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Varley: credit to shrink for up to two years

Robert Peston | 05:02 UK time, Saturday, 20 December 2008

One of the main contributors to what looks like a severe recession in the UK is a contraction of lending by our banks.

Which is why it's unlikely that a recovery will start until banks grow their lending again.

How long will we have to wait for that?

Well the chief executive of Barclays, John Varley, says in an interview with me for Monday's Panorama (8.30pm on BBC1) that it will take between one and two years for lending to stop shrinking.

He insists that banks are open for business, that loans are available. But he says that a reduction in the overall quantity of debt in the economy is absolutely necessary - although he concedes that the process is extremely painful.

John Varley also says that the banking industry is going through what he calls a public relations crisis, that it must apologise for what went wrong - because banks will not regain the vital trust of customers unless and until they own up to the sins of the past and say sorry.

UPDATE 09:12

Here are a few relevant quotes from John Varley.

He says: "I think that we will see the process of reduced borrowing play out over at least the course of the next twelve months maybe, maybe twenty four months. I think it's important to say though that the industry is open for business..."

Mr Varley stresses that credit remains available to businesses and households but that the amount available is "shrinking, it absolutely is, and that is a painful process; it's a process through which the world absolutely has to go and if you asked me 'when will it stop?' I think it will stop when asset prices stabilise.

"As soon as asset prices stabilise, then we will see the financial economy recover. And when will that occur? That will occur some time over the course of the next 18 months."

When he talks about asset prices, he means the price of property, shares and so on.


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  • Comment number 1.

    "...until they own up to the sins of the past and say sorry..."

    There could be a lot of startling revelations if the banking world were to enumerate "the sins of the past".

    Does "sorry" mean never having to say I'll give it back? Forgiveness and reconciliation may only go so far.

    I was a late post to Robert's Dec 19 article, so I'll repeat it here because it's a banking thing:

    Deja Vu

    "Like the financial disintegration hanging over us... [the] of the 1340s was the result of 30-40 years of disastrous financial practices, by which the banks built up huge fictitious "financial bubbles'', parasitizing production and real trade in goods. These speculative cancers destroyed the real wealth they were monopolizing, and caused these banks to be effectively bankrupt long before they finally went under."

    650 Years Ago: How Venice Rigged the First, and Worst, Global Financial Crash
    by Paul Gallagher
    Printed in the American Almanac, September 4, 1995.

    Having bumped into the article that this extract came from, I followed links from the webpage to find more about the financial world of the Merchants of Venice. As financial wealth was a tad more tactile in those days than most of our modern day instruments, I was left wondering what happened to the massive quantities of gold and silver bullion that the Venetians had monopolized, hoarded, and traded on spread. Who made off with it?

    Anyway, whoever was able to spirit sizeable fortunes away left a legacy for their heirs and successors to parlay into incalculable hard assets over the coming centuries. The financial world became more sophisticated and, until 1974, principally on the gold standard.

    Intrigued by the link offered in post #80 to this board, I then wondered where the safe financial havens of the mid-14th century were (maybe caves or deep vaults were all that was on offer). I also wondered why the likes of modern day San Marino, Andorra, Lichtenstein, Monaco and other minnows were never swallowed into the nations that formed around them in later centuries.

    I have my suspicions, of course, but I also wonder where our latter day Merchants of Venice have put their wealth to keep it proof from the current financial maelstrom. They surely knew it would come one day.

  • Comment number 2.

    Banks should fess up to participating in the greatest ponzi scheme theworld has ever known only then will public confidence [in freshly baked ponzi' pie in the sky ]be restored.

    Doesn't sound plausible either way does it !!!

    The only way out of debt now will be the oldest service industry in the world, appart from banking .

    MPerrors will be turning their london residences into well kitted out brothels at taxipayers expence ready for the next olympics ,wait and see.

  • Comment number 3.

    If Banks make money by lending money, and they are not going to lend for a few years, so wheres the future profits for shareholders coming from ? Hmm That ones got me !
    Oh maybe a 0% interest rate for savers, Loads and loads of money of Gorden (e.g the taxpayer) for recapitalisation ?
    Still make profits for shareholders and no need to lend ! Fantastic ! Sit back and enjoy the the ride ! Unless someone is sitting on you of course.

  • Comment number 4.

    So, how come a significant number of politicians and commentators keep telling us that we'll be climbing out of the dive at the back of 2009/early 2010?

    That would mean the oils of finance lubricating the economy nicely from about the second or third quarters of 2009 for us to see the positive effects by the end of the year. Since this seems highly unlikely, what is the realistic timeframe for us seeing the signs of sustainable recovery?

    Also, square this away with the head of GM saying that he needs to shift millions of (rubbish) cars in the first quarter of 2009 in order to save his company's bacon. Has he had a word with Mr Varley?

    How about no serious prospects of sustainable economic recovery until 2011 at the earliest? Has anybody told Gordon Brown, or will we continue to hear the patronising rot about how brilliantly he has positioned the UK for runaway success from late 2009 onwards?

    Spin away Gordon. According to the polls, the British people are being taken in nicely. At this rate, you'll need them to cast their votes ASAP ... before you get rumbled.

  • Comment number 5.

    The problem will be to regain trust with the banks whilst the same people are in charge and more importantly, the same (bonus) culture that encourages greed.

    It is a real shame we can't just swap out the senior management of the leading financial institutions and replace with successful managers of small-medium sized businesses, who are the savours of our economy.

    Whilst a lot is made of the complexities of modern finance, the actual (senior) management of it is probably pretty straight-forward and based on common business sense, something that has been sorely lacking.

  • Comment number 6.

    Does he not know that Flash will print as much money as he needs.

    Oh of course he did not sign up to Flash, that is why he will not get the new notes.

  • Comment number 7.

    Can we stop assuming that the only way to get finance is to borrow it.

    At present rates of interest no one is going to lend to any enterprise with even a suggestion of risk;so it's either under the mattress, into gold, or as a last resort government bonds.

    This means that the government has to do all the lending because they have got all the money.

    Not a good idea if you make your money in the City as they will steal your clothes.

    The other way to raise money is to sell a piece of the action.

    This will mean offering a piece of the company at a discount on the present share price; so that the return is so good that a risk averse holder of cash will have to have some.

    A rights issue!

    At the right return, say 15%, in a well run business you will have no trouble.

    When you are properly capitalised instead of having to dash off to the money lenders all the time, the small amount you need for day to day cash will be easy to come by.

  • Comment number 8.

    The credit markets have collapsed and will take a very long time to recover, if they ever do recover.

