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How sinister is the Libor rise?

Robert Peston | 00:00 UK time, Tuesday, 25 May 2010

The interest rate at which banks lend to each other in dollars, the famous BBA three-month dollar Libor rate, has been creeping up day after inexorable day since the end of February.

The cumulative impact has been a doubling of that rate during those 90-odd days, to more than 0.5% yesterday - the highest three-month dollar Libor rate for something like 10 months.

What does it all mean?

As you'll probably recall, when Libor rose relative to central banks' official funding rates in an almost unbroken sequence from the summer of 2007 till the autumn of 2008 - when Lehman collapsed - the causes were sinister.

It was the most visible manifestation of perhaps the worst liquidity crisis the world's big banks had ever experienced.

A whole series of wholesale markets in which banks had raised hundreds of billions of dollars closed down. And there was no great pool of cash elsewhere to make up for this great loss of finance - so the interest rates at which banks lent to each soared.

As 2007 turned into 2008, this liquidity crisis transmogrified into a solvency crisis, as the shortage of finance led to sharp falls in the price of assets, especially property and loans to property, which generated huge losses for banks.

The horrible consequence was that a liquidity crisis became a catastrophic solvency crisis: one enormous investment bank, Lehman, went bust, and a series of other financial institutions would have followed Lehman to the graveyard if taxpayers hadn't resuscitated them with unprecedented injections of new capital.

What's more, central banks have - since the Lehman debacle - created unprecedented amounts of new money, and have lent record sums to banks.

That means it's difficult to argue that banks are suffering from a liquidity crunch on anything like the scale of 2007 and 2008.

And if you want evidence that banks really can't be chronically short of cash, just look at how little the European Central Bank has increased its loans to banks over the past 18 days or so: its net funding for banks has risen just 6% or so, which is hardly proof of banks gasping for liquidity.

What's more the take-up of dollar loans by the ECB under swap arrangements with the US Fed has been paltry, even though the Libor prices indicate that the peak of stress for banks is in the dollar funding market.

All a bit odd. Unless you think that what's going on is the reverse of the trends of 2007-8.

It could be that this time a solvency problem is wagging the liquidity dog, rather than a liquidity shortage giving a good shake to the solvency dog.

Or to put it another way, it may be that what's persuading banks' creditors to demand a higher rate for their loans is the expectation that European banks' will suffer big losses on their holdings of assorted eurozone government bonds and their loans to assorted European property markets.

The rising price of Libor may be based on the belief that a possible default by the Greek government on its debts, or a further downward lurch in the value of Spanish property, could generate unsustainably high losses for a number of big European banks.

Or to put it another way, the Libor rise may be saying that the eurozone's fiscal crisis could be the precursor to the demolition of some substantial, thinly capitalised European banks.

Which would be the most worrying interpretation of the Libor rise.

There is however a more benign explanation.

The thrust of anticipated bank reforms - whether they're the Obama reforms or the increases in capital and liquidity ratios to be demanded of banks by the Basel Committee on Banking Supervision - are likely to have the effect of increasing the costs for banks of lending.

And if the costs for banks of lending were to rise, that would mean that banks themselves would have to pay more for their credit, along with the rest of us (ouch). Hey presto, three-month dollar Libor rises in a semi-permanent way.

As it happens, there is one more explanation of the Libor rise: that disunited regulators, central bankers and government heads are largely united by a single reforming ambition, which is to put in place new legal structures for big banks that would allow them to fail without crippling the economy.

Here's the paradox. If big banks can be allowed to fail, if they could no longer be certain that they'd be bailed out by taxpayers in a crisis, the risks of lending to them rise.

So in sanitising the banks, in turning them from weapons of mass destruction into more conventional businesses that can be permitted to go bust, they become less attractive to creditors, who would obviously demand a higher Libor interest rate.

Update 12:05: Three-month dollar Libor has spiked up again, to 0.54%.

Today's bout of investor and creditor nervousness has been triggered by the IMF's analysis of the structural weakness of the Spanish economy and mounting evidence of the fragility of Spain's banks.

There's never been any mystery about the excessive exposure of Spain's banks to a bloated property market. The mystery has been how its banks avoided crippling losses on this exposure - although that increasingly looks like pain postponed rather than avoided.

Or, at least, that's what today's retreat in share prices across Europe is saying, with bank shares falling especially sharply.

And the cost of insuring Spanish government bonds has risen again. Which implies that bond losses could be the double whammy for Spanish banks.

It's all looking a bit unstable again.

Comments

Page 1 of 2

  • Comment number 1.

    Well, I know what the acronym LIBOR stands for but what does it mean when it drifts about?

    Robert offers a number of possibilities but unfortunately this blogger thinks the solvency issue is the main motivator for the rise in LIBOR.

    When the survivors return, if possible, to operating a full reserve system, then maybe we'll have some meaningful stability.

    And/or we'll all be using the Co-Op and Islamic banks.

  • Comment number 2.

    1. JohnConstable
    "And/or we'll all be using the Co-Op and Islamic banks."

    I'm using an Indian bank!

  • Comment number 3.

    Considering there has been a major dollar rally these past few weeks, it is suprising that it is the American LIBOR that is going the wrong way, rather than the EURIBOR or London Interbank rate. Indeed, one would expect euro rates to be soaring because of the currency weakness, along with sterling that still has not accepted the new coalition government.

    There's a paradox here too, since George Osbourne's big cuts sheet will have the UK deflating rather than inflating over the coming months. People are now saving in the UK despite the low rates of return in bank accounts. Base rates at 0.5% is not doing much stimulating of the economy, since the general public are not actually able to borrow at such a rate!

    Lack of spending by government will do more harm in America with its large areas of decay than over here where at least there is a slim possibility of a private sector led recovery IF regulations on things like planning permission are softened. Around here, many pubs are boarded up, every 5th shop seems whitewashed over, and jobs are indeed being lost. There isn't however the signs of decay American style, indeed if traffic on the roads is anything to go by, we're not broke among the public yet. A very selective downturn perhaps?

  • Comment number 4.

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

  • Comment number 5.

    "Or to put it another way, the LIBOR rise may be saying that the eurozone's fiscal crisis could be the precursor to the demolition of some substantial, thinly capitalised European banks.

    Which would be the most worrying interpretation of the LIBOR rise."

    Is the most likely interpretation..... Burned once dont want to get burned again.

    Sarkozy/Merkel "We will defend the Euro at all costs" Good luck to them.

  • Comment number 6.

    Robert, surely the answer simply put is "greed".

    At the end of the day, no matter what, who, when or where when LIBOR rises someone (or group of creditors) is demanding more.

    The endless cycle of rate rises, with creditors always demanding more, will eventually collapse perhaps permanently.

    Debt cannot be funded by more debt in a perpetual cycle.

    In the short term, creditors may think it is fun generating healthier cash flow through higher interest rates, but remember that eventually it will be "purely nation tax income" that funds these debts and ultimately the banks.

    In simple talk, the Banks recognise that the end of the road is nigh and their only hope of "eating tomorrow", is to "hoover up" the sole remaining source of cash, through whatever manipulative means remain - in other words, the poor taxpayer.

    An elephant never forgets where to find water and where the well has dried up.

  • Comment number 7.

    "Or to put it another way, it may be that what's persuading banks' creditors to demand a higher rate for their loans is the expectation that European banks' will suffer big losses on their holdings of assorted eurozone government bonds and their loans to assorted European property markets."

    So, do I understand right that stage one of the 'banking crisis' was the banking system made hopelessly overoptimistic loans to people who could not pay them back, and when this was spotted, the banks began to collapse - and now the banks have a problem that the hopelessly overoptimistic loans to governments made by 'investing' in 'eurozone government bonds' are a problem because the governments cannot pay them back?

