GOVERNMENT MUST DO NOW
TO AVOID PROTECTIONISM AND XENOPHOBIA ETC,
WHAT IS REQUIRED IS A DOSE OF INTERNATIONALLY COORDINATED GLOBAL
BASED NOT ON PAST POLITICAL THEORY BUT ON SUSTAINABLE PLANETARY
IF NECESSARY, BANKS SHOULD BE NATIONALISED
Latest FEBRUARY 19th 2011
NOVEMBER 10th 2008
other measures, UK VAT should be reduced to 5% maximum on all goods and
services that, if their existing purchase is expanded or new examples
of such goods and services introduced, contribute to meeting
reduction set by the UK and EU or better. In some cases it
reduced to 1%.
EU agreement should be sought but, if not given, these measures should
be taken anyway for a minimum and conditional time to be settled, with
extension as a possibility.
Action to plan these tax changes should start.
thing the country needs is an unnecessary general election any time
There is no simple economic philosophy that can be used as a formulaic
guide to the handling of globalisation. The works of Ayn Rand and Karl
Marx both contain lessons to be understood but there is no need to
learn them again in practice or to deride the arguments within them.
The same goes for many other collections of principles and rules that
are quasi-fundamental and in reality mutually dependent.
We do need however to discuss internationally, in the existing fora,
the way to avoid chaos theory getting any greater foothold in the
global scene and deciding local outcomes. The PM is right in his
approach and, on the whole, Will Hutton makes more sense than Irwin
Stelzer just now, most of the time....
NOVEMBER 13th 2008
It is time to
think globally. At this summit they must bite the bullet and face the
fact that this is a crisis bigger than the financial crises that in the
past have brought about wars on a massive scale. It is a great
opportunity. It is time to realise this is a war scenario and move to a
partial command economy. This summit must be used to talk about
this. Bush will say the crisis is not the fault of free market
capitalism. As usual he is wrong. He will say it has to be
reformed, not scrapped. Unusually, he is right, but it will need to be
shut down and restarted - a reboot if you like. Because we
can't stop it, temporary nationalisation and a temporary virtual
finance system will have to take over in many instances. Bush's claim
that growth is the answer and free markets and free people are the only
way to achieve it begs the question: define freedom. Absolute freedom
is anarchy. Uncoordinated freedom is chaos. Competition without a
collective intelligent aim was crippling the planet and, thankfully,
For the US, the
imminent collapse of the automobile industry can be dealt with only by
effectively nationalising it, forcing it to produce environmentally
appropriate vehicles and passing laws to economically favour and to
come extent force the purchase of these vehicles as opposed to those
not meeting the criteria.
The absurd claim that 'governments can't run companies' can be
ignored. The managers of GM have already proved they can't do the job,
though any of them with brains can be kept on. Governments can
perfectly well own things on behalf of their citizens and get people
who can run them to produce what is required. They have done it in the
past as we all well know.
Using the IMF as a virtual banker, liquidity can be injected on an
internationally equitable basis without borrowing other than virtual
borrowing to fill the vacuum caused by the disappearance of virtual
wealth realised by the revaluation of fraudulent financial vehicles and
bundled securities. There will be be big losers amongst the private
shareholders, but where effective nationalisation at a knockdown price
affects pensions, insurance and medical welfare the government can
legitimately create the funds according to IMF rules designed for this
global recovery strategy. As long as this funding is done logically and
equitably by each national bank, it will not represent borrowing that
has to be repaid. All nationalised industries and services can be
privatised again in due course when the global economy has recovered.
However, it will not be an economy built on supplying goods, services,
systems and transport based on unsustainable operating systems. That's
what the free market economy produces, as the Chinese discovered as
as they got involved with it..
It will also be possible to restructure the taxation system which at
the moment still allows privileged people running hedge funds etc. to
make a fortune. At the moment, governments are scared stiff because
they need the hedge funds. They have been a vital part of the system.
But it is time to move on. There was a time when tax havens were a
necessary part of the system. There was a time when Switzerland was
necessary and skiing, chocolate and cuckoo clocks were just a cover
story. But now it is time dump the idea that of Communism, Capitalism,
.or any bloody -ism can save us from the responsibility of
looking at the planetary and biological reality and making sense.
The first thing to understand is that if we do this on a globally
agreed basis using the IMF, the whole world does not have to borrow
from itself and then tax itself to pay it back.
