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Bank of England: Owner of punchbowl or punchbag?

Robert Peston | 08:16 UK time, Thursday, 17 June 2010

The governor of the Bank of England says that the point of putting his organisation in charge of both making sure that markets aren't overheating and that individual banks aren't taking crazy risks is so that a single authority has the power and confidence to take the punchbowl of booze away when dangerous euphoria is gripping financial firms and the rest of us.

George Osborne, Mervyn King and Danny Alexander attend the Lord Mayor's Dinner to the Bankers and Merchants of the City of LondonBut there's another way of looking at George Osborne's dismantling of the Financial Services Authority - and that's to say that successful regulation requires there to be a single punchbag for as and when things go wrong.

Or to put it another way, if the Bank of England knows that it alone will be walloped when there's another financial debacle, possibly it'll do its job in a more determined and focussed way than the previous so called tripartite regime, where responsibility was divided between the FSA, the Bank of England and the Treasury.

Will it work?

That's impossible to say.

If you look at the developed country perceived to have come through the great financial storm of 2007-8 in best shape, Canada, its system of banking regulation has things in common both with the UK's old system and its new system.

Its Office of the Superintendent of Financial Institutions is separate from the central bank - and reports to the Canadian finance ministry.

But that regulator has a narrow role of preventing banks taking excessive risks; unlike our FSA, it doesn't also have the responsibility of protecting consumers from being ripped off.

That said, there is a logic to the chancellor's reforms.

Which is why most concern about those changes focuses on what's known as the execution risk, or that for the two-year period of transition to the new system the FSA will not have its eye on the ball.

And that's profoundly worrying, given that we're seeing serious signs of strain in the financial system once again - with there being, as you know if you read this blog, a genuine and worrying prospect of a second wave of banking disasters emanating from financially overstretched eurozone countries.

So Mr Osborne had quite a coup last night in persuading Hector Sants to abandon his previous intention of quitting as the FSA's chief executive.

Mr Sants - and his chairman, Lord Turner, also staying on - are widely seen to have raised the FSA's game very considerably since its disastrous performance in the run-up to the market mayhem of 2007-2008.

Even so, Mr Osborne has taken something of a personal risk.

If another financial storm comes over the horizon and the regulators react ineptly because they're fixating on which of them move to the Bank of England and which to the new Consumer Protection Agency, he will be the punchbag.

Comments

  • Comment number 1.

    Why is that bankers just get regulated, the rest of us have to bear the brunt of laws and possibly face custodial sentences?

  • Comment number 2.

    "when there's another financial debacle"
    Well done Robert, you have accepted that another one is inevitable. There just one further step for you to make, and that is to say "that it is the system of capitalism that makes these inevitable". Come on, dont be afraid to admit it.

  • Comment number 3.

    The banks are still taking crazy risks in order to earn large bonuses. That's what the business has turned in to.
    We need action now, not in 2 years time.
    Until the risk taking element is ring fenced the banks will continue the same way in the knowledge that they have government guarantees so they take the profit and the public take the risks.
    Come on GO, stop mucking about. Get some real regulation and ignore the threat that Banks will transfer abroad - you can threaten to take over RBS and Lloyds and make the UK a no go area for the risk takers.

  • Comment number 4.

    Why are the tree blokes in the photo all wearing fancy dress?

  • Comment number 5.

    You foresee the possibility (dare I say 'probability') of a second wave of banking disasters emanating from financially overstretched eurozone countries, but you do not focus on what the banks are doing right now under our very noses, namely, playing roulette again with potential debts of 50 times their assets and 5 times the UK's annual GDP. It seems time for immediate, nay, urgent, intervention by the B of E.

  • Comment number 6.

    1. At 08:40am on 17 Jun 2010, spareusthelies wrote:

    Why is that bankers just get regulated, the rest of us have to bear the brunt of laws and possibly face custodial sentences?


    This is a really good question. The banking industry needs regulation because it is not like the rest of us. It is often talked about as just another sector of the economy but it isn't. It isn't productive in a real sense and its assets and liabilities appear on the company balance sheets.

    Their role is supposed to be the efficient allocation of money/liquidity in the economy to the most productive enterprises. It needs regulating because it falls outside of conventional free market theory but is treated like a member of the economy.

  • Comment number 7.

    I cant see this working, the reforms proposed here have to cover a larger area. Anyone who watched Newsnight last night, would have seen that under the FSA banks increased their leverage from 20-1 to 80-1. Any sane person would know that this is ridiculous amounts of leverage. Until the government addresses the risk taking nature of these banks then the problem will not go away. Vince Cable mentioned the BoE would be able to reign in mortgage lending to combat house price inflation, this is simply not enough.

    As someone who works in the industry and is very outspoken on risk taking, every single risk can be justified on paper. If this is not a house of cards/pyramid scheme then tar and feather me and call me a liar. Only difference is, the government held the bottom tier and therefore had to foot the bill. It only takes a relatively small amount of losses (compared to the GDP of the world) to occur for the losses to be magnified. Even with the liquidity reporting rules, loopholes will be found as with every other piece of regulation that has existed.

  • Comment number 8.

    The important question to ask is will the Bank of England
    be tasked to ensure that the financial system mirrors the real productive Capacity of the Country rather than the other way round - which it is at the moment.
    I understand say a power station closing down because
    they have run out of coal. I don’t understand it when they close down despite having enough coal and having consumers who want the power but there is not enough numbers on a dusty ledger – it’s one thing to turn away a customer at a cinema because there are no seats left. Its another to turn a way a customer because there are no tickets left in the machine despite there being seats available.
    - A part time student clerk with half a GCSE will say. ‘Oh hang on a minute I’ll just get another role of tickets’ – Will the Bank of England do this ? Such a system has been worked out in the NEFS Net Export Financial Simulation system surely this or something like it needs to be the next step

  • Comment number 9.

    Whatever the merits of Osborne junior adjustment of the scheme of regulation it will still fall short of the magnitude of the task. The City needs supervision not regulation, Spanish Inquisition not a linesman with a red flag. Corporate and financial governance backed by statute and the prospect that miscreants end up doing time learning how socially unacceptable criminals do business and perhaps comparing methods!

    Add to this the inevitable discontinuity of transition and we find we are vulnerable to further disturbances with no one to blame but the new lad.

  • Comment number 10.

    Neither Mervyn King nor Hector Sants are the right people for the job! Both have the stench of abysmal performance and failure clinging to their vestments.

    George Osborne's words (namely those related to debt bubbles) show an understanding of what went wrong in the past. However, they do not show an understanding of how to get out of the problem now (or even by 2012). When the new system will be in action for real we must fervently hope that we have untainted and better people in post by then and these bystanders to the disaster are history.

    The powers that be are still guilty of ignoring quite obvious and enormously economically destructive fault-lines in monetary policy - namely the value/price of money. This is the present and most challenging problem! This is no technical argument - it is central to debt and borrowing and saving and investment.