    At least the banking system seems to have been consistent....

  • Comment number 8.

    What a pleasure to read the first six comments (the only ones presently viewable). They are obviously written by people who know something worthwhile about the subject. No doubt the usual ignoramuses will fill the blog page with their drivel in due course. But ten out of ten to the front runners here.

  • Comment number 9.

    Banks are charging everyone more, not just themselves.
    Presumably they want to make more money out of the transaction.

  • Comment number 10.

    "People are now saving in the UK despite the low rates of return in bank accounts."

    Liquidity Preference they used to call this in my old economics textbooks.

    Or if not saving then at least paying down some of that debt. I'm wondering whether the cash we are saving and banking would be better put to use stocking up on tinned food. How many tins of pineapple chunks will I need to live through this?

  • Comment number 11.

    The banks brought this situation on themselves.

    They continue to wallow in it.

    Have you met any unemployed bankers? Their sector recovered soon enough!

    Unless the taxpayer can find another structure to replace the banking system, we will be footing the bill.

    I guess what irks me is that this situation was so very avoidable.

  • Comment number 12.

    Robert, I think it is "none of the above".

    The original "crash" was driven by sub-prime. There are now huge trenches of prime loans due for renewal by main street, that will be at higher rates than the original loans (2 years ago). Higher rates, depressed economy, more mortgage defaults from prime borrowers ...

  • Comment number 13.

    I reckon the invisibilty of risk exposures to Eurobonds and Eurotoxic assets and the strength of the dollar drive the upward moves.

    Haldane of the Bank of England published a recent speech on "banking pollution"- he said the average annual govt subsidy to the top 5 uk banks is larger than £50bn(07-09),UK bailouts directly cost the taxpayer £20bn and lost uk output of monetary values between £1.8 - 7.4 trillions.

    Where is the decision to have a full public inquiry to examine everything and everyone involved under oath with powers to refer for prosecution and/or negligence suits in the civil courts.

    This has caused us more damage than some past wars and no-one is being brought to account!

  • Comment number 14.

    Another 300,000 unemployed just as a direct result of his cuts. Recovery stalling as millions of workers stop spending from uncertainty whether they have a job this time next year. Now the first signs of another bankers snout in the trough melt down.

    Sounds like Bertie Wooster in no.11 has us headed for a double dip.

  • Comment number 15.

    Another day, another rumble in the financial capitalistic circus.

    I wonder, how long will it take for YOU people to comprehend that this the monetary system a hopeless shamble of a system. It only serves the financial lords, that's all.

    Now, if anyone is interested to find out what REALLY is going on behind closed doors, read this - https://www.rexresearch.com/articles/ocultech.htm

    I'm sure WOTW will find it illuminating!

  • Comment number 16.

    All this tells me is that neither Peston nor any other 'expert' has any clue about what is going on. Yet we put our trust in these people as we did before the credit crisis occurred and none of these 'experts' predicted what would happen. The only blindlingly obvious fact is that Western governments, banks, companies and individuals have been living in a land wearing Emperor's clothing spun out of IOUs and these are now being laid bare.

  • Comment number 17.

    Had a good laugh about Bertie Wooster yesterday.

    He had to give credit and thanks to all the civil servants in the treasury who helped him draw up his cuts. Obviously Bertie has no idea how much the government was spending, how to even find out or how you would tell government departments how to stop spending. No idea at all. His nearest past experience was working as a data entry clerk for the NHS, don't think his degree in history helped much either.

    Really quite ironic that a guy who spends all his time telling us how public sector employees are all useless, lazy, wasteful etc etc has to begin his very first week utterly reliant on highly experienced civil servants.

    Shame they all couldn't have taken a week off - then we could have had a real laugh to see what Bertie could have done without them.

  • Comment number 18.

    It is at moments like this that one comes to question the rationale for bailing out the banks in autumn 2008. So I try not to think about such things.

    This suggests to me that the biggest policy failure in the western world was not to impose rigorous banking regulation, including the separation of retail banking from the casinos, as the quid pro quo when the original rescue was made necessary.

    Such failure by those who saved the world has allowed the recession to open a second front on government debt.

    The only comment that one can make at the moment is that the authorities must try harder. They need to enforce a full audit of the dodgy debts and initiate moves to some sort of debt jubilee. This can't be allowed to go on. The forced closure of all banks other than retail for a suitably significant period may also be necessary. Once was more than enough!

    How can we have a high LIBOR with a base rate of 0.5% after GBP 200 billion of QE plus whatever billions of euros the the European governments are chucking at the problem? It beggars belief!

  • Comment number 19.

    Could it be the tentative realisation by Banks that Governments can bring banks down if they want to?

    Current evasionary wisdom being that it is better to loan from the sharks in the markets than to take handouts from the Taxpayer. Given the rise, depositors should expect higher rates. That is unlikely to happen as the Banks struggle around to find enough money to ensure bonuses, profits and dividends are bigger than last year. Banking trouble has become a matter of borrowing to pay investors rather than to invest.

    Many governments are actually quite aware that investment is a necessity. Others, still under the spell of the bankers, are looking to make cuts. Just look at Greece: lots of cuts which have only increased their "crisis". Unless the Banks start delivering the investment product, the LIBOR rates will be the least of their worries.

    They might find themselves replaced by Depositors Mutual Building Societies.

  • Comment number 20.

    As I have already pointed out - the Germans put the short selling ban in place because they know 'something big is coming down the line' for European banks. This LIBOR change is just a symptom.

  • Comment number 21.

    Post 10. Ahh the liquidity preference that brings back memories of undergraduate Economics lectures.

    I tend to agree with the latter half of your post in that rather than saving people are paying down debts. Pretty much everyone I know has not reduced their mortgage payments and is overpaying their mortgage. We all know that the low interest rates cannot last so we are paying down our biggest debt we have.

    Anyone with large amounts outstanding on credit cards will have seen interest rates go up on unsecured loans and credit cards and will be looking to pay down these debts as well.

    Returning to the main post it is purely logical for LIBOR to go up we are having a repeat of 2008 but this time it is Sovereign debt and loans to other banks that are causing the concern. How many banks plunged into sovereign debt with "safe" countries like Greece and Spain all tied up in the Euro expecting to have no problems? How many people are worried that these banks themselves are over extended and that write downs in Greece and possibly other countries will tip them over the edge?

    It will all get very messy and soon.

  • Comment number 22.

    Investors, speculators, 'creditors' now...

    Whatever their name they cast a long shadow of misery...

    We are all in a system that cannot hold - take a look at this excellent graphic of the world economy

    https://news.bbc.co.uk/1/hi/magazine/8381597.stm

    the amount spent on the Iraq war, the size of a post card

    the total African debt (think of all the wretched hunger and misery) the size of a stamp!

    that has got to be insane (actually insane) just think about it! How could it be possible? This is just a glimpse of the current bigger picture, a picture that cannot last.

    Please BBC let's look forward - how about the "what if scenarios" mentioned by other contributors recently? we all need to navigate (if it is possible ) through this, or do we just wait for it to all go wrong?
    You have some excellent and thought provoking contributors to the blogs here - is there not a way that you could constructively offer a forward looking focus for all that intellect and experience

    For example a good and interesting article by Mr Preston about disquieting symptoms that are unpleasantly familiar.. soon someone will write that "It is the end of Fiat currencies" and I (and most people) will agree that will eventually happen - but what does that actually mean? what will we actually do then?

  • Comment number 23.