  • Comment number 9.

    lets not just blame the banks the vast majority of britons have binged on credit for decades now , the more material 'wealth' we obtained the more we wanted. it was allways going to end in tears it was just a case of when. that time is now so lets all who have borrowed take their share of responsibility and lets all learn from past errors and strive for a sustainable fair GREAT BRITAIN the best country in the world.

  • Comment number 10.

    I think what is happening right now is we are slowly returning to 'Normality' from the days of 'Irrational exuberance'. However it is the speed at which the tide changed that has caught out everybody. Most people had got used to living a life of credit with the assumptions; one that they would continue being in their job and in some cases gravy trains, two average house price would be half a million in another five years time.
    In fact yesterday there was a report that said that the UK consumer has become more confident because our deluded Brown and Darling keep drumming up the message 'everything is hunky dory and we are going to recover by the end of next year'. The bounce back in the polls probably sums up the financial acumen of his country as a whole. It explains why we got into this position in the first place.
    Personally I think eighteen to twenty four months sounds plausible assuming the worst is hopefully about twelve months down the line.

  • Comment number 11.

    Good morning from the Mad House. Varley
    knows well that his employers - two of the greatest robber barons of the 21st century - only need to lower the extortionate rates of interest and charges suffered by their unhappy customers if they want to improve their public
    image. They won't and they don't.
    Shame about the company you have to keep to
    do your job. Take care. Please try and have a bit of a rest this week-end.

  • Comment number 12.

    I have to agree with an earlier commenter that the banks have perpetrated the greatest ponzi scheme of all time.

    In their short term rush for riches long term investors have been well and truly (place appropriate swear word).

    As a result of the largess and the unparalleled culture of greed my "long term" savings have been decimated wit a 60% fall in the value of my pension and the collapse of endowment values (so much for the smoothing effect).

    Indeed my pension pot is worth less than the total I'd invested more than 10 years ago having effectively been stolen by short term speculators.

    To make matters worse those with final salary pensions (post office) see the government proposing to take over the pension deficit which I as a taxpayer will have to make up the shortfall whilst personally heading for retirement of poverty.

    It's criminal and any executive with any sense of moral fibre would pay back the bonuses they effectively defrauded. But oh, if they'd had any morals or common sense we wouldn't be in this mess in the first place would we?

    And if I hear one more MP blaming short sellers for the mess (David Blunkett radio 5) I'll die of despair. How stupid are these people - no really?

  • Comment number 13.

    Instead of continuing crying about how cruel the world is and how nasty the banks are should we maybe look at the real questions?
    1) Why did people spend money they did not have?
    2) Why the governement want to keep the same level of borrowing as before the credit crunch? To recreate another bubble? Doh...
    3) Why the FSA, who did not see anything coming, is not only asking banks te recapitalised, which is fine, but is asking to do it at a much higher level at a time when capital is scarce and expensive? This will obviously prevent lending and put further unnecessary pressure on the system.
    4) Many people here have critisised Barclays for not taking the money from the governement and went to the middle east to raise capital. Well first Barclays seems to be in much better shape than most of the other UK banks (not to mention the Americans!) and second few days after Barclays made its annoucement who was in the middle east? Gordon Brown asking for money!!! Well cut the middle man and stay independent!

  • Comment number 14.

    As predicted by Chelyabinsk a couple of weeks ago Robert Peston is being given his own BBC SCAM special on Panorama on Monday 22nd December masquerading under the title of the New Capitalism.

    This will make great Christmas viewing for all the family!

    The sound track should be Moby's Extreme Ways (The Bourne Identity) the lyrics are so apposite and the opening riff is suitably spooky and alarming.

    Beware Robert Peston's "new, kinder, caring" capitalism message. There is an unreconstructed socialist message of the old school lurking here.

    In recent weeks Robert Peston advocated the nationalisation of British industry on this website. Something which Gordon Brown has rejected. He is refusing to bail out UK carmakers.

    Old style socialism has been tried and failed in country after country and especiallly in this one.

    It's time to try the political system, never tried in the UK and advocated by John Maynard Keynes himself as the solution to the great depression, Social Democracy.

  • Comment number 15.

    We had a feeling the relationship was coming to an end, but it is immature of banks to say they wanted to end it because we were going to tell them the same thing. But there isn't any point in lending the bailout money at a time of fraud and banking crisis where many banks will go under.

  • Comment number 16.

    Banks need to do a lot more than say they are sorry. The sheer scale of the nonsemse they got up to is staggering.
    I think all the stories about derivitives, securitisation, bonuses and in fact fraud have all been well aired- the banks credit committees and directors have done far more damage than what happened with Enron or Parmalat in Italy. What we need to see is some justice which means probably locking rather a lot of bankers up for a long time and making sure that the payments into their pension funds are adjusted so that no ex banker gets a pension more than average earnings. Their current schemes should all be would up and paid over to the tax payer apart from an amount that gives each employee a fund that they would have had if they had paid in a matched contribution of say 10% of average earnings- they can then reduce that amount by 40% for the fall in value that their behaviour has caused
    for people in private pensions.
    This may sound draconian but fundamentally the behaviour of the banks has been the main cause for many of us losing about 40% of the real value of our savings excluding cash- and that is before looking at the slide in sterling. Without HMG intervention they would all have gone bust just about so the people in the banks have to pay as big a price as their victims. The issue then is to make sure those that have retired also pay a price as they have rather large pensions earned on the back of dodgy practices.

    We really do need to make sure these people realise what they have done to us all- better still why not send them all to Darfur or Zimbabwe to find out just how tough life can be.

  • Comment number 17.

    John Varley says "the banking industry is going through what he calls a public relations crisis, that it must apologise for what went wrong - because banks will not regain the vital trust of customers unless and until they own up to the sins of the past and say sorry"

    We could do with our NuLab Government owning up to the "sins of the past" and say sorry (and mean it !!) rather than their usual "we will learn from this" statement.

  • Comment number 18.

    So Robert, you are interviewing one of the wise men at Christmas.

    Is this the same John Varley who was to buy ABN Amro? He is only lucky that there was an idiot up in Scotland who was prepared to pay more.

    Remind me, what have Barclays cumulative write-offs been so far?

  • Comment number 19.

    Can we have a link to the story now it's up?

    He's talking sense, unlike Labour. And the Tories are too afraid of the "do nothing" tag to state this clear truth. Until asset prices reach a firm bottom, things won't improve. The sooner they get there, the better. Labour want to do nothing but delay it, hoping to scrape through another election.

  • Comment number 20.