  • Comment number 11.

    #4. Jacques Cartier wrote:

    "Why are the tree blokes in the photo all wearing fancy dress?"

    Because they want to pretend that they run the country to us peasants! But like the king's new clothes we can see that they are naked!!!!!

  • Comment number 12.

    ‘I am hereby ordering the American Banks who created the Credit Default Options out of sub prime mortgages that were no better than junk bonds, sold them on and also the credit ratings agencies who gave them triple A ratings, to create a disaster fund of £100 billion. This is a down-payment only.

    They will not control this fund. It shall be placed into my building society account while I determine the costs to every man, woman and child around the globe who lost their job, mortgage or had there lives ruined by the recklessness of those banks and the fools that ran them.

    They will pay back every penny’

  • Comment number 13.

    Re 10
    whoever is appointed to do the regulation they will almost certainly come from the pool of people complicit in creating the bubble, so i am not overly confident that things will be any different.
    But it is true that if responsiblity lies clearly with one party then maybe they will take more care, so some grounds for optimism that the very worst excesses ie the ones that bring down the house of cards may be limited but not for the creation of a more fundamentally solid system

  • Comment number 14.

    Got the day off so have a chance to ask some questions that have been bothering me. Novice in matters financhial so would be grateful for observations on the following.
    Given that we own a large part of a large bank already and GO and VC think they know how to avoid the mistakes of the past, then why aren't they busy setting up the RBGB (Royal Bank of Great Britain). This could offer better rates to savers as there would be no dividends to pay out and direct loans to areas that need them. No casino banking as VC wants. I'm sure there are those who would throw their hands up in horror so I hope they can explain why it wouldn't work.
    On the same theme why is it that 'mutual' banks such as Nationwide don't offer better rates to savers and/or borrowers as a result of not having to pay dividends? Is it a simmilar effect as that in the energy price market? i.e. a small number of very large players tend to drift their prices up to the highest, and customer service levels down to the lowest they can get away with rather that prices down and customer service levels up, as the free market (competition) model implies.

  • Comment number 15.

    One of the accusations of the failure of the tri-partite system, levelled by George himself was that there were too many regulators and not enough clear definition of who was regulating what (too many cooks spoiling the broth)

    So how does expanding a tri-partite system to a quad or penta? partite system solve this problem?

    If I understand it correctly - there will be:

    The MPC controlling interest rates
    The FPC controlling markets
    A new division of the BoE taking up regulation of all financial institutions
    The treasury issuing regulations - but only as a last resort - the BoE is doing the day to day regulating (and if that doesn't ring alarm bells then your alarm is broken)
    ...and finally the OBR - which whilst not actively making financial decisions, will be providing the data on which those decisions are based (or not, if it's just day to day - or maybe the OBR has to report to the BoE and the FPC - otherwise how will they know markets are overheating.....I'm confused already)

    Best of all - the total failure of any institution in history to call for action in a boom to slow the economy down - is a reminder that it's all well and good saying all this - but in practice nobody ever calls for the plug to be pulled in a boom.

    If you understand the fundamental reasons for recessions and booms, it's logical nobody calls for the brakes to be applied early because you will get a recession of some description - but the difference is you will be blamed for causing it (and not the truth which is you brought it on more quickly in the hope the slowdown would be shallower as a result)

    Clearly George has thought all this through and has a structure in which this is all going to change - if not then we'll be back here bemoaning the new regulator in the future.

    If anyone in Government applied logic to anything then they would stand out as a genius.

  • Comment number 16.

    None of this will work until and unless those appointed to regulate, investigate, threaten, cajole or prosecute are not City place men.

    It will take people with absolutely no connection with the City of financial services to sort this lot out.

  • Comment number 17.

    12. At 09:54am on 17 Jun 2010, DevilsintheDetail

    Nice.

  • Comment number 18.

    4. At 09:13am on 17 Jun 2010, Jacques Cartier wrote:
    Why are the tree blokes in the photo all wearing fancy dress?


    Fashion victims?

  • Comment number 19.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 20.

    What I find a little disingenuous is Mr Osborne's suggestion that the BoE did not have visibility of the problems that could come from the banks massively extending their balance sheets in the middle half of this decade. I say again, read the 2006 Financial Stability report of the BoE and some of their earlier papers.Also read the FSA Outlooks at the time.They did spot the problems and anticipate the risks, but thought they wouldnt undermine the system. There was a misplaced faith in the judgement of banks and the strength of the system. Its the latter point which is the key issue.If I recall there was more concern with bird-flue pandemics, 9/11 events etc.

    What we need is the publication of the Tripartite Authority's minutes to find ought who said what to whom.

  • Comment number 21.

    For seberal years leading up to the bubble bursting, I'd have conversations with people aged 30 to 80, from all walks of life, who recognised that the credit boom couldn't continue indefinitely. None of them worked in a bank, was an economist or a career mathmetician. They were mainly in manufacturing or the public sector. It was just common sense (a lot of people still have it) that the figures didn't add up and people earning less than £50k per year couldn't have a house which doubled in price every 2 years enabling them to buy a new BMW for the wife and have a flat in Majorca.
    I like to trust in a reasonable system of meritocracy where you will at least have half the people who were attending the evening at the Mansion House deserving to be there because of long term achievement and ability. However they all got it wrong or looked the other way and yet they're still there, patting themselves on the back and applauding first Gordon and now George. The sheer gall of these people ! if they worked for William Hill they'd lose their jobs because good competent bookies won't employ people who can't grasp the mathmatics of the odds or even cover off a bet sensibly...... in the world of bookies with suits (banking) its a crazy, crazy world.

  • Comment number 22.

    Why not have Frank Field and Andrew Haldane as the people in charge of banking?
    Whilst I have not always agreed with Frank Fields politics I have found him to talk more common sense than just about any politician.
    http://www.frankfield.co.uk/blog/
    Google Andrew Haldane and $100 billion question.

  • Comment number 23.

    RE: 14. At 10:16am on 17 Jun 2010, Idont Believeit

    "Why aren't they busy setting up the RBGB (Royal Bank of Great Britain). This could offer better rates to savers as there would be no dividends to pay out and direct loans to areas that need them."


    This is the logical progression in the future. Once the blind following of 'free market' policies is stopped people will realise that it is imperative for a country to directly control the creation of money/debt in its economy. As we have been reminded recently, risk in the banking system is always ultimately societies risk. The banking sector can not be treated like other areas of the economy as it isn't.

    On the other hand, we are all aware that the government/public sector are prone to inefficiency and and bad decision making with political motives. The changes that George Osbourne has announced has, for all intents and purposes, taken the banking system into the control of the state (state NOT government).

    On the other

  • Comment number 24.

    1. At 08:40am on 17 Jun 2010, spareusthelies wrote:
    Why is that bankers just get regulated, the rest of us have to bear the brunt of laws and possibly face custodial sentences?
    ----------------------

    I'm sure you know the answer yourself - masters and slaves!

