answer is that they are all designed to make it look as though we can conjure away the $500tr of gambling debt out there (which is what these derivatives are)and make them safely disappear. It cannot be done. The numbers are against its succeeding, and all that is happening is that we are being impoverished to the point of no return. It is sheer, unadulterated, insanity and a responsible financial journalist should say so in unequivocal terms.
While this smoke and mirror show takes place on one stage, on another the printing presses are set rolling to print trillions of dollars of make-believe, helicopter-drop, money. At the same time on yet another stage the government rolls out guarantees that depend on banks lending money the governments know the banks haven't got, and promising rhubarb, rhubarb in every which direction to manufacturers etc. Will it never end?
Face it, the plug has been pulled on the dirty disgusting schemes that have been run by governments, businesses and banks ever since the end of the last world war. Now we need to let the dirty water run out, scrub the bathtub and begin anew. But how?
Conventional wisdom has it that we pass a few regulations, dish out some money, and start the whole cycle of "growth" all over again (Read "greed" for "growth"). Alas, it is not going to happen. The resources of the planet have been plundered to exhaustion. We will NEVER get back to the old days.
So instead we have to recognise that things are going to be a lot tougher than we ever expected on any previous scenario. A whopping 70% or more of all spending is consumer spending. Barely 30% of spending is on the necessaries of life, and a lot of that is dodgy anyway. That means that roughly 70% of the workforce will be unemployed and can never hope for the sort of job they had in the past. Benefits will cease to exist and only the barest necessities will survive as services. Everyman (or woman) will have to take responsibility for himself and his family. His fervent prayer will be that he has clothes enough to keep himself and them covered, and food enough to feed his family. The allotment will become, not the idyll of the idiosyncratic, but the food bowl of the family. People will have to learn crafts, and produce useful items that others want to buy. A new culture based on thinking first of others, honesty, hard work, and love of family and God will have to be born. If not, we will tear ourselves apart in a struggle for survival in which few will actually come out of it alive.
The wheel has turned full circle and we will soon be back to the subsistence economy that we despise as the feudal era. In fact there is a great deal to be said for it. It was not organised on the principle of personal gain. That is an idea that had not taken root then. It was a world that was inseparable from the realities of the environmental, social and religious needs of the time. The profit motive did not exist. People worked together because they had to in a harsh and difficult world. We are often told that the profit motive is as old as man himself. It is not true. The profit motive is only as old as modern man, and that is not even as old as the printing press. To the Pilgrim fathers, for example, the idea that gain might be a tolerable goal in life would have been seen as a doctrine of the devil.
That is where we have to go, like it or lump it. Many will not like it, will kick against it. God help us all.
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Robert,
Is Mr Brown aware that the banks are taking the rise out of him with impunity. I am an SME who has the possibilty to expand my business because we supply, indirectly, the supermarkets. When I approach the bank for extra short term funding (five days to pay duty and VAT on imports) I am told they will not support us because we do not fit their criteria for lending.
Surely this attitude delays the recovery in the very sector which will drive the upturn, SME's.
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This comment was removed because the moderators found it broke the House Rules.
Put another way, every taxpayer is enslaved to the bankers for generations.
Before this mess people could, in a sense, opt out from being mortgage slaves, by putting money away and only buying what they could afford - including houses.
After a decade of short term binging and self gratification, everyone suffers through decades of additional taxation (or looming hyperinflation) and the bankers get their bonuses because they're special.
The question is, was it deliberate on the part of some bankers?
http://www.commondreams.org/view/2009/03/22-6
This article from the US expresses the anger that is felt over there and also illustrates that we are the mercy of the bankers because their crimes are too difficult to understand. It also mentions that slaves weren't allowed to learn to read or write and in a modern parallel our financial illiteracy is costing us all dearly and will enslave us for years.
I wish there could be a little more anger here but we're too busy with following celebrity loves and deaths to be bothered.
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I thought that if you bought something, wrapped it up and sold it as something else, that was fraud.
AAA and Gordon Brown don't mix. You can fool some of the people all the time but not all of the people all of the time. We already have a 1 Euro pound. Guess what it will be this time next year.
Telling people to be prudent and not borrow money to excess. Er what is Gordon doing?
Labour have taken us back to the 1970s, perhaps even 1940s: tax and waste. It will be dig to survive. Maggie where are u?
Will Gordon get rewarded for failure? and a pension?
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I don't understand the reluctance to nationalize a bank. There is a very real danger that the new lending policies will cause many good businesses to fail due to short term cash flow problems. If the government owned a bank these previously good businesses could seek finance there, moreover the cost of making that workforce redundant could be taking into the equation. While we plough todays and tomorrows resource into this grand bank saving plan we run the risk of only having banks and possibly MacDonalds left. And hell if MacDonalds will take a giro, who needs a bank.
Money unlike energy can be both created and destroyed, while an asset is only worth what someone else is prepared to pay for it. It has been shown that it is possible to play the market without having any money, provided you sell at a profit before the accounting period closes, done on a grand scale asset values were driven sky high, creating money, but only for the one who gets out ahead of the curve. In many ways the financial system comes to resemble a multi player game of "hot potato" or "musical chairs" is you prefer. Confidence and greed provide the impetus that keeps music playing, now the music has stopped, and the potato has been dropped, the greed looks criminal, and the confidence breathtaking.
So does the AAA credit rating matter, well yes, the financial dominoes are a tumbling, US and UK efforts might be able to halt the process, or isolate a section. However, if a state the size of the UK became insolvent there is no telling how deep a recession could go. Perhaps it could even eliminate third world debt, after all where no financial system exists there can be no debt.
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Robert,
If what your saying is true, then, in a few months time when the Option - ARM and ALT-A loans start to go sour (Think sub-prime all over again). It won't be the banks and insurers that topple it will be the U.S and U.K.'s economy as a whole. Probably the death of our current Fiat money system due to hyper-inflationary pressures.
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Surely the best long-term solution would be to bring the Federal Reserve back under public control as it is currently a privately owned company that loans money to the government at interest. This may help to negate the bankers ability to perform such wreckless actions and provide some transparency in the future. Additionally, this would also reduce the government spending by allowing them to control their own money supply and thus removing the Federal debt. The knock on effect would be that loans would be cheaper and taxing could be capped and eventually removed completely once the federal debt has been repaid! The US government are already borrowing money to cover the interest alone! This is the problem with fiat currencies (especially combined with a private central banking system) they have and always will END in the same way!
The deliberate actions that have lead us into this situation, to me, have clearly been engineered to push us further into globalisation of the economy and pehaps a 'One-World' currency. There is already talk of a world bank for this very purpose.
http://www.freenation.org.uk
If a government does not have control and it's own currency they leave themselves and the public open to expliotation by greedy bankers. Do you think that Wall Street cares about the common man? And when things go 'wrong' who do you think will foot the bill? History has already shown us the answers yet they are allowed to repeat their mistakes and get away scott free!
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I've been trying to equate everything into more understandable terms, regarding what silly things that governments, regulators and bankers have been up to.
Imagine you're playing a game of Jenga against the Devil. If you lose, the Devil takes your soul. If you win, you walk away free. Every single move you take either makes the tower a little more stable, or quite unsafe, but you have to make a move. If you don't understand everything about how the tower works (i.e. its too complicated to comprehend) you don't stand much chance.
How much chance do we stand, considering the complexity of the financial system, which has been teetering on the brink of collapse? As its made up of these dodgy deals, CDOs and rather strange and tenuous ways of robbing Peter to pay Paul, not a lot. Hence, why we are treading carefully now.
Hopefully common sense will prevail in a new global financial system.
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Robert writes: 'There's another important implication of the extent to which we've mortgaged our futures to save the banks.' And: 'Their argument is that we're all in this together'.