    Although the LIBOR is on an upward trend, it's not gone into 'rocket mode' yet - but if you look back to 2007/8 you'll see how quickly things will change.

    Just a little note to all those who were defending our 'great democracy' yesterday and argued that we are not a fascist state (as defined by Mussolini) - did you see the news this morning?

    This morning the police arrested a man who has already been 'legalised' as a protester by the High court.

    https://news.bbc.co.uk/1/hi/england/london/8702526.stm

    The police, without a search warrant decided that he 'obstructed them' in their search of his tent. What they were searching for I don't know as the place is under 24 hour surveillance and he's been there for years.

    Is this what you call democracy? Man protesting looks 'bad for the cameras' on Queen's speech day and you remove him without any legal right to do so?

    I laugh in the face of those who think this is a democracy anymore - this is a fascist state - the combination of business and Government in cahoots to enslave us.

    ...or is there a reasonable explanation for this behaviour? come on Democratic stalwarts - defend your beliefs and stand up for democracy - show me why this is different to the arrests of protesters in Iran, or Zimbabwe, or China...

  • Comment number 24.

    Any bets on the first British bank to come running to the taxpayer again ?
    Will the new Govt bail them out?
    50 gets you 1 the answer is yes.

  • Comment number 25.

    It is a mixture of the two

    The Euro will be unable to continue in it's current format for too much longer, and the uncertainty behind this must also be a factor in the level of LIBOR

  • Comment number 26.

    Pist 18. Hear Hear.

    All very well put and we need answers to the questions you pose.

  • Comment number 27.

    Some on the banks mainly is Asia managed to survive the toxic by "covering" their bad losses. Now there is the Eurozone shore up and the banks which have just about survived are now becoming exposed.

    Even just by mentioning the LIBOR rate rise, this will cause it to rise even more.

    And we all know what happens when the confidence starts to go...

  • Comment number 28.

    15. At 08:59am on 25 May 2010, plamski

    I'm glad you're back - I have some questions for you....

    In the resource Economy how do we prevent the population from growing to an unsustainable size once there is abundance of resources - or do you believe that the population would control itself as it does in the affluent developed nations?

    I can see the benefits in a moneyless system - and it's becoming clearer every day that we have effectively outgrown this current system - it's creaking under the pressure of further human devlopment. The system says 'no development for the next 10 years' - but I cannot see the human race putting up with that.

    Just like life, the human race's development will break through the monetary restrictions and succeed - it is far superior in power and position.

  • Comment number 29.

    #23 - WOTW

    This was probably arranged by that well known corporation... The Association of Chief Police Officers!

    What! The Police are being run as a corporation! Surely not, that would imply that we live in a fascist society!

    Now all the speed cameras make total sense, how else would they raise revenues in their company.

  • Comment number 30.

    23. At 09:28am on 25 May 2010, writingsonthewall wrote:
    I laugh in the face of those who think this is a democracy anymore - this is a fascist state - the combination of business and Government in cahoots to enslave us.
    --------------------------

    WOTW, the whole idea of democracy is fallacious. Read what the financial lords think about it.

    The so-called Left-Right political spectrum is our creation. In fact, it accurately reflects our careful, artificial polarization of the population on phony issues that prevents the issue of our power from arising in their minds. The Left supports civil liberties and opposes economic or entrepreneurial liberty. The Right supports economic liberty and opposes civil liberty. Of course neither can exist fully (which is our goal) without the other. We control the Right-Left conflict such that both forms of liberty are suppressed to the degree we require Our own liberty rests not on legal or moral "rights," but on our control of the government bureaucracy and courts which apply the complex, subjective regulations we dupe the public into supporting for our benefit.

    https://www.rexresearch.com/articles/ocultech.htm

  • Comment number 31.

    There is a deep insanity at the heart of policy and that is the pursuit and lauding of near zero interest rates.

    Further the pursuit of this stupidity is why central banks have almost no influence of real interest rates.

    On the other hand the market as reflected in the LIBOR and associated rates 'knows' that this interest rates policy is essentially a fraud on the price of money and the market will set higher rates and these rates will be beyond the control of central bankers.

    Money has a price - even if the small UK investor is essentially being robbed and the small but larger) borrower is getting an almost free ride - so grossly distorting the asset market with a huge danger of an imminent very damaging collapse.

    When even BP shares are yielding 8% the market is showing that money is grossly undervalued.

    The Bank of England must post-haste seek to regain some influence over the price of money (as well as extinguish the enormously dangerous asset price bubble) by raising interest rates from 0.5% (some one sixteenth of the yield of BP equities) nearer to 5 % as soon as possible.

    This is what the market is telling us! It is very little about Greece it is about us!

  • Comment number 32.

    Spot on newProtectorCromwell ..... it started at #8

    #14 jon112uk - thank god all the ‘double dip’ priming by GB & AD didn't go unnoticed... it was always coming as it’s the same recession... with a massive pre election spending spree in the middle.

    I hope the borrowing wasn’t wasted, the country is paying heavily for the votes they bought and it sounds like yours was one of them!

  • Comment number 33.

    25. At 09:35am on 25 May 2010, Kevinb

    I wonder if you and any other 'cut supporters' could comment on this graph which shows the total UK debt declining from it's peak in 2002 but which was all reversed in a couple of months in 2009 (that's when the banks went bust) - which doesn't really fit with your ideas that 'Gordon Brown spent us into this disaster'.

    It seems that either private debt was being paid down since 2002 (which is not was is being reported) - or public debt was not increasing over and above the GDP rise.

    You can of course simply respond with "you need medical help" when confronted with the facts as you did yesterday.

    It also illustrates my point that all countries are increasing their debts - not just the UK. they're all going broke

    The crisis has merely sped up the process. It also shows how talk of cutting the nations debt is just that - worthless talk - the country is insolvent because all it's hopes rest on other countries who are also broke buying what goods we do produce.

    P.s. EMKay, I saw your response yesterday and if you think the traditionally 'keen savers' of China and other far east countries are going to turn around and become 'giant consumers' - then you are as deluded as our Government. It's not going to happen - for starters, don't you think the chinese will learn from our's and the US mistakes of mass consumption to produce a false economy?
    There may be trade between us and other nations, but they don't know they're broke yet either - soon the awakening will come and then the panic that follows it.

    https://www.businessinsider.com/spanish-debt-contagion-2010-5

  • Comment number 34.

    28. At 09:43am on 25 May 2010, writingsonthewall wrote:
    I'm glad you're back - I have some questions for you....
    In the resource Economy how do we prevent the population from growing to an unsustainable size once there is abundance of resources - or do you believe that the population would control itself as it does in the affluent developed nations?
    --------------------

    Yes, I do believe that the population will self-regulate its reproduction as good quality education will be available to everyone.

    In Resource Based Economy the competition amongst people is not for monetary gain but for most efficient use of resource through innovative technology. This idea will be the cornerstone of society so therefore people will be able to realise that an accelerated growth of the population might put pressure on the resources.

    An unpredicted growth will immediately be felt in the shortage of some resources which will send the signal that the balance has been distorted.

  • Comment number 35.

    31

    I utterly disagree, returning interest rates to 5% in the near future is a crazy suggestion

    The markets do not want tis at all

    How you can see that in the current situation is a case of wishful thinking over any evidence whatsoever

    I have read you post this countless times, and am aware that you believe this should happen

    I am differentiating and saying there is no evidence whatsoever to suggest that the markets want this to happen as you claim

  • Comment number 36.

    35

    `The markets do not want this at all...'

    Well: so hard luck on the markets!

    Let's stuff them before they stuff us all over again.