  • Comment number 25.

    WOTW said "but in practice nobody ever calls for the plug to be pulled in a boom."

    This has been and always will be the case. Even with the best intentions now the reality is such that politicians are incapable deflating an economy during a boom. Saying that China has recently made noises that it is following this line.

  • Comment number 26.

    16. At 10:31am on 17 Jun 2010, Wee-Scamp wrote:

    "None of this will work until and unless those appointed to regulate, investigate, threaten, cajole or prosecute are not City place men.

    It will take people with absolutely no connection with the City of financial services to sort this lot out."

    ----------------------------------

    But none of us mere mortals could EVER possibly understand the incredibly complicated packages and deals. Only the most super intelligent people in the city are capable of regulating the industry that they understand so well.

    It might seem like common sense and basic maths that you can't borrow more than you can reasonably payback (even in the eternally unforeseeable recession of the future) but you would be wrong. The men that run the city/country are financially and intellectual gods, far superior to us in every way and deserve to be paid as such.

  • Comment number 27.

    12. At 09:54am on 17 Jun 2010, DevilsintheDetail wrote:

    Spot on!

    Can you also add in McDonalds and Coca Cola - for the medical costs of the obesity crisis they have created and nationwide litter problem, plus in the formers case crimes against good food.

    Also, Kraft - if there is an explosion at bourneville that leaves the entire West Midlands covered in sticky brown stuff - all their assets must be seized and compensation paid for eternity to traumatised citizens.

    How about Microsoft compensating frustrated users every time their os crashes - or becomes unsecure due to some 12 year old finding a backdoor in.

    You have your work cut out - but don't worry Obama will be their to help out

  • Comment number 28.

    4. At 09:13am on 17 Jun 2010, Jacques Cartier wrote:
    Why are the tree blokes in the photo all wearing fancy dress?

    Why do Scotts always feel the need to wear kilts at functions?

  • Comment number 29.

    How the bloody hell is any self respecting speculator supposed to make money now without any bubbles???

    I thought bubbles were an inherent part of capitalism!!!

    This all sounds like socialism through the back door to me.

    We should complain.



  • Comment number 30.

    14. At 10:16am on 17 Jun 2010, Idont Believeit wrote:
    'Given that we own a large part of a large bank already and GO and VC think they know how to avoid the mistakes of the past, then why aren't they busy setting up the RBGB (Royal Bank of Great Britain)'


    Answer: Not a clue, because it's a very good idea.

    In fact you could even merge it with some aspects of the Post Office.
    And if we had a State Bank, we wouldn't have to guarantee all the private ones.


  • Comment number 31.

    28. At 11:13am on 17 Jun 2010, StartAgain wrote:
    4. At 09:13am on 17 Jun 2010, Jacques Cartier wrote:
    Why are the tree blokes in the photo all wearing fancy dress?

    Why do Scotts always feel the need to wear kilts at functions?

    ----------------------------------------

    So that they can quickly slash!

  • Comment number 32.

    "Or to put it another way, if the Bank of England knows that it alone will be walloped when there's another financial debacle, possibly it'll do its job in a more determined and focussed way than the previous so called tripartite regime, where responsibility was divided between the FSA, the Bank of England and the Treasury."

    Robert - are you suggesting that the BoE 'couldn't be bothered to regulate properly' simply because it knew it would get away with any blame levelled afterwards as the responsibilities within the system was unclear?

    It seems to me if you do believe this then it's crazy to hand more responsibility to an institution which has acted in such an irresponsible manner. If I see someone getting mugged in the street I don't walk past and think "well I've done nothing wrong so therefore I don't have to act" (although I understand some self centered do) - but this is what the BoE did - worse still the BoE wasn't a member of the public - but was a CSO - not fully responsible for policing the streets but still with a sense of duty to ensure the law is not broken. Where were the letters to the FSA from the BoE stating "this turkeys going boom unless you stop it" - not a word in 13 years - and we hold this institution in high regard?

    As others have commented - why are we putting more responsibility in the hands of those who failed us before?
    The BoE isn't a mute - it could easily have spoken up about it's concerns in the finance industry - or do people really believe the independence the BoE enjoyed (given to it by Labour) wasn't enough to allow it to speak up? Gordon Brown conspiracies are one thing, but the BoE only has to ring Robert Peston and he'll be up there like a shot for an interview. Doesn't the BoE write letters to the treasuryon inflation? - surely a little addendum would have been the responsible thing to do.

    Everyone seems to think that this was a failing of the FSA - well it wasn't, it was a failing of all three parties in the tripe-art-ite system - and yet only one is made an example of.

    The BoE could have raised interest rates to cool the housing bubble - it didn't. It could have raised rates to reverse the long term low rates introduced following 911. An action which was to counter the 2001 recession we should have had - no what do they say about 'kicking the can down the road'?

    I'm evenn thinking about alienation and the 'division of labour' - I mean it's classic jobsworth mentality - not my problem Guv.

    Clearly George hasn't thought about this at all - he needs a scapegoat and the FSA fits nicely - it's easy to make an example of a regulator as everyone hates them already. Unfortunately he is just in the middle of 'promoting' the others involved in this mess who were equally to blame.
    The buck should always end with the treasury - they are employed to make those decisions - that's what they should be doing.

    ...and finally - how will the BoE regulate sub-prime mortgages in the states? Although this was merely a symptom of the underlying cause, if such a build up occurs again - what can the BoE do about it? It won't be able to force a sale of bank assets it doesn't like - that would be proper statism - where the state decides what free enterprise can or can't invest in - not what the coalition says on the tin now is it? - weren't they babbling on about 'small Government' the other day? - oh that's right, that was before the election!

    I was a bit slow yesterday and didn't realise what "George Cloo-less" was proposing - now I've had time to look at it more closely I can see the madness within the method.

    I underestimated George - he's much terser than I gave him credit for.

  • Comment number 33.

    Post 4 Jacques

    This is a library photograph from a recent visit to Madame Tussauds.

  • Comment number 34.

    Banking currently carries very high rewards with very little risk to bankers it seems. In the 'real world' if you risk everything and lose it you lose your job, income and possibly home and family as well. Currently in banking if it all goes tits up you get bailed out by the Tax payer.

    I think its time to put some risk back into banking by chaining bankers who lose money on stupid bets to Tigers. Plus they'll be doing something good with their risk taking by feeding an endangered species(or alternatively actually making money by taking sensible decisions).

    Should be enough to make them think twice.

  • Comment number 35.

    It's all well and good this move, time will tell if it actually works! I suspect it will be another hash of regulatory 'guidelines' which will just leave the system open to interpretation and further abuse. There'll just be a few extra paragraphs added to the existing guidelines. This is just a PR exercise by GO.