    John Varley is only speaking the truth about the gigantic reduction in liquidity/money that has, and is still, taking place. The synthetic money generators devised by the bankers over the last decade (which by the way kept interest rates low) have now vanished. This is a fact, and no matter how low interest rates are pushed can the central bankers regenerate anything like the sum that has vanished from the system.

    In fact it can easily be argued that in order for a particular institution to get more than its fair share of money (which is what markets force them to do) they have to offer higher interest rates, which explains the inevitable decoupling of interest rates from the bank base rate. The central bankers need to recognise this urgently and put up their base rates to reflect reality and admit their impotence.

    Oh, and apart from apologising the heads of all of the banks (and central banks and regulators) need to be fired as it is, and was, their policies that have caused this cataclysmic destruction of the World's economy.

    The Archbishop of Canterbury is also quite right to be harshly critical of the present economic policy as reflected in interest rates - it is not the right way to do things to have ever lower interest rates when it was every lower rates that caused and now magnify the credit crunch. The problem is that the lunatics are still running the asylum! Fire them all now!

  • Comment number 21.


    1) From what I remember Barclays was paying in shares not cash as RBS and Co!!!
    2) Cumulative write-off seems to have been much much lower than the other banks
    3) Barclays is still independent

    Remind me, do people need to have a clue what they are talking about when they post here? ;-)

  • Comment number 22.

    In their quest to rebuild trust, banks may wish to allocate funding according to a mix of ethical and strategic criteria.

    My ten year old daughter would have no trouble sifting the following list into a sensible order;
    a. 20k for new kitchen
    b. 10k for hip operation
    c. 10m to reopen coal mine
    d. 40k for new jag (25 mpg)
    e. 500k for industrial heat pump
    f. 50k for new range rover
    g. 500m for high speed passsenger glider
    h. 50m for ski-slope runways at Heathrow
    i. 2m for bankers severance
    j. 1m to top up headmaster's pension pot
    k. 10b to help people buy tellies and clothes
    l. 50b for complete set new power stations
    m.30b for river based transport system need to labour the point any further.

  • Comment number 23.

    A Banker's Ode

    I've got me City bonus boys,
    Though our bank's gone down the pan,
    I'm off to buy me Roller boys,
    The Nation's carrying the can.

    I've gambled away their billions boys,
    Got the firm deep in the mire,
    I'm cutting jobs like fury boys,
    Too busy to retire.

    Repossessing humble homes boys,
    Foreclosing people's dreams,
    Jack up those interest rates boys,
    Mine those golden seams.

    Let others fund our greed boys,
    Pick up our failure's bill,
    Then we can start afresh boys,
    To watch our pockets fill.

  • Comment number 24.

    Re No.11

    OK. Fair enough. Got a bit too near the knuckle.
    Have a nice week-end.

  • Comment number 25.

    Darksurfer at 13 asks why people spent money they did not have?

    The short answer I suspect is that they could resist "everything except temptation". They were encouraged to borrow ie to have now and pay later - on the false promise that they were getting richer because of increasing house prices. So everyone gave more and more of their future income to the banks in return for immediate consumption (where at least they got something) or for a house (where they got the same thing at a higher price).

    In an earlier blog someone spoke about a lyric for these times. I recall one, years ago in which Alan Price sang, "You live forever on the never never..."

    This process always had two natural limits. First, the point at which people had committed so much of their future income to paying of their debts (with interest) that further consumption was impossible; and second, the point at which first time buyers could no longer get onto the property ladder.

    This latter point has been getting closer for some time - and was visible in the self-certification boom, in property sharing, and, later in the Government's efforts to help first time buyers.

    The fact is that Government and banks (and other financial institutions) were encouraging people to borrow: and, as I said earlier in the week we stopped talking about "debt" and started to talk about "credit". So much more respectable.

    Two more lyrics:

    Your servant here he has been told
    To say it clear to say it cold
    It's over it ain't going any further
    So now the wheels of heaven stop
    You feel the devil's riding crop
    Get ready for the future it is murder.

    (Leonard Cohen)

    Or perhaps, on the brighter side:

    When money's tight and hard to get
    And your horse is also ran
    When all you see is a pile debt
    A pint of plain is your only man.

    Flann O'brien

  • Comment number 26.

    dear mr varley
    banking is not rocket science, you get people to lend you money by offering a rate of return above inflation, you then lend that money to people at a slightly higher rate, the difference after deducting your overhead costs is called profit. anything else is called gambling and is not an activity that banks should be participating in. yes it is that simple....!

  • Comment number 27.

    For the banks to regain credibility, saying sorry is just not going to cut it, full and frank disclosure is required. Once they start to reveal what has been going on I then think we will see a couple more 'Madoff' style schemes collapsing as they realise their number is up. One much larger, say about 90-120bn dollars and a couple of smaller, about 25-30bn dollars. Confidence in the banking industry will only return when people start to see them as a safe place to invest their money. I would suggest that people invest their money personally in local small businesses (preferably ones that actually manufacture something) so that they can at least see where their money is going and not into some banks giant smoke and mirrors scheme.

  • Comment number 28.

    The only way to get banks to be sorry is for us ALL to whip our saving out!

    MASS withdrawals from every bank in the UK would utterly destroy the banks, good enough for them i say!!!

  • Comment number 29.

    Is the global economic crisis not just a realignment to where we were before spending got out of hand? Like all things a bubble will eventually burst. Its just a shame that there have been so many innocent losers eg. Woolworths, MFI but this is testament to how naive we have been by assuming that we could forever live the way we have with our cash.

    Whatever our social backrounds, most of us have gained considerable wealth artificially over the last decade whether through inflated property or share prices it was not sustainable. We cant blame the banks for this as all they did was fuel our desire for more spending.

    It will be interesting to see how finance is distributed and wealth made in the next decade and how different our economy will be

  • Comment number 30.

    Why is Barclays apparently struggling after such a recent injection of money from the Middle East.

    Contrast this with HSBC.

    HSBC will lend up to £15bn in mortgages in 2009, a 20pc rise on this year.
    HSBC said it would create a new $5bn (£3.4bn) global fund for small and medium-sized businesses (SMEs), including £1bn in the UK.
    Paul Thurston, HSBC's UK managing director, said: "By some estimates, net mortgage lending in the UK will fall next year, but HSBC has no intention of closing its doors to customers, nor will we compromise our reputation for responsible lending. We remain open for business to the tune of £15bn."
    Michael Geoghegan, HSBC's group chief executive, said: "This is a difficult time for business in many economies. Customers are rightly looking to see how banks can help. "SMEs are the lifeblood of most economies and it is their success that will create economic growth."