    It's time the taxpayer was allowed to get their revenge in first.

    If Mr. Plod wants something to do then he can go in and tidy up the City.

  • Comment number 37.

    18. At 09:20am on 25 May 2010, stanilic wrote:

    "How can we have a high LIBOR with a base rate of 0.5% after GBP 200 billion of QE plus whatever billions of euros the the European governments are chucking at the problem? It beggars belief! "

    The answer is simple - the LIBOR reflects the level of trust between the banks themselves. If they are showing signs of distrust then we should be heading for the hills.

    Of course no journalist will suggest this because of the 'Northern Rock fear factor' - where by of you point out that "the king has no clothes" then everyone blames you for the king having no clothes - whereas you merely pointed it out.

    Isn't that right Robert? - you and your kind have been gagged by the powers that be who will stop at nothing to protect their failed system. Fearfull of being the one who lets the cat out of the bag.

    Well fortunately the writingsonnthewall has no editor to answer to - this sucker is going down folks and there's nothing anyone can do about it.

    This was epitomised by the forming of a new camp in trading circles, first there is the bull camp, then the Bear camp - now there is a new camp called the 'crash camp' and it is filling up with respectable people and not just 'the nutters'.

    Don't forget, the mad are only 'mad' until the majority join them - then the 'others' become the mad ones - such is the fickle nature of the herd.

  • Comment number 38.

    30. At 09:46am on 25 May 2010, plamski

    I shall read it at the weekend - I spent the last 2 weekends reading up on your last suggestion!

    I am intrigued by the Venus project and the Zeigeist movement. Anyone who doesn't want that for a future is either barbaric or plain selfish to the point of the extinction of their own race.

    These people are 'sub-human' and can be thrown out with the bath water - sadly it means a lot of 'powerful individuals' need to be cut rather than our services.

  • Comment number 39.

    It's pretty simple. Would you lend money to someone already up to their neck in debt and having to juggle money to make existing repayments, and with no guaranteed income?

    I wouldn't without taking collateral and/or charging a high fee/interest rate to afford insurance on the deal - and even the insurers are having the heebie-jeebies and charging higher rates these days.

    In more complicated terms the LIBOR rate will rise as more needy borrowers return to the fray, borrowing short term to fund long-term stuff. Crazy and always very risky because above, hangs that cloud of insolvency.

    There were days (not long ago but alas, forgotten) when the Money Market was used by banks to balance their books each day.

  • Comment number 40.

    Creating new money by quantative easing or other wheezes amounts to a devaluation of the currency, so interest rates including LIBOR must rise to compensate. In trying to keep interest rates low whilst actively taking steps that will make them rise, European governments including our own have been pursuing policies that are unsustainable.

  • Comment number 41.

    I must say it was good to hear some reassurence from 'Sir Stuart Rose' to follow in the lines of Mr King at Sainsbury's a few weeks ago as they triumphantly assure us that
    "the worst of the recession is over"

    Even in their 'head in the clouds world' they are cautious - notice how there was not a statement of 'the recession is over' - infact an indication that we're still right in it.

    With the stock market bubble bursting today then I wonder what the new line will be? Double dip, unexpected downturn, unforseen demand shortfall - all excuses for the fact that so many 'experts' have told you what they wish to happen, and not what is actually happening.

    ...and didn't Sir Stuart sign the letter of decleration to back the Tories?

    Why would we listen to the 'expertise' of someone who clearly doesn't understand Economics and who's only 'success' is the explitation of his workforce and consumer in order to produce surplus profit for his own gain?

    It seems like anyone can get on TV these days - as long as they are prepared to toe the line - I wonder what the chances of getting writingsonthewall on newsnight to 'interrogate' those who keep making these baseless and untrue statements with such authority?

    Surely the thought of his interviewee rushing out in tears as the realisation of the truth is explained to him, is too much for the BBC standards.

  • Comment number 42.

    ....oh and remember Roberts Blog only a month ago?

    https://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/04/lloyds_black_is_the_colour_of.html

    He said...

    "There is also growing evidence that taxpayers will emerge with a profit, perhaps a significant one, on the emergency investment the state pumped into Lloyds and Royal Bank of Scotland, to prevent them collapsing.
    At their current share prices, taxpayers are a few billion pounds up on the £66bn we paid in aggregate for our stakes in those two banks (on this morning's share price, Lloyds remains a smidgeon below the 73.6p we paid for our 41% stake, and RBS shares are well clear of taxpayers' 50.2p average purchase price)."

    Where are they today?

    RBS 42.46 -2.91 -6.41%
    LLOY 52.14 -3.33 -6.00%

    I find it unusual that Robert was so quick to jump on this originally - a man of normally conservative and cautious reporting.

    Were you under any pressure at the time? - we know that you are well aware of the fickle nature of markets - why did you think that the first foray into positive territory was good enough for that blog?

    I find it very strange...

  • Comment number 43.

    I rather agree with John_from_Hendon. This is a market related bypass of failing political measures. One notes that rates are rising as inflation is rising almost inline with self-correcting market theory. If central banks refuse to raise rates because of their masters’ political interference and meddling with economies, then it seems the markets will do so anyway. Good thing too as something has to set a sensible cap on governments’ intentions to borrow infinitely and then inflate to fiddle repayments. They must think markets are both blind and daft...

  • Comment number 44.

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

  • Comment number 45.

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

  • Comment number 46.

    Thank goodness BBC News 24 has an estate agent on almost daily now to reassure us that all is well and that UK house prices will rise daily until the planet melts into the Sun some 15 billions years from now!

    There surely can't be anything wrong with the economy when Britain has some of the highest price housing in the World - can there?

    Big crisis coming! Big crash! Should be before the year is out.

  • Comment number 47.

    36. At 10:28am on 25 May 2010, stanilic wrote:
    35

    `The markets do not want this at all...'

    Well: so hard luck on the markets!

    Let's stuff them before they stuff us all over again.

    It's time the taxpayer was allowed to get their revenge in first.

    If Mr. Plod wants something to do then he can go in and tidy up the City.


    You are misunderstanding me

    I am disagreeing with JFH, and HIS analysis that the markets want interest rates to rise to 5%

    Don't shoot the messenger

  • Comment number 48.

    Lots of interesting comments on this one so far.

    The rise in LIBOR does not seem to have reached front page news with any of the national TV stations yet.

    I'm just worried about my mortgage, never mind the international consequences for the so called Eurozone or the USA.

    Last time this happened we were about to come out of a capped rate and decided to variable because of the really high cost and rates on fixes/caps. Recently the cost of these has come down and we are considering whether to get back in and do a fix whilst the rates are relatively low. Looks we will need to make a decision fairly quickly.

    Unfortunately like everyone else who is of "working age" we are trying to 2nd guess how bad the tax rises are going to be next month, whether our predicted/self forecasted retirement age of 75+ is just going to be going to go up again, or if we might be able to afford a holiday next year etc

    If mortgage rates rise on the back of this LIBOR rise, it might make life even more difficult for many of us.

    I am just worried about the household budget. Making sure we have enough money to eat, put some petrol in the car, keep a roof over heads, pay the mortgage etc etc. May be I need to get a 2nd job and become a completely absent parent?? I must apologise to all greeks and other countries/areas with problems but I feel Britain should get on with dealing with its own problems first.

    No doubt I will be harangued for this comment - oh well

  • Comment number 49.

    PLEASE - more caution!

    Financial organisations are bought and sold like confetti - so you may bank with a Muslim or Indian bank today, but that doesn't mean next month, or next year it won't be part of something else, if it exists at all.

