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IMF vs Treasury and FSA

Robert Peston | 19:07 UK time, Tuesday, 21 April 2009

The International Monetary Fund has published some big and scary forecasts of losses banks and other financial institutions are likely to make in the coming couple of years.

And the emergency service for the global economy has also made some eye-watering estimates of additional capital that banks may need to raise.

Here are the headlines:

1) total losses for banks, insurers and other institutions from loans and investments in the US, Europe and Japan from 2007 to 2010 will be $4.1trillion or £2.8trillion - which is the equivalent of writing off the entire output or GDP of the United Kingdom for two years (a big number);

2) in the UK, the eurozone and what the IMF calls "other mature Europe", banks will need to raise a further $875bn of additional capital by the end of 2010 and perhaps as much as $1700bn - which implies that we'll see a good few more banks taken into public ownership.

Specifically on the UK, the IMF estimates that the costs to taxpayers (or us) of bailing out our big banks will be 13.4 per cent of GDP or around £200bn, rather more than the Treasury has been estimating or will factor in to tomorrow's budget.

On the IMF's figures, only Ireland will suffer greater taxpayer costs as a proportion of GDP. In the US, the so-called stabilisation costs would be 12.1 per cent of GDP.

However, the Treasury says the IMF ignores the fees it has received for some of the financial support to banks that's been provided and it thinks the IMF is being too pessimistic on potential losses.

The Tories of course argue that the IMF's assessment is just another manifestation of the costs to us all of the authorities' failure to rein in the lending bubble before it became almost lethally super-sized.

Meanwhile the Financial Services Authority is not overjoyed that the IMF says British banks will have to raise a minimum of $125bn of additional capital and perhaps as much as $250bn.

The City watchdog would make the following points:

a) it wouldn't disagree with the IMF's estimate that banks will incur further huge losses in the coming year or two;

b) it believes British banks have already raised sufficient capital to absorb those losses safely;

c) in measuring the capital ratios of banks (their capital resources relative to loans and other assets) the FSA is a bit bemused that the IMF doesn't seem to weight assets by their riskiness;

d) the FSA would not disagree that over the long term banks will have to hold more capital relative to assets than recent norms, but the FSA believes it would be bonkers to force banks to raise this additional capital until the recession is over - because to do so now would further deter banks from lending and would deepen and lengthen the recession.

Here's the bottom line.

Many may agree with the IMF's analysis and its desire that banks, including British ones, should raise more capital sooner rather than later.

But the power to force banks to raise additional capital rests with national regulators, such as the FSA, not the IMF.

And if the FSA doesn't believe that banks have an urgent need to raise capital, then banks won't raise massive amounts of additional capital (barring the disclosure of booboos that have somehow remained hidden).

UPDATE 00:05 The Treasury has shouted very loudly at the IMF. And the IMF has tonight withdrawn from the online version of its Global Financial Stability Report the table showing the costs to the British taxpayer of the bank bailout as being 13.4 per cent of GDP. That table is now, according to the IMF, "embargoed" - whatever that means.


  • Comment number 1.

    To commit over 13% of GDP to bailing out the banks is terrifying.

    But the fact that other nations are spending similar amounts really goes to show that this crisis is not of our government's making but is a truly global one.

  • Comment number 2.

    splendid article,all we now need is brown and his rag bag shower of a government to go and get lost or preferably call an election.brownwatch 405 days.

  • Comment number 3.

    Just more and more stealth taxes to be extracted from the hapless voter.
    Somebody has to pay.
    Cough up.
    It is your patriotic duty to pay the state and your betters.
    Do you not know your place by now?

  • Comment number 4.

    #1 "But the fact that other nations are spending similar amounts really goes to show that this crisis is not of our government's making but is a truly global one."

    It is a tragedy of the commons.

    When everyone else is raking in the money on risky behaviour you'd be a fool to turn it down. But then when we get systemic collapses the individuals involved are indeed to blame.

    We had a decade of prosperity, there should have been foresight and provisions. Hell, I'm certainly no financial genius and I predicted the housing meltdown years ago. Others were trying desperately to sound the alarm about the sub-prime crisis that triggered all this toxicity, but nobody would listen, why would they, they were making wads of cash.

    It *is* a global failing, but it is also a local one. We wouldn't be in half such a bad state if "prudence" Brown hadn't run up the debt like a kid with his dad's credit card during the boom years.

  • Comment number 5.

    Yes, it is frightening and in response to comment 1, no we are only one place above Ireland in how bad our situation is. The disease is hitting us harder because we have a government that have totally mismanaged our finances, and that on top of the global situation means we will be paying for it longer. People are not stupid and saying global every five seconds does not abslove anyone from responsibility for the mess.

  • Comment number 6.

    When are we going to get a National Debt Clock so that we actually KNOW how much borrowing is being racked up on Great Britain's 'Access Card' ??

  • Comment number 7.

    And dare one ask whether the IMF has a vested interest in putting us into penury so that we have to ask for a huge loan so that we are indentured to slavery to them for our lifetimes ?

  • Comment number 8.

    Who would you rather believe Mr Peston, the IMF or Eyebrows Darling and his sorry excuse for a prime minister ? Tomorrow's budget statement will be a short term fix aimed at trying to avert the demise of the Labour party as a credible political force rather than an attempt to get Britain out of the excrement Gordon Brown and his witless colleagues have dragged it into.

  • Comment number 9.

    So it appears the nation has lost at least 2 years of its normal earnings, albeit spread over 15 years or so.

    Ideally this pitfall should have been avoided. Nevertheless the only way from here is onwards and upwards.

    One hopes the nation will be wise enough to expect the next and subsequent First Lords of the Treasury to use whatever it takes to restore and maintain the nation's finances to a fit and proper state.

    Without sound finances all political parties manifesto hopes will be no more than hot air.

  • Comment number 10.

    I had wondered if the government had been playing down the true extent of the debt mountain. Clearly they have, the next questions are:
    1. What other matters are still buried or not recognised as yet?
    2. Assuming we are at the end of the financial melt down; what are the UK politicians going to do to turn Britain into a cash positive economy?

  • Comment number 11.


    You always seem very quick to defend the Brown Govt and make the point that it is a "global" problem.

    I don't ever recall seeing anyone on here trying to make the case that the Govt actually caused the problem.

    This Govt have been at the wheel for 12 yrs which is a long time in anybody`s book. Do you honestly feel that they have done a stellar job in running the economy over that period and could not have done anything differently which would have left us in a bit better position?

    I accept that there are other countries which are in a worse position but amongst the G20 nations we are worse placed. Would you not at least expect a little better housing keeping from a country that is the 5th largest economy in the world?

  • Comment number 12.

    Well, here's a 'Debt Clock', but it looks to be using last year's figures.