We, the nation, have not voluntarily mortgaged our futures nor got in this together. Please, 'we' have been put into this dreadful situation by the failings of the senior regulator of the Treasury, the 1st Lord of the Treasury (i.e. the Prime Minister).
He has committed the Emperor of Cock Ups which has removed the necessary credibility that any 1st Lord of the Treasury requires to be able to remain in post.
As soon as Germany invaded Poland, I understand that Neville Chamberlain was one of the first to realise he could not continue after his 'peace in our time Munich speech'. It is clear from Gordon Brown's "golden age" epithet 2007 Mansion House speech, that he had not a shred of insight into how close he had taken the nation towards the mother of financial icebergs.
It gets more breathtaking each time his words are read: "So I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London....And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created."
SOME NEW WORLD ORDER!
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This latest essay of financial-techno-speak reads like so many others. It would have been easier to say that the financial world in putting a new twist into the grotesque knot it has been creating in order to further protect itself at the cost of the rest of us.
The banker et al must be protected at all costs (to the rest of us)
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Robert, you wrote: 'we are all in this together' and there should be 'profound gratitude' from the bankers.
That would be wonderful indeed if the mega-rich finally acknowledge the error of their old ways. It would be even better, if those with a profound insight in how the parallel, shadow banking system works (bankers, lawyers, billionaires, etc) help the politicians to establish financial transparency worldwide on where all the profits of those boom years went.
There is more than enough capital available globally, it just is currently hidden away and often unlawfully in the wrong hands. Without cleaning up the world of tax havens and offshore banking, as well a tighter controls on hedge funds and those financial businesses who serve anyone with money, no questions asked, it is difficult to see how a lawful banking system can be sustained. The moral hazard of fast and easy money will corrupt most bankers, unless banking is firmly regulated and bankers are subjected to law and order, just like other ’normal citizens’.
You can find many more details on global tax justice in my blog:
http://globalinsights.wordpress.com/
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"The British and American governments are exploiting the perceived strength of the public sector to correct the failure of markets to channel finance to where it's needed."
The markets are not failing to channel finance that exists. There is actually a SHORTAGE of finance. This shortage has been caused by losses made on bad loans. The losses are real. The governments in the US and the UK, ultimately, are transferring these losses away from banks and their shareholders, to taxpayers. A kind of gift from the taxpayer to the shareholders in the bust banks, who should be losing their shirts.
"The US and UK public finances are in a dreadful state, because of recession-induced collapses in tax revenues and the cost of measures to stimulate our economies."
The US and UK governments were running big deficits even in the boom years (Gordon Brown called it "Prudence") so it's hardly a surprise that the finances are in a dreadful state now the boom is over, especially with the governments giving gifts to bank shareholders.
"The US and UK governments have a very delicate balance to strike between supporting the banks and overstretching the public-sector balance sheet."
Words (almost) fail me. To even suggest there is any semblance of balance left is ridiculous. The balance sheets of the nationalised banks in the UK now dwarf by many times the balance sheet of the public sector. Gordon the Gambler is playing roulette with all our futures.
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Banks made dubious (bad) loans worry free because they had no risk of loss as the loans were guaranteed by the monolines.
Now the Government has become the bank's new monoline.
What is stopping the banks from making more dubious (bad) loans with their new monolith taking all the risk for them?
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The public are being expected to bear a heavy burden in the form of future taxation in order to simply preserve the system that got us in this mess in the first place.
Nobody seriously believes that any reforms will be effective. The bankers will find a way to pay themselves a fortune with or without bonuses.
I think that in return for losing all our future prosperity we should have the right to expect more than just a beefed up FSA. We should expect a complete change in the way money is created and administered.
Such a change would take control for our money away from bankers, and demand the emergence of new political parties which are not tainted with the corruption and poor judgment of the past.
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So the US government will be loaning money ('providing finance') for other institutions to buy up bad debts from companies that incurred them by buying up bad debts from the companies that loaned money ('provided finance') to people who couldn't afford it.
Crazy - isn't just excess lending that got us into this trouble in the first place?
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Yes I agree, GDP is the underlying asset of governments acting as monolines. The difference this time is that as far as we know there are no novel mathematics of probability associated with this AAA government debt.
However, the reason why the original monolines were so successful is that the mathematics based itself on evidential long term stability. It also assumed that finance company products would be sold responsibly re-enforcing the long term position. It really was a win win situation that could not go wrong hence the AAA rating.
With the UK government constantly crowing about sustainable growth, the best for two hundred years, it gave credence to and re-enforced the assumptions of the mathematical models.
I sense your reservation about government AAA debt. It is based it seems on nothing more than the same optimism that caused the original bubble to grow. Is it reliable? I think so given the long term evidence.
However, it is public finances, the cost of running the states infrastructure, a cost to nations that will undermine credit ratings if allowed to grow too big. At some point somebody will have to cry enough and it won't be the electorate nor the government.
It will only take a political prick to burst the bubble for us to see a cascade of failing economies reduced to borrowing from an already overstretched IMF.
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If I read this correctly Robert, The US are going back to their original plan A that Brown talked them out of before, when he sold them the "do it my way" line. They changed their minds did it Browns way, he claimed to have saved the world, it didnt work, now they are back to what they thought would work all along, I.E create a toxic bank.
Surely now this puts the final nail in the, so called saviour of the worlds', coffin.
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a new and exciting week in prospect me hearties
just heard Stephanie F on News at One saying that the Geithner PPP on toxics is effectively offered the private buyer of a toxic asset a 94% incentive (the US govt picks up 94% of the risk)
the Dow J will presumably go way up but only in the short-term; this does not back-stop the toxic problem or solve any of the mess, IMO so I would go with Krugman in the NY Times, as #12 Goffee refers to; it will also be seen as more 'socialisation of the risk' and the anger in the US is reaching a level where Obama may not be able to keep Geithner in past for much longer; US taxpayers may see this as one bail-out too many and the Obama administration are running out of ammunition fast now
the situation is on a knife-edge......
#22 skynine asks why the British should underwrite RBS losses but then why should the US taxpayer have paid out $150bn SO FAR on AIG losses which were almost entirely the result of activities by the AIG outfit here in London at Curzon St in the toxic capital otherwise known as Mayfair? the answer is that all ordinary taxpayers everywhere get to pay for the privilege of the last 10+ years of excess; which is why the Germans are particularly annoyed with the Anglo-American model, though their own banks were not playing Snow White either
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Hi,
"low-quality subprime loans were sold as AAA investments - the highest quality investments, up there with the sovereign debt of the richest nations". Robert people have said this months ago. The real reason for this mess was Standard and poors and other rating agencies that rated these instruments at 'very safe'. All banks at least those that train staff in financial technology were caught out by this. The punishment is that many bankers(low and high) have been slapped away from the troff just when at the moment they were feelling safe. So let Sir fred keep his pension and his knight hood at least for the previous ten years of service. Tell the mob to calm down and treat others like you would want to be treated!
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The taxipayerrs have been turned into sleepers and tied to the monolines to allow the HIDDEN off balance sheet Dorian gravy train epicture to derail to infinity and beyond ,not even the reformed keystone copse planktown from the sfa that ran out of sherwood forrest can save us now ,we shall just have to lie back and think of inkland whilst the merrymen watch the engine QE'errs have their way with every bottom line that gets in their way out way.
Nothing beats playin english
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So finally we get to the end game... The Credit Rating Agencies are the Evil ones.
If they had valued properly, then it's likely that the originating banks that packaged the tranches of CDO's would not have been able to sell them on to other banks due to the lower rating and higher risk they posed.
We should Nationalise the Credit Rating Agencies, they should not be private companies as there is an obvious conflict of interest.
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And so it goes on and on and on.
