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Goldman, Hungary and Regulators

Robert Peston | 06:59 UK time, Monday, 27 October 2008

The International Monetary Fund, the ambulance service for the global economy, announced late last night that Hungary would be receiving an "exceptional level" of financial help from it - without specifying how many billions of dollars in loans that would be.

Man counts his cash in UkraineEarlier it had said that it had agreed to provide $16.5bn in standby loans for Ukraine.

It's a fair bet Hungary will be receiving rather more than that, because its dependence on loans from overseas banks and financial institutions is greater than Ukraine's.

Official figures that are out of date and are therefore an understatement show that Hungary has borrowed well over $100bn from abroad, equivalent to more than its entire annual economic output.

Ukraine's foreign debt is about half that.

So Ukraine is less exposed than Hungary to the global trend of capital being withdrawn from economies perceived - rightly or wrongly - as weak.

Although Ukraine has a special problem of its own, namely its dependence on steel manufacture: there has been a serious worsening in Ukraine's trade balance caused by the slump in steel prices, which in turn has been caused by the worldwide economic slowdown.

Ukraine and Hungary are trapped in the vice of the last phase of deleveraging, or the reduction in credit being provided by banks and other investors, and the decline in the real economy.

As for this most recent phase of the withdrawal of credit, which has caused financial crises for a series of emerging economies in eastern Europe, Asia and South America (see "Now there are runs on countries") and also global falls in share prices, it was in a way wholly foreseeable.

It was caused, to a large extent, by an exceptional and unprecedented shrinkage in the prime brokerage industry, which in turn led to a serious reduction in the volume of credit extended to hedge funds, which in turn forced hedge funds to sell assets, especially those perceived as higher risk.

This contraction in loans provide through prime brokers was the inevitable consequence of the collapse of Lehman, but also - far more importantly - of the recent conversion into banks of Morgan Stanley and Goldman Sachs.

Morgan Stanley and Goldman are - by far - the biggest prime brokers, with Morgan Stanley the number one.

But as banks, they're prevented by regulators from lending as much relative to their capital resources as they had been as securities firms.

So the US authorities should have known - and presumably did know - that by allowing Morgan Stanley and Goldman to become banks they were in effect forcing a serious contraction in the hedge-fund industry, which in turn would lead to sales of all manner of assets held by hedge funds and precipitate turmoil throughout the financial economy.

Which, as if you needed telling, only goes to show that regulatory intervention carried out with the best of intentions can have consequences that - in the short term at least - can be very painful.


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  • Comment number 1.

    Poor old Ukraine & Hungary.
    Communism failed there 20 years ago.
    Capitalism has now done the same.

    What does that mean for the global political situation ?

  • Comment number 2.

    And now, Gormless Gordon wants to borrow even more to "spend his way out of a recession" !! If he cannot see that his spend, spend plan caused a 20% fall in the sterling within the last few days, then he is blind to all reality.

    By cutting interest rates to the bone and printing more funny money, in effect devaluing his way out of his borrowings, he has shattered what little trust that foreign investors have in UK. They are not going to tamely sit back and allow Gormless Gordon wipe out their investments by devaluation. So that did unto him first before he could do unto them !! They fled with their *hard cash* and, thereby, negating at one stroke, all that money lent to the banks to "ease the liquidity problem" !! Without sufficient real assets to back up the quid, it went into a tail spin, not quite a "plummet" yet !!

    The end result of this is that pensions and savings have lost one fifth of their value instantly, all thanks to this government's spend, spend plan !!

    Much more of this and we'll end up envying the Zimbabweans and their mere 5,000% inflation !!

  • Comment number 3.

    #1 From what I can understand, Ukraine is quite steady. Their problem is that, after the Communist years, they lacked the capital to re-build their industries. Instead of diving head first into the credit market, they did so rather cautiously and got castigated for it particularly by the ex-Communists, now turned fervent Capitalists !! Not much noise from that bunch *now* !!

    Hungary is a different case altogether !! Since I do not know very much about the Hungarian situation, it is not for me to comment on them !!

  • Comment number 4.

    For once in the financial world there is a voice who explains the situation as I a mere working nurse can understand. Thank you Robert Peston, keep up the the CLEAR explanations

  • Comment number 5.

    Though economists talk about "soft landings", I don't think there is such a thing when you are talking about the collapse of a pyramid of dept.

    The US regulators may have inadvertently done a good thing by in effect speeding the process up a little. In any case this has a long way to run yet and the market will contract a whole lot more.

    In one way I was surprised to see both Buffet and Bolton more or less calling the bottom of the market recently. This tells me one thing: that even the very best investors are still too optimistic, reading the data in black and white, but seeing what they want to see. They are clinging on to the conventional wisdom of the last bull run ie. that everything must go up. When the last of this optimism has evaporated, that is the time to call the bottom.

  • Comment number 6.

    to lizpeters,
    just bear in mind that as a nurse, you are doing a vital job for the community. Financiers, though they talk in fancy jargon to freeze the rest of us out, often aren't...

  • Comment number 7.

    You mention "Global" almost has many times as Brown and his puppet Darling !
    WW11 was a "Global" problem but it the cause of the problem wasnt Global. The financial problem may now be Global but it has been caused by the disastrous spend, spend, spend policy and abdication of all financial control by the Brown and Bush Governments.
    Still Brown wants to give more of the same, tax, spend and borrow which caused the problem in the first instance.
    Unless we get Brown out of office and replace him with someone who cares more about Britain and its future than his own, we are in for yet more heartbreak in the coming years.
    Reckless and inept standards in financial and moral management is so rampant in this Government that there no hope for any recovery until it is removed.

  • Comment number 8.

    So the global support for banks don't really solve anything. It just shifted the debt onto central banks and governments. Debt cant just disappear. Watching the likes of Buffet and Bolton to gauge the bottom of the markets is not so much of a smart idea either. Remember they have never seen this type of turmoil before either. You guess on where the bottom is, is as good a guess as anyones.

    I reckon the FTSE will hit 3500 today, or get dam close to it.

  • Comment number 9.


    I see that AEGON the European pensions and investments giant (includes Scottish Equitable based in Edinburgh) is seeking a multi billion bail out from the Dutch government. Surely it is only a matter of time before the UK financial services companies that are not banks will also follow suit?

    If these companies are bailed out I fail to see how an increased spending plan can be put into effect without creating a basket case economy. Shades of the Weimar Republic perhaps?

  • Comment number 10.