    All the FSA have managed to achieve is a trail of red tape that does little to really protect those who need protecting from the financial sharks. The cost of which has ultimately fallen onto the consumer.

    There really ought to be a two tier system. One for those who want to, put their pensions and investments into the hands of the bankers, to gamble and lose.

    The other a state run scheme to benefit the saver, rather than the banker, with fixed annual returns, and potential of bonuses if the kitty has swollen due to periods of prosperity - much like With Profits. All with total transperency for one and all to see the fund position.

    The latter is unsophisticated I appreciate, but it has to be the better option than average Joe's only choice of having to hand over his pension fund at the mercy of the banks/investment house's poker game.

  • Comment number 36.

    I'll confess my ignorance; I do not really know what this is going to do to help change the underlying fundamental sickness.... 21.5% of the working age population is economically inactive (8.19m).

    You can do some arithmetic to massage these figures wrt those who chose not to work/true incapacity and those who really would like to work and have just dropped out of the humiliation system constructed to catch the 10% of unemployed who really don't want to work but want all the freebies. You can similarly do the same for the number who can only get part-time employment when they want more. It still ends up at about 20% of the workforce. One way or another every four people in work support one who cannot get enough work. If you then add in all those who get low income tax credits/other benefits we are a very sick society indeed.

    These reforms may delay the next monetary crisis. They won't prevent it.

    How do you stimulate a society in such a way as to create 5-8m jobs without having loonie credit policies and make-work roles funded on the never never by governments of all creeds? What will it take to change viewpoints that the cheapest item is not really that cheap at all, cos it contributes to the requirement to support 1/4 of an unemployed person through increased taxes and increased negative balance of trade cos it was made abroad. How do you persuade companies that they must balance production between cheap labour areas and high cost areas?

  • Comment number 37.

    All this user's posts have been removed.Why?

  • Comment number 38.

    Many thanks to Treading Water @ 23 and Dempster @ 30. I thought perhaps I was missing something or wasting time considering a 'stupid' idea. Still I bet there must be those who see big faults in it. I'm all ears.
    TW can you explain further why a 'Royal Bank of Great Britain' isn't likely in the shorter term? Is this connected to ideology, perception of public sector as 'rubbish' at everything or something else.
    You may have detected from my earlier post that personally I am far from impressed by the efficiency/quality of decision making of, at least parts of, the private sector - the same probably being true of parts of the public sector. Strangely many of these private sector inefficient/bad decision makers seem to make very healthy profits and salaries. Why doesn't that apply to the public sector? Just wondering or do I mean wandering.

  • Comment number 39.

    I seem to remember that the Governor of the BoE once said that regulation cannot work because the bankers would always find ways round it. Has being given more power helped him to change his mind?

    The truth is that the amount and nature of the credit available is just as critical in a capitalist system as the size of the money supply.

    Private banks should not be given a carte blanc to lend as they think fit and enjoy unlimited backing by the taxpayer at the same time. Taxpayer backing must be strictly conditional on their acting in the public interest, as instructed to do by the Treasury, not merely to maximise their profits.

  • Comment number 40.

    The motivation behind this article still seems to be Robert's state of denial that the FSA should be dismembered. The tripartite system is over and the FSA is being consigned to history. Three cheers and let's move on.

    I hope that in addition to the regulators stepping up to the mark the same will be true of banks internal management, internal audit, external audit and the shareholders. "We're all in this together"

  • Comment number 41.

    I don't care who the police officer is. As long as he isn't corrupt and as long as he is determined to take the evidence to the prosecutors. Has anyone noticed that it doesn't bode well for a police officer to hang out with the 'knowns'? And that means no hanging around with the lobbyists - seen this http://thebureauinvestigates.com/2010/06/17/bureau-publishes-comprehensive-civil-service-hospitality-database/ anyone?

    And I don't care who the prosecutor is as long as he isn't corrupt and is determined to see justice done and keep the public safe.

    But whoever these people turn out to be. The won't stop all the problems - they may well, if they are effective and punishments are tough enough, be just the deterent a lot of otherwise greedy individuals need. Jail terms, barring of unsuitable individuals and removal of the ability of some guilty companies to operate are all required and must be seen to be used - frequently.

    There are others here with more experience than I in saying who would be suitabale in these roles.

  • Comment number 42.

    WOTW "Robert - are you suggesting that the BoE 'couldn't be bothered to regulate properly' simply because it knew it would get away with any blame leveled afterwards as the responsibilities within the system was unclear?"
    I'm not Robert but it explicitly rather than suggests my view, other than I would also add (for my view) that the B of E became so out of touch it didn't see what was coming. Merv has very much been an eloquent “not my job Gov, Governor”. This is a govt and B of E takes the credit and FSA take the blame structure

  • Comment number 43.

    QUANGO: An organization or agency that is financed by a government but that acts independently of it.

    Lord Snooty and Bertie Wooster told us they were mortal enemies of the quango.

    But all that Wooster seems to have done so far is set up yet more quangos and pass off most of his responsibilities onto them.

    Is there a bit of a pattern emerging here? - Pass everything off to a quango so he can pass the buck in a few months time when everything goes pear shaped?


    (Bit worrying that he has crippled the regulator as we are heading back into recession, or is that deliberate to let his mates in the city have free reign?)

  • Comment number 44.

    4. At 09:13am on 17 Jun 2010, Jacques Cartier wrote:

    "Why are the tree blokes in the photo all wearing fancy dress? "

    A monkey in an expensive suit is still a monkey - and that picture proves it!

  • Comment number 45.

    28. At 11:13am on 17 Jun 2010, StartAgain wrote:

    "4. At 09:13am on 17 Jun 2010, Jacques Cartier wrote:
    Why are the tree blokes in the photo all wearing fancy dress?

    Why do Scotts always feel the need to wear kilts at functions?"

    He's a scot? - I thought he was beaker from the muppets

  • Comment number 46.

    36. At 12:24pm on 17 Jun 2010, p45builder

    The truth is we don't need to be working.

    The country could easily provide it's needs with a tiny amount of labour input thanks to technology.

    We're all working so that bankers can extract surplus value from us - which has the effect of making them rich and powerful - and ensuring we have to continue working in order to feed ourselves.

    This is the real secret of Capitalism - or rather the monetary system - it's now holding us back. It is unable to change with the technological advancement of man - and therefore we keep having to adjust it to try and keep it in line.

    I saw a Top gear episode last night, in it they had an old time Jaguar. In today's value this would cost about £30,000 - and in today's technology, this would be similar to a bugatti veron - which costs about £300,000.
    This example (and there are many others) show how our wages in real terms are diminishing. In the time of the Jaguar there was a chance one could own one if you made sacrifices - the chances of you owning a bugatti veron today is remote to say the least. Don't forget it's not just the list price, but all the other things too - insurance, fuel, tax etc.