The media commentators are calling for any restructuring to be put on
the back burner so that immediate steps can be taken to stop recession
and get help to the most unfortunately dispossessed. But there is no
way a recession can be avoided. The consequences of ignoring basic
facts and values cannot be undone. On the other hand assistance can be
given to mitigate, relieve and compensate the most innocent and the the
most desperate and a general category that includes those on the margin
where tax relief would have results beneficial to the economy. This in
no way calls for anything to be put on the back burner. We need Intelligent Finance, which as I
recall was the name recently given to an operation that may not have
been the type of intelligence required. We need to get finance to the
new green systems economy and let much of the old, unsustainable
NOVEMBER 23rd 2008
Some tax cuts are expected to be announced tomorrow, but apart from the
Green VAT reduction.advocated here (which is not yet expected) it is
doubtful that tax cuts will do anything to boost private individual
spending. I think that is a good thing. We should not get out of this
recession by 'shopping' unsustainably when we should be saving more
anyway. We need some seriously green government expenditure in housing,
energy-saving, new green technology, public transport maintenance and
upgrade. It may or may not be nationalised industries and banks that do
these things but it will be national expenditure and that is where fund
should move to pull us through the recession, retrain the work-force
and keep unemployment low. Private enterprise is still key but let us
face it, market forces in the hands of a public, global and domestic
with no responsibility for a sustainable planet or its economy can be
left to make its choices only within limits that have recently been
broken. Barack Obama is getting his plan ready in the USA and it looks
to me as if he understands this only too well.
NOVEMBER 24th 2008
This is only a start. Despite the headline it is NOT a gamble. It is at
best what was needed, but a lot more has to follow in the way of
rebuilding the economy which we should be glad is collapsing, as it was
Vince Cable's complaints have some merit, the Tories' none at all.
Darling unveils borrowing gamble
Chancellor Alistair Darling has cut VAT but taken borrowing to
levels in moves he says are needed to save the UK from a deep and
Top earners also face more tax and all National Insurance
contributions will rise, he said in his pre-Budget report.
Alcohol, tobacco and petrol duty rises to offset the 17.5% to 15%
Mr Darling said "exceptional measures" were needed with the economy
to shrink next year - but the Tories said he had "mortgaged" Britain's
VAT cut by 2.5 percentage points
45% tax rate on earnings over £150,000
All National Insurance to go up by 0.5% from
Economy to shrink by up to 1.25% next year
Borrowing to hit record £118bn
Phased increase in vehicle excise duty
Shadow chancellor George Osborne, for the Conservatives, accused Mr
Darling of "bringing this country to the verge of bankruptcy" by
doubling the national debt, which is set to reach £118bn next
Mr Osborne accused the government of creating "a huge
unexploded tax bombshell timed to go off at the time of the next
He said Mr Darling had offered "temporary tax giveaways
paid for by a lifetime of tax rises on the British people" and he said
the country's future had been "mortgaged to bail out the mistakes of
Lib Dem treasury spokesman Vince Cable said VAT cuts
would not be enough to boost consumer spending and "it would be much
more sensible to put money directly in the pockets of low paid workers
by cutting their income tax".
In his Commons statement, Mr Darling slashed economic growth
for next year from 2.75% to between minus 0.75% and minus 1.25% - the
biggest downward revision on record.
But he said the government would inject an extra £20bn
into the economy, or 1% of GDP, in a bid to get it moving again funded
in part by an extra £5bn in efficiency savings and a big increase
| In these extraordinary
circumstances allowing borrowing to rise is the right choice for the
The most expensive stimulus measure is a temporary cut in VAT from
17.5% to 15% aimed at getting consumers spending again.
Mr Darling says the cut - which comes into effect on Monday in time
Christmas shopping - will pump £12.5bn into the economy over the
of the 13 months it will last.
But the rise in duty on alcohol, tobacco and petrol, to
ensure they do not benefit from the cuts in VAT, will be permanent.
And in measures aimed at clawing back the VAT cut and
other measures, top rate tax will increase to 45% from 2011, for people
earning more than £150,000 a year and from April 2011 all rates
National Insurance (NI) contributions will be raised by 0.5% for
employees and employers.
The starting point for NI will be brought into line
with that of income tax so that no-one earning under £20,000
any more contributions as a result, the Chancellor said.
On borrowing, Mr Darling said it would be "perverse and
damaging" to stick to government rules in the current crisis so they
would be temporarily suspended.