  • Comment number 31.

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

  • Comment number 32.

    Bankers no longer have any credibility, so why should we listen to Varley? It annoys me that the BBC keep wheeling out these 'experts' on programs about the economy.

    None of them, or politicians, are likely to tell the truth because none would dare to tell us we are doomed, or how much they have made personally out of the boom.

    I also wonder where those guys put all the money they creamed off, and whether it could ever be got back off them. The total amounts paid in bonuses would go a long way to recapitalising the banks, in fact.

    I expect a lot of it went into 'castles in the sand' in places like Dubai. However there must be a reasonable chunk in T bonds and gold which could be recovered.

    I am hoping a new political party will emerge that would be prepared to take the harsh steps necessary to properly punish the corrupt and get us 'back to basics' with the economy.

    The only thing that worries me are the parallels with pre-war Germany and the rise of nazism. What we need is a Churchill, not an Adolf Hitler.

  • Comment number 33.

    No, it's not enough to own up to their sins and say sorry.
    They should go.
    No more ludicrous salary.
    No more staggering bonus.
    No more cushy pension.
    They've broken their banks.
    They've broken the country.
    Why are they still in their jobs?
    They should lose the lot.
    But who will take their place?
    People with common sense and less greed.

  • Comment number 34.

    BBC why does this forum display the dollar symbol but not the pound symbol? That is ridiculous. Sort it out please.

  • Comment number 35.

    GB, AD, MK want the banks to keep lending. There are borrowers and non borrowers so therefore the banks have to keep lending to the borrowers, with a fair few of these already up to the hilt in debt. It just does not make sense at all.

    What no one in HMG or BOE seems to realise is that the big items bought over the last few years were funded by the re-mortgaging of houses and this avenue has now been blocked. The 4x4,s, exotic holidays, designer wear were all bought using the house as a cashpoint machine.

    Many people, including the off-spring of people I know did this very thing and are now scared stiff in case house prices plunge further leaving them in negative equity. These idiots have enjoyed the pleasure, and so called fulfillment, during the last few years whilst their depreciating material assets will be worth nothing eventually.

    A travel agent friend of mine recently spent one hour organising a holiday for a couple only to be presented with a credit card that bounced when they tried to pay the deposit. They duly declined the holiday and walked out.

    I rest my case.

  • Comment number 36.

    We must blame the banks! It is their responsibility to ensure that a person they are lending money to is able to repay that money back. We've seen 125% mortgages and 50 year mortgages and 5+ times annual income mortgages - loans which are far too high for most people to sustain, therefore are more risky to make.

    The banks foolishly lent this money out, so helping to drive property prices up. Had they not made the loans, they would not now have the problem of negative equity and people would not be being put out of their homes. It is the lender's responsibility to say "No" sometimes. It is not wrong or greedy for someone to wish to buy a house as a home.

  • Comment number 37.

    Sadly Woolies was going under well before this financial crisis, they had the rug pulled from under them when all their assets (the buildings) were sold from under them to pay cash back to shareholders after being taken over in a leveraged buyout. This exposed just how bad their retail business model was.

  • Comment number 38.

    Only 25% of Barclays profits where generated from retail banking the rest from Barclays Capital. It now appears from this interview that the retail customers who contributed this 25% are expected recapitalise 100% of the bank.
    They was no admission what has brought the banking sector to its knees. It was these capital departments trading and speculating in every conceivable financial instrument which now has caused serious losses.
    The recession will now be longer and deeper than necessary caused by the banks need to recapitalise against the public good in favour of their own business needs.
    It is clear if the government wish to mitigate the downturn then further action will have to be taking to encourage the banks to act in the public interest.
    Assets will only rise when bankers stop talking down the market.

  • Comment number 39.

    Hopefully they will have more accurate asset forecasts of house prices than the public , Nationwide and Halifax who have a vested interested in selling mortgages have stopped providing data because the market is falling and the government is using selective counting as usual to try and pretend things aren't as bad as they are in the real world.

    If there is reduced debt avaliable lets make sure banks have enough UK staff employed to make sure they can make sure good small and medium sized businesses don't go to the wall because of poor judgements made by a 'senior banker' in front of a computer screen to try and make up for the losses they have made in investments financed by borrowing.

  • Comment number 40.

    I like to see the opinions of people here even if they don't know what they are talking about. I think I've spotted s couple by Gordon himself.

  • Comment number 41.


    Good to say that HSBC and Corporate Affair are working over the weekend, keep up the good work!

    PS: How is lending doing?
    "HSBC has emerged as one the largest victims of Bernard Madoff’s alleged fraud with potential exposure of about $1bn to the investment manager’s collapsed venture, people close to the situation told the FT"

  • Comment number 42.

    And it's the ordinary bloke in the street who's got to pay for this over-paid lots lash up.
    And now we've got to pay for this for the next 20 years.
    Ay any normal firm who had this lot in charge, they would have been booted out months ago.
    Dont let the public school education and the smart suit fool you...they are idiots.

  • Comment number 43.

    Just goes to show the strength of the $.

  • Comment number 44.

    Forgive me here Robert, but at what point is this startling news?

    Just because Crash and the boy wonder have ignored what the banks have been saying and trying to drown them out with the rhetoric that you have reported on here doesn't mean it doesn't exist.

    I am quite alarmed that you haven't managed to ask the questions that brought the government to account for their policies.

    Once we know where the "floor" is then some kind of confidence will return, until then the cycle of negative feedback loops will continue.

  • Comment number 45.

    How come somebody else is always to blame ? Was it the banks or the people who borrowed more than they could afford to buy a bigger house than their neighbours , or to speculate on property thinking the price had to keep rising ? Blaming the banks is like blaming pubs for alchoholism or bookies for idiots losing their shirts. The basis of the problem is greed , by the banks the borrowers and the government which was riding high on a massive tax take from both. Hard earned cash was taken out of the economy by the government and ploughed into the workshy and the pseudo sick instead of into creating jobs and social housing. The result was an enormous unsustainable bubble of debt and overpriced property.

  • Comment number 46.

    In Gordon's brilliant book on economics, in the last chapter "Revelations" it states that the person who gets the whole country into a mess should be the person who is forced to get them out of that mess.

    We have to apply the same logic to bankers, those who acted with incredible irresponsibility will now act in the opposite way and save us all.

    Likewise Armageddon Brown is the one to save us from the irresponsible mess he's created.

    We only have to look at Zimbabwe, where the same thing is happening - Mugabe is just waiting his time to reverse all the chaos all around him.