    By ensuring there is always inflation - the ordinary folk can't see this diminshing wage - because their actual wage is always rising - but their purchasing power is diminishing as goods and services increase by more.

    When we reach the maxim - then we get a recession. In the meantime we have production continuing at the previous level - but nobody can afford to buy the goods anymore and we get overproduction - which leads to asset value decline.

    Despite this happening time and time again, neither Government nor free market supporter will accept it - but cannot come up with a credible explanation for this phenomenon either - and certainly not a solution.

  • Comment number 47.

    * post 12. How true. If only we had the guts, or to put it another way, the financial muscle.

  • Comment number 48.

    38. At 12:51pm on 17 Jun 2010, Idont Believeit wrote:

    "TW can you explain further why a 'Royal Bank of Great Britain' isn't likely in the shorter term?"

    ------------------

    There will always be private banks as the spectrum of risk needs to be available for all types of investor. This means that any public bank will need to tread a fine line in terms of competition with the private banks. It is likely that they will always lobby successfully against this and they have a lot of power and influence as an industry (more so than any other industry).

  • Comment number 49.

    Useless and worthless, the top photo on this front page just makes me sick.

    What about seeking compensation from the banks for this economic catastrophy, just as Obama is attaining compensation from BP.

    If this government does not seek and gain substantial damages from the banks, then I personally do not recognise them as being legitimately interested in the wellbeing of the actual citizens of this country so are unworthy of holding power and position in which they obtained via telling blatant lies to the electorate then using power of position to haggle between themselves to grasp power and control over the UK.

    I think a more apt heading would be-

    UK citizens- punch drunk on political spin or just a financial punch bag

  • Comment number 50.

    re 39
    I am not sure if you are advocating that banks in receipt of taxpayer money be forced to lend lots or that their lending should be regulated.
    I am worrying every time I hear banks being given lending targets as overlending is as much a cause of our current problem as was the criminaly insane betting that took place. Whilst I agree it is morally wrong of such banks to suddenly withdraw existing funding from businesses that they had previously thrust down their throats, it is not wise to force large amounts of new debt.

  • Comment number 51.

    It seems that according to the Moderators any criticism of Mr Peston is "defamatory". Maybe these self-appointed arbiters of what is right and wrong - at least in their blinkered politically correct eyes - should remember that it's the people who contribute to the debates on these blog pages who are paying their wages.

  • Comment number 52.

    One of the biggest risks to the western financial system is the use of mark-to-market valuations where asset prices fluctuate downwards triggering firesales of those assets at exaclty the wrong time, solidifying losses and making them irreversible.
    What we need is good old-fashioned guts and vision and sticking to them, and that is hard to legislate.
    Guts and vision is risky , but without them, gains are never large and losses are never recouped.And that is riskier still.
    And whatever you think of Gordon, he had guts and vision.The OBR and Osborne would quite happily preside over the collapse of the western banking system in the interests of saving pennies short term.
    A LOT OF DAMAGE CAN BE DONE IN FIVE YEARS, LOOK WHAT THEY'VE DONE IN FIVE WEEKS!

  • Comment number 53.

    Technically, making the BoE 'singularly responsible' (for ?), does sound a sensible way to go although:

    1) Isn't the BoE just an extension of HM Treasury, anyway?

    2) Will the Office of FBR monitor the BoE now on figures and statistics?

    3) Is the size of the UK financial sector too large .. or will the new regulation maintain the inherent 'over-sized' related risk?

    Sounds like different reporting channels rather than dramatic changes but the FSA did some good work with 'unhappy financial customers' with routine matters ... it always had the feel of a grossly expensive waste of space quango.

    Surely the important aspect of banking financial regulation ... that it is a continual process ,,, rather than 'this is my fix' (e.g. as for the last 13 years) when the world is constantly changing around us?

    Some useful changes although there are major related problems with vested interests, golden ladders, golden troughs, transparency, accounting procedures, information, etc. and it will be interesting to see if and how far these are tackled by George O., in due course.

    But an impressive start by George Osborne ... its easy to be critical of anyone and anything ... but should bring back some clarity and confidence into the sector ... but let's hope .... not too much confidence.

  • Comment number 54.

    no 46

    trust me there were still only a handfull of people who were going to be able to drive the equivalent of a buggati veron in the old days, your not going to get one today for under a million.

    Yep, capitalism will mean people will pay over the odds for percieved exclusivity or badge value but in real terms for the average UK worker, typical family cars are more affordable today than the good old days

  • Comment number 55.

    Jobs for the boys business as usual, any attempt to get the fraud squad to investigate the activities of the city is always squashed, we have had serious wrong doings here and the government has not instructed the fraud squad to investigate I wonder why?
    May be because the police and bankers are all members of the same lodge and cover one another's tracks so as to prevent the general public from finding out whats really going on with our cash and savings.
    The system is corrupt no question of that, until you get the police involved in actually policing the city with highly enforcible rules and regs then it will always be the same.
    Need to send a clear message perhaps some people doing jail term?, then it will wipe the smirk off the faces and give their annual bonuses to charities.

  • Comment number 56.

    46. At 2:29pm on 17 Jun 2010, writingsonthewall wrote:
    'I saw a Top gear episode last night, in it they had an old time Jaguar. In today's value this would cost about £30,000 - and in today's technology, this would be similar to a bugatti veron - which costs about £300,000.
    This example (and there are many others) show how our wages in real terms are diminishing. In the time of the Jaguar there was a chance one could own one if you made sacrifices - the chances of you owning a bugatti veron today is remote to say the least. Don't forget it's not just the list price, but all the other things too - insurance, fuel, tax etc'

    This is a rubbish comparison and does nothing to illustrate your probably valid point. For a start the Jaguar XK120 was a mass produced car of which 12055 were made and there have only been 200 Veyrons made. The Veyron cost £1m to buy, but VW make a LOSS of £2m on each one! So it's just a marketing exercise.

    Be serious, how many people made sacrifices to enable them to buy an XK120 in the 1940s and 50's? Very very few - most people were too poor to ever be able to afford them, they were too busy rebuilding their lives after the war, and cars were way down the list of priorites, expecially with rationing still in force. The people who bought them were those that could afford them. In fact people are more likely to be able to make the sacrifices (or get credit/loans) for the car of their dreams today, as they are much more culturally important now that 60 years ago.

    Stick to the facts...

  • Comment number 57.

    Interesting to note that we have pages and pages of rules and regulations governing what the consumer can and cannot do.This is backed up by laws and courts to enforce it if you step out of line and break the law.
    When have you actually heard of a lending institution or insurance business being taken to court for sharp selling practices, misrepresenting or concealing information from investors, or using highly illegal methods to shut a business down or foreclose on someones mortgage or loans?
    Lots of investigations which drag on for months if not years then they hope everybody forgets about it and carry on business as usual.
    Banks have a private sector monopoly and they exploit the lack of real competition to the full.Best bet is to fully nationalize the banks that have been bailed out and get them to compete against one another.
    At least the public sector banks make profits for the benefit of everybody not just a select few shareholders.