    This regulation is exactly what was needed. Yes the consequences will be nasty for some, but without deleveraging we have not solved the problem.

    So when will Gordon and Co recognise that and stop encouraging banks to lend at their previously silly rate?

    Unless they legislate to stop it, it will happen again and I have collegues that still cant wait to get their hands on a 110% mortgage!

    As always fools and their money are easily parted.

  • Comment number 11.


    Many weeks ago on this blogset I wrote "Where are the IMF?" all I can now say is: 'About time too'.

    I think there is presently a severe case of the 'king has no clothes' in governing circles. I am not sure if it it a good thing or not. What I mean is that there seems to be an attitude that so long as we do not admit to the public there is a very bad problem then the problem does not exist.

    I would be interested to read other peoples' views on this conundrum:-

    Even though we know we have an inescapable deep depression coming is it better to hide the fact from the public or not?

    (By 'better' I mean - will the fact of not telling anyone actually reduce the depth of the depression.)

  • Comment number 12.

    Before someone says that Hungaians have been "living beyond their means"...

    Here are some FACTS about Hungary...

    Government deficit 2008: 3.4% of GDP (compared with 25% in Iceland, 5% UK, 4% US)

    Private sector debt: 63% of GDP (compared with 435% in Iceland, 198% UK, 226% US)

    Re mortgages on real estate:

    In Hungary, about 28 % of homes carry a mortgage, the rest are completely paid off...

    In the US, about 75 % of homes carry a mortgage.

    In Hungary, credit card debt per capita is around $330 - approx 41 % of average monthly salary.

    In the US, credit card debt per capita is around $9,200 - approx 365 % of average monthly salary.

    A lot of the 100bn debt Peston talks about, is money owned by subsidiaries to their foreign owners! In a sense, it's a measure of Hungary's success in attracting foreign investors.

    Btw, while the Hungarian government was far too profligate between 2002 and 2006 because of the Tony Blair-backed Medgyessy government and the Mandelson-backed Gyurcsany government, there has been an austerity package for the past 2 years.

  • Comment number 13.

    Apologize my bad english.

    Many talk about the similarities with 1929, and of course, there are some if you focus on the finance markets.

    But there are of course big differences, at least in western Europe.

    This time we had not a worldwar just 10 years ago or a hyper inflation in Germany just 5 years ago.

    Instead we are living in the most developed wealth and social circumstances in our history.

    So the outcome might be harmful, but will never reach such low levels of living as in the 1930ies. In western Europe.

    USA might be different, they did not win a worldwar just 10 years ago, but are in costly wars all over the world right now. And they are the ones who really havethe debts.

    The developing countries in eastern Europe will be much harder affected. They are at least 20 years behind western Europe in developement.

    So Poland, Hungary or Czechia will be hitten worse than people from France or UK, but have the benefit of membership in the EU, which means a strong hand to help them.

    But Russia, even with all it's oil, will be in bigger problems than the new EU members and people from Ukraine and all the other former soviet satellites at the end of the european wealth chain might be hitten like germans in the 1930ies.

    And that means a big risk of revolution and maybe civil war in big areas at our european eastern borders, which, in my view, is by far the biggest problem we all have to fear as outcome of this finance mess.

  • Comment number 14.

    We live in borrowed houses, spend borrowed money, and borrow the future from our children.

    The world economy runs on borrowed money; it doesn't take much of a brain to work out that that is the cause of the problems that face us.

    Now Gangster Brown wants to borrow more, to spend his way out of poverty.

    Nothing more to say.

  • Comment number 15.

    you're right about calling the bottom.

    One thing that amused me about the banking bailout was that the press (and the markets for a while) seemed to blindly accept that this apparently gigantic problem was solved over a weekend. And hooray! How clever are we politicians!

    Politicians, investors, fund managers et cetera are seeing what they want to see. Not sure what this phenomenon is called, but it has cropped up elsewhere. For example, when Iran Air Flight 655 was shot down by USS Vincennes in 1988, the WHOLE chain of command were convinced that the airliner was diving (ie. what they wanted to believe, so they could shoot the plane down) when the data clearly showed that it was keeping level altitude. Data says one things, everyone reads something else (what they want).

    Sorry for going off track, but it is relevant. The majority of players at the moment don't want to look at the facts...

  • Comment number 16.

    I'm sorry to say it looks like we are headed for a one pound one dollar exchange rate.

    Which is good if you are an exporter.

    International investors have been put off Britain by the way the Banks have been nationalized and forced to merge.

    Britain is not a safe place to buy shares and they know it.

    Interest rates should have been cut over a year ago, too late now.

    Public sector employees should have a pay rise that shows respect for them as professionals and takes into account the rate of Inflation (around ten percent).

    Holding back the Public sector puts a break on everyone else.

    Of course Gov't are used to being able to be disrespectful to their public employees.

  • Comment number 17.

    #4 - A mere working nurse? Surely not.

    RP - I am not to worried about the cost of money, but rather the human cost. The ramifications of the situation is far reaching with alarming consequences.

    The Easten sector of Europe has little or no effect on our economies, however, our hearts are going to be stretched when the TV crews turn up in about 12 months time.

  • Comment number 18.

    You'd have thought with his upbringing as the son of a Churchman that 'Gifted' Gordon Brown would be aware of the immutable law of business that you can't 'borrow your way out of debt' unless you have some pretty robust sales revenue coming in to cover the interim shortfall.

    You'd also have thought he might have taken time to look up 'usury' in Wikipedia. usury is (un) commonly used as a criticisim of excessive rate of interest but it is - fact - historically the mode op operation of the Lombard banking system we use in the West. The Lombards of course were little more than the usurers of previous years under another name, and it's hardly suprising that the Lombard system offers no fallback position, because it's entire modus operandum is accumulation of bank wealth based on client debt, per se.

    The Islamic bacnking system is vehemently opposed to usury and it would be interesting to hear how the Islamic banking system is doing. Better than ours I figure.



  • Comment number 19.

    Dear Robert,
    Sitting here in Istanbul traffic, where the Turkish Lira is nosediving in front of me, I can't help but wonder where this knight on a white horse called the IMF finds these billions of dollars so easily.
    Turkey has been bailed out many times and I suspect that we are in the queue again.
    Is there an IIMF in the background to bail out the IMF ??

  • Comment number 20.

    Markets are in free fall. How do the Friday chancers feel?

  • Comment number 21.

    I just noticed, that Germany will be hitten the most if eastern Europe collapses, because german Banks by far are their biggest lenders.