Government borrowing would more than double to £78bn this year
£118bn next year, before starting to come down, with the books
be balanced again until 2015/16.
"If we did nothing we would have a deeper and longer
recession that would cost the country more in the long term," Mr
Darling told MPs.
"In these extraordinary circumstances allowing borrowing to rise is
the right choice for the country."
He added: "Taken together these steps will ensure that there is
money flowing into the economy when it is needed most, but we can
reduce borrowing when growth returns."
In other measures, Mr Darling speeded up the introduction of
planned rises in child benefit.
And he softened the blow for drivers by announcing a more gradual
introduction of new vehicle excise duty, with rates only going up
per vehicle in 2009.
Work to upgrade motorways, refurbish schools and repair
council houses is also to be speeded by bringing forward £3bn of
And there will be more help for home owners, with the
scheme which covers mortgage interest payments for those who have lost
their jobs doubled to cover mortgages of up to £200,000.
This year's increase in the income tax personal
allowance of £120 a year for basic rate taxpayers will be made
permanent and increased to £145 in April, helping 22 million
taxpayers - another 500,000 households not just this year but for good.
The 45% top rate will not come into effect until after
the next general election, meaning Labour will not break its 2005
manifesto commitment on not raising income tax.
Mr Darling's Commons statement heralds the biggest shake-up of
Labour's economic policy since it came to power in 1997.
DECEMBER 15th 2008
Here we have what seems like a lunatic suggestion but if turned around
the truth is staring us in the face.
Philippe Varin, the CEO of Corus, threatens to move the European
operations to China unless regulations regarding carbon emissions are
overhauled. This looks at first a poor way to behave, but he is right!!
Governments must stop forcing European industry to buy carbon credits
and instead help them with finance to improve their production process
and develop new technologies both in production and in the goods
produced. This is the way to spend our way through and out of
recession. It could never be done without causing inflation if the
market economy and its associated investor were calling the shots; but
now they are temporarily on the sidelines, sent off the field injured,
governments can do what needs to be done. This sort of action when
applied across the board on new, green growth with fund training,
employment and all the things we so desperately need.
The terms of the finance need not be draconian, they just need to
ensure the rights of the citizens of this country and others to a share
in the future of the industries that are shepherded through to
sustainable success. Private investment is welcome, and indeed will
follow if the government replaces blind market demand in the key
sectors with educated state demand to fit the requirements. Because
nobody is allowed to say a good word for Hitler, his decision to
commission the Volkswagen or do many other necessary things are never
praised these days.
Let us never forget that
Churchill said loud and clear that if he had been an Italian [at the
time of which he spoke] he would have been a Fascist,
and as late as 1938 he stated that if England were ever in the same
straits that Germany had been in 1933, he hoped that England would find
such a man to lead her out of them. The eminent Anglo-American
publicist, Francis Neilson,
declared that Churchill's praise of Hitler was the most extreme tribute
ever paid by a prominent Englishman to the head of a foreign state.
It is vital to understand what C was saying and how he went on to
dedicate himself to the removal of these two leaders who had not the
personality, education or breeding to avoid taking themselves to be
more than they were and leading their people in what they saw as a
national destiny to rule under their unique vision. We need not go into
the causes of their excesses and obsessions here, but unless we can
rise above the piddling bleating of the Camerons of this world and
realise that modi operandi are only there to achieve necessary ends
(such as getting out of holes dug by taking other modi operandi to
extremes), and that we as electorates of free nations must pull
together or sink together if we want to AVOID fascism and military
dictatorship - that we must use privatisation and nationlisation as and
when appropriate - then we will just make a big mess of what is an
opportunity handed to us on a plate.
A global as opposed to a national or regional or hemispherical collapse
of a useful and well-used and finally abused financial system gives us
the opportunity to give it a rest, cleans the Augean Stables
(spelling?) of their shit, dethrone the Nicola Horlicks etc who grossly
overrate their own understanding of all and everything, and MOVE ON!
When Zimbabwe prints money it causes inflation for very good reasons.
The UK can print money because it is needed to replace the billions of
notional money that was part of the economy and now ceases to exist
because its notional existence was fraudulent. This printed money will
be Bank of England money. It cannot (as some notable economists have
stated) in the last resort be dropped from helicopters for the public
to find and spend to revive the economy. That is the last thing we
want. The money must be earned. They way it is earned is through
employment. But this time not through employment producing what
advertisers can con people into buying, regardless that it is leading
us all to perdition, but what they really have to have. These new
ESSENTIALS are not the old ones, though to be such. They will be
different. And their use will be promoted through such very simple
ideas as insurance and liability as well as legislation.