  • Comment number 58.

    OMG. As hard as I try to read and re-read some of Mr Peston's blogs - he says so much, but explains so little, from time to time?

    Anyway, visit the new HM Treasury site - it's new site may just be a small indication of open government? In fact visit all new government sites that were full of deliberately confusing c**p?

    Furthermore visit or re-visit your local authority sites. Do they declare what management earns? If not, why not? University Vice Chancellors declare their salaries - why don't your local authorities do the same?

  • Comment number 59.

    Come on Robert, say what you know to the people you are writing for?

  • Comment number 60.

    #26 Treading Water wrote:

    16.But none of us mere mortals could EVER possibly understand the incredibly complicated packages and deals. Only the most super intelligent people in the city are capable of regulating the industry that they understand so well.

    +++++++++++++++++++

    This whole mess happened because NOBODY understood these complicated packages. Not the banks, not the rating agencies, not the regulators, neither here or in the USA.

    Warren Buffett did warn everyone that there were Financial WMD's out there. He was right but nobody listened.

  • Comment number 61.

    43. At 1:52pm on 17 Jun 2010, jon112uk wrote:

    "Is there a bit of a pattern emerging here? - Pass everything off to a quango so he can pass the buck in a few months time when everything goes pear shaped? "

    Why of course - that seems to be the plan. On the bright side it seems George has finally realised that he will never control Capitalism - however rather than rid himself of the system - he's just going to put other people in charge.

    if you look at Boris's mayoralty - he employed the same tactic. After hiring 6 'depudies' to do all the work for him, he gets to prance around the place doing nothing but talking piffle.
    Unfortunately Boris's downfall was that he didn't really check to see who he was hiring and he lost most of them through scandals in the first few months.

    Now think about the Tory plan (because it's not a lib dem one) about people managing their own schools. It's another great way of passing the blame elsewhere. All those gullible parents who are keen on running their own school don't realise they will face exactly the same issues as schools run by local Government. The chance of finding a private investor will be slim to none, so you'll have to rely on the portion assigned by Government - which as we know will be reducing over the next decade. Parents will be in a situation where they either have to contribute extra to keep the school going and make up for diminishing funding, or fold. Remember parents won't have the experience and resources local authorities have (e.g. repairs to schools can be done by general council repair men - parent run schools will have to hire a janitor)

    It's a brilliant idea - dump all your problems on others under the guise of transparency. They think they're getting freedom, but actually they will get a poisoned chalice.

    Meanwhile Government - who will now be free of all that 'social drag' will be able to get on a concentrate intergrating corporation and state and implementing fascism whilst we manage the country ourselves for the parasites to extract wealth from our hard work.

  • Comment number 62.

    52. At 3:45pm on 17 Jun 2010, onward-ho wrote:
    And whatever you think of Gordon, he had guts and vision.The OBR and Osborne would quite happily preside over the collapse of the western banking system in the interests of saving pennies short term.
    A LOT OF DAMAGE CAN BE DONE IN FIVE YEARS, LOOK WHAT THEY'VE DONE IN FIVE WEEKS!

    I think John Mcenroe would have something to say about that!

  • Comment number 63.

    I think this story just about sums it all up.

    http://news.bbc.co.uk/1/hi/england/london/10340798.stm

    We can see where we're heading now. When is assault not assault - when the police assault commit it.

    You all saw the video for yourselves - I don't think anyone who has seen it could think it was anything but assault.

    This is how it's going to be - the law is absolute - it must be in order to protect the system.

    When the riots come - remember this and why people might appear to be aggressive.

    No retreat - no surrender - a man fighting for his freedom is worth 100 oppressors.

  • Comment number 64.

    54. At 4:29pm on 17 Jun 2010, Kudospeter wrote:

    "Yep, capitalism will mean people will pay over the odds for percieved exclusivity or badge value but in real terms for the average UK worker, typical family cars are more affordable today than the good old days "

    you're not taking into account the improvement in technology. The average car isn't more affordable because of improving wages - it's more affordable because in many factories the labour cost is almost zero. If the wages remained constant we would all be driving bugatti's by now.

    56. At 4:50pm on 17 Jun 2010, CarreraVulcan wrote:

    "This is a rubbish comparison and does nothing to illustrate your probably valid point. For a start the Jaguar XK120 was a mass produced car of which 12055 were made and there have only been 200 Veyrons made. The Veyron cost £1m to buy, but VW make a LOSS of £2m on each one! So it's just a marketing exercise."

    My 'rubbish' comparison is not about the specific cars - it's about the decline in average wages over time. In the past houses were more affordable - but less desired, now everyone wants one and nobody can afford them. This is because of the decline in wages - why else do you think banks have to keep extending the 'salary multiplier'???

    "Be serious, how many people made sacrifices to enable them to buy an XK120 in the 1940s and 50's? Very very few - most people were too poor to ever be able to afford them"

    I think you're confusing 'poor' with 'no desire' - many people could afford cars in the 40's and 50's but they chose not too - possibly because they had a decent public transport system and they weren't so lazy and 'de-localised' (i.e. commuters)

    "expecially with rationing still in force. The people who bought them were those that could afford them. In fact people are more likely to be able to make the sacrifices (or get credit/loans) for the car of their dreams today, as they are much more culturally important now that 60 years ago."

    Most people take out a loan these days to but an average car - but in the past they wouldn't. This shows how wages have declined and credit has been used to take it's place - or did the credit bubble appear out of pure greed?
    Even I took out a loan to get my first car - I couldn't afford to buy it straight off - but my Dad managed to buy his first car with cash - despite his job being a much lower pay scale than mine was.

    "Stick to the facts..."

    The facts are all around you - look how everyone needs credit to get what we term 'essentials' in the modern world. The argument that people borrowed money simply to engage in hubris is only true for the high end - the lower end has been in a forced debt spiral for some time - which is why they're going bankrupt in droves.

  • Comment number 65.

    Robert, Merv now is now responsible for preventing future asset bubbles. That's good. Is he meant to deal with existing asset bubbles, e.g. the house price bubble? They're clearly too expensive by all long-term measures, e.g. average salary. Why isn't this problem being mentioned?

  • Comment number 66.

    Evening Robert,
    If previous regulation hasn't worked then why do it at all?
    Who will pay for this new expansion of the BOE when the banks paid for the FSA?
    This new Government was committed to abolishing Quangos not forming dozens of new ones!
    I remember the BOE was instructed by the Treasury/Government to take a particular course of action which Mervyn was obviously not happy with. So much for impartiallity. Since Mervyn was approaching retirement he probably thought "what the heck" and did as he was bid.

    One final comment, according to Professor David Harvey, Capitalism requires 3% compound growth FOR EVER. Could that be the reason that it is logically flawed?

  • Comment number 67.