    On the other hand, does that mean, that we "own" these economies in the future?

    Of course, that question was not ment serious, but what I'm wondering for real:

    Are all these debts are just to be written off, or are the investors able to save some of the assets for the future, even if the are not of high worth right now?

    I mean, in the end, it should not be, that the lenders go out of this crisis better than the spenders.

    Problems over problems.

    You know, british papers are full of the Iceland crisis, while, if my informations are correct, UK banks have just lent 4 bln $ to Iceland, while german banks invested 21 bln in Iceland.

    Or even your neighbour Ireland, has debts at british Banks of 221 bln $, while 250 at german.

    And not at least: british banks are in debt four times as high at german banks, than german banks at british.

    So what will this all mean in the end?

    Are lenders and spenders all eaually at zero, if it all collapses, or own the lenders some buildings, factories, gold reserves of the lenders in the end?

  • Comment number 22.

    It may be painful and we are all sorry to the innocent bystanders in Budapest and Kiev, but this deleveraging has to happen, it was not sustainable.

    What concerns me, are the knock on effects these events will have.

  • Comment number 23.

    Those figures are more or less correct, but of course, most of these are incomparable internationally (even though the IMF pretends that they are comparable).

    It is true that most of the debt derives from corporate borrowing and since 8O% of the GDP is produced by foreign owned companies, thus you are right, these are actually foreign debts. In effect only SMEs borrow in forints and in Hungary.

    But one has to remember that the entire Hungarian transition to capitalism was based on selling the entire economy to foreign investors and liberalisation (counterbalanced by extremely complex fiscal measures). Thus it is a failure of the transition.

    However, as I showed it in my book, this is the same crisis that plagued Hungary since the 196Os, just it appears in different forms (1961-62, 1973-75, 1979-1983, 1988-89, 1992-1995, 2OO6-O7 and now).

    One of the really awful things in the current crisis is that Hungarian banks were recapitalised between 1992-1995 at a cost of 1O% of the GDP before they were privatised. However, no drastic measures against banks and large firms are contemplated in Hungary. It is not too surprising as the same messianistic apostles of free market are the advisors of various government since the early 198Os. Anybody, who disagrees with them get the label of "Stalinist".

    Politically the situation is rather difficult, however, more difficult than it seems from coolridin's figures as in the last two years almost all Hungarian personal loans and mortgages were nominated in Swiss franc, thus the Hungarian currency has to be defended, which means mad interest rates or through easing through fiscal measures, which creates problems with the EU and the IMF. Of course, there is a third option: putting the burden on the banks and if they cannot cope with it, then it can be written off against their equity and then the state can recapitalise them if it deems it necessary.

  • Comment number 24.

    BBC headline:

    Millions of pounds have been wiped off the value of the UK's pension pot in the last year pensions has dropped by nearly a third from £552bn to £395bn,

    Millions? Are you joking? BBC, that's 157 BILLIONS down, or to put it into millions for you, it equals 157,000 millions

  • Comment number 25.

    #4 lizpeters

    Would it be possible for you to get someone sectioned for the sake of the country?
    (I believe a section 41 is the necessary requirement)

    Oh, btw, he lives at No. 10 Downing Street. He tends to have a habit of laughing at seriuosly inapproriate moments.

  • Comment number 26.

    Dear Robert,
    Finally got to office to find Turkish Lira down 35 %. As our banks appear?? to be weathering the storm and it is only the stock market nosediving please have a whip round to help us out.

    Dear IMF,
    Please send a lot of money as we can't pay our bills,
    Love and kisses,

  • Comment number 27.

    From IMF.

    Regional Economic Outlook: Western Hemisphere
    Date: November 2007
    In spite of a slower U.S. economy and recent market turbulence, growth in the Latin America and Caribbean region has continued at a robust pace. This reports explores the resilience of the LAC region to external shocks and the policy challenges involved in sustaining the region's improved fundamentals. The analysis focuses, in particular, on real and financial linkages with the United States, the strength of underlying fiscal positions, and the sustainability of the ongoing credit boom.

    God help us

  • Comment number 28.

    #12 Thanks for these interesting facts about Hungary. I will store them in my database.

  • Comment number 29.

    With this inequality will increase and global trade will decrease. What is happening in this world could bring revolutions as people get fed up with the political process, this is one of the reason for Nazi and Communist got power in the past.

    Democratic governments should do what ever it can to stop this happening. This way we can protect democracy and human rights also avoid wars as in the past.

  • Comment number 30.

    When will the IMF run out of money? This is a crisis which is bad enough for smaller economies. But what if a big one like the UK takes a hit? The Global leaders are so far behind the crisis that it risks spiralling further out of control.

  • Comment number 31.

    The IMF has about $350 billion to dish out if it wants to

    Which aint gonna last too long, is it?

    This serious situation is being treated with contempt by our Leaders and we are being treated likewise -

    Shops and Businesses are closing

    Many unempoyled seen entering the job centres

    Banks offerring 8-9% interest rates, desperate to get savers cash

    This IS going to be a Depression and THIS will wipe out the western financial sector and any business that needs to borrow. House prices will fall 45-50% off their peak.

    There will be riots

    There, I just called the bottom, Buffet

  • Comment number 32.

    13 starof thesouth

    No need to apologise. Your English is fine and your point good. It is the potential of the social destablising effect of this situation which is the biggest worry.

  • Comment number 33.

    Isn't it nice? When Yushchenko was the head of Bank of Ukraine, he advised (even protested) against increased borrowing. Ever since the glorious orange revolution, however, he and Timoshenko were borrowing (or authorising borrowing by banks and firms) abroad like mad so that they wouldn't be swept out of power by the discontent of the people. And even then Yushchenko's popularity is about 3%.

    That's the story of capitalism in Eastern Europe: it has no inherent legitimacy, thus it has to be bought. The new elite first sold anything that was marketable, then they borrowed. It is really a comparador elite.

    It is true to most of them to different degrees (perhaps the Czech Republic and Slovenia are the exceptions, although less and less so).

  • Comment number 34.

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

  • Comment number 35.

    Is someone going to put the clocks back at the BBC forums? - all the timestamps on these comments are 1 hour wrong.

  • Comment number 36.

    It made me laugh listening to Radio 4 this morning when some stockbroker was advocating buying shares in supermarkets 'because even in a recession people have to eat'.

    Tell that to the people of Zimbabwe, who are starving as a result of economic mismanagement and the fact that there currency has devalued so much they cannot buy food abroad.