    So the 'Debt per head' is just over £ 10 k each - one suspects that it may be approaching £ 15k per head now, and heading fast to £ 20k per head.

    But who knows ? Perhaps the BBC can enlighten us !

  • Comment number 13.

    The IMF is:

    a) aware that it is a bit out of its depth in understanding the present mess;
    b) determined to show a view of economic prospects which is no longer denatured by politically driven prettying-up imposed by the US and British Treasuries; and
    c) aware that it is all too likely that politicians will want to ignore the risks of things getting even worse.

    So they have produced a forecast which is worse than the least unlikely outcome, but well within the range of possibility. We should be grateful.

  • Comment number 14.

    In an economic and statistical debate between the IMF and the FSA I know which, based on its track-record, I would judge to be the more credible and reliable....and it isn't the FSA.

  • Comment number 15.


    Dominique Strauss Kahn warned of the unresolved banking black hole in his interview with Paxman last week. Ken Clarke and Sushil Wadhwani warned that more could and would be needed on toxic assets on 20 April Newsnight. Wadhwani spoke of the central/eastern european debt farago washing onto our shores in a second shockwave. Its not at all certain that the Geitner JV plan for purchase of toxic assets will work. You need to read the Trends in Lending report of the BoE just published April 2009. Flow of net lending to uk businesses was close to zero in February 2009. BoE corporate bond asset purchases have helped to repay some of the bank debt ( yipee for the banks) for the privileged footsie companies.Everyone else makes do the Enterprise Finance Guarantees. It claims that it finds it difficult to disentangle the separate influences of changes in the supply of and demand for credit. Growth of Lending to business has severely fallen back.This could throttle off recovery.Net mortgage lending has collapsed with annual growths in lending falling to its lowest rates since series figures began in 1988.

    If there is a collective lack of will in the political / regulator classes to recognise the urgency and need to deal with bank balance sheets, there will be a worse outcome for all of us. The banks hold us to ransom - this should never be allowed to happen again.Why should we trust the FSA calculations, when in October we were told that capitalisation phase one would restore lending after their stress testing at that point. What are we on now? Phase Four?

  • Comment number 16.

    Right, Peston, it is time to come clean.

    Andrew Neil on his Daily Politics Blog says that 'the markets' are already factoring in the potential for 'Borrowing' [by which I mean total debt, not the ridiculous use of 'borrowing' to mean 'just this year's slice'] of up to 100% of GDP !!!

    That means we are already heading for a figure of £ 20, 000 PER PERSON.

    Is this right ? Why on earth isn't the BBC zoning in on this, and why aren't people making much much more of a fuss about this, if this is really the case ??

    It is a dereliction of duty if this is not covered properly and gets camouflaged with all the other 'Budget Day' figures.

    Scandalous !!!

  • Comment number 17.

    My money's on the IMF's assessment (and similar third-party assessments). The amount of 'bad stuff' still undisclosed (deliberately and inadvertently) in the global financial system is huge. The risks to the global economy remain truly enormous and unprecedented. The last analysis I would trust these days is anything coming from the Treasury or the FSA. Both organisations are utterly discredited and politically biased. Why on earth would either of them want to put out anything other than the most optimistic (ie unsubstantiated) of messages?

    People must bear in mind that we are ruled by an incompetent, deceitful and, latterly, desparate Government.

    The citizens of this country would do well to proceed with their lives on the basis that the next 10 (or even 20 years) are going to be extremely difficult economically and socially. The global recession has barely started (let alone coming to an end, as some politicians would try to con us into believing) and we have yet to experience the forthcoming horrendous impact of the end of cheap energy, coupled with the UK's appalling levels of energy (in)security.

    Tomorrow's budget will be the usual nonsense that we've come to expect from The Brown Terror. The global reality of what lies ahead will unfold against the laws of diminishing natural resources, supply and demand and overpopulation regardless of the frantic and ultimately futile lever-pulling by our politicians. We've reached the end of mankind's era of debt-fuelled (fantasy) economic growth predicated on infinite supplies of cheap energy.

    The next 10 years and beyond will be the payback and the transition to a new world order: but not the world order that Gordon Brown keeps banging on about.

  • Comment number 18.

    The IMF warned several times about the housing bubble but they were igonored. Now they warn about something else and they are ignored. It seems the government and FSA messed up before and they'll mess up again. The former, to try to secure reelection, the latter because they're trying to please their political masters.

  • Comment number 19.

    The same IMF forecast 1 trillion a year ago - has it any credibility?

    Forecasts are that - forecasts.

    Sadly the UK economy is underpinned by house prices, rather than more productive manufacturing etc sectors.

    Look at a few agents websites - the proportion of properties under offer has increased enormously over recent weeks - a sure sign confidence is returning, but who knows for how long? - however with low interest rates, increased mortgage availability and favourable demand/supply perhaps it will last, in which case many of those UK toxic debts will become non-toxic.

  • Comment number 20.

    When there are banks still to fail, truly colossal losses in the system and unemployment only just getting rolling and house prices still falling I find it hard to believe that the worst of the recession is over, particularly when those saying this have such an absymal record of forecasting. It all smacks of lets say its stopped and maybe it will.

  • Comment number 21.

    The IMF's findings support the idea that there are more dominos to fall.

    No-one need be surprised by this, not should anyone be taken in by rosy-tinted pictures painted by Darling tomorrow: the fact about dominos in a crisis like this is that they fall slowly.

  • Comment number 22.

    It's been pretty clear for ages that no-one has really "come clean" about the full extent of the banks exposure - and our exposure to the banks. I guess this is partly to protect the guilty (in both the financial and the political classes) and partly because to do so would bring the whole edifice crashing down.

    The Government and the FSA are simply doing nothing in the hope that something (preferably the economy) will turn up. If it does not, and if the IMF are right - I'm not in a position to judge - then another grim day of reckoning lies ahead when the banks find they are writing off further bad loans/assets and don't have the resources to meet their liabilities.

    It seems to me they may already know this. They are, shoving up banks chages and screwing their customers for every penny (presumably all "for a rainy day".) It beggars belief. Banks, for example, charge extortionate interest on credit cards while charging retailers 15% - effectively a form of VAT - for the privilege of selling and still they have no money.

    So lets start a fight back. Let everyone stop using their credit cards and start using cash. It may be modestly inconvenient - but if everyone joined in it would hit the beggars where it hurts: and they might have to start paying attention to the paying public for a change.

  • Comment number 23.

    #11. jd6969preston wrote:


    You always seem very quick to defend the Brown Govt and make the point that it is a "global" problem.

    I don't ever recall seeing anyone on here trying to make the case that the Govt actually caused the problem."

    Are you serious? There are many, many regular contributors to this blog who are repeatedly claiming exactly that. They blame Messrs Brown and Darling for everything.