No-one seems to know just how much of these toxic assets are in the system. Every month that goes by more and more of these now valueless assets are discovered and have to be bought by the governments concerned to keep increasing numbers of companies afloat.
There is no way that the money can be borrowed to take these off company balance sheets so more and more funny money will have to be manufactured which will eventually inflate them out of the system.
Does anyone know what the eventual outcome would be apart from hyperinflation and poverty for the people whose incomes pensions and savings lose their purchasing power.
Does anyone even understand what is going on and what horror stories lie ahead?
Such fuss that the tories may not be able to keep to their promises of 2007.
Who in their right mind would even try and what sane person would really expect them to?
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It's surely only a matter of time before the British government defaults, AAA rating or no AAA rating. Whilst the people of Britain were willing to endure about 30 years of high taxes and reduced public spending to pay of the cost of WWII (although not, curiously, willing to similarly pay off WW1) people will not accept a generation of high taxes to pay off the gambling debts of a few rich bankers.
The mainstream political parties show absolutely no appetite to reign in public spending to match tax receipts, and are hardly likely to reduce it by a substantial fraction to accommodate the losses on the so-called asset protection insurance scheme. The inescapable conclusion is that the govenment will default.
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Have all the posts above condemned the latest financial/political twists or have I missed one?
To be very simple I will divide society into 3.
1. Those who have over borrowed in the past - banks will not lend
2. Those who have been prudent - don't want to borrow simply because they have a short-term benefit of low interest rates. Preference is to pay off debt because they know a storm is brewing. They will continue to be prudent
3. Those with savings - income and spending have been cut
Industry needs these people to spend but we are all constrained.
So when the banks get their money who of the above are they going to lend it to? Perhaps lending it to each other would be a good idea.
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I don't understand this monoline insurance stuff. How can you insure against a company the size of Citybank or RBS defaulting? These insurers could never have enough money to pay out if an organisation with > £2tn on its balance sheet failed. Also, if one of these huge companies failed and its assets flooded the market driving down prices then all the other huge banks would go bust too.
This is the conventional wisdom and is why governments were told they needed to bail out banks. It leaves the question: why would anyone buy insurance or a credit default swap or whatever against an event that the insurer was obviously unable to pay out on? Similarly, isn't it fraudulent to sell insurance or a default swap or whatever on an event which if it happened is obviously so large that it would destroy the system and so you would never be able to pay out?
Were a lot of banks were buying and selling useless insurance they knew could never pay out because pretending they were insured allowed them to take on more risks and make more 'profits' and bonuses.
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Firstly, the very fact that the US and UK banks STILL have AAA ratings show the utter worthlessness of the rating system. No one could look at the situation these institutions are in and sensibly rate them triple 'A'. Put simply this proves the fakeness of ratings system.
Secondly what investor in his right mind will invest in these toxic assets. They have proved impossible to value and ultra high risk. They have been, IMHO, utterly discredited as a sane investment. No one will touch them with a barge pole, WHATEVER fake rating the new packages are given. Creating an artificial market for them is ludicrous. No incentive would persuade me to buy a hand grenade with the pin missing.
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Lol,
As if Moodys or SnP will shoot themselves in the foot like that. I'm reminded of the IBM exec who during their heydey of the 1970s-1980s blustered "we're not an American firm, we're IBM USA, IBM Chile and IBM China". The response from many commentators at the time? "ok, so when you run into bureaucratic bother in Beijing, go call Deng Xiaoping for help".
The problem with predicting in these extreme situations is that it is politics and not economics which calls the shots. It's not a matter of private investors losing confidence in the USA. As long as the Western Central Banks keep buying each other's debt the 'money' will be there. We'll have inflation but that's for next year's blog.
If you bet against US debt you may aswell bet against the modern capitalist system which feeds you. Exercise in futility, like booking profits on CDS trades referencing subprime.
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This post raises some interesting philosophical questions about how governments finance themselves. Oddly enough, taxation, selling assets and printing money are not that different in outcome:
http://www.knowingandmaking.com/2009/03/state-assets-and-importance-of-being.html
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#7. MrCalmdown wrote: "The amount lost remains the amount intially lent. I think that in the atmosphere of panic that prevails we are in danger of multiple counting these bad debts and talking ourselves into thinking the crisis is evn worse than it is."
Unfortunately its not that simple. Remember that banks "make money" by lending more multiples than the original deposit. This is supposed to be supported by the asset that backs the lending (e.g. the house is the asset for the mortage). This growth of money is needed when as a country we are generating real wealth. When you pump oil out of the north sea, it generates wealth that didn't exist before. But when you just say a house is worth twice what it was a fews years before, then you have a bubble, fictional wealth. Now it is coming crashing down we are seeing there are layer upon layer of debts that need to be de-leveraged.
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The people who are really paying for this are us through our pension funds.
The amount the taxpayer will lose (in their capacity as taxpayers rather than pension savers) should be nothing, providing the country doesn't go bust which it will do if the banking system is not supported. The taxpayer may well make tens of billions out of its bank shareholdings in due course, providing it is not too incompetent in its management of the banks.
The taxpayer will though lose as the government continues to fritter money away on unnecessary and/or expensive public sector spending e.g. via expensively financed and managed PFI projects etc - but then it would have done anyway.
Why does it take action in the US courts for UK pension funds to seek justice, after being misled by bank directors, bank auditors, and suffering the incompetence of the FSA, BoE and Government (which also allowed misleading statements to be made after the crisis had well and truly started).
As Portillo intimated on Sky yesterday he suspects the reason is linked to the fact that the justice system in the US is independent of the Government, with lawyers seeing a good chance of success in the US compared with the UK.
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And now we need a new number.
What's the word for a thousand trillion?
We've done the millions, billions and trillions.
We'll have to start inventing new numbers, the rate these bankers are going.
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From Mr Geithner's article, it seems that the US scheme will actually attempt to find a market price for these assets. They will be auctioned off the the highest bidder with the US Government providing 50% or so of the funds to whoever wins the auction. Well OK, I'm not sure how much higher the price will be compared to just auctioning them off without the Government contribution, but I suppose at least the US taxpayer will probably not make a big loss on this.
The UK scheme on the other hand seems much more worrying. Our Government is "insuring" these assets. But how is it putting a valuation on them? Are they being insured at face value or "market" value? If it's at face value, then we may stand to lose a large proportion of the sum insured, much more that ther 10% first loss that the banks are expected to take.
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This plan by Geithner is just another fraud to be carried out. Just heard at the time of writing this post that the US Treasury has said from this point on they will no longer refer to toxic assets as "toxic" - they are now to be called "legacy assets".
Who do they think this fools???
This plan is the same original plan that was first presented by Hank Paulson back last fall. Geither was heavily involved at that time and has been desparate to get this in place to help his Banker and Wall St. cronies. The Bush Administration decided at the end of last year not to proceed with the plan as it wasn't going to work. Now Obama and Geithner are going ahead with it.
Should we take it as they are all out of ideas then?
"Geithner's Five Big Misconceptions"
http://creditcrunchedoutinuk.blogspot.com/
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I see that the Dow and most other markets are up up and away in appreciation of the latest govt capitulation to the banks and private financial powers
As is the growing anger amongst taxpayers in US in particular; the higher the market goes today/this week the more the anger
have a look at this link, and particularly some of the comments from the posters; the last one suggests that this bail-out will encourage 'bait and switch' deals and will cost the US taxpayer approx 70% of the total loaned for toxic asset purchases
http://www.theglobeandmail.com/servlet/story/RTGAM.20090323.wrgeithner23/BNStory/Business
why the US and UK govts' absolute refusal to nationalise a bank??? as a result they are risking turning us - our countries - into versions of AIG
Robert missed the biggest scoop of the year on the Barclay's SCM situation which the Guardian have brilliantly exposed
I guess he could go up north and hang around outside the Dunfermline Building Society vulture-like, but why not do some proper investigative journalism of the ties that bind our political parties to the big banks and vice versa
Oh and there is always the auto industry that is now only week's away from collapse........ and apparently unworthy of help because they make things and employ engineers and manual workers and have unions; how about a report on that soon?