Those who cause global warming unnecessarily will find it impossible
(for example) to afford the insurance legally required to drive energy
wasting and carbon wasting vehicles. Those who buy, use and do the
right thing will find they CAN afford it. Because the alternative will
be for the insurance companies to go bust or put premiums for
Today we hear that a big, revered Wall Street investment manage had
really just been running a pyramid selling scheme. He is in fact just
the first to admit it. The others have schemes that are simply more
modest - whereas he used his reputation to bag his customers by
offering impossibly competitive rates of return. All relied on the
pyramid principle to a certain extent. Running pyramid schemes is great
fun. Once you have set it going you can pay others to do the day to day
admin and just do the lunches, charming the customers and consuming
lots of lovely wine and food.
That's all for today.
DECEMBER 20th 2008
The expression 'thinking outside the box' is well known. I
thought Gordon Brown, with his considerable experience gained in moving
beyond the borders of boxes he had become expert in as his life
developed, was able to think not just outside the box in which he was
confining himself and the country when insisting on his financial
and monetary rules, but outside the box of boxes. I am not yet sure
that he has got where he needs to be.
Perhaps this is just as well, but it does lead to misunderstandings.
Barclays CEO John Varley is right when he says he expects the Credit
Crunch to be with us for 2 years. He is right when he says that banks
will NOT resume lending on the pre-crunch basis. There is no point in
the PM asking them to.
Ibrahim Hussein is right when he
says that speculators
were responsible for the massive rise in oil prices to nearly $150 a
barrel, and that the current reduction in OPEC output is both rational
and sensible, as consumption is now affected by the shrinkage of the
world market economy and all transport needs and forecasts.
That the price has not fallen immediately is due to those who bought
and have to take delivery, and store, at inflated prices, and
that includes a great many people who are sticking together to save
their own skins and, they would claim, ours. Gordon Brown rightly says
the instability hurts producers and consumers but the current OPEC
reduction is not the reason prices are not falling, even though dealers
must think ahead.
There is a lot that MUST be done and Brown and Mandleson (who seem to
me to be the nearest to being able to think outside boxes while still
realising how important they are and how carefully their content must
be looked after) must lead the way with the help of a number of their
intelligent colleagues (some of who may need to be reinstated after
having been trashed over the years to placate the media).
The government does not need to borrow money in the conventional sense.
The Bank of England, as any other national bank, is SUPPOSED to print
money to reflect the value of the national wealth. That value is set by
demand. In the free market economy, that demand is set by private
buyers and the government itself which can buy on behalf of citizens.
The government can purchase shares of (partially or fully take state
ownership of) any critical industry on behalf of its citizens when
private demand for shares fails. The Bank
of England can act for the Treasury in such instances and BUY the
shares at their existing market value.
That purchase constitutes 'demand' and the the Treasury and Bank
of England acting as one can issue the funds without borrowing from
banks or selling bonds to anyone. If the private enterprise
shareholders have so abandoned faith that the share value is low, so be
it. The public own the shares purchased. They do not have to be taxed
in future to pay off any debt incurred. The issuing by the Bank of
England of money is not inflationary in these circumstances as no notes
have to be printed. The 'money supply' as reckoned as just been
shrinking colossally as values of
fraudulently assessed stocks
and bonds have plummeted, not just in the UK but world-wide. Obviously
this sort of operation can not be done in the circumstances of a
flourishing private enterprise capitalist free market system, and would
not need to be unless there are other, overriding and extraordinary
There is no point in owning Jaguar/Landrover for instance if private
enterprise can keep it going. There is no justification in saving it by
nationalisation either, however, unless national ownership enables it
to be run in a way that conforms to government policy, which is to cut
carbon emissions while at the same time producing vehicles that do the
job of LandRovers and Jaguars and attract buyers. Bear in mind that as
we are not in the EMU zone and part of the Euro, and that our main
business of banking, investment and speculation has been discredited at
least for the time being, the Pound Sterling will be falling further.