    You think it could not happen here? At least Zim has plenty of good agricultural land and sunshine.

    People of the UK are in for a hard lesson in what extreme poverty really means I fear.

  • Comment number 37.

    The really alarming thing I find, day to day, is NOTHING is getting done in the UK to protect and survive us all. Things just go rolling along, more and more social issues grab the headlines, no inititiaves.

    Here are a 2 initiatives that will make a difference in the short term:

    1. Introduce a national 50mph speed limit.
    (makes roads safer, saves gasoline, good the 'planet'), costs nothing to introduce.
    2. Re-open some of the coal mines. The pound is dropping so imported coal (which most of it is) is going to go up in price taking energy costs with it across the board. (Costly to reopen a pit maybe but so what? Creates mining and many assoc jobs, restores a mining community and coal is one of our relatively few natural resources). My Grandad was a mining engineer in Whitburn BTW - and his 'Scott's mine', which was still a live mine when it was closed is grassed over (landscaped?) and just begging to be opened up.
    3. Social improvements like free electricity, oil and gas for older folk. Not exactly rocket science for social services to figure out who needs it. I think it's going to be frightening time for so many and they are one sector of society who are least-well placed to speak out for themselves.

    I could go on, but what's the point. This mob at Westminster, all they ever do is talk.


  • Comment number 38.

    Dear Robert,
    I know that it must be impossible for you to read many of our comments,many of which are very informative.
    Most are critical of the financial institutions,and quite rightly so, considering the financial mess WE are in.

    From BBC
    'Claimants who are neither terminally ill nor severely disabled could have their benefits cut if they refuse to attend interviews with jobs advisers.'

    Thin end of the wedge.

    Turkish Lira still dropping, so selling car and buying bicycle- old enough to remember Maggie!!!!!


  • Comment number 39.


    It is a delusion to think Democracy is the answer. OK, so very few true democracies actually exist in the world, but in any case, democracy is an excuse for silly squabbling (ever seen our parliament in action!) and a moronic zig-zag of changing policies every 4, 10 or whatever years.

    What is needed in consistency, which will only come about by authoritarianism (read Benign Dictatorship). See Singapore. No democracy to speak of. Neither an oil state, but doing fantastically well. We have knife and gun crime, they leave their doors unlocked because there is no crime. We sell our assets to foreigners (nuclear power, water infrastructure, airports etc.), they run their country like a plc.

    Keep your democracies - Brown, Blair, Thatcher all voted in and all in it for their own egos. Run this country like a plc, and we would still own our infrastructure. Our leaders (all of them) have stripped this country bare for their own gain, not that of the country..

    And one other important point. Whenever there's a problem in this country we try to reinvent the wheel. Look at recycling and green issues. The Germans have been doing it for decades, lets just "best" them.

    It's no surprise that Lee Kuan Yew, when he came to power in Singapore, had spent 2 years traveling the world learning who does what best, so that he could copy them. We Brits are arrogant, and wouldn't dream of looking further afield. And who do you think the Chinese are looking to to learn some useful lesson, yes, Singapore.

  • Comment number 40.

    #12 - coolrindin

    Thank you for stating the case for Hungary.

    I would like to add that one of the reasons there has been a mass exodus of deposits from Hungary has been due to the fact that Hungarian banks were not especially exposed to the sub prime fall out. There was no reason to suppose that deposits were at risk and no need, therefore, for guarantees. When guarantees were offered by western banks, naturally deposits flowed to them.

    There has also been a climate of fear surrounding the extent of foreign interest in the banking sector. Fears about the parent caused concern amongst UniCredit depositors while KandH, which is largely Belgian owned, experienced problems as a result of problems at Fortis, ING and other Benelux institutions.

    The irony is that none of this is Hungary's fault. She has basically done the right things attracting high levels of inward investment. The growth in the economy is only now being stifled by global effects beyond her control. Essentially the Hungarian economy has fallen victim to the folly bankers further west.

    In answer to TGRWorzel at #1, I would say watch out for the Visegrad group pulling together to force some hands in Brussels. The IMF intervention is welcome but I feel the ECB contribution last week was somehow forced. Remember that it takes four dissenting nations to kill off QMV and there are four Visegrad nations to contend with.

    Here in Budapest, the sense of injustice is palpable. This is not a case of going cap in hand to IMF and ECB but rather with an attitude of 'you screwed it, you fix it'. Brussels, London, Paris and Berlin take note - if you do not play fair with your new found friends, you could be in for a very rough ride.

  • Comment number 41.

    #35 - __cats

    On the contrary, the time stamp is right for the first time in ages - at least here in eastern Europe. That is what we are tlking about isn't it?

  • Comment number 42.

    Sorry to be in a panic but if the ambulance of the world economy only has 350 bn then the only metaphor left is how much does the undertaker have.
    Even God cannot help him

  • Comment number 43.

    I notice that the IMF is forcing Ukraine to pass an emergancey package of laws before the country can access this loan.

    Are these reforms more of the same free market IMF docrine? Or is the IMF also waking to the new reality that an unregulated market will eventually run off the rails?

  • Comment number 44.

    BBC, get your clock sorted (if this post says 9.44 and not 10.44 then you already have!).

    OMG - Does that mean RP wrote his update at 05.59?!

  • Comment number 45.

    I'm on a roll.
    Do what Turkey did 2 years ago and knock 6 zeros off all currencies.
    Hey presto no more billions.
    Sarcasm gives way to cynicism and then total desperation.
    Turkish Lira still going down so going for a smoke as I cannot afford to import even a sausage roll into Turkey never mind British machinery.
    Cannot see trade looking up for a long time so probably have to return to UK as asylum seeker!!!!

  • Comment number 46.

    when will they ever learn, during this downturn any country in debt will suffer greatly.
    any government that will borrow its way through these times is in serious error and will likely cause there country more harm in the long run.
    the old eatern block countries are bound to suffer there governments have not the experience to deal with these problems, but looking at it fairly our beloved government who should know how to deal with these problems never took history thus have not learned the lessons of the past and therefore will suffer even greater hardship no they wont the people of the country will suffer the hardship at there expence.
    as we can plainly see this week with benefit reform this government is borrowing billions and trying to spend its way out of trouble whilst at the same time penny pinching from ill and disabled people.

    there is no longer a funny side to this situation the only people who seem to be not suffering are bankers who got millions in aid and members of parliment who it seems will keep there high wages and expences.

    under this government the best we have becouse we can not choose a better one this country will continue to suffer and fail.

    and there is nothing we can do about it there are no quick fixes or magic potions no great minds awaiting in the wings to pull this country out of the fire.

    sadly we will all loose so kiss your assets good bye we are heading into a winter of discontent, and going nowhere fast.