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#1 crunchedup:
"who cares about this AAA rating at this stage - the guys who give the ratings should be in jail not just the bankers"
------------
Absolutely! Who rates the Rating agencies? Qui Custodis ... etc?
I rate them as Rubbish.
AAA+ CDO's? What were they doing?
And they were getting paid for these 'services' by whom?
Reminds me of the FSA.
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Robert
I'll try and get through moderation this time..
Your quote:
'Or to put it another way, the productive potential of the British and American economies is being mortgaged to prop up the banking system. The banks are being kept alive by our promise to provide an indeterminate proportion of our future economic output to make good the banks' future losses.'
Or to put in another way - Has anyone got a handle on the global money supply? I still think Goondog Trillionaire Brown's put the UK taxpayer in it for two or three trillion - not just the £1.3 billion reported everywhere.
WHY? Partly because the UK/global bailouts are out of kilter and even if the raw money figures add up now - all the differen 'promises to pay the bearer' will not stack up globally if the bail out means that huge borrowings of OVER-PRINTED currencies are created to finance the previous losses.
There's a lot we're not being told - presumably this is all be discussed BEHIND THE SCENES by the 'smug survivor' faces at the G20 meeting next month?
Now that's not being even slightly rude to anyone in particular is it?
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Robert. Fair dos, this was good a article, and informative.
This had better work. Even if we vote out Labour, Cameron isn't going to make any difference if his attitude is anywhere near Boris's. Surely, BJ can't be serious when he says that the City is important for creating jobs - jobs for the City yes, but not for the rest of the country. Second thoughts, Boris's attitude is usually a long way from DC's.
Lots of estate agents are telling me they're busy since they came back from Christmas. Starting to sell lots of small stuff that's been on the market a while - higher priced property is taking longer.Watch for the next summary of mortgage approvals.
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I'm no financial whizz, but at the risk of repeating the same thing others have said, and then I wonder If I can work it out, the assembled great minds of Government, financial institutions and common interest groups would have taken the same 2 minutes to work this out.
Who assembled the CDO's ( The Banks amongst others)
Who gave them AAA ratings ( The paid for by the banks rating agency )
"The treasury is bailing the banks out" ( wrong the common man and woman is through increases in taxes and debt stacked up for years, because the greedy rich ones already drew their money out into tax havens, the evidence is there )
To say we want the gratitude of the banks ( no we want a bank run they way they used to be run)
I heard today that the debts accrued by these CDO's will be sold to the private investors because they have no accurate means or working out wether it is worthless or worth anything, because no one is buying them and even if they could they can't get the loans for them.
So all the investor needs to do now is invest 6% in the dollar and the rest will be covered by the government , and if they do this , then this will get this debt of the books and the banks can go back to lending and the economy will grow, and then bonuses can be paid and Gord and the rest can say "see we were right"
WRONG
They should never have bailed the banks out, the debt is still there, if they had let the banks go, we would not have the debt now, sure there would have been a lot of firms go bust because of it, jobs lost etc, but we wouldnt be in hock for the next 30 years and that is assuming this all works
So we will keep going round in circles until all involved are jailed for a very long time, their assets seized, and all these secret groups and groups of self interest are disbanded to have no influence and get back to a more simple transparent way of life.
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DEAR TAXPAYER
whilst I abhor the greed of the bankers and wish to cancel their bonuses, I find myself stuck in London N16; it is about to rain and I left my umbrella and Oyster card at home in Camden; although I could buy another Oyster card and umbrella for c £10 and return home I propose instead to stop at an old girlfriend's house for a couple of days where I can do some work whilst waiting out the bad weather; this will cost no more than £500
I trust this is prudent and will send along the bill in due course
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Unfortuneately some seem to be more into working together than others Bob
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Too late, suckers.
If anyone seriously thinks that the bonsuses/brown envelopes, etc, already paid haven't been immediately squirrelled away then prepare for a disappointment. Huff and puff all you like, the money's gone.
Legislation to recover it though punitive tax? Hilarious. Will many of these rats feel obliged to repay their bonuses? Er, no. Will the so-called "bonus culture" be stamped out. Umm, no. Frankly, the bonus indignation is an irritating smokescreen that is obscuring debate on the consequences of the financial black hole that we are now careering into.
The important question is this:
Will investors continue to accept on the same terms triple A rating for junk just because the UK government says it will underwrite it (like the monolines)? The answer is: no, they won't. They will expect to pay less for higher returns on bonds. And the screw is already starting to turn.
The UK is being screwed first. The next couple of weeks will be very interesting. Expect an earlier election than feared. It will inevitably follow the devaluation of the pound.
Lots of luck.
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Attention moderator: Pull your finger out!
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#39 OhRogan
An EXTREMELY pertinent point.
Some people seem to be getting into a mindset that could be summed up as, "Don't know what all the fuss is about, it'll all be fine in 12 (18 or 24)months time".
I personally think there is still serious harm to our socio-economic stability that is yet to be revealed.
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Do we the tax payers have a new role?Are we all monoline insurers?If so do I get a fat bonus?
It's not worth the paper it's written on ...comes to mind.
May be AAA should mean (absent any assets)
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May we, the public, have the last laugh, soon ...
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There are actually quite a number of people who know exactly how bad the numbers really are; what %age of these stupid pieces of paper are likely to default, what the true unemployment position is going to be, how far the currency is going to fall and by how much your pound is going to be devalued.
The problem is that they don't trust the public to behave themselves when the truth comes out, so we are drip-fed tiny snippets of partial truth and told 'green shoots' are just around the corner.... to keep us in line.
At some point the public will just decide that they won't take it any more, and the rule of law and respect for the lawmakers will fail.
What Frank Field is hinting at, is very probable.
The Very Dear Leader had better think very carefully about the path he has taken us down; these are very high stakes indeed.
If he insists on deceiving us too much, almost everyone in the country is affected. Employees, Savers, Pensioners, the Youth. Once they reach their respective tipping points, a scowl and a rant from Mr Brown can't undo the damage.
His party should be considering his position -and quickly.
Time to go Gordo.
Regards,
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#64 stevewo:
"And now we need a new number.
What's the word for a thousand trillion?"
-------------
The Greeks new how to denote large numbers:
Kilo 10 to the power 3 (thousands)
Mega 10 to the power 5 (millions)
Giga 10 9 billions
Tera 10 12 trillions
Peta 10 15 - anybody know?
Exa 10 18 "
Zetta 10 21 "
Yotta 10 24 "
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Robert,
I can assure that, should you approach the Banking sector [and one can easily and quite rightly surely assume that an approach to one major Bank, will be as an approach to all Banks, and a Bank with a majority holding being held by the Public, via reason of Collosal Public Funds Bail-out/Credit Injection, would also be a direct approach to Government as well] with a modest multi-million pound plan, which IT is Guaranteed to Return/Pay Back to the System, the Loaned/Invested Funds [Funds which we must remember, have been Invented and Provided to these Third Party Institutions, for just such an Entrepreneurial Eventuality] with Significant Consumer Spend which Energises and Maintains and Sustains and Seeds Umpteen Other Similarly Energetic Novel Programs from and for Other Third Parties, which then will Feed their Investments in the Novel Host Program into the System thus Enriching and Increasing ITs Core Store and Raising ITs Credit Potential/Future Mutual Worth, you will be Amazed at the Sloth of the System, and the Lack of Feedback and Industry from them, which can only be a Dearth of Intellectual Capacity and Moral Depth for the Sector doesn't actually Do or Make anything and which we can physically purchase and which would justify Unseemly Delay with the Money/Credit Invented and Currency Given/Loaned to them for Distribution to Enterprising Spenders with Novel Seed Programs for Business and Industry Driving Economies for Power and Control Systems, does it? Or is the plan that we purchase the Credit they have been given and that is their major Interest in being Given Billions to Energise Economy Drivers and Power and Control Systems Controllers?