    If only I had a penny for each time an insurance policy of mine had changed owners as this or that insurance conmpany was bought up by some other.

    But what is rather sinister about this is that the whole financial system of the world seems to exist to perpetuate that one and only financial system. There seem to be almost no sustainable alternatives which don't struggle to survive despite the existing system because it isn't geared to supporting any alternative.

    Oh and LIBOR rate increases will have an effect upon Co-operatives and Mutuals too. As will the increasingly debt-burdened governments' actions to cope (i.e. one austerity budget after the next - Ireland, Portugal, Greece, Spain ....)

    And it's all happened because a reasonably small number of people were allowed to be greedy ... very greedy. And weren't 'regulated' to prevent them being exceesively greedy.

    Given the existing system - and a lack of any alternative - these are all just natural consequences and sequels. Shame there isn't any financial "fire escape" system other than bail out by governments.

    Maybe we should align banks and finance bodies with religious loyalties. Does the Catholic Building Society still exist, or has that been taken over by someone too?

    (Damn - it got merged into the Chelsea Building Society in 2008).

    Is there a Luke-warm-and-not-too-devout-Christian(ish) Building Society, perhaps?

  • Comment number 50.

    How are the markets doing these days?

    Well the Nikkei broke below the 10,000 barrier
    The FTSE is below 500 currently
    If the Dow falls 67 points then it will have broken through the 10,000 barrier.

    When did this last happen? - well it was coincidently around the last time the LIBOR was rising.

    Now where did I put my Gold, it's sat in my flat for a few weeks and it's increased more in monetary value than my house - even though the house is worth much more.

    I'll be needing that for when the currencies collapse.

    We even had "good news" today as the Government fiddles the Q1 figures upwards - but it's been brushed aside by the reality of the situation - the lies no longer work folks.

    What we need is (yet) another bailout - watch out folks, one's coming up very soon....

  • Comment number 51.

    ...and so the Euro toxicity goes on. At least we know why the LibDems were willing to compromise on their policy of entering the Euro - it is obvious that it is in serious difficulty (I hesitate to say doomed as yet, but if something isn't done...).
    Just as banks can be allowed to fail, I can't see why a nation's membership of the Euro club can't be allowed to fail, except for franco/teutonic pride. For many years Greece, Portugal and Spain have been running institutionalised fiscal policies that were counter to the aims, objectives and, indeed, the rules of membership of the Euro. After too many years of profligacy, the gangrene is setting in.
    IMHO they need to be pruned out of the Euro and given back their own currencies which can then float and allow them the extra tools (control over credit, currency rates, local interest rates) which they don't have at the moment. At the moment, it seems to me that the only weapons they have are government spending and unemployment levels, since all else is governed at a higher level than any single nation's sovereignty.
    Take the toxic countries out of the Euro, and the rest becomes healthier, lest the entire edifice crumbles.

  • Comment number 52.

    This move in LIBOR is a concerning trend Robert although I do not pretend to fully understand exactly what is causing it I do understand that it is concerning. By your several alternative explanations it seems that you are in the same position.
    Quite a few markets seems to be moving in odd directions for example I was reading on the notayesmanseconomics web blog earlier about the somewhat surprising fall in UK government bond yields that has taken place just as many were forecasting a rise in them.
    "The time horizon of gilt market investors is in my view very short currently and they are not thinking of the long-term consequences of their holdings. Buying UK ten-year gilts at 3.5% yield at this time would lead any computer programme you had written to analyse the gilt market to blow up! This is because these yields would not compute with the level of issuance required and our level of inflation both present and expected."

    For those interested https://notayesmanseconomics.wordpress.com

  • Comment number 53.

    Fact: LIBOR rise always equates to fear of one kind or another in the banking sector.

    With half of euro land banks about to see the Euro futher nose dive after months of them watching its steady decline, it comes as no surprise to see LIBOR's corrisponding steady climb. Governments debt has have continued to climb in equal measure. Is there a link? Lets see a couple of more euro bank bail outs and you will all have your answers.

  • Comment number 54.

    You can moderate out the writingsonthewall but you cannot moderate out the markets.

    Today they speak volumes about the fact that all lies eventually get found out.

    Everyone must face reality one day.

  • Comment number 55.

    48. At 10:57am on 25 May 2010, goforit99

    I'm afraid current Government statistics have already proven - you don't exist!

    People are not feeling the pinch, not concerned about uncertainty and not worrying about the possibility of bankruptcy.

    When Calamity Cameron talked about 'the great ignored' it was you he was talking about - and now he's gone back to ignoring you.

    Take my advice, don't concern yourself with monetary salvation, just make sure you can provide your own food and clean(ish) water.

    I have found a great device which is a 'clean straw' - a cheap survival device which means you can drink safely from any water source.

    With regards to your mortgage, well you need to think how I do. "There are a lot more people going to to belly up before I do - I shall wait and see what happens to them before I make my decision on what to do next"

    In the US - the people are stopping the repossession of their property by the banks through defiance and solidarity.

  • Comment number 56.

    WOTW
    Dow futures show - 240 at the mo

  • Comment number 57.

    52. At 11:14am on 25 May 2010, Francesca Jones wrote:

    "This move in LIBOR is a concerning trend Robert although I do not pretend to fully understand exactly what is causing it I do understand that it is concerning."

    The LIBOR is a reflection of TRUST between BANKS - I can say no more as I will be moderated.....but I think you can work the rest out for yourself.

  • Comment number 58.

    49

    Sutara wrote

    Oh and LIBOR rate increases will have an effect upon Co-operatives and Mutuals too. As will the increasingly debt-burdened governments' actions to cope (i.e. one austerity budget after the next - Ireland, Portugal, Greece, Spain ....)

    Not necessarily the case

    It depends on where the money for lending comes from

    If it is from savers deposits, the original building society concept, then LIBOR rates are irrelevant, other than as a comparative pricing tool

  • Comment number 59.

    #49. At 11:02am Sutara wrote:

    "If only I had a penny for each time an insurance policy of mine had changed owners as this or that insurance conmpany was bought up by some other..."

    You'd have, ooh, at least 6p by now.

  • Comment number 60.

    The Korean troubles are also a big factor

  • Comment number 61.

    56. At 11:33am on 25 May 2010, dudeHangingon wrote:

    "WOTW
    Dow futures show - 240 at the mo"

    I can see the press conference now - George standing with his head in his hands asking himself "I did what I thought the markets wanted, I offered them the sacrificial cuts they wanted - why have they done this to me?"

    Don't take it personally George - there's nothing personal in the money business.
    Our fate is sealed - all we need to do is wait around for the big bang and then everyone will realise it

    I hope your brought your helmet.

  • Comment number 62.

    58. At 11:37am on 25 May 2010, Kevinb wrote:

    "If it is from savers deposits, the original building society concept, then LIBOR rates are irrelevant, other than as a comparative pricing tool"

    Oh dear, a little behind the curve on that one - that was last century.

    Even the Nationwide has begun dabbling in money markets in an effort to 'boost profits' - just like all the others.

    The model you describe has been dead for some time - I mean who is saving anyway? Who is keeping their cash in the bank when the rates are below 1%? (without catches).

    It's not like we were heavy savers before the crisis in 2008 - what are the chances the UK has changed it's ways in such a short space of time? - have Greece changed their ways? - nope.

    This is why it's all going Pete Tong - it's just some people cannot afford to believe it whilst the rest of us have accepted reality and therefore won't be too concerned when we're proven right.

  • Comment number 63.