  • Comment number 47.


    "Ukraine and Hungary are trapped in the vice of the last phase of deleveraging, or the reduction in credit being provided by banks and other investors, and the decline in the real economy."

    Are you saying that this is the last phase of the crunch and the light at the end of the tunnel will soon be switched back on?

    Should you have put 'vise' instead of 'vice' or does it work either way?

  • Comment number 48.

    Even now, I sense that most people are observing this unfolding seqeuence of intricately related events at a superficial level. Of course, I exclude most of the bloggers here, btw.

    We're witnessing a slow-motion convergence of catastrophes which has only just begun, let alone being nearly over as some politicians (in particular) are trying to dupe us into believing. Mustn't frighten the horses eh?

    If you look behind the sadly superficial reporting of the BBC (yes, the quality of BBC News has declined significantly in recent years, dumbed down and chasing audience ratings no doubt), the 'red top' newspapers and other mainstream/superficial news media you'll see quite quickly that the portents are decidedly grim.

    The current situation is wholly unprecedented. The connectedness, complexity, fragility and real-time nature of global financial and economic systems make them inherently unstable, just like the proverbial house of cards.

    Since the foundations of the house were manufactured from fractional reserve banking, excessive debt, flawed financial derivatives, over-valued assets, the assumptions of infinite growth and endless cheap energy, all wrapped up in political collusion to make us think that everyone could get rich quick (whilst allowing the bankers to indeed get rich quick), then let's not be surprised if we now face the mother of all systemic failures.

    To be fair, there are some commentators who are saying that we ain't seen nothing yet. I just wish our political elite would get serious, come clean and indicate to us that this is going to be very, very tough indeed (they and the BBC have only just recently agreed to use the word 'recession' for goodness sake) and, moreover, to come up with some sound and substantial strategies for dealing with the likely long-term economic and social effects of this mess.

    True to form, I have yet to hear one British politician talk in anything other than sound-bites about the problems we now face (perhaps with the exception of Mr Cable). As for Gordon Brown's solution that we now further ramp up our nation's already stupefying indebtedness ... well it rather makes my point I suppose?

    Since the wealth-creating sector of our economy has been throttled half to death over the past 10 years (bear in mind, Gordon Brown despises wealth creation per se), just watch it suffocate over the next decade as Mr Brown's beloved public sector consumes all before it.

    And where are the Tories in all of this? Nowhere to be seen; been far too busy for 10 years making themselves look like Labour-Lite and are now desparately trying to figure out how to become Her Majesty's Opposition.

    Shock! Horror! Could this be the end of 'The John Lewis List'? Don't hold your breath guys. Three cheers for our political class anyone?

  • Comment number 49.

    # 43

    Yes they are. And also include demands for further privatisation that is actually outside the remits of the IMF by its own statue, not because it cared what in its own statue at any time.

    In 1993, the IMF demanded from the Hungarian government that the railway workers' families' reduced rate railpass should be abolished, because it was against the market principles. There was a point in the negotiations when it became a sticking point... The finance minster had to ring up Washington to ask the big bosses to rein in their delegation a bit.

  • Comment number 50.


    Your clock appears to have been adjusted twice

  • Comment number 51.

    The IMF gets its funds from the taypayers in the rich countries. That makes it more effective than the old EMS [European Monetary System] where the weakest country bore the burden.

    (Remember when we had difficulty in keeping our currency exchange in range by raising interest rates, Germany offered to 'help' by buying pounds but we only found out later that we had to repay them, buying Marks with (even weaker by then) pounds.)

    The principle of the EMS (which we then rapidly left) being that the weakest country bore the burden was thus shown to be fundamentally flawed.

    The FTSE-100 share index is regularly checked to make sure that the top 100 companies are the nucleus of that index (so it you have a tracker fund it bears lots of dealing costs to keep it 'in line').

    How then do we make sure that the IMF draws its funds from the wealthiest countries (e.g. Middle East oil producers, China, etc.) in the right proportions to America etc. so that it doesn't fail (when stressed) like EMS did?

  • Comment number 52.

    Dear fellow bloggers,
    Returning from lunch, I wanted to ask you what you would do ,if you were a supreme being ,in order to stop the rot.

    I will give up smoking.
    PS Turkish Lira in a hearse so next stop back of lorry on route to Blighty via Calais !!

  • Comment number 53.

    All the stuff surrounding this Credit Crunch is very simple to explain and understand.

    Governments and personal debt, through government spending and personal borrowing was way beyond what would have been considered prudent several years ago.

    This applied mainly to USA and UK countries.

    This money was borrowed from the future.

    It will have to be repaid now or in the future.

    The government has decided to repay it later by borrowing more now.

    The UK citizens will have to pay more in the future through taxation.
    The UK citizens & government will pay through the -get out of jail free- card i.e. inflation.

    I think this is the preferred government route - it is just that they would never admit to this.
    In the inflation route, it is the poorest in society who will lose out the most.

  • Comment number 54.

    To put the West's problems into perspective the Ukraine is set to receive a handout of 16.5 Billion dollars we have just given RBS a handout of 20 Billion GBP which prior to Gordon's devaluation was about 36 Billion Dollars. A single insurance company in the US (AIG) has recently said that the current government handout of 123 Billion Dollars may not be enough. If every financial in teh west is in this much trouble it rather makes the money the IMF are lending the Ukraine quite miniscule

  • Comment number 55.

    Where does the IMF get its money from?

  • Comment number 56.

    All the stuff surrounding this Credit Crunch is very simple to explain and understand.

    The source of the problem was mainly the USA and UK countries.

    Governments and personal debt, through government spending and personal borrowing was way beyond what would have been considered prudent several years ago.
    USA spent on foreign wars.
    UK spent on schools and hospitals – buildings and wages.
    Lots of cheap money in both countries was available for bankers and money people to put into leveraged, so called investments. These investments were sold around the world.
    No money was saved in either country.

    This money was borrowed from the future.

    It will have to be repaid now or in the future.

    The government has decided to repay it later by borrowing more now.

    The UK citizens will have to pay more in the future through taxation.
    The UK citizens & government will pay through the -get out of jail free- card i.e. inflation.

    I think this is the preferred government route - it is just that they would never admit to this.
    In the inflation route, it is the poorest in society who will lose out the most.