    I did not vote Labour at the last election, and certainly do not wish to see them win the next one, but I accept that the cause of this global crisis was a combination of greed (by the banks) and a global lack or regulation and oversight. For all its faults, this government is not responsible.

    Or are you suggesting that the UK has such influence that it can precipitate financial crises right across the globe, from Iceland to Australia, Latvia to Japan?

  • Comment number 24.

    #22. chriss-w wrote:

    "Let everyone stop using their credit cards and start using cash. It may be modestly inconvenient - but if everyone joined in it would hit the beggars where it hurts: and they might have to start paying attention to the paying public for a change."

    So tell me how I will pay for that next flight on Travelocity, or those CDs from Amazon, or that computer from Dell. Should I walk into town with a thousand pounds in my pocket just in case I decide to buy something?

    If you pay off your credit card each month you do not pay any interest - so the banks are effectively offering you a safe, convenient way of paying for purchases for absolutely nothing. Why is that bad?

  • Comment number 25.

    The grasp of macroeconomics shown by the bloggers here is very thin, they have no idea of what the numbers mean.

    They have no idea of the size or elasticity of either the global product, the American economy by itself or the volumes that can be brought to bear by BRIC.

    A simple look at for instance UK and USA housing stock asset valuations and what the implications of even a 5% rise means in terms of equity available to the economy.

    If you translate the debt per gnp figures of the G20 and the projected ongoing defecits, then it is the same as many domestic familly budgets; i.e overstretched but manageable.

    The major problem is the short termism engendered by the limited terms of the political/executive leaderships when we should be looking at a 10 yr and beyond structure they perforce must keep an eye on the next election and the ignorance/incapacity of the electorate to do much more than count on their fingers.

    A substantial number of bloggers seem motivated by a venal hatred for this government (who I hold no torch for) that has exceeded anything I have witnessed in 45 years of following politics/economics.

    From the day of the Blair Accession I have heard, been told or witnessed extremes of loathing that the same people (in the Main)would hesitate to heap upon Himmler,Goebbels or Hitler.

    Whilst disagreeing with much of what the liberal/labour/leftist clique have done I can not think of any life or nation threatening activity or omission that could produce such rage, even the unfettered immigration and failure to apply just deserts to immigrant criminality, while annoying does affect so few of us that I wonder if I have missed some momentous sins of the socialists.

    Calm down people; its only a recession!

  • Comment number 26.

    All the more reason for GB government to 'nudge' the banking sector into consolidation - ease the burden on the taxpayer.

    Too many banks in the UK or affiliated with the UK being improperly managed. We need fewer banks of the right size, with the right management and appropriate British focussed business plans.

    This can be achieved by putting them all under control of the Bank of England which is 'half-way house' and cheaper and more efficient than wholescale nationalisation of anything that looks like a bank which would not work because nationalisation would bring the country to a grinding halt under incompetent government. The UK banks should now have to feed on each as take-overs/merger in a vulture frenzy for value and not keep going for innocent home owners - this all needs to be done quickly as 5 months overdue already.

    The difference is ask yourself - What is more efficient? e.g. 20 UK banks keeping correct capital reserves/ ratios or 200 + UK banks trying to keep suitable capital reserves - this is not rocket science - much of this is common sense. It is probably not possible for all of these UK banks to do everything financially as best practice in a recession - their business models only have one 'top gear' - accelerating growth and they simply do not have enough money coming in to maintain reserves, overheads, sort out toxic assets, etc etc. Some of the the banks need culling either in whole or part and most need breaking up and right sizing. We have too many bankers in the UK and most of these should now be looking to retrain.

    We're trying to support too many banks as most banks rely on the big four or five banks for inter-banks loans - the whole banking sector is too big and cannot be regulated and is unsustainable without major consolidation. We may have rescued the banks but by rescuing them haven't we now inflated the huge over-sized bloated UK banking mess and made things worse for many years to come?

    Too rebuild and restructure our economy I think that we need a smaller more efficient and well regulated banking sector serving the needs of the country, economy, business, people and not just the banksters. Government/politicians talk about this but do nothing about it.

    Robert, - I think your are hinting at this 'bank sector resizing/efficiency/control issue' in your review of the IMF forecasts but I'm wondering why you have not said this directly? (Actually, you may have said something like this elsewhere on the blogs?)

    We need a list of banks for the chop! Anyone going to have a bash at a better banking sector structure/profile?

    Complex problems of global goon banking finance can have simple solutions like e.g. a change of government, fewer banks, fewer bankers, fewer speculators - we need a government that can get control and means business - to do what is necessary and not goon around like Goondog Trillionaire Brown.

  • Comment number 27.

    Is 9/15/08 the “Second Shoe Dropping” after 9/11?

    The greatest impact of the ‘financial crisis’ or ‘economic shock’ that began on 9/15/08 (with the collapse of Lehman) may signify something more important than even trillions of dollars of money for our country. It may signal a relationship between the shocks of 9/11 and 9/15.

    An unguarded comment that Daniel Yergin made recently at a conference about
    the precipitous impact of 9/15 (08), when the Bush Treasury Department's
    Hank Paulson made the preemptive decision to drive Lehman into bankruptcy,
    and unleashing an extreme 'shock' (bordering on an ‘economic attack’) on the
    US economy, caused me to consider the possibility that the events of 9/15/08
    may very well parallel the suggested 'shock doctrine' (as Naomi Klein calls it), and of the 9/11 ‘kinetic attack’ (as the intelligence community calls it)..

    A recent article in the NYT reporting that the Defense Department
    and various intelligence agencies have just now run the first
    'war games' focused on economic warfare, which was planned initially in
    September of '08, further caused me to consider the obvious linkage in US intelligence planning between what they call 'kinetic attacks’ of shock and awe, and of the more modern ‘economic attacks’.

    Such perception and understanding of these attack
    profiles of old fashioned 'explosions' and new style 'economic explosions'
    against or by the US would seem to indicate that a 9/11 style attack and a
    9/15 (08) style attack are both on the minds of these 'defense' planners, intelligence experts, and security analysts ---- let alone their overseers.

    It would seem that those working on the 9/11 issue might gain considerable
    supporting evidence of any conspiracy (if one exists within the US or other
    imperialist governments) by comparing factors and decisions involving the US
    role in 9/11 and in the events of 9/15 (08).

    I have recently written speculative suggestions such as, "9/15 (of
    2008, the collapse of Lehman, and the beginning of this economic 'shock
    doctrine') is clearly the 'second shoe dropping' in this tragedy begun on
    9/11 by the ruling-elite 'corporate financial fascist Empire' that currently
    controls our country behind the facade of its two-party, 'Vichy' sham of
    democracy. It is more than ironic that even Hitler did not need two
    Reichstag fires to transmogrify the German Republic into the Nazi Empire.”