    There is of course another line of logic that says the bunglers should get fired, but I did't see it in the Brownian Revelations.

  • Comment number 47.

    "... he says that a reduction in the overall quantity of debt in the economy is absolutely necessary - although he concedes that the process is extremely painful."

    Absolutely necessary, yet the Government have stated that they want lending to return to 2007 levels.

    "... the banking industry is going through what he calls a public relations crisis, that it must apologize for what went wrong"

    The Government could learn a lot from this approach.

    "... but that the amount [of credit] is shrinking, it absolutely is, and that is a painful process; it's a process through which the world absolutely has to go and if you asked me 'when will it stop?' I think it will stop when asset prices stabilize."

    Funny that the Halifax and Nationwide are refusing to comment on house prices for 2009. More than willing to talk them up during the boom years but gutless during the normalization period.

    The Government really aren't helping here either. Firstly stating that banks have to rebuild their balance sheets, and then stating that they want the bank to resume 2007 lending levels. These seem to be contradictory requirements. That's why I raised the following petition:

    As asset prices are inextricably linked to this problem, and considering the Government have bought the banks; I believe the Government need to state their aspiration for mortgage lending in 12 months time in terms of Loan-To-Value (LTV) ratio, multiples of annual income, and loan duration.

    We're either looking at a real crash in house prices (not just flats and apartments) or a return to irresponsible and risky lending. This begs the question; do we believe that the Government has a real commitment to lending regulation and reform?

    Please sign if it if you feel it's applicable, better still get your friends to sign it too.

  • Comment number 48.

    Where has Terry Callier been all of our lives?

    spiraling guitar leads,

    "Lazarus Man"

    I thought I heard somebody call out my name
    yeah somebody was saying 'Lazarus Arise'
    I sat up opened my eyes
    You know I wanted to dance
    but I didn't have room
    so I threw off the sheets
    and walked out of the tomb

  • Comment number 49.

    In reply to 28, a friend of mine did just that. He explained that a competing bank was offering a slightly better interest rate.

    His own bank instantly matched the rival level of interest and added an extra per cent for good measure. Withdrawal of cash is the banker's greatest fear ...use it as a weapon of reprisal

  • Comment number 50.

    So, Mr Varley reckons asset prices will stabilise in around 18 months. Since every banker I can remember in recent history has been severely over optimistic in their predictions I would say double his estimate and add six months (for the unforeseen bad news that we are slowly being drip fed) and you might have a realistic estimate of what will really happen.

    Think about this: if the bankers can get share buyers to believe that 18 months from now is the time to start buying shares again then they can expect a nice bounce in their share price at that time (even if there is no sign of the end of the recession), whereupon they can recoup some of their losses and when they've done that they can confess to some more losses without taking as much of a hit.

    Look at Barclays recent history: the subscribers to their first bail-out in the autumn lost out big time when the share price tanked afterwards, and then when they were meant to have shored up their position they confessed they needed even more money and, miraculously, they managed to get it! Will history repeat itself? Quite possibly!

    By now it ought to be clear that we can't believe anything a banker or a politician says about the current economic malaise. They each have their own agenda. Bankers want to take our money and politicians want to be re-elected. Bear that in mind and read between the lines.

  • Comment number 51.

    #36 by no means am i saying the banks are blameless but as a individual i am responsible for living within my means and if circumstances change which they do in life you have to adapt to them for better or worse. you can not look to lay the blame at some one elses door whether it be the banks or politicians when times are diffulcult.

  • Comment number 52.

    Investment bankers and bank directors should be paid their annual bonuses and golden parachutes in the form of "toxic assets". Until they get personally hit hard in the pocket they will never learn. Credit Suisse has set a lead. May the herd follow.

  • Comment number 53.

    Just who does John Varley think he is?

    Surely the statement 'lending will resume when asset prices stabilise' simply means that Varley, Barclays and other Banks are quite happy to see property prices CRASH before they will lend again?


    Mr Varley's statements are more than arrogant and somewhat lacking in contrition.

    Just who on earth do the bankers think they are? They will only continue to earn contempt with that sort of attitudes.

    Barclays is well known to have had many murky financial dealings with dubious individuals and nations over its chequered history and is obviously desperate to stay away from any government control to ensure that the past remains closed. Like many before me, I would like to know what role Mr Varley played in these deals.

    I think Mr Varley should OWN UP for the SINS OF THE PAST and confess to all and sundry, for what has as we now have come to realise has been inter-bank fraud on a colossal scale.

    I don't yet hear the words 'apology' or 'what can i do to put it right' or 'yes we will treat our domestic customer base as a priority'.

    Until that time, I think Mr Varley should be stripped of his assets and pay, put on the dole and asked to survive just like so many thousands are now forced to do, simply because he and many like him think they are above reproach for what they have done.

  • Comment number 54.

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

  • Comment number 55.

    "Which is why it's unlikely that a recovery will start until banks grow their lending again."

    Oh... My... God... The world must be such a confusing place for you people.

    Recovery CANNOT begin UNTIL the banks start lending. Why? 97% of our money IS BANK CREDIT. It is created when new loans are taken out. No new loans, no new money, no "growth". It really is that simple.

    We have a recession BECAUSE the banks have stopped lending. There is a credit crunch BECAUSE the banks are not lending. Recessions, depressions, credit crunches are the same as credit contraction which is the same as banks refusing to lend.

    By allowing the banks to create and destroy our money, they can (and are) literally bringing the country to a halt. With no money, there can be no transactions.

    It's an entirely stupid state of affairs and why the power to create and destroy money MUST be removed from the hands of the bankers.

    Watch, read and digest:

  • Comment number 56.

    The banks stance on lending contributed to the asset bubbles and now are contributing to the collapse of those bubbles. All of this comes at the expense of genuine economic growth.

    If the asset values are related to the amount of lending in the amount of lending is related to the asset values what magically stabilizes the system two years from now? There is a possibility, perhaps a strong one, that this feedback loop needs direct action to stabilize it. Otherwise we could be in for a repeat of the 1930s falling asset values caused buyers of assets to take a prolonged holiday and the rest of the economy took one along with them.

    The banks collectively have a responsibility to stabilize this. Otherwise they should not be surprised if someone else does it for them. They accept hundreds of billions in bailouts and laugh at the rest of us. This is simply not acceptable.

    The banks actions to guard against loan-losses are making those loan losses larger. We do not want the inflation in asset values that created the illusion of wealth without actually creating the reality of wealth. But neither do we want those asset values to collapse. It is not in our interests, and it is not in the collective interests of the banks.