    32. At 09:55am on 25 May 2010, thinkbe4 wrote:
    Spot on newProtectorCromwell ..... it started at #8

    #14 jon112uk - thank god all the ‘double dip’ priming by GB & AD didn't go unnoticed... it was always coming as it’s the same recession... with a massive pre election spending spree in the middle.
    I hope the borrowing wasn’t wasted, the country is paying heavily for the votes they bought and it sounds like yours was one of them!
    =========================

    Everyone assumes I'm a labourite because I criticise lord snooty and bertie wooster.

    I didn't support the last lot and I don't think these are any better.

    My vote? If they put 'none of the above' on the ballot paper then I'll turn out to put a cross beside it.

  • Comment number 64.

    Sinister? No ... just market economics

    UK interest rates and probably Euroland interest rates are probably too low and the banks are consolidating and hanging on to their own cash.

    The market has no emotions and the general Grecian uncertainty is affecting anything. However, ironically, it may not be Greece that fails here - could be a smaller Euroland bank that is over-exposed in e.g. Easterm Europe and Greece, Spain and elesewhere that has borrowed heavily in the wrong currency that has or is about to lose a good deal of exchange value. We have seen what a bank collapse can do - Northern Rock was not a large bank by international standards - but just look at the damage it can do

    I think this is a direct extension of what has been worrying the Germans recently with commenst regarding hedge funds - pehaps a German bank that has unsustainable finances that are perilously close to collapse if a certain % swing in a particular currency occurs. This means that the ECB probably know and have already identified this bank and/or other banks but events may be out of their control ... in terms of reklative currency values and contortions.

    The sooner this bank and/or similar banks collapses so much the better ... I am sorry to say as the only thing that can save this bank or these banks is a massive global economic recovery - which Alas ... is not going to happen ... any time soon.

    There are a few dodgy situations that need to be resolved to allow the markets to recover - my view is that it is a bank or more than one bank that may have leant to e.g. Greece ... Sunmed... but in what currency?

    Ironically, it may not be Greece that is the problem but a number of badly exposed banks with money in one particular sector and vested in one potentially volatile currency.

    My guess ... for what it is worth ... a German bank - borrowed in Swiss francs and dollars and possibly another couple of currencies.

    The UK interest rates are slightly too low also - these need to increase so as to protect savers and even some of the UK banks would prefer higher interest rates... hence also a Libor increase?

    Will be interesting to see what pans out - all those brokers pulling their hair out - but it is the ordinary citizens with mortgages etc who will feel most pain (like me)!

    This is no time for negative trading by currency speculators who can be the catalyst to turn this crisis into a disaster.

  • Comment number 65.

    Is this all not somehow linked to the Europe area's hubris and arrogance in suggesting back in 2008 that the US/UK financial structures and manipulation of credit markets was flawed and that Europe's systems of checks and balances were safer. The thin veneer offered to the world by France and Germany was bound to come crashing down once the effect of claiming that one has a safer investment environment, that is, that investor scrutiny of the system reveals the true nature of the chaos in the financial industry. When will Europeans learn not to leer down their noses at US success.

  • Comment number 66.

    At 11:02am on 25 May 2010, Sutara wrote:

    "Maybe we should align banks and finance bodies with religious loyalties. Does the Catholic Building Society still exist, or has that been taken over by someone too?

    (Damn - it got merged into the Chelsea Building Society in 2008).

    Is there a Luke-warm-and-not-too-devout-Christian(ish) Building Society, perhaps?"

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


    You could go with CajaSur in Spain - managed by the Catholic Church.

    Whoops... it went bust over the weekend and has now been taken over by the government.

    The idea that 'The Church' would be any more competent, less greedy or more moral in financial management gets its comeuppance.

  • Comment number 67.

    55. At 11:32am on 25 May 2010, writingsonthewall wrote:
    I have found a great device which is a 'clean straw' - a cheap survival device which means you can drink safely from any water source.
    ------------------

    WOTW, tell us about the 'clean straw' devise. I'm curious.

    Btw, forget about gold. By buying gold you playing into the system's fallacy. When currencies collapse, you can't eat gold, you know. And besides, how will you buy a pair of watermelons with one big gold bar?

    I'm saving up for my escape - 100% self-sustained house - electricity from solar and wind, heating from geothermal and water from rain. Food grown on site too. If I need money, I could sell electricity to the grid at a very good price (above market price).

    We can ONLY beat the system by not participating!

  • Comment number 68.

    Great article. Once again you have provided a clear perspective on a complex issue. More importantly you have provided a range of interpretations which is consistent with the view that Economics often appears an art rather than a science. I particularly appreciate your approach of providing different scenarios which encorage your readers to draw their own conclusion on a complex issue. If this approach encourages people to improve their financial literacy then it is to be applauded.
    Whether debt is sovereign, corporate or personal, it still represents a liability on someones balance sheet (Government, Corporate or individual). Movements in Libor will have far reaching affects on the ability to meet those liabilities. Perhaps our political masters should be more attentive of the inexorable upward movement in this fundamental index.

  • Comment number 69.

    "The mystery has been how its banks avoided crippling losses on this exposure - although that increasingly looks like pain postponed rather than avoided."

    The "mystery" is solved once you realise Spain's banks and cajas agreed together in 2008 not to recognise how under water their property portfolios really were; the hope was that recovery in the rest of Europe would drag Spain out of its slump, without Spain, or the Spaniards, having to take any of the tough medicine now being forced on the country by the EU and the IMF.


    As a protectorate of the EU and IMF, Spain is much better off for now, and will one day emerge a stronger and better economy.

  • Comment number 70.

    65

    That is a little harsh

    The Germans sneer down their noses at everyone, be fair

  • Comment number 71.

    Talk about the Emperor having no cloths. The whole system is rotten to the core and has to be junked. Delaying action is just allowing the rich to get richer and the poor poorer, which I suppose is the intention really.

    Wait until the penny really drops and we realise that property in this country is still overvalued by a factor of at least 3. I'm so looking forward to seeing the front page of the Daily Mail the day after that particular morsel of manure hits the fan.

  • Comment number 72.


    I have read all the comments, the worried, the getting desperate, the survivalist, where are the hopeful ones?

    They are all starting to point to one thing and one thing only:

    Personal, National and International organised debt default sometimes known as a debt jubilee.

    There is no choice left, it's out of control, interest on multiple trillions of anything will be not be payable by anyone.

    What price the next bailouts in 5-10 years time? Quadrillions?

    We need to start again in a way that allows people, companies, countries and banks to survive.

    As a world, we either choose the moment or we just let it happen when it will.

    I would like to choose choice.

  • Comment number 73.

    There's nothing sinister about banks; they are blatently reaping the rewards of the tax payer bail out whilst at the same time giving peanuts in interest to savers, making first time buyers in the housing market stump up huge deposits, and are happily keeping those of us struggling with our finances in debt. They cheerfully send out letters to say they are charging us £25 a time for every default on a d/d payment and £5 a day for every day over our limits. Obviously they seem to be totally unaware that many of us have had pay cuts, or no pay rises and are faced with rising food and fuel prices too, even though we write/phone or tell them. They then helpfully tell us how to avoid charges ... "don't go over drawn" .. " please ensure enough funds in your account before bills are presented" ... "use your savings to pay off overdrafts". Hmmm now tell me are they really living in the same world as us? Let's have a huge crash in the banking system, then it can be changed and re-regulated again without the bankers moaning ... because most will be out of a job like many of us ordinary folks!

  • Comment number 74.

    #35. Kevinb wrote:

    "I utterly disagree, returning interest rates to 5% in the near future is a crazy suggestion

    The markets do not want this at all"

    Sorry, but maybe you haven't noticed LIBOR rate are going up. The market is forcing rates up, if the bank does not follow it will commit a / (yet another) heinous economic crime that will destroy sterling.