    In other words, 9/11 research and 9/15 (08) research might very well complement each other in establishing evidence of whether such attacks on our country can be better understood, explained and exposed to patriotic American citizens.

    Alan MacDonald
    Sanford, Maine

  • Comment number 28.

    The FSA ' does not believe the banks have an urgent need to raise capital'

    The IMF says they do.

    On track record and grounds of self interest who should we believe do you think?

    The whole system is shot, held up by past momentum only like some cartoon character running off the edge of a cliff he is only just realising there is nothing underneath him but thin air.

    rbs- temp

    I agree with you it is not the UK's fault exclusively, it is a global systemic failure we in the uk are particularly exposed to through poor management.

    We also proportionally carry a higher proportion of the blame globally as the problems and imbalances have largely been as a result of the gravy train created by wall street and the City regulators. Other financial centres were bewitched by the illusion of success and jumped on the bandwagon too but are slightly less exposed.


  • Comment number 29.

    THe conspiracy gentleman from Maine has surely missed a couple.

    1st shoe JFK
    2nd shoe Refusal of Bush snr to take Baghdad (allowing jnr his shot)
    3rd 9/11
    4th Lehman
    5th Another "Grassy Knoll" for Obama?

    The Americans have a delightful cache of fantasists that can always make me chuckle!

  • Comment number 30.

    What we have seen is a sudden devaluation of assets that had an overinflated value, ie a price correction. The over inflation was as a result of the bubble going back many years. A bubble is an increase in price of something that is more than the underlying worth of the asset. The underlying worth of something is the price that can be reasonably afforded by those who need to buy it.

    What I would like to know is: if these assets had not had their prices over inflated, what would their prices be ? Where are they with respect to their underlying value ? This is important because:

    * if the assets are still over priced, in spite of the fall, then they still have further down to go.

    * If the price is about right have we really lost anything at all ? The price of things is as it should be. We are all feeling poor because we had got used to assets having too high a value. It is like getting out of a hot bath: the bathroom fees cold in spite of us being happy with it before we got into the bath.

    Then we can look to see who benefited and who lost as a result of the bubble. The big problem is that some will have benefited hugely - which must be matched by others suffering an equal sum of losses. It would be interesting to see this net flow of value.

    I suspect that many who, as a result of the bubble, found much more cash in their wallets went and squandered it on items that they really should not have afforded - they spent beyond their true earning ability. It would be easy to blame them for this, but for years the spend, spend has been encouraged by the banks and high street - who benefited from it. Neither can we allow them to avoid all blame, everyone should know that you don't get owt for nowt.

    Many who were careful with their spending are unfortunately caught up in this, they have had to buy houses at inflated prices and are now loosing their jobs through no fault of their own.

    The worst culprit is our government who cashed in on the boom years and did not put anything away for the bad years. They could not claim ignorance, they had access to the best advice. The story of Joseph's interpretation of the pharaoh's dream of 7 fat and 7 thin cows is well known. In a few years they will leave office on a good pension while we continue to pay for their profligacy.
    This is on top of the up coming financial head aches that will be caused by an aging population and global warming.

  • Comment number 31.


    "For all its faults, this government is not responsible."

    I'd say half the Labour MPs don't even genuinely believe that one. Brown could use you at number 10 - I heard he has a vacancy for a new side kick.

  • Comment number 32.

    Got to ask the question.
    Whom has any validity here as a substantive commentator/source?
    All these organisations/individuals MISSED the crash so why should we believe ANYTHING they say about depth/extent/recovery?
    it seems to me that the entire financial sector has no legitimate commentators!!!
    As for Mervyn King, the sooner he is gone the better.....;

  • Comment number 33.

    Of course, if Brown hadn't run up debts of almost £200bn between 2001 and 2008, before the bungs and bali-outs even started, then we might have been able to afford the bail-out, or potentially not even needed it in the first place.


  • Comment number 34.

    I agree with Moncursalion-Monochrome! in that the hatred felt towards this government is enormous, but to put this anger down to being caused only by the recession is totally incorrect. The man on the street has been warning of over fuelled house prices, making money from `thin air` being unsustainable, the eradication of freedom of speach, wastage of tax payers money through hair brained schemes such identity cards, to name but a few. But this has been ignored and we have been belittled by an arrogant un-elected PM. I wish that we could be rid of career politicians and actually have somebody with real world experience and common sense running this `democracy (?)`

  • Comment number 35.

    Well I actually believe the Treasury know more about the UK economy than a bunch of pessimistic postgrads reading internet blurbs in the NY office of the IMF.
    And secondly , who the heck is going to default on a business loan or mortgage at 1, 2 or 3% over base rate?
    Hardly anyone.
    So move over, gloomsters, the recovery is on its way and I've been telling you this for ages.

  • Comment number 36.

    It's worth noting that according to Newsnight, the IMF have pulled the 13% figure - something about a "drafting error", according to our lot? Apparently, they meant to indicate a range of between 6-13% - again, I'm just going by Newsnight, and I may have got hold of the wrong end of the stick.

  • Comment number 37.

    24# rbs_temp

    In case you did not know this, the banks also charge retailers, and anyone else you pay by credit card a rate of 15% odd for the privilege.

    This is the same as the Govt's VAT take at the moment: and the more everyone uses their credit cards the for "convenience" the greater the share of public spending that's subject to this surcharge.

    would it be worth your while carrying cash if retailers offered you a 15% discount - as many do on the continent?

  • Comment number 38.

    Ridiculous. People swallow whatever the Tories tell them to because Brown lacks charisma while Cameron has a winning smile and the Telegraph - who says personality politics died with Blair. These IMF figures stink of reactionary hyperbole - we STILL have lower debt to GDP figures than the majority of the G20 (believe we were 16th at last count) and the sheer amount we have spent on bank equity and credit insurance is due to the size and previous success of our financial sector.

    The shares we now hold in our nation's banks are highly likely to go up in value again and the government credit insurance only becomes a risk if the banks collapse again - which by all recent accounts seems unlikely: bank lending up, mortgages up, the downward spiral slowing. These two major expenditures are still pie-in-the-sky figures (and, in the case of equity, may actually turn round a tidy public profit when the upturn inevitably comes - as happened in Sweden (

    It's a sad fact that people are willing to believe what George Osborne tells us to because talking down the economy gets the most coverage. Yes, public debt will be huge - it generally is after a recession - but to claim that somehow it is Brown's fault is truly naive.

    Post 1930s depression we introduced regulation to stop it ever happening again. Heath started chipping it away, but it was our first female prime minister who big banged all these safeguards away. Labour's mistake was to never reverse her mad decision.

  • Comment number 39.