Many UK resident citizens may find British made cars attractive and
cheap. So there will be a point to making them here, but the actual
models will have to compete with what the EU and Japanese companies can
produce in UK factories and do the same job. So any rescue carried out
just to save jobs must be done by THINKING IT THROUGH. We must employ
people in tasks that enable our survival rather than our
In the end, the only think that will count in 5 years time is who
(statistically) ends up owning what and where they pay their taxes. The
UK has a very special problem in that we are part of the EU, with all
the solidarity that provides, but without the protection of our
currency that EMU provides. For that we can thank the Tory party and
our bankers who thought they could make a fortune by being on the
interface with one foot in the lifeboat and the other on the shore. It
was a game one Gordon Brown had to play and he thought he could manage
it. Now we have all fallen in the water. I do not personally blame
Brown too much even though he did sell out to the bankers. They had the
only game in town.
Incidentally the Archbishop of Canterbury was too modest about his
understanding of economics. He analysed very clearly the causes for the
present difficulties. What he does not understand is the way out. But
if Brown does, he either is not letting on or he thinks it unwise to
explain it. Human beings all live in their boxes. Explaining the rules
outside would cause chaos within.
DECEMBER 22nd 2008
I fear the penny has still not dropped for those demanding the motor
industry be 'saved'. The global production of vehicles was linked to
ecologically unsustainable growth, insoluble traffic problems and a
fraudulent financial system based effectively on a global Ponzi scheme
(no point in singling out Mr Madoff as a special culprit, just as a
huge one). As I have pointed out years ago the solution on the vehicle
front is to use fewer cars, have more people filling the seats and get
low emission low consumption engines to propel them.
This means that vehicle production must (a) diminish and (b) change its
nature. That applies to the entire automotive industry. If, having
accepted that, the saving of Jaguar can be indulged, then OK. Let's see
a plan. I do agree our national motor manufacturing business and skills
should be safeguarded as part of our way of life and employment
opportunity. That is a separate question.
DECEMBER 30th 2008
Very unusually, I am in agreement with Cardinal Cormack Murphy
The criticism by the Anglican Bishops of government policy to avoid or
mitigate deflation is not (unless they are completely daft) an attempt
to encourage a debt fuelled re-expansion or to expect the banks to
encourage borrowing that cannot be repaid, however low the interest
rate, on the basis they could always foreclose on the borrower's
assets. There has to be some spending. It has to be internationally
coordinated so that National Debt so incurred can be offset and to a
significant extent written off.
JANUARY 3rd 2009
All today the news (broadcast and printed) has been that the PM was
planning a further bail-out of the banks to get them lending. This was
a most unlikely story and this evening we learn that he was planning
nothing of the sort, but rather the correct action of getting the green
agenda moving and getting employment, earning power and profitability
moving to rebuild a new economy. Let us hope these 100,000 jobs will be
the seed to grow 2,000,000 more in the same vein. Bank lending can be
part of that, on a proper basis. Bugger bail-outs
Brown to create 100,000 new jobs
Prime Minister Gordon Brown has revealed details of a programme
create 100,000 jobs as part of a new initiative to curb rising
Mr Brown told the Observer of a programme of investment in new
technologies and green projects.
He said the environment is part of the solution to the recession.
But the prime minister also played down the likelihood of a further
bailout for the banks, saying it is not the first thing on any agenda.
The prime minister is touring the country this week before a jobs
summit involving government, business and unions.
In his interview he gives details of plans to bring forward
government spending on public works, digital technology and
environmental projects to create new jobs.
He says a further expansion of apprenticeships is also planned.
Mr Brown confirms the government is looking at ways to boost bank
BBC political correspondent Carole Walker says with unemployment at
highest level for more than a decade and many workers facing an
uncertain future, Mr Brown is keen to demonstrate a new focus on the
But putting more taxpayers money into the banks would be
politically risky, our correspondent added.
The Conservatives say another bailout would be an admission that the
government's approach to the recession is not working.
JAN 5th 2009
Cameron is again stating the obvious and claiming it as original
thought. Those relying on their savings for income are feeling the
pinch when interest rates are low. But abolishing income tax on savings
for basic tax payers is not necessarily a better idea than just raising
the tax threshold for all. Other, targetted measures may be needed to
help those who are really in trouble. Cameron says the PM needs
shaking. Interesting comment from one who has only just woken up and is
still bumping into the furniture.