    It is you I am afraid who is living in La-La Land (as usual).

    You cannot continue to deny the facts, sooner or later(in your case) the blindly obvious will get through to even you - then I predict both a nervous and financial breakdown!

  • Comment number 75.

    67. At 12:37pm on 25 May 2010, plamski wrote:

    ...
    I'm saving up for my escape - 100% self-sustained house - electricity from solar and wind, heating from geothermal and water from rain. Food grown on site too. If I need money, I could sell electricity to the grid at a very good price (above market price).

    We can ONLY beat the system by not participating!

    ..................................

    I have already done all of that but believe me it is still worrying times. The majority of my savings are in Canada, I stopped work when my taxes started being spent on illegal wars (note to WOTW, practice what you preach) but can not avoid council tax (too much savings), VAT on what I do buy and pesky rabbits and deer eating my crops!. Thinking of selling up soon and changing country but finding it difficult to select one I like that looks relatively safe. Just back from Canada which looks OK at the moment but like us a few years back property seems way out of touch with earnings. Problems coming I fear.

  • Comment number 76.

    Correct me if I'm wrong:

    If you are a large global corporation then you normally issue corporate bonds (commercial paper) to raise working capital.

    This has been going on for years, so the bonds that were issued 5, 10, 15 years ago are continuously coming into maturity.

    As the bonds come into maturity, these corporations have to replace these bonds just to stay still (as opposed to move forward).

    The currency that these bonds are issued in is entirely dependent on market terms and conditions. It would have been easy to offer Euro-denominated corporate bonds a year ago, but today with the Euro in constant question-mark territory, bonds will be cheaper to service (according to the yield they must offer) if issued in US Dollars or Yen.

    Corporations that issue their debt have to make calculated decisions on which is the best currency to issue in, because repayment of that debt in 5,10,15 years time will have to be in the currency that they issued it in. For example, US Dollar bonds will have to be repaid in US dollars in 10 years when US Dollars may be cheaper or more expensive relative to the currency in which the corporation makes its operational earnings.

    This is one cause of US Dollar gluts and shortages that is slightly distinct from US Dollar direct demand for Safety. "Investors" who buy commercial paper in US dollars also have to calculate that these US dollar exchange rates will still be worth as much to them when their paper (bonds) mature.

    This market is subject to real commercial forces and speculation of its own kind.

    This is a flaw in having no Global Currency, but the US dollar instead. Recently the Yen and then the Euro have been alternatives to the US dollar as a Global Currency, whereas Sterling fell with the British Empire.

    Why isn't there a Global Currency denominated by the IMF or the World Bank?

    Because it is too profitable to some types of people to have the US Dollar as the preferreg Global Reserve Currency?

  • Comment number 77.

    So UKIP have been proven to be 100% right about the Euro and closer EU integration. And I don't know why people keep blaming banks for all of this when it is sovereign nations who have been borrowing far too heavily. They are the ones supposedly in control of banking regulations but they are the worst offenders of all when it comes to irresponsible borrowing.

    This should be clear enough by now for all to see who are willing to open their eyes.

  • Comment number 78.

    So let me get this right; LIBOR hits the heady heights of a rate not seen since (shock, horror) last summer, (yes doubling, but from nearly nothing to a rate that is still almost an historic low) and suddenly this is the precursor to the end of the world. Yet another Peston scare story, he really would be more at home writing for the tabloids than playing at being a serious economic commentator

    Truth is you can paint a doom hypothesis from almost any piece of economic data, and whilst Mr P gets more airtime from his sensationalist nonsense, the incessant gloom peddling by the BBC itself has a dragging effect on the economy. But then I guess reporting from the lines outside the Rock was just so exciting they can't help hoping for another chance...

  • Comment number 79.

    "WOTW, tell us about the 'clean straw' devise. I'm curious."
    Available from amazon and all other stockists, whilst stocks last. whilst your there may as well buy the Marines survival guide. Gets a good right up. Gold is handy, if your looking for something heavy to defend yourself. And it traditional has always been desired as something to trade for 1000s of years. No sense not having a back up plan.

  • Comment number 80.

    62. Not so- try looking at Credit Unions the one i'm in will pay 3% on standard account and 4% on a 90 notice account.No shareholders and a volunteer board, in business for 23 years and £60 million in assets with over 20,000 members.I'm no Tory but it shows what 'small' can do.

  • Comment number 81.

    Latest news; BetFred William Hills and Paddypower are no longer taking bets on when the Euro goes bust;

    Financial analysis of the highest order.Enough said...

  • Comment number 82.

    47 Kevinb

    Perhaps the messenger should get another job as he wasn't very clear.

    My view is that without sound money we won't get a sound economy. Yes, an increase in interest rates to reflect inflation is the only way to sound money.

    As it stands at the moment the saver is being expected to subsidise the markets. This is an intolerable imposition which is preventing any development of growth beyond the anaemic consequence of printed cash lacking any value. Hence my presumption that the so-called markets are nothing more than a racket.

    For my part I am tired of all this failure and all the excuses for the continued failure. We continue to be told that if we do anything to try and resolve our situation then we endanger the recovery. What recovery?

  • Comment number 83.

    67. At 12:37pm on 25 May 2010, plamski wrote:

    WOTW, tell us about the 'clean straw' devise. I'm curious.

    I'm saving up for my escape - 100% self-sustained house - electricity from solar and wind, heating from geothermal and water from rain. Food grown on site too. If I need money, I could sell electricity to the grid at a very good price (above market price).

    _____________________________________________________________

    Plamski. You will also need some heavy calibre machine guns to go with your idyllic property ?
    I too am interested in the 'Straw water purifier' though.

  • Comment number 84.

    Is the moderator on his lunch break. I thought the BBC had got rid of it's canteens to save money? I can't afford the licence fee for my old black and white (TV) before the PC brigade have me for abusing a minority.

  • Comment number 85.

    72 and 73
    Open your eyes Credit Unions are an alternative. Not for profit and volunteer led, the larger ones offer a full range of products, stop moaning about the rip off banks - do something different 'vote' with your money take it away from the banks!!! who needs them.

  • Comment number 86.

    Its obviously just me but I see almost everything in the world economy at present acting in the correct way.

    There are corrections going on that seem BIG compared to how a "normal" system would work but as the imbalances that were created during the recent "south sea bubble" were extremely excessive and leveraged instruments exacerbated the effects of those imbalances then these corrections are having to be BIG.

    Its like driving too fast and suddenly realising you are heading for a sharp bend or obstacle, you may have to screech on the brakes (Credit crunch) which causes you to swerve from side to side(market volatility) but as you regain control through a series of large corrections and steering INTO the skid (Q.E) you eventual drop your speed (deflation) and return to proceeding at a normal rate in a straight line.

    The vehicle still has the capacity to be driven badly (speculators) but there are laws to be upheld (regulation) and self interest (survival and fuel economy). Once the juveniles are taken out of the equation (Wall Street etc) the rest of us make our way at reasonable speeds for the road conditions.

    The unroadworthy (sub-prime) are gradually forced off the road, m.o.t's are enforced (regulation) and the roads become as safe as normal though as ever always liable to accidents caused by intoxication, speeding and carelessness(Wall street etc).

    EVERYONE has known about Greece, Spain, Ireland, Iceland and the quiet elephant Austria but just like myself when I've had a spendthrift month that has maxed out my cards and O/D then as long as I don't get to the point where my credit is stopped then I simply have a personal age of austerity for a few months until the normal balances of a bit of credit, a reasonable cash flow have taken care of it.