    Unfortunately, the attitude of each bank will be that whether or not there is a depression is outside of their control. They will take the actions needed to protect their shareholders in the face of falling asset prices by reducing the loans using those asset valuations as collateral. The government must intervene to force the banks to act in their own collective interest.

  • Comment number 57.

    The fundemental question is what are banks for? Their core activity is acting as the middle man between borrowers and lenders, charging for that service. This function is absolutely central to having fully-functioning capitalism.

    Banks have moved on from this - using derivatives and other finanical instruments, originally set up to minimise and protect against risks, they ended up using them to spectulate. By having a salary and especially a bonus culture that encouraged speculation, the banks undermined their own core reason for existing.

    Banks cannot be allowed to undertake activities that undermine their ability to carry out their role in matching lenders and borrowers. Much tighter regulation and indeed government interference in banking is needed in the future, not only in the UK but internationally, and especially in the US.

    For the banks, this will mean lower profits in the good years to ensure lower risk in the bad years. Speculation and enterprenureal risk taking should still happen, with appropriate hign returns for the successful, but not using the money that should be available for the more mundane, day to day activities that banks are supposed to be involved with.

    The alternative is that the state undertakes these core activities as indeed it will be doing, at least in the short term, as owner of the part or wholly state-owned banks.

  • Comment number 58.

    Talking of assets here's another one we no longer own.

  • Comment number 59.

    Robert Peston interviews Barclay's Chief Executive John Varley.

    It would be more entertaining if Rory Bremner interviewed Captain Mainwaring!
    And probably more informative.

    I suggest Robert Peston jump into some London Taxis with his microphone and camera.

    The Cabbies have a better feel for the real economy that fat cat bank executives in their ivory towers in Canary Wharf.

    Apologies from these people are really not enough. A whole generation of Bank executives should resign or be sacked along with their regulators.

    Stocks should be placed in Canary Wharf and the guilty men pilloried.

    Or perhaps this is the closing scene of Robert Peston's Panorama programme. Is this what he means by the "New Capitalism"?

    The guilty men actually get punished for once.

  • Comment number 60.

    This man Varley with his 'just too bad' attitude should be removed from office with immediate effect.

    Why do we have to put up with a banking sector whose order of priorities is:

    1. Themselves
    2. Their shareholders
    3. Their customers
    4. Their country

    Yours in despair etc

  • Comment number 61.

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

  • Comment number 62.

    The banks based the amount of lending in large measure on asset values and those asset values are based in large measure on the amount of lending. This is a giant Ponzi scheme and is inherently unstable. Any significant shock to this system and it goes roaring off in the opposite direction.

    This is not acceptable.

  • Comment number 63.

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

  • Comment number 64.

    The banks should say sorry, eh?

    It's EASY to be "sorry" after the ridiculous bonuses and profits they've creamed off over the years, and it's especially EASY to be "sorry" when your frankly idiotic mistakes catch up with you and the taxpayer comes along with a comfy safety net.

    Maybe if we give them even more money they'll be even more "sorry", who knows?

  • Comment number 65.

    "13. At 08:11am on 20 Dec 2008, darksurfer wrote:

    1) Why did people spend money they did not have?"

    Because there is NO other CHOICE!

    97% of our money comes from bank lending. If (under our current Fractional Reserve Banking system), nobody BORROWS money, or nobody LENDS money, then there IS NO MONEY.


    Go learn what money really is. The vast majority of our population clearly have no clue what money is. How it's created, how it's destroyed. Which is simply a bizarre situation, what on earth do you go to work for? if you don't know what money is, why are you all out trying so hard to earn the stuff.

    There are some links here which will allow you to begin educating yourself as to what money really is:

  • Comment number 66.


    'GB, AD, MK want the banks to keep lending. There are borrowers and non borrowers so therefore the banks have to keep lending to the borrowers, with a fair few of these already up to the hilt in debt. It just does not make sense at all.'

    I think they know this and that this is why they are purposely devaluing the pound!

    Watch out for major inflation and a boom (yes boom) in house prices coming to you very soon!

    |For further info, if you had say 200k in a bank at the moment (taking inlfation into consideration over the next 3 years or so) where would you put this money?

    Equities (Ha Ha, we own them all anyway!)
    Keep it as cash in bank (Oh dear, you will lose it via inflation)
    House stock (Hmmmm, inflation proof asset?)

  • Comment number 67.


    Thank you for the laugh, very refreshing!

  • Comment number 68.

    53 - Property prices are recovering. They are recovering to their normal average price of 90% of the average house in the average area being 3.35 times the average wage (currently 26K).

    The fact that this recovery is a downward adjustment is sad for a lot of people who bought in the last couple of years, but if you go around fooling yourself that you buy a house as an investment as opposed to somewhere to live, then you desrve what you get.

    And the next time you here a banker or government minister or building society executive on TV saying "12 months this 18months that" ask yourself, ifr they know so much then how come 12 months ago they didn't see this coming and therefore, just how reliable are their predictions now?

  • Comment number 69.

    #15 - yes, it can only be a matter of time before he produces a book called "The New Capitalism" - not that there is anythjing new about it, just a rehash of corporatist state ideas that come out every decade or so. God help us if they are taken seriously - I just hope tha this is not the next Labour Party Manifesto out on a marketing trial. Taxpayers as the main source of funding scares the wits out of me - it is just compulsory saving

  • Comment number 70.

    I couldn't agree more. Banks will have to downsize but lets all hope the first job losses are in the boardrooms of these failed businesses.

  • Comment number 71.

    There are 3 parties going for the same
    (a) banks
    (b) government
    (c) the people

    (a) + (b) are not real people and have lost all credibility, have proven to be manipulative, self-serving and are easily replaceable

    (c) should be empowered to take self control and start to run operations

  • Comment number 72.

    re 71
    for (a) + (b) this is only a 9-5 job
    for (c) it is 247365

    my tip is (c) can't lose

  • Comment number 73.

    Sorry from past and present PMs, MPs and politicians would be a good starting step too. sorry for putting personal ambition and glory before the interest of the country, sorry for toeing the party line for the interest of the party above the masses, sorry for demanding people do as they say and not as they do.

    Another quick and sharp asset deflation to attractive and affordable levels could shorten the time to recovery. Eg. average house price at 3-4 time average salary, average FTSE350 PE of 10 or lower.

    Measures must also be put in place to detect, discourage and limit conditions and causes of asset bubbles. Eg. buy-to-let, bonuses (some interesting recent examples from Switzerland).