    "Swear allegiance to the flag, whatever flag they offer
    Never hint at what you really feel
    Teach the children quietly, for someday sons and daughters
    Will rise up and fight while we stood still"

  • Comment number 68.

    re #64
    The facts are all around you - look how everyone needs credit to get what we term 'essentials' in the modern world. The argument that people borrowed money simply to engage in hubris is only true for the high end - the lower end has been in a forced debt spiral for some time - which is why they're going bankrupt in droves.
    ---------------------------------------
    I'm not sure the statistics would back up that statement in the last sentence. Have you checked?

  • Comment number 69.

    When you are on about bankers excesses and how they think they are above the law take a look at the video clip below, its an actual Cannon Ball run using exotic cars majority driven by bankers.

    http://video.msn.com/?mkt=en-ca&vid=2e3c8474-0a10-492c-aa59-9c0e2a22283e&tab=m1209589337389&from=hpquad
    And you still think they respect the law, more like they are showing contempt for the law.You cannot touch me I am a banker.

  • Comment number 70.

    By the way one of the merchant bankers is British!
    He got off with a very low fine and the Lambo was in the police pound!
    Still think this rule change covers everything?
    Jobs for the boys business as usual, any attempt to get the fraud squad to investigate the activities of the city is always squashed, we have had serious wrong doings here and the government has not instructed the fraud squad to investigate I wonder why?
    May be because the police and bankers are all members of the same lodge and cover one another's tracks so as to prevent the general public from finding out whats really going on with our cash and savings.
    The system is corrupt no question of that, until you get the police involved in actually policing the city with highly enforcible rules and regs then it will always be the same.
    Need to send a clear message perhaps some people doing jail term?, then it will wipe the smirk off the faces and give their annual bonuses to charities.

  • Comment number 71.

    The average worker is on such a poor wage now that most of them are receiving benefits to top up their wages to an acceptable level. So in effect all taxpayers that pay tax(eg do not avoid tax off shoring etc) are subsidizing the lower income groups.
    So UK businesses are again in the pockets of the taxpayer subsidizing their business operating costs its a downward spiral in every sense of the word.
    Then they wonder why they are not selling anything!

  • Comment number 72.

    64. At 5:39pm on 17 Jun 2010, writingsonthewall wrote:
    'Most people take out a loan these days to but an average car - but in the past they wouldn't. This shows how wages have declined and credit has been used to take it's place - or did the credit bubble appear out of pure greed?
    Even I took out a loan to get my first car - I couldn't afford to buy it straight off - but my Dad managed to buy his first car with cash - despite his job being a much lower pay scale than mine was'.

    I brought a brand new Peugeot 12 years ago (Interest Free Credit!) and the equivalent model today, with better spec, is now only a couple of hundred pounds more expensive. Cars have become considerably cheaper over the last 10 years or so.

    It's a fact that we live in much more of a consumable/choice/disposable society. Many people cannot control themselves and 'have' to have the latest fads immeadiately and are not prepared to make sacrifices (i.e. save) for them. Easy Credit just fuels the greed. Your father didn't need a loan, because the choices were just not there, and I'm sure it was preferable to save than trying to get a loan from your Bank Manager.

    It is probable people in the 50's had no desire because they knew they could never afford them, and debt was only for 'poor' or 'careless' people.

  • Comment number 73.

    67. At 5:56pm on 17 Jun 2010, DevilsintheDetail wrote:

    "Swear allegiance to the flag, whatever flag they offer
    Never hint at what you really feel
    Teach the children quietly, for someday sons and daughters
    Will rise up and fight while we stood still"

    Might have more impact if it hadn't been written by a public schoolboy (Charterhouse) and someone from a selective fee-paying independent secondary school (Allan Glen's School)!

  • Comment number 74.

    64. At 5:39pm on 17 Jun 2010, writingsonthewall wrote:
    54. At 4:29pm on 17 Jun 2010, Kudospeter wrote:

    "Yep, capitalism will mean people will pay over the odds for percieved exclusivity or badge value but in real terms for the average UK worker, typical family cars are more affordable today than the good old days "

    you're not taking into account the improvement in technology. The average car isn't more affordable because of improving wages - it's more affordable because in many factories the labour cost is almost zero. If the wages remained constant we would all be driving bugatti's by now.

    56. At 4:50pm on 17 Jun 2010, CarreraVulcan wrote:

    "This is a rubbish comparison and does nothing to illustrate your probably valid point. For a start the Jaguar XK120 was a mass produced car of which 12055 were made and there have only been 200 Veyrons made. The Veyron cost £1m to buy, but VW make a LOSS of £2m on each one! So it's just a marketing exercise."

    My 'rubbish' comparison is not about the specific cars - it's about the decline in average wages over time. In the past houses were more affordable - but less desired, now everyone wants one and nobody can afford them. This is because of the decline in wages - why else do you think banks have to keep extending the 'salary multiplier'???

    "Be serious, how many people made sacrifices to enable them to buy an XK120 in the 1940s and 50's? Very very few - most people were too poor to ever be able to afford them"

    I think you're confusing 'poor' with 'no desire' - many people could afford cars in the 40's and 50's but they chose not too - possibly because they had a decent public transport system and they weren't so lazy and 'de-localised' (i.e. commuters)

    "expecially with rationing still in force. The people who bought them were those that could afford them. In fact people are more likely to be able to make the sacrifices (or get credit/loans) for the car of their dreams today, as they are much more culturally important now that 60 years ago."

    Most people take out a loan these days to but an average car - but in the past they wouldn't. This shows how wages have declined and credit has been used to take it's place - or did the credit bubble appear out of pure greed?
    Even I took out a loan to get my first car - I couldn't afford to buy it straight off - but my Dad managed to buy his first car with cash - despite his job being a much lower pay scale than mine was.

    "Stick to the facts..."


    I think the reason that most people dont notice they are becoming worse off is because they dont stay in the same job for long enough. They may get a promotion, or progress up a career grade if you work in the public sector, and it 'appears' that you are becoming better off. In reality you are taking on more responsibility and or hours to make up for the fact that pay is eroding. However, if you were to stay in a job rather than "progressing" the annual cost of living increases never really keep pace, over the years. Workers who tend to notice this the most are low paid public sector, ie binmen, admin assistants, care workers etc. And these are the ones that will be hit hardest by the cuts and will probably start to strike this summer. The pay offer we have been offered is 1.5% over the next three years. After a decade of below inflation rises, with only one exception, this is destined to result in protest.

  • Comment number 75.

    73. At 7:16pm on 17 Jun 2010, CarreraVulcan wrote:
    Might have more impact if it hadn't been written by a public schoolboy (Charterhouse) and someone from a selective fee-paying independent secondary school (Allan Glen's School)!

    Ouch! Must be rubbish then.
    A bit dimsmissive of a person's life and work to judge everything they did on where their parents sent them to school though dont you think?