Now we have the Tax-Payer's alliance claiming that in the present
circumstances, people are demanding and deserving tax cuts. Apart from
raising of the threshold and the special case for VAT on new green
technology and services I outlined in the opening of this file, there
is no case at all for tax cuts and the proof is the Tax-Payer's
Alliance spokesman failed to make one. In 5 minutes of blathering on
BBC Radio 4 today, not a single logical point was made to justify his
JAN 8th 2009
The latest cut in the Bank of England's base rate to 1.5% won't make
much difference. It may be the right thing to do but unless it causes a
decision change by a significant number of large investors or a huge
number of small investors (including goods-purchasers of durables) it
will not affect the overall picture very much. The Nissan spokesman
made a lot of sense, enough to give one confidence that there remains
intelligent life on Earth, The priority is to hold on, develop the new
technologies (that does not mean there will be significant buyers yet
awhile outside enlightened rental companies if such there are) and be
ready for the economic recovery which may be 5 years away. Of course
the recovery might come quicker if Obama and Brown and sensible
European can get together with a plan, but that plan cannot be to
reflate on the basis of the old market economy. There must be an
intermediate stage before any free market economy can be artificially
encouraged to drive the world, such is the penalty for the abuse in
recent years of the one we have benefited from.
JANUARY 12th 2008
David Cameron has announced that Gordon Brown and the government were
wrong in their past and present economic policies and are wrong in
their plans for the future. It is hard to know if Cameron is just
pretending, playing to the electorate, or if he really is as juvenile
as his utterances indicate. There is no 'right way' to deal with the
current economic situation. There are choices, each with different
advantages and disadvantages. It is quite possible to choose Cameron's
ideas (if he ever laid them out in a way that makes sense) and take a
completely different line to Brown. If taken consistently,
domestically, we could do that. It would require a lot of social
cohesion at a time when confusion in the social realm is such that
Prince Harry (a Brit) has to aplogise for calling a mate a Paki (or
presumably a Scot, a Digger or any brief, affectionate name for one
whose character is enhanced by their country of birth or upbringing). I
think it was a great mistake for him to apologise for what is not an
insult and is now made into one, officially. It is hard to
imagine a greater stupidity that that exhibited by those insisting on
and approving this apology, both in the Military and political arenas.
(Sorry guys, I am as you know, frank).
If the whole world took Cameron's economic line, the world economy
would go through a really extraordinary slump. In the past, such
conditions have led to war. If we were to rely on America alone
pulling us out, that would have very obvious bad consequences too.
A balanced, coordinated, agreed international stimulus by means of
government finance, guarantees and purchasing, coordinated with
legislation to deal with climate and energy, with IMF financial
coordination and yes, our banks back in business, is what we
should be part of. Of course we can opt out and do the usual British
sulk with one foot in and one foot out, or we could elect Mr Cameron
and then not back those of his idea we don't like. Any sort of muddle
through is possible. But the idea that a global stimulus to stop
deflation and replace for a time the anarchic free market (which was
both aimless and damaging) will leave our children in personal debt and
our country in debt to the world is the product of immature minds who
have never understood the difference between protocols and hardware.
JANUARY 19th 2009
Critics are divided about the following measures. Some say they should
have been taken months ago - but they could not. Most of the people
criticising now would have been against it then. The measures have been
badly received amongst the bank shareholders but so what? They are
selling because they now realise the situation was worse than they
The hard fact is this: if trade and commerce is not driven by market
forces coming from those with money to spend and invest, and ideas and
desires of their own personal choosing, then for the time being
government will have to guide investment into the channels it favours
in the light of the best expert advice and encourage development it
deems appropriate for the national good. The alternative of deflation
and slump is not desirable. The banks and those who invest in them will
play whatever role they decide and may well be bypassed if they do not
wish to play.
plan to boost banks' lending
The government has announced a second package of measures to
encourage banks to lend to individuals and businesses.
The long list of policies includes a scheme to offer insurance
banks losing more money from the bad debts that started the credit
Prime Minister Gordon Brown said the new announcements
were vital. Meanwhile, the Bank of England is to be able to buy assets
direct from firms.
Yet despite the new initiatives, banking shares have fallen
By mid-afternoon in London, Royal Bank of Scotland (RBS) was down
63%, while the new Lloyds Banking Group had dropped 34%.
Four key points
On another day of major development for the banking sector, here are
the key points of the government's latest announcement:
• Banks will be able to take up government insurance against their
expected bad debts
• The Bank of England will be able to buy up to £50bn worth
of assets in companies in all sectors of the economy
• Northern Rock has been given extra time to repay its loans from
• The government is increasing its stake in RBS to nearly 70% from
RBS also said it was set to report a huge loss for 2008, with asset
write-downs of up to £20bn.