I don't think much of that Pathetic Parasitic Business Plan. It'll never get a Look in from any Bank that I know of, for it Offers Absolutely Nothing of Any Value at All.
Or have I missed something?
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Thanks for the post Robert.
Well said.
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The toxic debts are really part of the smoke and mirrors that characterise economic policy at the moment. The truth is that the G20 countries are, for the most part, insolvent (I exclude China and Japan). They are faced with the stark reality that there is no way they can pay their debt.
The honourable thing to do is to state so categorically and announce that they are defaulting. But there is an alternative to the honourable way. It is to print money, which is nothing but another way of defaulting because it renders the debt essentially valueless by the debasement of the currency. That is the road Britain and the US have embarked on - in the case of the UK slowly, slowly; in the case of the US at full tilt.
And to detract from their disgraceful act, there is much argy-bargy about credit default swaps, monoline insurance, et al. It is all deceitful and disgraceful.
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Any investment bank using terms like AAA and Tier 1 seriously need their heads examining. Maybe those terms still have some meaning in the warped environment in which they work but they certainly won't fool me.
There is no pecking order for investment banks now, they all occupy the same position of equal last place.
They need their collective heads banged together for as long as it takes until they show some collective humilty and responsibility.
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If the US govt is covering 94% of the price of the 'legacy loans' and only asking the private investors to stump up 6%, where does that price the assets? What would be the loss if all the loans were marked down by 94%?
Is this an indication that 6% is all they can realistically ask for with a straight face or have they calculated in a profit margin for themselves - and is so, at what level?
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BBC News: US Unveils USD 1 Trillion Toxic 'Asset' Plan.
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The Bank for International Settlement has the numbers for derivatives at over $500 Trillion.
This plan seems like a drop in the ocean.
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Robert,
This is absolutely terrifying. Until you explained it in these stark terms I had not understood the extent of our exposure as a country.
The potential consequences of a loss of confidence in our ability to make good on these guarantees are very scary.
Thank you for making the dangers of this policy clearer.
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"To those that have shall be given and from those that have not, even the little they have shall be taken away"
This is the First Rule of Government. Practiced joyfully by every self serving back-bencher - whatever
their Party- and with great gravitas by our unelected Leader, the son of the Manse.
It is disgusting to see Dow et al rise in happy anticipation of more Government handouts of public money.
But it only rises because it clings to a hot air balloon, and quite soon, as more and more hot air is pumped into the fragile vessel in an abortive attempt to keep it air-born, it will explode and crash to earth.
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what puzzles me is where are we going? i mean we keep spending all this money to the banks to recapitalise/promote lending , but for what reason? Surely not to make house prices rise, or to make everyone take on even more debt, so what exactly is the point of all this? Can some one tell me what the supposed outcome of spending all these billions is......
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66. At 2:23pm on 23 Mar 2009, jd6969preston wrote:
Just heard at the time of writing this post that the US Treasury has said from this point on they will no longer refer to toxic assets as "toxic" - they are now to be called "legacy assets".
Who do they think this fools???
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Ha ha ha ha ha ha!!!
Remember that there are politicians and bankers involved in this renaming process and they think that we are ALL fools!!!
As my old local barman used to say:
'you can polish a t+rd for all you like, but at the end of the day, it's still a t+rd, just a shiny one'...
I think he was talking about renaming the old second Division into the 'Coca Cola Championship' but it seems more apt than ever when talking about these clowns.
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..."All new members are pre-moderated initially, which means that there will be a short delay between when you post your comment and when it appears while one of our moderators checks it."
I AM NOT A NEW MEMBER....SO WHY THE DELAY?
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Robert,
Here's a thought for you, when (not if) the UK Government is downgraded from it's AAA status by these same monoline insurers, then what difference will it make?
This whole scam has been covered up by the Western Governments. Surely they cannot keep a lid on the losses for much longer. We all know that the defaults are coming (or are already here) and that the ratings game is now worthless information.
Check out the Alt-A and ARM securities in the states - they are the next thing to hit the dirt.
Meanwhile - this is what the nation should be concentrating on. It seems the Government are starting to get nervous - and quite right too!
http://news.bbc.co.uk/1/hi/business/7955103.stm
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As I observe, without being able to in any way change or alter the tragedy that is rapidly unfolding, I experience intense feeling of deja vu, because I experienced in my native land a very similar situation, though on a much smaller scale, in 1982.
Then, the newly elected Prime Minister, confronted a similar resource gap in the national budget and the foreign exchange reserves.
A situation he inherited and inveighs against until he earned the nom de plume 'prophet of doom' while he was Leader of the Opposition. Annually, he reiterated again and again his formula for fiscal responsibility that a government must spend what it earns, with a little saved for emergencies.
But he failed to heed this dictum and tried to borrow his way out of his nation's financial woes, tripling the national debt in three short years. Needless to say this prescription did not work, and, my island in the sun slid deeper and deeper into economic decline.
I predicted then at my going away bash, that the exchange rate of that nation's currency then five to one against the US Dollar would be one hundred to one by 2010, the last time I checked it was ninety to one.
I predict that within the coming year the popularity rating of President Obama now above sixty per cent, will fall below thirty per cent, that he will preside over the US being demoted from super power status, that the unemployment rate in that country will rise above twenty per cent in the next five years, that that country will experience a recession that will much greater than the Great Depression of the Thirties - all because of the fiscal insanity that now grips the Obama Administration.
They have no idea what they are doing, they are completely lost.
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The sad matter is that our Politicians will continue to treat the British People with utter contempt and only when the true size of the problems start to unfold will they find that it is too late to con us any more.
I fear for the UK, present and future. Browns lack of morals and his unrelenting efforts to save his own skin have taken the great out of Britain.
I am also saddened that has a life long Conservative I am left with no faith whatsoever in the present lightweights now in Conservative colours.
Brown has to go and must go soon before we do find the situation is iretrevable, if it isnt so allready. We really are at the point of no return.
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Now 1659. Read last post available at 1520. Must be moderator's tea break.
Montagues, Capulets, Machiavelli, Robert Walpole (on introducing income tax) observed that war was the great reliever fo financial stress. The winner usually became the owner of the loser's assets. But the US and UK are already at war. Who can GB/AD pick a fight to win with?
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*12. Goffee
"Paul Krugman, a Nobel laureate - writing in the New York Times, picks all the holes in this plan that Robert fails to mention or glosses over."
Links also to John Hempton at Bronte Capital giving a defence of the Geithner plan and tells which banks to nationalise-
"The problem at the moment is that there are plenty of assets you will not buy because you cannot fund:
(a) Set up the funds – maybe 10 of them – with enough capital that the risk to the treasury is not large.
(b) Send in the regulators to the bank and say YOU MUST SELL A BIT OF THIS ASSET WHERE THE MARK DOWN IS QUESTIONABLE.
(c) Having tested the capital THEN use that tested price to mark the bank’s book.
(d) Confiscate the banks that fail the test using the new market."
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I still have a William Hill betting slip for my selection in last year's Grand National.
I thought it was a sure-fire winner, but, sadly, it fell at the first fence.
Will the Treasury take this toxic asset off my hands, do you think?
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"Every single move you take either makes the tower a little more stable, or quite unsafe, but you have to make a move. If you don't understand everything about how the tower works (i.e. its too complicated to comprehend) you don't stand much chance." .... lukeo1980 wrote #41.