    But what do I know, I am just the electorate.

  • Comment number 57.

    # 51

    The funding mechanism of the IMF doesn't work as you assume. In effect the largest few contributors determine how much any one country can contribute.

    The main source of IMF finance is the quota. After the last quota reform (this April), the largest quota is with the US, then the EU. These together have 49,5%. China has a mere 3,7%, the Middle East and Turkey about 7 and a half percent.

    Now, of course, the IMF can borrow, but in none of the two major programmes the countries that you listed feature (except for Saudi Arabia with a smaller sum).

  • Comment number 58.

    ps your web site clock requires adjusting to Winter Time

  • Comment number 59.

    Bear in mind that the current stability in Europe depends on Russia not wishing to over extend itself, as it did historically to protect itself post 1945. That stability depends on trade, and a degree of acceptance of mutual incomprehension. It also requires the current political absence of presidential leadership in Europe : counter-intuitively, a very stabilising feature in itself.

  • Comment number 60.

    Thanks SVRSIG
    'How then do we make sure that the IMF draws its funds from the wealthiest countries (e.g. Middle East oil producers, China, etc.) in the right proportions to America etc. so that it doesn't fail.'

    This tells it all.
    Bahrain, Qatar, UAE, and China ,who don't give a monkey, are the supreme beings who will save the world.
    Baldrick , where is your cunning plan???

    On lorry, heading west, hoping for internet access in Bulgaria, if it is still there !!!

  • Comment number 61.


    So the IMF will fail once it is stressed?

    The IMF will have to do some fast talking if we are not to see that "the Emperor has no clothes" then.

  • Comment number 62.

    It is 11:44.

    I am in the future and posting this to the past - about an hour - I have to warn you all to watch out for theeeeeeee..........

  • Comment number 63.

    I am afraid I do worry about where this is all leading, long-term...

    GB and Darling seem to have put the lid back on the kettle, after the heat was turned-up too much and steam blew the lid off, but its still boiling away.

    Although its been topped up and could be topped-up again, sooner or later we run out of water and the heat will burn through the bottom and we have our meltdown....

  • Comment number 64.

    Dear Pensionholder

    Please take a look at The Scotsman today:

    £160bn bonfire of the pensions

    Date: 27 October 2008
    By Gerri Peev

    WORKERS' personal pension pots have had at least £157 billion wiped off their total value in the last year, a report out today reveals.

    Defined contribution schemes – which account for about a fifth of all pensions – have seen their worth plummet over the last 12 months as a result of the credit crunch.

    Is anyone in the press examining this bubble?

  • Comment number 65.

    We're all dooooooomed. AAAAAAAAAARRRRRGGH!

    Now we've established that, i'm off for a pint. Beer sales are falling y'know. Only helping the domestic economy.

    ciao all.

  • Comment number 66.

    #58 MrBloggy

    There is no such thing as winter time. Its now UTC or GMT. Take your pick ;-)

    I see beer sales are down. So we cant even afford to drown our sorrows by the looks of it.

  • Comment number 67.

    11 John-From-Hendon

    I have to agree John. There seems to be this weird thing going on out there whereby everything'll be fine if we just don't tell 'them' how bad it really is. For me, this stems from the overwhelming acceptance in high financial circles that 'sentiment' is all. Well, I suspect you know, as do many others on this blog, that there's more to what's going on at the moment than mere sentiment . It's pretty shocking though. What we need is transparency. It's helping no one playing down how grave the situation is only to then announce on the weekend that whoops! another bank, or as it seems now: country, is on the brink of collapse. What a mess.

  • Comment number 68.

    # 61

    Kind of, I agree.

    The IMF has about 2OO billion in ready cash, if it needs more, it has to go to the members. However, I don't see China contributing more (especially as it will be hit by the recession in the US and Europe and Japan) without increased voting rights which won't suit the US. So I guess the banknote-printshops will have to do some overtime in the US and ECB.

  • Comment number 69.

    Just to pour petrol on the fire:

    European and UK banks have five times as much exposure to emerging markets as their US and Japanese counterparts.

  • Comment number 70.

    Hy guys,
    Good news at last.
    People in Bulgaria are very happy because they havn't got a clue whats going on.
    The lorry driver also smokes and my Japanese Yen are enough to buy most of the banks here.
    They welcome the arrival of the AMF, who gets his funds from Mum in Hereford.
    Next news from Sofia,

  • Comment number 71.

    Someone on here predicted 1.0 dollars to equal 1.0 pounds.

    I figure 1 dollar to equal 0.78 pounds. Around the 1978 rate.

    It makes complete and utter sense for everyone to imediately convert all there savings into Dollars. Just take it out of the banks and building societies and exhange it. Wait a couple of months and exchane it back. The growth will be better that keeping where it is.

    I did this when 2 dollars equaled 1 pound. and stated so on this blog. I will exhange back at the above rates.

  • Comment number 72.

    Dear Robert
    I am unhappy at the way certain media and bloggers are so critical of you and your reports. I would like to state that all my collegues family and friends think your contribution on BBC TV and through this web sight are invaluable. To us the "Joe Bloggs" of the U.K. your explanations of the info you receive are invaluable, please continue with your good work and ignore totally the critism you receive, mainly from those who have a vested interest to keep the truth from us i.e, the shysters of the banking and financial world. We the "ordinary people" will have to pay for their incompetency and greed in the end.. You must feel very flattered that your reporting has caused this Financial Fiasco as suggested by some ,its so laughable it beggers belief. Keep up the good work!.

  • Comment number 73.

    Slightly off topic

    I have some questions if some one will be kind enough to answer.

    Can some one please explain how borrowing will kick start our economy and eventually who will have to pay it back. (I can make a reasonable guess at the tax payer).

    Brown keep saying we are all interconnected which is his defence to why it’s not his fault. (That is starting to look rather thin imho)

    How will that help us when our trading partners worldwide are in recession don’t we need global recovery before any meaningful local recovery can start.

    Finally the bank bail out really has been a damp squid from the looks of things it has not stimulated confidence in the system at all, judging by today stock market figures.

    All in all as a layman I am beginning to wonder if Gordon Brown and Darling are the right people to lead us out of this situation, It don’t appear to be going too well.

  • Comment number 74.

    When in Sofia should I change my Yen to Dollars and wait until I get to Hungary??
    Lorry driver reckons government bonds to be safer, but what does he know, he is from Barcelona.
    Stopping for petrol, so chance to talk to locals about potato futures.