    #35 onward-ho Well I actually believe the Treasury know more about the UK economy than a bunch of pessimistic postgrads reading internet blurbs in the NY office of the IMF.

    Well, I'd rather believe a Nobel winning economist, or James Galbraith, than someone who resorts to insults when the facts are inconvenient. After all, the treasury forecasts 18 months ago were rather less than accurate. Also, the people you seem to be insulting are probably industrious postdocs who do their research properly, and don't have a pecuniary interest in the outcome, except that the extent to which they get things right might improve their future employment prospects?

    Not that I'm against the odd insult, but that should be a Curzonesque venting of spleen, rather than a pretense of reasoned argument?



    There - that made me feel better!

  • Comment number 40.

    #37. chriss-w wrote:


    In case you did not know this, the banks also charge retailers, and anyone else you pay by credit card a rate of 15% odd for the privilege."

    Retailers do pay a fee for the "privilege" of accepting a credit card in payment, but it is nowhere near the 15% you quote. Try 3-5%, and you might be somewhere close to the actual figure. And that seems to me to be a reasonable sum of money for handling the transaction on the retailer's behalf.

    "would it be worth your while carrying cash if retailers offered you a 15% discount - as many do on the continent?"

    If retailers offered a 15% discount for cash than I would certainly take advantage of that where possible. But that's not going to happen and, as I have said, for the majority of transactions in today's sophisticated society paying cash is simply not a feasible option. I really don't know where you're going with this argument.

  • Comment number 41.

    It feels like Billy Bunter has been put in charge of admitting banking losses:
    "We haven't made any losses...well the rights issues will cover the losses...well there are a few more losses but that really is it...OK we need to be nationalised but only part nationalised....well actually mostly nationalised..."

    Where will it end?

  • Comment number 42.

    So who has gained the £2.8 trillion that the banks are supposed to have lost? Come on, own up, you know you're out there somewhere. It can't be all in Fred's pension. Who's sitting on a big fat mattress stuffed full of cash?

    It must have gone somewhere - or is it just a paper loss?

  • Comment number 43.

    All that piling money into the banking system does is save the banks because they are keeping the money to themselves and not lending it. We are not creating demand for products or services so how are we goiong to pull ourselves out of the recession?. Therefore we should implement a building programme, on a massive scale, to rebuild schools, hospitals, prisons etc and carry out rail upgrades. This will create demand for construction and infrastructure products/services, create jobs and produce add-on benefits such as increased demand for cars and high street sales plus reduce the increasing social benefits bill.
    It will cost money, however, rather than just saving banks, it would be producing something worthwhile and tangible at the end and if my tax is going to be used for something, then I want it used for something I can see.

  • Comment number 44.

    Robert, to really make your point at what an absolute catastrophe of years of financial management this is, state the numbers properly in full. I believe your abbreviation $4.1 trillion (what does this mean written like this, it has no impact) should be $4,100,000,000,000.

    Or approximately the value of 23,000,000 (23 million) houses at the average house price, ie, most of the private property in this country.

    It would be hard to imagine being the person most responsible for this level of ineptitude.

  • Comment number 45.

    37 # Chriss-w

    Having run several small businesses I have never been charged nore than 2% by any credit card company for transactions, although at one time the AMEX card was an extortionate 4.5% and I would not accept them.

    75% of Tesco t/o is via credit cards and I would image they pay a fractin of one percent.

    The ludicrous nature of your claim for a 15% transaction fee simply confirms my earlier assertion regarding the innumeracy and ignorance of most posters to this blog. Please go onto a site that welcomes the " All immigrants get a free car when they apply for asylum, yeah, and a 6 bedroom house, yeah and £1,000 a week in benefits for each of their 96 relatives,yeah." ; you know the type.

  • Comment number 46.

    37# - chriss-w

    Where are you getting this ridiculous 15% figure from? Are you just guessing? Interchange fees, to which you are referring, consist of a fixed fee and a small percentage of the transactional value. Granted, if you are making transactions of low value this means the percentage charged is higher (ever wondered why pubs ask you for a minimum spend on card?), but to put this figure at an average of 15% is plainly wrong.

    A more realistic estimate would be at most 2%.

  • Comment number 47.

    At least in the US they're going after the banksters for fraud. Here the useless FSA has been tasked with looking into the reasons for the collapse of RBS, but what's the betting they'll do a Hutton and be unable to nail the guilty parties ?

  • Comment number 48.

    chriss-w wrote:
    24# rbs_temp

    In case you did not know this, the banks also charge retailers, and anyone else you pay by credit card a rate of 15% odd for the privilege.

    Correction most retailers pay the credit card companies 1.5% commission on sales and at most 4% to american express whom we stopped trading with many years ago as a small retail outlet, and by the way in the real world we are fast approaching hyper inflation due to the weak £ to euro. 30% rises in costs are the norm since jan 2009, were is the deflation coming from certainly not in my high street.

  • Comment number 49.

    Their are/were too many banksters trying to get rich in Gordonziland ,and with no new tranches made up of the ones born every minute ,they should be downsized [or taxipayers will be turned into the ones born every minute]

    The effects would include a collapse in city office prices and collapse in GDP ONCE BRATAINS FANTASY things can only get better ECONOMY IS FACTORED OUT turning the %debt reality from a kerbstone into a mountain.

    One only has to look at the face of the great leader to see the seedy inkrusted embodyment of the seven debtly sins that should have been replaced by the honourable Frank Field a decade ago.

    And today ,budget day they shall contiue to fart in taxipayerrs faces to the tune of Land of Hope and Glory and show the world that Britains got tallent.

  • Comment number 50.

    I reckon my house is valued at about 2 trillion quid.
    I fully intend to leverage this to 50% of value and am actively looking to finance a 1 trillion quid loan against the properties value.

    How many lenders in the World do you think would lend me the money?
    I undoubtedly believe it would be none.

    Why, because my 'notional' self deemed value of my asset is worthless as an opinion of real value, yet, with the clear abandonment of the mark to market accounting rules, this is exactly what the banks are doing.

    Here in Australia there is a NSW local government that has on paper lost hundreds of millions of dollars investing infrastructure fees paid by developers into CDO's. It is still valuing these at the purchase prices and is refusing to re-assess for 'real value'. The CDO's typically of the type purchased are running between a 75-80% loss. The council is stubbornly refusing to accept that they have lost this money and the longer they wait the closer they get to their maturities and being forced to realise their losses.
    Till then let's ignore the problem and hope no one notices. Perhaps the election cycle is at play here.

    Not liking the result of a formula, it is not an accepted scientific principle to change the formula in order to derive the required result.

    Who cares about accounting rules when you don't like the numbers they spit out, just change the rules. This doesn't change the fact that banks have assets on their books they do not acurately record a value against. All financial statements issued by banks now can be trusted even less than they could be when off-balance sheet loss hiding was rife.