I couldn't agree more, lukeo1980, however, .... understand everything about how the tower works and you have proxy control of it, and can blow it down with a feather, with just the faintest of deft touches should it choose not to respond in the proxy supplied and required fashion.
"The banker et al must be protected at all costs (to the rest of us)" ...#43 oldgrandadjoe. Why? They have proved themselves to be Totally Unfit for Common Future Purpose, being only an Exclusive and Excluding Parasitic Elite and just a Toxic Legacy which they would have you believe you Need, but they can be Extremely Easily Replaced and with the New Money being Invented and Deposited in Custom Made New Virtual Institutions, which don't have their Extravagant Unnecessary Overheads. Put them all out to Grass on a State Pension and Sequester Bank Assets for Liquidation and Collateralised Credit Distribution. Only a Fool in a Folly thinks themselves Indispensable, oldgrandadjoe.
And if this is the best plan that the US Treasury Dept can dream up .... http://cryptome.com/0001/treasury/treas-tg65.htm .... then they aint gonna survive and will be brought to their knees, and not just because of this flight of pure fantasy ....."Shared Risk and Profits With Private Sector Participants: Second, the Public-Private Investment Program ensures that private sector participants invest alongside the taxpayer, with the private sector investors standing to lose their entire investment in a downside scenario and the taxpayer sharing in profitable returns." .... Yeah, I can see them there private sector investors queuing up down Wall Street for a piece of that action? I Think that deserves a Homer Simpson, Doh!
And thanks for the perverse and subversive humour with #72 somali_pirate_SP500. :-) Be careful now, we wouldn't want you being thought of as an Extremist and getting Madame Jacqui all hot and bothered and disconbobulated.
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History shows that bankers are not above the law and can push things to far. He may not have been able to get the bankers to return their bonuses but I think King Henry in 1125 AD had figured out how to make them think twice about ripping the country off.
Anglo Saxon Chronicle:
AD 1125: In this year sent King Henry, before Christmas, from Normandy to England and bade that all the mint-men that were in England should be mutilated in their limbs. That was that they should lose each of them the right hand and their testicles beneath. This was because the man that had a pound could not lay out a penny at a market. .... And that was all done in perfect justice because they had undone the land with the great quantity of base coin that they had bought.
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Hi Robert,
Well, if you read the account of Toynbee and Walker, they found UK city bankers and lawyers believed the poverty threshold in the UK was 22 000 pounds per annum in the UK, while a salary of 162 000 pounds is the point when top tax rate applies.
ISBN:9781847080967 page 27.
So, they intellectuals deserve the massive salaries and bonuses, while we bail them out, so they. I just do not think so!
As to AIG. If a company promises goods in returns for cash, yet fails to provide those goods, since they know they do not and will not have those goods in the forseeable future, isn't that transaction a fraud?
These people think we can afford to pay for their mess!
I still say we should sit back, arms folded and watch how they sort it out for themselves. Aren't they able to, given the salaries they earn? Now is the time these people step up and demonstrate they are worth their earnings.
We've been waiting for months. Can they let us know, so we can set our TV recorders to watch the moment? Wouldn't want to miss it while we are out demonstrating through the city streets, now
Somali_pirate,
Have you already booked your pirates ship for the car manufacturing equipment about to leave the country in those huge containers?
Let me know when you are done with the containers will you? As folk who earn so little, we dream of the poverty line salary are planning on converting them into homes, just as they do in Uganda - takes time to add in vent holes you know before we can ship them off to homeless ex-bankers and the like!
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I just read Stephanie Flanders latest article http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/03/the_devils_not_in_the_detail.html
It is perhaps ironic that the most probable investors likely to buy the US toxic / legacy assets are perhaps banks and other similar financial institutions.
It rather reminds me of how banks all clubbed together many years ago to fervently deny that "phantom withdrawals" from ATMs were possible - presumably for fear that customers would realise that their money wasn't as safe as they thought it was! (Of course, we all know now that was a pile of complete tosh and the idea of cloned cards being used in ATMs is well established.)
What I wonder is, are members of the international bankers' club(s) able to (secretly) arrive at a consensus on the way forward from this downturn(to benefit themselves) somewhat faster than the members of the international government club(s), such as the G20, or the Eurozone members, are able to come to a consensus about the way forward to save their national communities?
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re 64 STEVEWO
Maybe an AVARICILLION?
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#78. puzzling wrote:
"May we, the public, have the last laugh, soon ..."
How can we possibly have the last laugh? If the banking industry - or, God forbid, the entire country - goes down, we all go down with it. There will be no winners.
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here is an excellent discussion of some of the reasons for the current US disillusion with capitalism Wall Street-style, and why Pres Obama needs to tread carefully
http://www.nytimes.com/2009/03/22/opinion/22rich.html?em
it also contains many interesting links
unlike the British, most Americans generally approved of people getting rich and most had their pension funds linked to active investment in the stock markets; so their current anger is akin to a keen poker player who finds out - after years of play and nothing to show for it - that the game was rigged
this is a lot angrier than your typical Northern Rock shareholder who grumbles about the shares they were GIVEN turning out to be worthless
me? I'm totally unconvinced by last week's and today's stock market jumps and plan to keep my investments in easily convertable Pieces of Eight, buried on the beach north of Mogadishu
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#80 Toldyouitwould
The UK translation is:
Peta 10 15 is a Squillion
Exa 10 18 a Gigillion
Zetta 10 21 a Darlillion
Yotta 10 24 Brownillion
Those Greeks, ahead of their time, who'd have thought we'd have ever needed these numbers...... is it only a year ago I was trying to remember if a billion was a thousand million or a million million.....
Oh Happy Days......
On a more serious note: This Government are terrible!
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42. At 1:03pm on 23 Mar 2009, stmewan wrote:
>>Robert writes: 'There's another important implication of the extent to which we've mortgaged our futures to save the banks.' And: 'Their argument is that we're all in this together'.
>>We, the nation, have not voluntarily mortgaged our futures nor got in this together. Please, 'we' have been put into this dreadful situation by the failings of the senior regulator of the Treasury, the 1st Lord of the Treasury (i.e. the Prime Minister).
I could not agree with you more...BUT the UK Electorate did vote for this Govt. !
Not every elector voted that way, but given our current Electoral System it was the public's decision and we, the public, now have to pick up the tabs.
Unfair perhaps for those who did not vote (like me ) and those who voted otherwise....But that's what Democracy has become...an IGNOCRACY....voting by the ignorant for the ignorant for, in turn, governance of and by the ignorant. A virtuous circle.
How qualified are voters to vote ?
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#80
Re: words for big numbers. You'll know things are getting bad when....
they start measuring money in decibels (dB)
(for the non-initiated the dB is a logarithmic unit used in engineering for quantities where the range of values is so large the mega, giga, tera system becomes unwieldy.)
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Good grief. If SOMALI-PIRATE is flat today what hope for us.
Now that the US are revealing some of the toxic debt figs, the treasury may need to declare some of the hideous details the banks have been hiding.
If ever the Government need a "good day to bury bad news" it will be this week.
Can Somali Pirate not organise some kind of offshore incident to divert attention from the dire statistics about to head our way?
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#25 - nametheguilty - Well said. I agree. What's more, I have been banging on about this in my various blog responses to Robert's teasing messages for months now. The guff below from me is is not a politically based series of rants, but plain common sense. If I can see this, and the bloggers (mostly) to Robert's posts also see this, then why can't everyone see what Government (over 25 years) has done to its electorate. It has sold us all down the river. Politicians basically could not give two hoots about all of us. We are merely pawns in the greater game of power and greed. In real "money of today" terms, this is my view.