  • Comment number 75.

    What never ceases to amaze me is the failure to see the obvious, i.e. that the Capitalist system has collapsed and is beyond repair - and no this is not a call for Communism or indeed any other -ism, but just a statement of fact.

    Instead our political lords and masters continue to exacerbate a bad situation and make it worse, rather than have the humility and honesty to admit that they have got it spectacularly wrong and we are in it deep.

    Capitalism failed in the 1920s/30s and it was only WWII that got us out of the mess which necessitated a complete rebuilding programme and so they started all over again, without any attempt to accept or acknowledge that the system works in the short term, but is ultimately flawed and so fails in the long-term.

    And so here we are again. Unfortunately though, there is no clear answers on the horizon. Globalisation, which enabled multi-nationals to use and abuse different economic systems by playing countries off against one another and then bank the profits, together with the considerably advances in technology, which has down away with the need for mass labour, has ensured that the crash is more spectacular than ever before.

    Credit, whether it be government, financial, business or individual was the thing that kept the illusion going and now the music has stopped. It is now just a domino effect.

    Brown is wont to blame this all on global issues, which to some extent is true, it is just that the UK is more heavily leveraged and less able to cope.

    Being that our entire economy has been based on government spending, the financial, retail and leisure sectors - we have had it.

    If you want specifics businesses - and some of our biggest names - will be collapsing imminently, millions will lose their jobs (5m+), there will soon be a run on the pound and the UK will be declared bankrupt.

    Brown will get his place in history alright - as the man who helped bring the whole world economy to its knees.

  • Comment number 76.

    From the shop in petrol station:
    Toys from China
    Mobile phones from S Korea
    Fags from Turkey
    Petrol from Iran

    Countries like the UK who have forgotten how to make something ,
    cars, motobikes, tv's and even good beer of course, collapse when the debts are called in.
    Sofia in an hour or two

  • Comment number 77.

    The IMF imposes conditions on its loans. I would very much like to know the intricacies of these terms & conditions. Whom do they (as in these terms/conditions) benefit in the long run?

    Back to UK specific issues.

    The majority of our great overnight economic experts (i.e. bloggers) here have been advocating sharp reduction of base rates. This will further hasten the outflow of "hot money" out of the UK - and there are still quite a bit in here.

    UK market pessimism, further and sharp lowering of base rates will further pressure the GBP.

    How low will the GBP fall? Parity with the USD? What happens then? Capital controls? Pegging of the GBP?

  • Comment number 78.

    #73 - Your answers

    Borrowing – See failed Keynesian economics.

    Interconnected – See Globalism – Led by USA and UK and to some extent the rest of the EU. Ever wondered why there where so many angry protesters at financial summits? What is happening was an inevitable consequence.

    Trading partners – See…..Hmmmm. Good question.

    Bank Bail out – See Monetarism – Now proven to have failed as a theory and as practiced. Bail out was for effect and to delay the day of panicked depositors taking all their cash and stuffing under the mattress.

    #74 - turkey

    With the staement last week form the 7 top boys, I would bet on that statement being a message that a concerted effot against the Yen will take place, as China is not listening to requests to devalue. Therefore it may be done for them. Yen against Dollar is to high, so it must come down one way or another. So in short, yes, sell Yen, buy Dollars.

    Fur Tanks

  • Comment number 79.

    Dear Mum,
    Thanks for the loan.
    We now own a petrol statiön in Bulgaria and sixty sacks of potatoes.
    I am doing my bit to promote stability to this neck of the woods.
    PS Do you want anything from Hungary, like a steel rolling mill ??
    God these Yen go a long way.
    PPS Are Hereford United up for sale yet??

  • Comment number 80.

    Re. IMF - It was the Americans who first blathered on about "No taxation without representation". Are they now expecting the Chinese and other rich nations to contribute to the IMF kitty without any proportional representation on its board ??

    The IMF was, and still is, run by Americans for American interests. When the Asian currency crisis hit, they forced various nations to make changes to their economies that made their pain even greater. Many economists have become wealthier by dissecting the IMF's role in the debacles that ensued. The same had happened to Argentina previously and they made a mess there but the IMF still pushed through their agenda in Asia as if it was God's own Word !!

    Thailand, the Philippines and Indonesia learnt their painful lessons well and ensured that they always have a stash of cash to hand to ward off the IMF. This time round, they will feel the crunch but in a much milder form !! South Korea did not learn and is now in deep doodoo *again* !!

    If the Hungarians and the Ukrainians disapprove of the measures imposed on them by the IMF, they now have a new source of funding. They can ask the rich Asian (including the Middle Eastern) nations for help !! If they are going to hock the family silver, why hock them to the Americans who are, themselves, in the deep doodoo ?? Why not hock them to the Sovereign Wealth Funds of the rich nations ?? At least they won't impose unreasonable demands on their respective economies !!

    From what I can see from the previous comments, the Western countries that invested in Hungary and the Ukraine are feeling the pinch. To alleviate some of the pain, they are withdrawing funds from these nations. This, in turn, caused them severe liquidity problems and difficulties in servicing their debts.

  • Comment number 81.


    Dramatic, UK equals Dead Man Walking?

    Not yet my freind. We English are made of stuff that nightmares are made of.

    There is not a nation that can boast such deviousness, cunning viciousness when the chips are down. Watch this Lion roar.

  • Comment number 82.

    Um... How exactly can the IMF help?

    What do they have that governments and national central banks don't?

    Central banks (should they choose to) can create ANY quantities of both currency (notes and coins) and credit, from nothing...

    Our governments by not allowing these banks and financial institutions to fail and become bankrupt are causing the crisis to continue indefinitely.

    They *should* have simply set up national commercial banks (and it is something they should all do as a matter of urgency) to lend directly to those who were the customers of the failing institutions. Businesses and individuals would have been able to transfer their *existing* debt to the national bank.

    The only institutions to fail then would be the banks dabbling in "weapons of mass destruction".

    This would have cauterized the gaping wound which is the credit crunch but would have minimized the effect on the rest of the economy.

    Instead. It's going to continue for the next 5 years, with millions of job losses.

  • Comment number 83.

    at 73 your first question is easy it will ensure there paypackets are full firstly and it will leave a mess for who ever takes over, this is a typical labour move knowing the winds of change are against them why do you think blair bailed :).
    borrow as much as you can then dont worry becouse it falls on the people of the country to have to re pay it in higher taxes and less government spending so after a while when things are looking good again the people are fooled into voting for a new government that promisses to lower taxes but increase stealth taxes.
    its the cycle of life that we are becoming used to.
    it never works and with the world ecconomy in tatters it is a realy foolish game to play.