Under the insurance scheme, banks will agree with the government
the amount they expect to lose from particular debt.
The Treasury will then sell insurance against about 90% of the
institutions' additional losses from the debt.
The banks will have to pay for the insurance, but the government
says it does not expect to be paid in shares.
While criticising the banking sector for some irresponsible lending
the past, Mr Brown said the new scheme was vital to help restore normal
"Good businesses must have access to credit, jobs should not be
lost needlessly," he said.
"It is because of this that we are taking the action to expand
The government hopes that by insuring banks against additional
it will encourage them to resume normal lending to businesses and
Chancellor Alistair Darling told the BBC that banks
taking out the insurance would have to make "very specific legally
binding agreements to lend more money".
Despite the scope of the government's latest
announcement, it has done little to lift investor sentiment in the
banking sector, at least initially.
Bank's new role
Under the Bank of England's new role, it will be able to buy up to
£50bn of high quality assets directly from companies.
In the past, it has only bought such assets from banks or financial
A new subsidiary company will be set up to buy the assets, but the
Bank's executive will decide what sort of assets it will buy and from
But the list of assets includes corporate bonds, so
some companies will now be able to borrow money directly from the Bank
Liberal Democrat treasury spokesman Vince Cable said
the government's latest plans did not go far enough, and that instead,
it should now nationalise the whole banking sector.
"The government must bite the bullet on the public
ownership and control of the banks to ensure that lending is maintained
to sound companies who can keep the economy ticking over in these
turbulent times," he said.
Northern Rock extension
There have also been changes to the terms of previous bank rescues.
Northern Rock has said that it is to be given longer to repay its
loans from the government.
There was concern that the timetable for repaying the loans was
Northern Rock to reduce its mortgage lending too quickly, which was not
in line with the expansion the government wanted.
In another announcement, RBS said it had agreed with
the Treasury to swap the £5bn of preference shares the government
for new ordinary shares.
This will mean the government's stake in the bank will
increase from 58% to nearly 70%, but it will reduce the amount that the
bank has to pay to the government every year.
The chancellor said that as a result RBS would have to lend more
The agreement came as RBS said it expected to announce 2008 losses
of between £7bn and £8bn.
However, RBS also said it may have to write down the value of past
acquisitions, including the share of Dutch bank ABN Amro it bought in
2007, which could lead to a hit of up to £20bn.
Another bank helped by the earlier recapitalisation was the
combination of Lloyds TSB and HBOS.
They announced this morning the completion of their merger to form
Lloyds Banking Group.
The advice to 'sell sterling' now is pretty
daft unless you are a currency speculator, in which case you
should have sold it ages ago when the Euro started its rise. It is also
true to say that the governments actions to stabilise the economy
cannot work if it gets no support in a free market. It is out of such
situations that restrictions on free markets and currency exchange have
arisen in the past. The Eurosceptics bet the farm on the new British
Empire (sterling, banking and north-sea oil) and they are all in
trouble. It was always a boastful bet. I see the Tories have hoisted
Ken Clarke back onto the front bench so when they have to do a U-Turn
he can do the talking. It may take a while though, as we can't suddenly
join the Euro now even if we wanted to.
It is interesting to speculate on how much everyday private expenditure
over the last year was essential and how much optional, and how much
domestic sterling will be spent buying non-essentials in coming months
just because they are at knockdown prices and considered a better
investment than cash in the bank. We could go back to barter!!
FEBRUARY 6th 2009
How confused is it possible to get? Sarkozy of France rightly
that a fiscal stimulus, in the form of government led expenditure on
vital infrastructure (including steps to tackle global warming) is the
way to counter the recession, while tax cuts will not produce the
required effect. But why does he think Brown's very modest but long
term VAT reduction was ever designed to do that? It was just a
necessary, helpful addition to the process to aid hard pressed
shoppers rather than bring about extra spending. It has to be said
that by saying so little, and not rushing, Brown has led a lot of
people to think his steps are having no effect. He will indeed have to
be more clear. But with an opposition and press who are so completely
opportunistic as to glory in his failure, and a public that is
sceptical, disunited and looking to their own personal problems, it is
hardly surprising he tends to limit his own discussion and work
quietly. It is also true that interest rate cuts can no longer produce
a general increase in either investment or expenditure or lending. Any
fule kno that now for obvious reasons. As I have been saying for many
weeks a dose of the command economy is required. The French are used to
it, they assume the British will not touch it, but we certainly will
have to. Internationally coordinated, national debt need not be a
burden on future generations. We are in a global economy.