    Prudence and hardwork must be rewarded, not sacrificed to subsidise the feckless and the greedy. When listening to political and businesses lobbying, public servants should consider VERY carefully what are bring lobbied. It is no accident Obama did not take donations from lobbists.

    Above all, lead by examples, not by words.

  • Comment number 74.

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

  • Comment number 75.

    Mr Brown only hears what he wants to hear and will disregard the comments made by Mr Varley.
    The Government have to continue their message of recovery "mid to late 2009" in order to brainwash the proletariat who only hear what they want to hear and disregard the rest. This is their only chance to have electoral success.
    It is refreshing that Mr Varley acknowledges that we are in for an extended period of turbulence, something that most Bloggers have known for some time!
    Just what we have in store, nobody knows, but as long as Mr Brown keeps the money hose at full flow, I fear that Mr Varleys' forecasts will prove extremely optimistic indeed!

  • Comment number 76.

    I've said it before and I'll say it again...

    Reckless borrowing and lending was the cause of the cedit crunch and global crisis.

    A conctraction in lending is actually a good thing and I'm all for it...

    But it needs to be permanent actually, or we'll only have a repeat of the reckless borrowing/lending that caused the crisis. I hope the credit crunch continues for a lot longer than two years...

    All those bemoaning the lack of credit at the moment, need to think about the brave new world where credit is much harder to obtain.

    They need to stop moaning about it and get on with the new ways of financing businesses, e.g. by re-investing profits instead of paying fat-cat salaries and excessive bonuses so you can all drive Aston Martins, Ferraris and Lamborghinis...

    That's what we need in 2009. The big players in Finance, Commerce and Politics must move to the brave new world of greater financial and moral responsibility, instead of trying to retrieve the old failing system, which it has now been PROVEN BEYOND ANY DOUBT, served a few rogues at the expense of everybody else....

  • Comment number 77.

    As the Property BUBBLE has rendered the

    UK as one of the MOST UNCOMPETITIVE








  • Comment number 78.

    nar,banks been bailed out so will sell new loans, loadsa em, no risk when running a bank eh !

  • Comment number 79.

    68. RedLenin;

    I don't agree with either your assessment of the long term average house price/earnings multiple (it's not the right measure anyway), or the validity of your average wage figure (as it applies to the average homeowner or borrower).

    However, if you are saying that average house prices will fall to £95k, I thik that is highly unlikely. That would imply rental yields of 10%+ against interest rates of 2%-. There would be buyers long before then. Much better than trusting to a pension provider.

  • Comment number 80.

    The Crash Gordon response will be more spin and weasel words to hide what is going on. Fiscal Stimulus (more debt), downturn (recession) - I forget the one meaning print more money!

    He looks happy and may be set for another term in office. How can we be so stupid?

    Why is everyone avoiding talking about the near zero interest rate in the US? Money is in short supply so the cost of money goes down? What happened to supply and demand?

    I'm getting the RP book for Christmas - Let's hope that explains things! My brain hurts!!

  • Comment number 81.

    As a matter of fact we own the money that the banks look after, so we should be getting the interest. Money by the people for the people. All it needs is intelligence-y to turn the tables

  • Comment number 82.


    Totally agree. The fact that this blog doesn't seem to be able to display the £ sign, especially when it's a financial blog, is ridiculous!

    This perpetual fault shows a lack of attention to detail that could make one distrust other information on the BBC website. Get it together BBC and display pound signs for us, it can't be rocket science.

    Or are you assuming the demise of the pound so soon, that you don't think it's worth making this correction?

    Mostly fascinating reading otherwise, thanks everyone.

  • Comment number 83.

    Should banks be less cautious on lending? I have looked back at the history of US Toxic Debt, and it seems to date from good intentions in the Clinton years. The theory was that home-owners were more socially responsible, their children better educated, so banks were required to give mortgages to poorer people. If their lending did not reach the required level, the banks were prevented from opening new branches, merging etc. So they dropped their security criteria in order to comply. One they found that they could "lay off" this "secured" debt, the sky was the limit! We know where a road paved with good intentions leads! Let`s not press UK banks to take us to the same destination!

  • Comment number 84.

    Well if it comes from the mouth of a banker or politician or economist it must be true, that has been proven so much recently. These interviews come across as PR opportunities with what is spouted simple accepted. I found it quite noticeable that the suggestion the Sorry word should be used was to say the least very oblique. I did not see anybody actually personally saying sorry. So somebody else should be saying sorry, now there is something new. Or a nebulous sorry from an industry. An industry is individuals not a cloud.

    First of all it is going to be over by Xmas, bit like WWI, then next year and now the year after, nothing to stop it slipping further really - its all words, not backed up with money - with recovery unlikley before the guillotine of a General Election. Interesting. Nowhere to run. I really do not take a great deal of notice of opinions because I reckon if you said to these types - if your opinion is wrong you will be stuck in a pit buried up to your neck and left, suddenly all these wordsmiths would be quiet. Whilst they can spout and ponificate with no penalty they will and that is how we got here. Global growth of 4% is needed - for a decade. Hmm. I guess if you push things low enough you are bound to get significant growth but it all sounds gross extrapolation. The word unsustainable comes to mind.

    I have yet to understand what use an economist is to anybody. Their sole objective seems to be to say you should do something I say with your money, or somebody else should do something I say with your money. They seldom appear to do anything with their own money. And there are always apparently more economic opinions than economists, perhaps they occupy parrallel worlds. That would explain it.

  • Comment number 85.

    "But sacking all these hopeless bankers might upset the international investors" might do exactly the opposite...they might be pleased to see the back of them.
    Probably the real reason the government is not throwing them out is because it would highlight government failure and lack of regulation.

  • Comment number 86.

    Be careful what you say. Jacqui Smith doesn't understand sarcasm when people told her they would 'love' to have an ID card. So we must categorically state we do not want credit card ID's either.

  • Comment number 87.

    What John Varley seems to be saying is that the banks are not going to help us out of the recession. They will be too busy recapitalising themselves by taking advantage of the scarcity of credit to increase their margins. They will be trying to hoover up savings at low interest rates, while re-lending very little, at much higher rates.

    This confirms that it was a mistake on the government's part to bail them out. They should have been allowed to go into administration and bought from the administrator as going concerns, without the bad debts and loans, and then run in the public interest rather than that of their shareholders.

  • Comment number 88.

    A word of warning.

    Has anyone heard an insurance company confess to holding any of these falling assets in endowments or pension schemes?

    Thought not.

    Beware. Make sure you know exactly what your money is invested in. Or you could live to regret not doing so.