  • Comment number 84.

    #76 You smoke fags from Turkey ?? Yuck !! From my one and only experience of that stuff, it is merely the barest of cuts above camel dung !! Even Albanian fags are better and that's not saying a lot !!

    I would suggest that you save your money until you get to Hungary (if you are going in that direction) and buy your fags there. At least they are pretty decent and the forint is down so you'll get more fags for your money !!

    BTW, the Hungarians seem to want Euros now !! At least they did when I was there 2 weeks ago !! "Yankee dollars" are not in such good odour now !!

  • Comment number 85.


    Thank you for bringing a smile to my face. Beats twiddling my thumbs - and it's too cold outside for a lunch walk.

    More please! :-)

  • Comment number 86.

    Peter thankyou for advice.

    The Bulgarian countryside is amazing.
    Littered with swathes of peasants eaking out a living from rusting closed down communist steelworks.
    Not a bank or hedge fund in sight.

    Even CREDIT cards are useless here,not that I would be stupid enough to use that word anymore.
    Cash is king

    PS What is ' panic selling' in Hungarian ??

  • Comment number 87.


    ' panic selling' in Hungarian ??

    It equates to accepting the Ruble instead of the Dollar

    Fur Tanks

  • Comment number 88.

    #71 #74

    Caution about switching into dollars. The guys over on MarketWatch are talking about a "Dollar Bubble" which will burst soon (by mid-Jan) at the latest. Someone even stated that this is "The Event" Biden was talking about - you the event that the new prez will have to deal with.

    See also Peter Schiff
    One quote from there
    "The current gains seen by the dollar will reverse violently."

  • Comment number 89.

    Glad you could join the journey.
    Turkish fags are 10d ( old money ) a packet thus making them smokeable.
    Its like Ducados in Spain.
    My driver smokes Marlborough but doesn't have an import-import business to support.
    Not a mistake, who wants to be paid in Turkish lira !!!
    E-mail me in Belgrade after I have bought a football club or 2.
    Aubergine futures look good, might just dabble

  • Comment number 90.

    To those who are bigging up the concept of communism or more controlled nations/economies I would always refer you the late great Winston Churchill who in 1947 stood up in Parliament and said...

    "Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

    He was right then and he still is now.


  • Comment number 91.

    To clarify

    The video on the Schiff site is from two years ago. It's the text under the video that applies to the present.

  • Comment number 92.


    Peter Schiff bases his forcast on hyperinflation. That just cannot happen in the current situation. Inflation will rise of course, but not into the startosphere.

  • Comment number 93.

    The problem is that I am being deadly serious.

    The driver has just switched on the radio - guess where that was made, and the big news is that someone on a lorry heading from Turkey to the UK via Bulgaria is gobbling up their potato and aubergine assets.
    The road blocks pose no problem to Basil ,he assures me.

  • Comment number 94.

    ' panic selling' in Hungarian ?

    No one seems to know. Perhaps the concept is alien to the locals - a bit like manana. Nothing ever justifies that degree of urgency.

  • Comment number 95.

    Re: 4, 72 Agreed.

    Re: 63 I forgot to say its an unstoppable nuclear-like chain reaction that's fuelling that hypothetical Kettle.

  • Comment number 96.

    Hi electronicturkey ... great commentary!

    We could do with your sort on the MPC ... that would really confuse the life out of the worthies setting interest rates!
    More please.

    PS If you see a couple of gezzers on BMW's ask if A Long Way Down is close to How Low Can You Go!!!
    Must go ... need to check the still!

  • Comment number 97.

    There is no proper word for panic selling in Hungarian, electronicTurkey (thanks for all the smile and laughter). Oddly, the only form is tozsdepánik, that is, panic of the stock exchange. Not because it affects anybody there. Most of the companies are privately held (that is, subsidiaries of large multinationals) or only tiny fractions are traded.

    And yes, all the Hungarian advisors say that IMF is the good uncle... Yes, it's their good uncle, but not that of the Hungarians. The only hope is that it would be so tough that the government looses all chance (not because it has much, unfortunately, I have to ad) to win in 2O1O, thus may try to wait and see. There is no family silver to sell to Asian investors (though China, then secretely, has bailed out Hungary a couple of times before 199O), they sold them to Westeners, who funnilly bought them for loans that represent a quite big proportion of the Hungarian debt because of which they have to go to the IMF.

    If you want to buy a steel-rolling company in Hungary, electronicTurkey, there is one, it is owned by a Ukrainian company (but it could be owned by a Russian firm in turn. The IMF does not know what it goes into there. It didn't know it in the 199Os, doesn't know now).

  • Comment number 98.

    The Hungarian prime minister announced that the aim of the negotiation with the IMF is to protect the interests of the Hungarian economy and Hungarian families. He does not know what he talks about. Last time when Hungary negotiated a stand-by loan, the IMF wanted to reduce child benefit.

    At the same time he participated in the opening celebration of the new Mercedes plant and said that it was a proof of the reliability of Hungary and the Hungarian economy....

    Just an idea electoronicTurkey, why don't you buy a Mercedes plant instead of a steel-rolling firm in Hungary?

  • Comment number 99.

    90. geordiewiz wrote:

    "To those who are bigging up the concept of communism or more controlled nations/economies I would always refer you the late great Winston Churchill who in 1947 stood up in Parliament and said...

    "Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

    He was right then and he still is now.


    I don`t think communism is any great shakes(google "distributism" for a nice replacement economic system),but quoting Churchill as if he was some sort of political genius is in bad taste,especially in the current revisionist political climate.
    Read this,and see what you think:
    Alan Clark,the former defence minister wrote this about Churchill in the Times in an article titled "A reputation ripe for revision" on 2/1/93:

    "There were several occasions when a rational leader could have got,first reasonable,then excellent,terms from Germany....The war went on far too long,and when Britain emerged,the country was bust.Nothing remained of assets overseas.Without immense and punitive borrowings from the U.S we would have starved.The old social order had gone forever.The empire was terminally damaged.The commonwealth countries had seen their trust betrayed and their soldiers wasted".

    This maybe the man who won the public vote for "Greatest ever Briton"(Michael Crawford from some mothers do ave em came 17th!),but that does`nt give his views any value whatsoever.

  • Comment number 100.


    You cannot mean to that we should have left the Nazis in power can you?


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