Consumers CONSUME. Consumers are the employed (mostly). They have jobs (mostly). UK Govt is subsidising banks and telling them to encourage mortgage lending for housing to keep house prices up. They are also asking the banks to lend at favourable interest rates e.g. LOW. Result. Banks are deficit financing the general mortgage owing public at the expense of savers and pensioners (the vast majority). The Banks cannot access wholesale funds readily, and when it can, the interbank rates are significantly HIGHER than their mortgage rates. BANKS LOSE MONEY!
Producers PRODUCE. Whether goods or services. Consumers WORK FOR Producers. UK Govt tells banks to be careful about business lending and conserve its capital. Banks can lend to businesses (mostly SME's - 98% of UK companies are SME's) at HIGH margins over their WHOLESALE cost of funds. UK Govt therefore styming Banks from lending money at HIGHER than wholesale cost of funds rates. Therefore, good companies, relying on sensible commercial finance cannot grow at best or at worst are starved of cash to ease their working capital cash flow. Businesses go bust, people lose jobs and mortgage arrears rise. BANKS LOSE MONEY again!
Fewer PRODUCERS = Fewer CONSUMERS = Higher Defaults = More Bank Losses = More Taxpayers money lost to support banks = UK PLC losing AAA rating = massive devaluation of £ = massive reduction in asset values of all classes, especially residential property = more debts for individuals = massive unemployment = increased social unrest (Frank Field has for years seen this outcome and has been pitifully ignored) = legacy of debt for generations to come = little hope of recovery = risk potential of UK as a third world country (with its associated problems) in 10 years time.
Today's remedy - UK Govt tries to stimulate the economy by guaranteeing swathes of debt and insuring toxic debt. Outcome - who knows, but millions of honest people have been badly let down over the past 25 years by our politicians who have failed to save prudently for a rainy day when UK Plc was in better shape, and failed to regulate those who craved "Jam today" in bonuses and short term profits. Does the British electorate deserve this? I think not!
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"The way to see all this is as the public sector - especially in the US and the UK - taking on the risks of lending to the private sector."
It could be looked at like that, if some new lending to the public were to flow from it and that seems unlikely. All that we are doing is transferring losses from the banks (and thus their shareholders) to the public at large. The lament is that the toxic assets cannot be valued but that is untrue. An administrator could put these up to auction and we should almost certainly find that the market value is not only below the sixty cents on the dollar figure of the banks, but well below the thirty cents on the dollar figure of the supposed "market".
The truth of the matter is that the banks, all of them, are bust and the world economy along with them. The sooner this is realised the sooner governments might start to think about creating a system instead of trying to reconstruct the bubble that has burst.
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I am fast losing track of all this Monopoly money. It's rather like violence - in the end you become anaesthetised to it all.
One thing which bothers us in my home is - have we been stupid not to join in the party? Maybe we should have been less careful, should not have lived within our means and instead we should have spent what we have and more.
On Saturday I went on a day trip to Calais - shops were empty - it really hit home that France is in recession. Back home in Ashford (Kent), the supermarket and other shops were heaving, people loading their trolleys with goodies, huge spanking brand new four wheel drives in the car park. I know small businesses are feeling the pinch, but it doesn't feel like a recession here. So, the French have been far more prudent but are nevertheless feeling the pain whereas good old England has no industry, nothing to offer and is hopelessly in debt, but all appears to be well here. I am going to have to re-assess my life, unless someone can tell me that this is a mirage!!
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#54 Ikantbelieveit:
" .... We should Nationalise the Credit Rating Agencies, they should not be private companies as there is an obvious conflict of interest."
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Why would we want to nationalise any outfits that have demonstrated this much incompetence?
They should be made responsible. Overstating the value of something is fraudulent is it not?
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BONUS ANYONE??
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Isn’t it wonderful how Mr & Mrs taxpayer has all that cash to bail all the unscrupulous organisations out.
What a jolly generous chap / chapess he / she is!
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I'm very confused by the latest $1T to buy off the banks' toxic assets. I thought the first $700B last year was for that purpose - if not, what was it for?
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brownwatch 435 days
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Robert.
I read your threads with great interest. Thank you for posting the link to the glossary. I only hope that knowing what the hell you are talking about will not prejudice my future enjoyment:-)
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at 9:39pm posts from 4:57pm still not moderated.........i give up!
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Ah, the moderators are back after over 5 hours - must have been a meeting about pensions or redundancies...
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eh,
Why am I seeing this message yet again?
Where's my comment?All new members are pre-moderated initially, which means that there will be a short delay between when you post your comment and when it appears while one of our moderators checks it.
BBC hit by a massive IT project failure like so many other UK institutions, is it?
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Anyone been checking the running totals of bailout funds since last year? I've lost count and my calculator hasn't got enough spaces on the display-I keep getting 'E' for error. I guess that's the problem at the Treasury?
Random thought (due to too much caffeine I expect) - how many zeros in a gazillion? Also, if history repeats itself, then the King Henry punishment will advent itself shortly-does this mean banks and government will be staffed entirely by women and eunuchs? Isn't that like the ancient Greek Oracles-go to a bank and pray for a miracle-sorry that should mortgage, not miracle.
Although, with all the redundancies and negative equity, credit ratings of potential borrowers will be so bad that no institution will be willing to lend to them. Who's going to sort that one out?
And finally, AAA ratings are not worth the paper they're written on-last year, just after all this hit the fan, the WTO site listed the UK banks as 13th best in the world (if I remember correctly).
Guess who's info this assessment was based on-
Yep! You've got it! The bankers themselves!
What else is going on that is being hidden behind all this CDS,CDO, AAA and bailout smokescreen?
THAT is what I find very scary-what, EXACTLY, is slipping past us under the radar?
Be still my beating heart.....
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This comment was removed because the moderators found it broke the House Rules.
115.
"I'm very confused by the latest $1T to buy off the banks' toxic assets. I thought the first $700B last year was for that purpose - if not, what was it for?"
The total 'toxic asset' value in the global financial system is actually $500T - if you value all the 'fictional investment vehicles' (CDOs) and gambling debts (CDSs) still on balance sheets.
As you can see, the bailouts so far are only the tiniest tip of the iceberg and the total resources of all the world's governments cannot even begin to save this system. The next bank or insurance bailout demand will come soon - and the UK government, for one, will have nowhere to go to raise the funding needed.
The only solution is a global voiding of all CDO and CDS contracts - financial carnage yes, but possibly less damaging to the 'real' (ie non financial) global economy in the long run than these futile attempts to prop up the current system.
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"Support for the UK's banks and for private sector lending in the form of loans, guarantees, insurance and investments is equivalent to just under 100% of GDP, or a bit more than £1.3tn"
This is truly terrorifying. Significant real long term injuries and damages have been and will be done to the general population. So now the government issues updated counter-terrorism strategy and headline of "Price falls spark deflation risk" !!!
Financial terrorism, terrorists and WMD are real. Economic and financial acts of terrorism done with financial and economic WMD have alread happened, is happening and will continues to happen.
What is government doing about it, except talk and meek execuses?
Nothing.
Where are our security services when we REALLY needed them. These terrorism acts are real, very sinister and deeply damaging to the national security?
Silence.
There is no deflation except in wages, return on prudent savings and the housing bubble. Energy bills are still indecently high, probably needed to pay fat bonuses. Because of the £ weakness, many imported items which we have to import because we don't make them anymore. What prices have fallen is either insignificant to the most of us or only in the hopes and propaganda of the politicians who probably have never served served our interests.
There is no deflation risk, only calls to distraction and diversion.
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#89 jolo
"what puzzles me is where are we going?"
Who is "we"?
Where are you and your family going? Where is your local community going? Where is the nation going? Where is the world going?
And that's the nub of it.
You, personally, really cannot do very much about the answers to some of those. Even if you had the will, you are dis-empowered by rules, regulations and laws.
But you might be able to make some difference to some.