  • Comment number 89.

    #74, don't spam us your 20th Century propaganda, please. The 'Energy Crisis' will be fixed within 5 years. Have a little faith in technology and your human ancestry.

    Now, if you had something interesting to say about relative wealth and the manipulation of the plebs' expectations of material goods manufactured with that energy, I'm all ears!

  • Comment number 90.

    Re 74: Nice one. Couldnt agree more. See also 'The Revenge of Gaia' by James Lovelock. Someone wrote about confidence earlier today. Capitalism is a confidence trick, a pyramid scheme. But communism was corrupted by greed as well. There must be a middle ground out there but I cant think what. Anyone got any ideas?

  • Comment number 91.

    I have more or less abandoned the UK

    BANKING SYSTEM both on a personal

    basis and for my business.

    I simply DO NOT TRUST the SYSTEM.




  • Comment number 92.

    It is in the news but off thread so I apologise.

    When a couple of decades ago a gent I knew let me know in an offhand comment that the buzz was Aldermaston amongst other activities was under review and that Thatcher was looking to see what could be sold I was dumbstruck. What about the Biochem warfare outfit I asked myself, is there no limit to the madness, are there not things best kept within state ownership. What is to stop the likes of Saddam making a bid. I see Aldermaston is now to be sold to a US company. Now theres safe, nothing to worry about. I can see no difference between Thatcher and Brown in policy. I thought Blair/Brown where elected to be different. Mistaken obviously.

  • Comment number 93.

    Was someone trying to tell Emperor Gordon and the real Joker (Darling) that they have no clothes?

  • Comment number 94.

    #21 "Remind me, do people need to have a clue what they are talking about when they post here? ;-)"

    No !! Why spoil a good rant with truths and facts ?? After all, that's what the government is doing at the moment !!

    Witness Ms. Frozen-rabbit-in-the-headlight Smith and her "Victory over knife crimes" !!

  • Comment number 95.


    I think you'll find the middle-of-the-way-you cant-quite-put-a-name-on is fascism.

  • Comment number 96.

    actually thinking about it all markets are the same so we should go global everything all over the world

  • Comment number 97.

    Oh dear, moderators. We are touchy. So I make two general references to financial chicanery, using the terms 'crooks' and 'scallywags' and finish with a half joking statement that the use of these words will probably get the post moderated out, what do you do?: Bam! moderate it out of the blog. My God has it come to this? There's a double standard at play here. When references are made to the dirty dealings of politicians it seems OK but when it comes to the 'masters of the universe' bam! we can't have that can we? Come on: moderation ought not to be censorship. I know we live in difficult times but let's not slide into the abyss that is over policing. A little satire and word play never hurt anyone, well, except it seems those with big enough pockets to frighten the life out of the good old BEEB. What a shame.

  • Comment number 98.

    One of the things that really concerns me going forward is the availability of risk equity capital for startups and spin-outs.

    It's always been more difficult in the UK to raise risk equity capital than almost anywhere else on the planet particularly when it comes to manufacturing start-ups. Now of course most so called VCs are investing as little as possible in order to preserve cash.

    If we are to rebalance the economy properly then perhaps we need to make it a legal requirement of all the banks to make available say 10m pounds per annum each to a national venture fund.

  • Comment number 99.

    Finally, some common sense. Borrowing against a rising house price to buy consumer doodads is a mug's game and violates the first principle of gambling, namely not to count your money while it's still on the table.

    Realised profits are great, but borrowing against unrealised profits is insane. My parents always used to tell me that what you have doesn't count, only what's paid for counts.

    Now of course we need to get out of the mess we are all in, thanks to irresponsible borrowing. Crash Gordon seems to think the answer is more borrowing, which shows what he knows about economics.

    Unfortunately economic cycles don't always line up conveniently with political cycles, which is the only reason I can see for Crash to be pumping so much cash into the system to delay the implosion, in the desperate hope that he can delay the meltdown until after an election and blame the conservatives for it.

  • Comment number 100.

    74. At 10:55am on 20 Dec 2008, PeakOilPaul wrote:

    Stephen Hawking said something like:"the future of humankind is to explore space"

    The amounts of helium-3 needed as a replacement for conventional fuels should not be underestimated. The total amount of energy produced in the 21H + 32He reaction is 18.4 MeV, which corresponds to some 493 megawatt-hours (4.93x108 Wh) per three grams (one mole) of ³He. Even if that total amount of energy could be converted to electrical power with 100% efficiency (a physical impossibility), it would correspond to about 30 minutes of output of a thousand-megawatt electrical plant; a year's production by the same plant would require some 17.5 kilograms of helium-3.

    There have been many claims about the capabilities of Helium-3 power plants. According to proponents, fusion power plants operating on deuterium and helium-3 would offer lower capital and operating costs than their competitors due to less technical complexity, higher conversion efficiency, smaller size, the absence of radioactive fuel, no air or water pollution, and only low-level radioactive waste disposal requirements. Recent estimates suggest that about $6 billion in investment capital will be required to develop and construct the first helium-3 fusion power plant. Financial breakeven at today's wholesale electricity prices (5 US cents per kilowatt-hour) would occur after five 1000-megawatt plants were on line, replacing old conventional plants or meeting new demand.[45]

    The Moon's surface contains helium-3 at concentrations on the order of 0.01 ppm.[33][34] A number of people, starting with Gerald Kulcinski in 1986,[35] have proposed to explore the moon, mine lunar regolith and using the helium-3 for fusion. Because of the low concentrations of helium-3, any mining equipment would need to process large amounts of regolith,[36] and some proposals have suggested that helium-3 extraction be piggybacked onto a larger mining and development operation.[citation needed]

    The primary objective of Indian Space Research Organization's first lunar probe called Chandrayaan-I, launched on October 22, 2008, was reported in some sources to be mapping the Moon's surface for helium-3-containing minerals.[37] However, this is debatable; no such objective is mentioned in the project's official list of goals, while at the same time, many of its scientific payloads have noted helium-3-related applications.[38] [39]

    Cosmochemist and geochemist Ouyang Ziyuan from the Chinese Academy of Sciences who is now in charge of the Chinese Lunar Exploration Program has already stated on many occasions that one of the main goals of the program would be the mining of helium-3, from which operation "each year three space shuttle missions could bring enough fuel for all human beings across the world."[40]

    In January 2006, the Russian space company RKK Energiya announced that it considers lunar helium-3 a potential economic resource to be mined by 2020,[41] if funding can be found.[42][43]

    Source: google wikipedia and there is much more information on the subject.


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