    I'd go with the IMF on this one, whilst not the most reliable of predictors it stands head and shoulders above the FSA on any measure of financial reputation.

  • Comment number 51.

    rbs temp @ 23

    There are many, many regular contributors to this blog who are repeatedly claiming exactly that. They blame Messrs Brown and Darling for everything

    yes, that's an accurate observation - there's plenty of that type of comment and it's driven by partisan politics rather than any semblance of objective analysis - nothing wrong with that so long as it's seen for what it is

  • Comment number 52.

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

  • Comment number 53.


  • Comment number 54.

    still @ 53

    I do indeed! - at least for the second world war - however, for this banking meltdown and consequent economic downturn, I mainly blame a combo of lax central bank monetary policy and the ridiculous bonus culture in the financial services industry - in both cases US originated, with the UK (as is our habit) slavishly following on

  • Comment number 55.

    54 The bonus culture based on 57 varieties of alphabet soup was originated[packaged] in london not New york, hence Roubini's observation that the Anglo Saxon model is dead [and not pining for the fjords ]

    The love affair with piracy fuelled[levered] by central banks has finally ended in tiers for souveneers.

    The Labour government relied on the lucre now no longer coming in to the city from every scaaam on the planet and soon the true debt to gdp figures will emerge .

    Perhaps you would like to blame Laurel and Hardy [thats another fine mess they got us into]

  • Comment number 56.

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

  • Comment number 57.

    #50. SoapboxJoe wrote:

    "I'd go with the IMF on this one, whilst not the most reliable of predictors it stands head and shoulders above the FSA on any measure of financial reputation."

    Well, it looks like the IMF has accepted that their calculations were incorrect on this occasion and they have withdrawn the estimate they made yesterday...

  • Comment number 58.

    #50. SoapboxJoe wrote:

    "Here in Australia there is a NSW local government that has on paper lost hundreds of millions of dollars investing infrastructure fees paid by developers into CDO's. It is still valuing these at the purchase prices and is refusing to re-assess for 'real value'. The CDO's typically of the type purchased are running between a 75-80% loss. The council is stubbornly refusing to accept that they have lost this money and the longer they wait the closer they get to their maturities and being forced to realise their losses."

    But a loss is not a loss until it is realised, just like any increase in asset values is only notional until the asset is sold. Perhaps the approach the local government is taking on this occasion - which, dare I say it, you may have somewhat oversimplified for the purposes of making a point - is simply standard accounting practice?

  • Comment number 59.

    if mr fat man takes that new fat pill it will be a true brownwatch 404 days.

  • Comment number 60.

    the only people i can see supporting this crxx government are the people that have their mortgages paid for by the sensible savers.

  • Comment number 61.

    An historical change has happened.
    Whilst profits from property "booms" go into private pockets, the eventual massive losses are now handed to the taxpayer.
    This has never happened before.
    EVERYONE is now at risk.
    Anyone who wants to see another surge in property prices must be off their rocker.

  • Comment number 62.

    "However, the Treasury says the IMF ignores the fees it has received for some of the financial support to banks that's been provided and it thinks the IMF is being too pessimistic on potential losses."

    The Treasury is muddying the water. I understand that the losses incurred are not only in Sterling, 2/3rd of the Banks liabilities are in hard foreign currencies. If Sterling goes down the pan the size of the liabilities will grow. Why is the British taxpayer underwriting the losses of American subsidiaries of RBS?
    Willem Buiter's blog well worth a read.

  • Comment number 63.

    Robert do really believe that the IMF is frightened of the Treasury? Personally i don't think so.

    Quite simply the IMF have taken the gloomiest view possible and given figures to so called finacial journalists who have then gleefully published the IMF's guess at the future. The IMF have had to quickly withdraw their silly predictions.

    How much more sensible to look at the facts rather than speculation - but then what would you do without a scare story?

  • Comment number 64.

    OK - thanks to all and I stand corrected. For the record, the 15% figure was not a guess. It is what what I was told I would have to pay in charges on an internet payment scheme I was trhinking of setting up. (I note that wikipaedia says that internet charges are higher than mormal retail which may be some explanation).

    Even at say 2% the charge means the banks are skimming a couple of billion £ a year. Whether this is reasonable depends on your definition of reasonable. I note the many references to anti-trust actions in this area so someone is not so sure. Is there a differential cost depending on the value of a transation that would justify a % fee?

    As for where I was going with the argument. My original point, lost in the debate about fees, was that people are being treated as passive players in this crisis - and they are expected to go on paying for it - and that perhaps there is something they can do (a form of mass action that goes to the heart of the matter (ie the pockets of the banks)) to make their presence felt in the debate.

  • Comment number 65.

    still @ 55

    exactamundo ... boni and Central Banks (UK and USA) with Brown happy to go along for the ride ... passenger on take off, in the air, and on landing - no clue

    but where do Laurel and Hardy come in, for Heaven's sake? - the only pair of retired, over the hill Clowns you might look to blame are Greenspan and Thatcher

  • Comment number 66.

    #60. rvpisneverinjureds wrote:

    "the only people i can see supporting this crxx government are the people that have their mortgages paid for by the sensible savers."

    Whether they voted Labour or not, there are a lot of people who understand that the current financial crisis is not of this government's making and that they are doing the best they can to get us out of the mess caused by the astonishing collective greed and poor judgement of almost the entire financial sector.

    #62. skynine wrote:

    "I understand that the losses incurred are not only in Sterling, 2/3rd of the Banks liabilities are in hard foreign currencies. If Sterling goes down the pan the size of the liabilities will grow."

    On the other hand, I presume that the IMF and Treasury are calculating the cost of the bail-out at current exchange rates...? In that case, the final cost is just as likely to shrink, as Sterling really only has one place to go from here and that is up. (And let's not forget that it has been this low - and lower - before, under governments of both left and right).

    We must also remember that the stakes the government has acquired in our biggest banks are likely to produce massive profits in the medium- to long-term. This crisis may yet end up costing us nothing at all. :-)

    It's such a pity that the blinkered, relentless sound-bite partisanship on this blog (which is demonstrated beautifully by post 60) makes mature economic discussion and debate almost impossible.

  • Comment number 67.

    The question I would like to see answered is - Where has all the money gone? The banks/building societies don't have any, so they ask for more from the government/shareholders/savers. The Government doesn't have any money, so it needs to lend more.

    I'm sure as hell that the ordinary 20% rate payer, like me, doesn't have the money, but I've got a bad feeling about this - we'll be forced to pay for it.

    Also, for all those who want Brown out, are you really sure that bringing in a Conservative government will make any change at all? The one voted out 12 years ago for its own failures?

  • Comment number 68.