    By keeping the PIIG probs on the back burner until now they have prevented a Euro banking collapse and allowed a degree of recapitalisation. Some are going to go, Spain and Greece may well default in the same way some people have had homes repossessed, but their combined GNP is such a small part of the European, never mind world economy it will just be another nasty skid to correct.

    Over-reaction and panic are our only enemy's as long as Wall street and its cohorts don't slop oil on the road.

    If you look at the size of the world economy and look at the sums that a switch from 0.1% contraction to 0.1% growth are, then you soon see that a $100 billion here or a Trillion there are just unpleasantries not life threatening planet killers.

    Chill.

  • Comment number 87.

    I'm with goforit99. Much as I admire the way Robert P & contributors to this board can wax lyrical about the ins and outs of solvency, banking practice and the eurozone fiscal position... and much as I appreciate that there are more plot twists here than a series of 'Lost'.... I'm not grasping the potential impact of a higher LIBOR on ordinary-person-in-the-street a.k.a. 'me'.

    In short, do I flog the maisonette and join the squatters on Westminster Green with a placard or what?




  • Comment number 88.

    75. At 1:16pm on 25 May 2010, Uphios wrote:

    I have already done all of that but believe me it is still worrying times. The majority of my savings are in Canada, I stopped work when my taxes started being spent on illegal wars (note to WOTW, practice what you preach) but can not avoid council tax (too much savings), VAT on what I do buy and pesky rabbits and deer eating my crops!. Thinking of selling up soon and changing country but finding it difficult to select one I like that looks relatively safe. Just back from Canada which looks OK at the moment but like us a few years back property seems way out of touch with earnings. Problems coming I fear.
    -----------------

    Really? Well done! Would you share some insights. How much did it cost in total? Was a self-built or you converted another house and best suppliers for solar, wind and geothermal?

    Thanks in advance! I'm sure it could be helpful to a lot of worried souls here!

    I'd say go Eastern Europe, regulations are still not that tight and you cane escape the pesky council taxman but not the rabbits, I'm afraid.

    Canada is not safe - It's too close to the big ticking bomb - USA.

  • Comment number 89.

    79. At 1:23pm on 25 May 2010, Averagejoe wrote:

    "WOTW, tell us about the 'clean straw' devise. I'm curious."
    Available from amazon and all other stockists, whilst stocks last.
    --------------

    Thank a lot!

  • Comment number 90.

    UK public are saving?
    Yes but mainly by paying down debt.
    That means less "disposable" income for spending hence the prolonged/postponed "recovery".

  • Comment number 91.

    My biggest problem today; I have a 20 mile cycle home and a very strong head-wing has suddenly started blowing.

  • Comment number 92.

    first the banks weaken states by engineering a crisis that means if there not bailed out they will fail.

    The bailouts threaten to destabilise those governments and the financial markets keep pushing them towards the brink.

    meanwhile the top bankers(our true lords and masters) gain more control over more money and make sure no government challenges them over this control.

    We now have a situation where major countrys owe so much to these bankers and financial markets that they are not making the policy choices but are forced to accept what the market tells them.

    Banks are not elected and predominately owned by a very small group of people whose family's have been working towards this for a very long time.

    America declared independence in part to rid itself of these influences only to become completely at the whim of said influences.

    Slavery and capitalism have one key difference and one major similarity.
    A slave(the work base) is housed and feed by the owner
    Under capitalism workers must feed and house themselves.
    That's the big difference the major similarity is who is in charge, predominately the same groups and familys.
    who was it that brought about these changes? those at the top as slaves didn't have the power to free themselves.

    so the libor rise is just part of a much larger and sinister plot.

    or if you think this is paranoid ramblings bear in mind this is what happens and you by labelling me paranoid just refuse to accept the possibility this was planned and not a series of coincidences

  • Comment number 93.

    Looks to me that the markets are trying to panic us into selling our shares so they can buy them on the cheap.

    Economic conditions are difficult but there is no need for this level of widespread panic.

    Keep calm and carry on.....

  • Comment number 94.

    Its a times like this that I wish Brown and Darling's experienced heads were in charge. Will our coalition of the inexperienced be paralysed, or will they judge wisely and act in a timely and decisive manner? Is this fear a factor for the markets?

  • Comment number 95.

    Robert: Everyone, but everyone, know how Spanish banks are avoiding crippling losses on exposure to the bloated property market; properties are valued on books at their pre-crash / pre-crisis values!! They have to be, otherwise a good many of the CAJAS DE AHORROS would immediately go under. The objective of the Spanish government is to give the CdAs time to consolidate - there're too many too small CdAs in Spain. The question is: can they consolidate fast enough? If they fail to do that, then it's a one way ticket through the event horizon of a black hole.

  • Comment number 96.

    13. At 08:40am on 25 May 2010, shireblogger wrote:
    An interesting point in having an inquiry on the crisis and trying to sort out the wheat from the chaff. There is so much short "termism" and entrenched view points that a public enquiry might give a better and more open understanding of all these machinations, red herrings and blind alleys that people are being led up.

  • Comment number 97.

    Not sure if this would directly effect LIBOR but Germany is now proposing to extend naked short-selling ban to ALL stocks:

    Germany's Finance Ministry Tuesday proposed extending a ban on some "naked" short selling to cover all stocks and euro currency derivatives not intended for hedging.

    The proposals were outlined by the ministry in a draft bill, seen by Dow Jones Newswires, that will be discussed by the German cabinet next week. They also include a new "transparency system" for short selling.

    The proposal does not explicitly state which shares would fall under its proposed ban, saying only that the "naked short selling of stocks ... should be forbidden."

  • Comment number 98.

    Maybe the bank LIBOR Rate is like the capitalist barometer/weather.
    If it goes up to far/spreads, maybe it is a bit like asking...

    ''Have you saved for a rainy day ?''.

    Having stated many months ago a concern for inflation to hit 5% in 2011 and a BOE's reaction to this, again I have to question the BOE's response to CPI at about 3.5% and RPI above 5%.

    Mr King is adamant that ''the slack in the economy'' will reign back inflation back down to the 2% mark.But...

    a) doesn't this necessarily imply negative or poor growth/GDP and,...
    b) I've never been too sure of this ''slack''. There's unemployment yes, but the percentage of employed is a less than in the 1980's(b/c of higher populations).Secondly FIXED COSTS born by many, many businesses are stubbornly high and so companies cannot reduce revenues/prices by much.
    Indeed c), I have detected a ''psychologism'' among business persons as less philanthropic and more misanthropic.

    That is, today, a propensity for entrepreneurs to get the 'big house', the 'big car(s)' and 'expensive holidays' first, before the 'T-shirt'.
    Again, resulting in a reluctance or rather 'intransigence' in bringing down prices.

    [who knows Best ???. We will soon see.]

  • Comment number 99.

    41. At 10:41am on 25 May 2010, writingsonthewall wrote (re Sir Stuart Rose):

    Why would we listen to the 'expertise' of someone who clearly doesn't understand Economics and who's only 'success' is the explitation of his workforce and consumer in order to produce surplus profit for his own gain?


    It's called business. And in the absence of any other measure, a successful business is one that makes a profit.

  • Comment number 100.

    Oh dear I see the moderators gone AWOL. Its taking over an hour to have comments moderated, do you not have any targeted or measurable service standards? Or has it been out-sourced to the far east like the rest of our service industries. You wouldn't get this under the ConDems, or have they cut your budget already? In my day the BBC was the envy of the broadcasting world, just like our banks...bring back the old gunship politics.

 

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