    No you probably dont.

  • Comment number 76.

    Is the Bank of England not a bank ...why then should it have any say in the regulation of Banks..makes a total nonsense if you ask me...we need the current system strengthened and the system left as is ...but no our new inexperienced finance guy thinks he knows all the answers ..and in his smug Eton accent thinks he can put down people who have got us out of a very difficult position due to international problems...we are now in an era when the Tories as they always do think they have a mandate to decimate this country and make us in to a third world state ..but with a few rich left unscathed...well wrong again Cameron minor this time we will not fall for it..even tho you have conned the LD into an untenable position where at the next election they will lose most of their seats ...I can see Laws and Alexander on the scrapheap and I think Cable will find it very difficult to get re-elected my message begins now...Do not in any circumstance vote LD at the next general election and most certainly get rid of them out of local government in the interim...they have gone back on all their promises

  • Comment number 77.

    The BOE did actually predict the credit crunch in July 2006. Just that noone chose to acknowledge it. There was a financial stability report by BOE economists in July 2006 before the credit bubble burst. It was warning about debt and banks' reliance on wholesale funding and their vulnerabilities if there was a slowdown. Mervyn King played it down and was persuaded that "securitisation" overcame the fragilities. I expect he wishes he had paid more attention to that report now! One overall regulator overseeing sounds logical to me. We definitely need smaller banks and more competition though.

  • Comment number 78.

    69 My comment has been chopped by the moderator.
    The link was to a video article showing merchant bankers in the USA and some British ones all competing in a Cannon Ball run across the USA and finishing up in Montreal.
    All driving Lambo`s or Ferrari super cars, some got pulled over for speeding and one British merchant banker got his Lambo confiscated and put in a pound.
    He had to pay $750 GBP sterling fine to get it back, small change to these guys. Interesting how an article showing them for what they really are get chopped I wonder why. Is their some bias on this blog?

  • Comment number 79.

    75. At 8:43pm on 17 Jun 2010, DevilsintheDetail wrote:
    73. At 7:16pm on 17 Jun 2010, CarreraVulcan wrote:
    'Might have more impact if it hadn't been written by a public schoolboy (Charterhouse) and someone from a selective fee-paying independent secondary school (Allan Glen's School)!

    Ouch! Must be rubbish then.
    A bit dimsmissive of a person's life and work to judge everything they did on where their parents sent them to school though dont you think?

    No you probably dont.'

    I'm not dismissing the words or the people who wrote them, but it is hardly a revolution song, and Mike Rutherford/B.A. Robertson are hardly known to speak up for the underdog. It was just a middle of the road commercial claptrap pop song with no meaning except to make money. It's a bit like Phil Collins singing about homelessnes while wearing a designer jacket - Laughable

  • Comment number 80.

    Becoming apparent that the BBC is colluding with the city LOL!
    After all its embarrassing showing all this rich little boys playing with their toys and getting caught their not used to being caught!
    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 81.

    68. At 6:07pm on 17 Jun 2010, Up2snuff wrote:

    The facts are that the companies who operate in this industry are expecting a rise in corporate insolvensice

    http://www.ft.com/cms/s/0/32ec6b3c-724a-11df-9f82-00144feabdc0.html

    In Scotland there has been a 39 percent rise in corporate insolvencies - whilst only a slight 9 percent fall in personal ones.

    http://www.business-sale.com/news/article/scotland-sees-rise-in-corporate-insolvencies-32863.html

    The young are going broke....

    http://www.independent.co.uk/money/loans-credit/debt-is-good-message-may-be-luring-young-people-to-disaster-1998151.html

    ...and reposessions continue...

    http://www.beatmydebt.com/news-articles/debt-map-reveals-repossession-hotspots.htm

    How many more facts do you require? There has been a slight let off in bankruptcies due to Government stimulus - but that's over now and the trend is resuming.

  • Comment number 82.

    79. At 9:57pm on 17 Jun 2010, CarreraVulcan wrote:
    I'm not dismissing the words or the people who wrote them, but it is hardly a revolution song, and Mike Rutherford/B.A. Robertson are hardly known to speak up for the underdog.

    Revolution ? Where did that come from?


  • Comment number 83.

    The man in the skirt with Merve the Swerve, despite his lack of experience in the financial world, would do a better job than King.

  • Comment number 84.

    What will keep the BoE officials insulated from euphoria and mania (or depression)... they are people too. Anyway, lets say they do manage to assume the personality of a top-quality thermostat. This all assumes that central banks actually have the power to control markets. I think that assumption is false. They have the power to create money from nothing. And through taxes, governments have the power to destroy excess money. Although they are both in a sense part of the market, each really only responds to markets (and often too late). Markets have moods and no central bank can fight nature.

    Regarding future economic shocks and collapses; they are mathematically guaranteed by the interest-bearing fractional reserve system we operate. Remember, when money is created (through debt aka 'Credit') only the principle is created. The portion which will pay the interest part is not. So unless the money supply is perpetually expanded at a good clip, when the market gets unhappy about something and the music stops, some portion of us will find there aren't enough chairs for everyone. It's just a fact of the system we've decided to use. Keeps enough of us 'hungry' to ensure economic progress. But it can be brutal.

  • Comment number 85.

    81. At 09:54am on 18 Jun 2010, writingsonthewall wrote:
    68. At 6:07pm on 17 Jun 2010, Up2snuff wrote:


    -----------------------------------------------
    If I were you, I would not look at debt avoidance companies web-sites when seeking information about personal insolvencies.

    If you go to the Insolvency Service web-site you can see the numbers of processed cases for (England and Wales) which is probably the most reliable guide. You will see that there has been a peak in Q1 2007, a fall to Q3 and a steady climb through 2008 and 2009 followed by levelling off in 2010. The levelling off is at 35,000 and the '07 peak was around 30,000, approximately a 16 per cent steady increase over two and a bit years. Hardly in line with your "which is why they're going bankrupt in droves.", is it?

    The position is serious, and bankruptcy is serious. But an additional factor in the current situation is there are now people who are seeking to exploit those with borrowing difficulties. That is also affecting the current figures. The best people to see if you are in borrowing difficulties are Citizens Advice and a Debt Counselling Service, rather than these self-acclaimed debt cancellation service companies.

    In your original post you did not refer to corporate insolvencies, but I think you will find that they are currently running at levels below those in the 1991-93 and 1981-82 recessions.

  • Comment number 86.

    Bravo Luc @ #84 If you dig one layer deeper: The financial system adopted is a quick fix to an underlying problem of wealth distribution. The GDP has to be either totally consumed or partly consumed and partly invested (with some allowance for building up/liquidating stocks). The system allowed to defuse crises by printing additional money and storing it( or rather them - differently denominated as they are) in trusted institutions. Another fix is "green investment". The problem is in creating an appetite for the right investment, which would come at low cost to the planet and possibly flat rate of overall social rewards.

 

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