Maybe, the key-word is self-sufficiency. Some would say that it's just a step or two away from protectionism.
In reality, whatever the G20 does, or Obama says, or GB and AD pronounce, you (and yours) still need food, drink, shelter ... ...
Planning and implementing food production, planting food crops, entering into local cooperative arrangements about livestock, community micro-energy projects and the like are probably as good as investments as any ISA, or bond, or finance industry offered investment.
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Oops .... re #122. Sorry about that Mods/BBC, I have removed the contravening video clip, which I have presumed to be the reason for .... "This comment was removed because the moderators found it broke the House Rules." ....and although I looked for the email ..."You will be sent an email informing you why your message has been failed." it must have been lost in transit or delayed on its packet journey, as sometimes happens with all this electronic finery we have at our disposal.
However, should there be another reason, which would then also warrant this post invisible/unsuitable, please advise for future reference. Thank You.
#65. At 2:22pm on 23 Mar 2009, random_thought wrote: "From Mr Geithner's article, it seems that the US scheme will actually attempt to find a market price for these assets." ...
The US scheme, random_thought, is to create a market place for those assets/liabilities with invented money ....in essence, create another Ponzi. It is what the Art of Perceptions Management does.
Normally though, it is done so Sublimely that you don't realise how Deceptively Simple it is.
The UK scheme though is Mr Brown's pathetic attempt to keep the Magic Trick and the Ponzi a closely guarded Secret, with the un/undereducated population brainwashed into believing that they will be loaded with the Sub-prime Toxic non-productive third party gambling debts to be repaid by future generations of productive revenue-generating workers ...... making them all effectively slaves to the Failed and Failing System even before they are born, which is a Perverse Legacy to knowingly engineer and leave behind for your children, is it not?
It is hard not to conclude that such is an Evil and its Root is in a certifiable Madness rather than just being psychologically flawed.
At least in the US model, all that debt is removed from the public, who are the dumb innocents in the Great Game. Darling Brown's plan is another Epic Fail and a Cynical Odious Assault upon the Integrity and Intelligence and Personal Liberty of every citizen. QuITe why he and his cohorts, for of course, it is a conspiracy of knaves, are not rounded up and confined at HM Pleasure, is something for the Palace and the Monarchy and the People with their Police Forces and Military Units .....to Ponder over and Wonder at the Nature of Impotence and its Relationship with Lack of Intelligence and Information Shared/Secrets held/Views Censored and/or Pre Moderated and subjectively discarded.
Fortunately, for now, have we the BBC to ensure that Anarchy does not reign even should it be disguised in an Establishment War of Terror in its own War on Terror with the Phantom Ghosts of its own Making, which would challenge their Capital Slavery Model and of course, QuITe Naturally, reject it for themselves and the Future, left behind for their Children who would expect a Better Life.
What you must all realise to be in any way effective, is that Life and the Course of Events which will Shape IT, are Directed with Words Shared with Media and BroadBandCast around the World, in Order to Paint a Picture of the World and Gangs ruling parts of the World/Present a Collection of Now Network InterNetworking Vistas, which is always a Major Creative Works in Progress, which either Resolves Conflicts or Creates Conflicts. But only one of them is Worth Supporting.
In the Western World, there is one Society, oft Polarised but SMARTer than any have Imagined, with the Virtual Communications Expertise and nearly 50 years of Practical Experience in the Resolution Field of Mindless Conflict and Collective Madness and they would Resolve to Ensure that All that they have Suffered and Learned in the Troubled Past is put to Good Use in the Future, Changing the Mindless Conflict Fields with the Injection/Introduction of Special Applications of ProgramMING with Media and IT Participation in a NIRobotIQs Civil CyberSpace Project for the Beta Generation of Future Infrastructure through the Power of Transparently Shared Intellectual Property........ aka NEUKlearer HyperRadioProActivity. A Simply Sublime Perceptions Management Program of QuITe Staggering Dimension yet Surprisingly Easily Administered, Mentored and Monitored from Cloud Base and ITs Virtual Intelligence Space Stations.
And All of that, is maybe probably definitely not something which you can do, but then you do not need to, whenever it can be done so easily with IT for you, with nothing more onerous than a fistful of dollars and to be really specific, a seven sevens figure sum of £7,777,777 has been RBS tabled for Feed from Quantitatively Eased Seed, thus to Extraordinarily Render the Program AIReality in the Greater Reality of Novel Virtuous Virtual ProgramMING Projects, Privately Owned and Publicly Produced or Publicly Owned and Privately Produced, if you Prefer ...... for IT, it matters not a Jot.
Future News Fit to Print and Seed Today, Robert, and Run with for AI and Beta Futures with Innovative Novel Growth in Derivative Tangents to Explore/Investigate/Report/Create. :-)
And a complete antithesis to this doom and gloom monger/fearful merchant. Please Google "Jay Rockefeller: Internet should have never existed"
But then Senator Rockefeller would be bound to say that, wouldn't he, as Virtual World Control does not need the Rockefeller Private Control of Feed to Greed Legacy Banking Systems and its failed New World Order same as the Old New World Order Project ....... although, to be Perfectly Honest, whoever/whatever Funds Future ProgramMING Programmers, automatically Defaults to Proxy Leadership Role ....... which presents any Out Moded/Dinosaur System Administration with an Enlightened and Enlightening Opportunity in the New WAI of Doing Things in AI Betas Managing Future Perceptions for the Creation of IT Realities ..... as there are any number who would be into such Great Games Play and all would be most welcome as Assets Rich Drivers for such Opportunity which Harnesses Intellectual Property Potential for Present Control of Future Power with ITs Future Power Controls.
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And if the rating agencies were worth a light, they'd have understood the toxic debt being carried and withdrawn the ratings from the banks, insurers and finds participating in the racket yeas ago, thus avoiding or greatly limiting the effect of the defaults. But, the rating agencies were as conniving and incompetent as the rest. They are, in my view, charlatans and thieves. Trouble is, the systems rests on their unimpeachable integrity and utter competence. Thus, the system rests on sand and not rock and is bound to fail. We need a totally different way of doing business because if we continue with a refreshed version of what went before it will in time crash about our ears again. And ratings agencies, in my view, have no legitimate part in the future.
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Apologies, further thought. As we can't trust ratings agencies, it surely shows that business must be done at a smaller (but more diverse) level, where business partners actually get to know each other and have insight and knowledge fo the others tranght and abilites, rathe than hding behind a didactic tick box approach of "what does S&P or Bests or Moodies (or whoever) say" and relying blindly on them. There has been an abdication of responsible business practice, in large part as a result of the pushto globalisation. It seems to me that smaller, more diverse businesses trading with each other in smaller transactions automatically limits risk due to business failures and also creates more work and broader prosperity. The push to massive monolith business empires may have had efficiencies of scale within given organisations, and led to mega-pay for a few, but society as a whole must surely be better off and better insulated with more, smaller businesses?
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"tn" as trillion. Haven't seen that before. Shows how common is has become to bandy about trillions that it's not worth typing the word out anymore. But is there some international standard saying it's "bn" for billion and "tn" for trillion in the same way the banking world agrees on GBP and USD? Google doesn't have trillion for a search on "define:tn".
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So what you are in fact saying is that we have mortgaged our children's futures to pay for our present? How very generous of them. Did anyone actually ask them if that's what they wanted?
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Another long-winded way to re-write disaster.
Would it be possible to pay bankers' & politicians' pensions in these "toxic assets". After all they created them... (And all the other incoherents who push around and expand debt, call themselves talented, and take huge bonuses from taxpayers' money) Likewise all politicians' allowances and expenses.
Let's use a teacher's pay scale. Anything above that scale of remuneration is paid in toxic assets. Evidently any private company which has had no bail out is free to do as it pleases.
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