    Well this crisis is global and politicians and to some extent the public, the sensational press are not getting the perspective for whatever reason have not yet grasped "global" and reconciled it with "national" The governments of the glabe have been loosing fiscal power since the electronic internet age.

    There is still yet more fanancial woe to come as the dirty linen is exposed at the bank. HOw come the American banks aree turning losses into profits in such a short time/ Are we gwettign short changed again?

    To add to all this rumours in the USA are coming in that Saudi Arabia has not been forth coming with their oil reserve stats which have remained the same year on year for the last twenty years even though no significant finds have been made. Whats going on?

  • Comment number 69.

    For Heaven's sake, isn't it about time we stopped all the doom and gloom talk... it's just becoming a self-fulfilling prophesy.
    House sales are up, (some) companies are announcing record profits... yet there are those who STILL persist in trying to drag us all down.
    But then good news and putting a positive slant on things doesn't sell newspaper inches or TV seconds... or get Mr Peston's face on the front page of the BBC website every day!

  • Comment number 70.

    This is very scary indeed! The public takeover of corporate bodies can only lead to one thing in the long run, fascism! This seems to be happening globally with government bailouts coming from everywhere! To keep a healthy balance in society between public and corporate interests we need to let some the big corporate players fall on their own sword and start again with a clean slate.

    Gerald Celente (Trend Analyst) gives a very good oversight of what is happening with this here:

  • Comment number 71.

    Robert, I am surprised you don't know what 'embargo' means.

    In publications it generally refers to information that should not be published yet.

    That is, the information is not wrong or in any way questionable, it is merely not to be publshed yet, for potical/commercial reasons.

    I would surmise that the figures are not disputed, but publishing the facts too early will make it difficult for the government.

    If they had told the truth as soon as they knew it, they would expect to be thrown out immediately - but by gradualy drip feeding ever higher figrues they hope to retain power just a little bit longer.

  • Comment number 72.

    #62 skynine

    Thank you for the link: Buiter's article is, as you say, well worth a read.

    One little headline: Too big to fail means too big.

    #69 Sorry Andy, despite my best efforts, even through rose-tinted spectacles, the emperor does not appear to have any clothes - at best a g-string.

    Why? because confidence can't pay the UK's massive import bill. We have to provide goods and/or skill that the rest of the world wants. And I can't see them wanting our financial "services" any more.

  • Comment number 73.

    1. rbs_temp,

    lol, your labour ramblings get funnier by the day!!!

    I wonder why it is you support them so much?

  • Comment number 74.

    This must be the worst blog debate ever for the quality of factual comment, starting with # 1 which is off in a world of its own. Only an idiot would claim that the current crisis is not global. There are many borrower nations (eg UK and US) which have significantly over-borrowed and there are many saver/exporter nations (eg Germany, China) which are suffering huge falls in demand for their goods. And there are nations (eg in Eastern Europe) which have borrowed in non-domestic currency which cannot devalue their way out of trouble. Very few nations are not in serious difficulties.

    Having identified the global aspect of the problem, only a complete idiot (aka Crash Gordon) would claim that there are no things done by the government in the last decade which have not worsened the problems for the UK. The list of Crash's mistakes is very long, with some having a major impact, others a minor impact. Some have only emerged as "bad" with the benefit of hindsight but most were heavily criticised at the time.

    Critics of the government would like Crash to acknowledge his role in making these errors (and preferably put the matter to an election vote) since acknowledging past mistakes is the first step towards finding a correct new course. Crash's characteristic of taking personal credit for everything good that has happened over the last decade but blaming anyone and everything for all things bad is inexcusable. As the man in charge he is responsible for controlling the country and the economy. On any important measure he has not done well.

    # 30. These comments are getting to the heart of the matter. Government actions to date have been aimed at short term benefits (and re-election), mainly seeking to re-inflate the bubbles of excess of recent years. In the housing/savings sector the current low interest rates have caused and are causing a massive transfer of value from savers to borrowers. There can be no hope of a long term solution until we start to address the structural problems of the UK economy and asset values reach their long-term sustainable level. Until then we are simply moving the deckchairs on the Titanic.

  • Comment number 75.

    Post 8,


  • Comment number 76.

    As Rbs_temp mentions above, the IMF have 'withdrawn' or admitted error in their figures.

    There is either significant political bias operating within the IMF with regards to GB's figures, or they're simply incompetent. I'm not sure whats worse but on balance and in light of their financial colleagues' abilities, they're probably incompetent.

    The truth about the current situation is that it is worse that the chancellor says, (as he wants to keep his job)- but its probably not as bad as the IMF make out as they're being manipulated by international pressures from other governments wanting to point the finger so as to distract from their own woes.

    The position will be somewhere in between. For the IMF to have 'forgotten' to include the bank charges (sweet irony) HMG have charged the banks seems sheer lunacy- how much is the author of that report being paid? Of all the variables that must have been considered in preparing it, surely a cost/benefit analysis was vital? They failed at step one.

    All of the above doesn't help with the underlying problem here, which is confidence. How can anyone, investors, consumers, banks, governments have confidence in lending or borrowing if accurate facts cannot be clearly stated. It is the lack of confidence which is crippling global liquidity and the IMF merely exacerbate the problem. Ridiculous.

  • Comment number 77.

    One question I've never seen adequately investigated or answered, Robert. Where's all this money gone? Money doesn't evaporate (however much one might think so looking at our Government's spending over the last decade). If one set of organisations have lost 1700 billion, then somewhere somebody has made 1700 billion.

    Some no doubt has gone to US householders or housebuilders who sold at inflated prices to people to then defaulted (or to US banks who sold on those mortgages as packaged debt?). Some has no doubt gone to pay a decade or more of excessive salaries and bonuses to bankers (borrowed from now!) or indeed went in taxes to fund Brown's spendthrift ways. But do those account for all of it? Or are there some very happy organisations keeping very quiet right now? (Good for them, but it'd be nice to know!)

  • Comment number 78.


    These forecasts are about as good as the Bill Giles one of the 80's where he didn't predict the hurricane winds.

    The IMF are guessing
    The treasury are guessing
    The Government are guessing
    The CBI are guessing

    It's funny how most of these 'reassuring predictions' have to be revised downwards (i.e. worse)

    This week alone we have seen downngrading of forecasts by the CBi, the IMF and today it will be the treasury.

    The IMF have quadrupled their forecast in les than 6 months, from a cost of 1Trillion to about 4 Trillion. How could they get it so wrong?

    How can you people still believe a word the Government says? Are your memories so bad you cannot remember last week - let alone last year? What happened to Baroness 'belly laugh' who stated she could see 'green shoots' out of her window.

    What so many people don't realise is that the efforts to reverse a much needed devaluation are going to cost us all very dearly in the future.

    Even the US banks 'good day' recently was under-analysed by the 'desperate to believe' crowd who missed the fact that their profits and good results may have actually had something to do with the 150 billion Dollars the US Government has just handed them.

    I shall be interested to hear what 'magical Darling' produces out of his hat today and more importantly how long before the markets discover there is no substance to it and that you cannot 'talk your way out of recession' and you certainly cannot 'lie your way out of recession'.

    It's all about maths - anyone who understands numbers can see this clearly.

  • Comment number 79.

    #74 angryCB. You note: "This must be the worst blog debate ever for the quality of factual comment..."

    Yeah, maybe, but as no-one seems to know what is going on, getting hold of facts is not that easy. The UK Govt. seems to be changing their forecasts more regularly than Newcastle change managers.

    Anyone that comes out with a forecast that some vested interest doesn´t like immediately becomes subject to the full forces of smear and spin.

    Accounting rules have been changed for short term optical benefits for the accounts of banks. This is clearly bananas - imagine if Drs. changed their medical diagnosis for the short term optical benefits of the patient. "I´m sorry Mr. Smith you don´t like the idea of having a broken leg, no problem let me just change my notes. There you are, you now have a slight nose bleed - nothing to worry about off you hop"

    When is the last time the UK decided it was a good idea to reduce interest rates to effectively zero and embark on money printing? Answer never, so how is anyone supposed to provide facts that will inform the likely outcome? Japan tried something similar (albeit with the benefit of strong savings and an export focused economy), and it didn´t work - and so because it didn´t work no-one can talk about it.

    Bankers get paid large amounts of money because of their special skills -so how come these special skills led RBS to a GBP 12 billion rights issue about a year ago and effective bankruptcy a few monts ago. Do you think their business benefited from the application of facts?

    There are some facts. Politicians and the media bang on about global warming and the consequent need to reduce emissions, even if this entails short term costs. Large swathes of the motor industry finds itself in economic difficulties - so the immediate answer is to force taxpayers to subsidise this industry. This has the consequence that taxpayers have less disposable income to fund purchases such as, oh I don´t know, say new motor cars. These are facts, but how they string together to lead to any rational conclusions escapes me, and I´m sure pretty much everyone else.

    Then you´ve got politicians with their seemingly endless stream of profound insights. "British jobs for British workers", "The abolition of boom and bust." What do these soundbites mean? Who knows, but hey let´s move on.

    You have the effective officially sanctioned subversion of the English language. All kinds of expert braying sheep are on the TV opining that UK unemployment may rise to 3.5 million. Yeah great except that in the UK there are already nearly 9 million people of working age who are not working. Whatever else these people may be they are unemployed. But they are non people, not worthy of either comment or of being counted. For some their only purpose is to be on constant standby for officially orchestrated vilification whenever it is deemed expedient for the general population to ritually boo the scroungers and the workshy.

  • Comment number 80.

    BBC R4 TODAY John Moulton talking about a long drawn out "L" shaped recession. very good analysis on the subject.

    he thinks we are in deep trouble,

    I think he thinks someone was trying to buy an election by proping up the banks,

  • Comment number 81.

    #1 lemming and cliffs come to mind.

    maybe they all need to win elections ?

  • Comment number 82.

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

  • Comment number 83.

    When are people going to apply some thought to the oft repeated question "Where has the money gone?" ?


    If as one poster posited earlier I VALUE my house at £1 Trillion and for some insane reason that figure gets into the system then the whole system is OVERVALUED by approx £1 Trillion less the REAL VALUE of my house.

    When it is realised that the value is actually £150,000 then there has been a "LOSS" of almost £ 1 Trillion, i.e the perceived value of the housing market is down £1 Trillion.

    Nobody had the Trillion, it wasn't there, but because it was PERCEIVED to be there, there is a £1 Trillion loss.

    If people had been trading on currencies or other indicis based upon asset values then they may have suffered real losses when the adjustment is made and those indicis fall.

    BUT NO ONE had the £1 Trillion, it was a FANTASY figure.

    The LOSSES we keep hearing about in equities, commodities,gilts, cdo's, cds are all in one way or another caused by NOTIONAL VALUES or NOTIONAL RISKS.

    One of the biggest of which was AIG's little man who decided that the world was one a one-way upward financial roll. He said you all have lent huge amounts of money but we will insure you in case the person/corporate entity you lent it to defaults (CAN'T PAY YOU BACK).

    His department took a NOTIONAL view of the risk and chargeda few cents in the dollar to insure TRILLIONS of debt. The fee's amounted to BILLIONS, out of which he got a reasonable personal salary of £200,000,000 in 8 yrs, because the world WAS on an upwards only roll, very few defaulted so very little had to be paid out.

    End of upward roll, beginning of defaults and AIG did not have, and never had.had any where near the amount of money needed to pay for the debts insured. True beginning of W.W.Crisis.

    The winners here were apart from the gentleman with £25,000,000 a year pay packet and his bosses with their bonuses, were those that had had the loans and used the money then defaulted, the losers were AIG stockholders, and to an extent the people who paid for this fraudulent insurance, but in the main the US tax payer who is having to directly bail out AIG or stand guarantor to its debts, and of course the rest of us having to survive the global re-adjustment to REAL VALUES.

    It is just another example of the kind of trading that has been going on.

    Wheres the money gone?


    On a personal level.

    The payroll computer has a glitch and instead of paying £2000 into your account at the end of the month, pays £200,000.

    You go out and buy a Bentley continental for £100,000.

    The computer error is discovered and corrected.

    You are now £90,000+ in debt to your bank.

    Whose fault?

    The original error was the cause, but the fault for this having an effect was you "DECIDING" that the NOTIONAL VALUE in your account was true, in the face of all evidence re past salary etc.

    Did you "lose" £190,000+ ? NO, it was never their to begin with.

    There is no little gnome sitting in a cave with the trillions the world has "Lost" it was never there .

  • Comment number 84.

    Try to get your heads round the simplest fact of all: the banks have debt so huge that it is beyond the ability of ANY and/or ALL governments worldwide to bail them out. We are only seeing the beginning of the problem. It hasn't begun to really bite yet. Everything pales into insignificance beside this fact. There are hundreds of trillions of dollars waiting in the wings for payment. And when the banks eventually do fail, that is the end of every economy worldwide. Only one person in Government seems to understand the depth of the problem, Baroness Vadera. No spin doctor she. When she was asked about bailing out the banks she replied that she wasn't trying to save the banks; she was trying to save the economy from the banks. At least she tells it like it is.

  • Comment number 85.

    83 Moncursalion-Monochrome

    Thank you so much. I always knew the answer was something like this but this blog has been waiting for months and months for someone to explain this in simple English. Though I doubt that it will stop people coming after the "winners"!


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