TRADE CAN BE REGULATED AND AGREED WITHOUT RESORTING TO EXTREMES OF
EITHER FREE TRADE OR PROTECTION. APPROPRIATE PURCHASE AND EMPLOYMENT IS
PERFECTLY POSSIBLE AND NEGOTIATABLE IN EVERY CASE.
FEBRUARY 22nd 2009
Help for those PURCHASING cars can only be done if it does not
incorrigeable processes. It must also be borne in mind that the
greenest action for an individual up till now has been to keep the car
they have for as long as possible if in good order. Now, with cars
standing in lots awaiting buyers, some should be bought by the
government and offered for rental at special rates, through schemes run
by the existing major car rental groups on behalf of the government.
New super-green models should in due course be ordered and purchased by
the government for rental in this way. It is vital not to engage the
public in more personal debt - surely we have learnt that lesson - so
only those who can afford to buy should buy. Hire-purchase can make a
comback perhaps on very low interest terms. One way or another the UK
vehicle industry must be saved and upgraded to world-class winner in a
global market or at the very least a most competitive domestic supplier.
Incidentally the much repeated mantra that countries should save and
put by reserves to make sure that they can deal with future crises like
this is complete poppycock. It is not possible for countries to compete
in hoarding reserves in either currencies or goods or properties. As
soon as they attempt to do so they create a problem which will result
one day in a similar crisis. We now have to move to a realisation that
we are interdependent, must compete in a coherently regulated global
financial system, with an international body (an enhanced IMF) that can
deal with global liquidity on an equitable basis and provide funds to
deal with any global threat, internal (like the current one) or
external (e.g. a crash programme to mitigate a danger from space).
FEBRUARY 26th 2009
It is a bit much to ask Fred Goodwin to decide exactly how much
pension to give up. It is also wrong that he should set ths figure
himself. So to that extent he is right not to take the action. It would
be absurd. Now he has acknowledged that, it is up to the government to
ask some unfortunate person or tribunal to recommend the sum he should
forfeit. It should be halved at the very least. I recommend this as one
who does not attribute the current banking crash to Goodwin, I merely
see him as typical of the very large number of people who are
collectively responsible. Being a prominent leader and trend setter, he
can in this way be very rightly made an example of.
Personally I was in favour of temporarily nationalising all the banks
months ago, in many countries and certainly in the UK, but I am well
aware of the arguments and more importantly the people, assets and
forces that would be employed against. A great many people still think
government of any complexion is unnecessary and untrustworthy when the
chips are down. I happen to think the reverse. While corruption and
incompetence are possible in private or public organisations, we have
learned that when the chips are down any nation has to make sense in
its public and national fora and its government has to take charge if
order is to be maintained in finance and social affairs.
The huge losses of RBS are huge because it is the world's biggest bank,
invested all over the world, in every sort of asset and instrument. We
have a global financial crash, so £8 Billion is in fact the least
one could expect by way of an RBS loss for the year. It is no good in
hindsight saying the business model was crap, that was the model the
world was dealing in. That was the only game in town. Fred Goodwin
gambled successfully for the whole of the British public and if he
hadn't, along with the competition, put so many of them into personal
debt as well they would frankly not have much of a case for him to
answer. Their personal debt is also a shared responsibility. Every
single person connived in what occurred or benefited from it to some
Any action taken must have some basis in law. Retrospective law is
exceptional, in most cases undesirable, but logically not impossible to
justify in every case. However, the argument that 'the taxpayer' is
paying Fred's pension because the taxpayer now owns and funds RBS is
not strictly true, so I recommend care in whatever course of action is
FEBRUARY 28th 2009
I am glad to see all the above factors have been recognised and will be
taken into account.
MARCH 9th 2009
It is being suggested by commentators that Alistair Darling, the UK
Chancellor of the Exchequer, is supporting Treasury hardliners who are
against a full-on move to a climate-control economy. I hope he is just
holding fire awaiting international agreement. It is important to
understand that all the measures being applied including quantitative
easing (yes, 3 Ts in that please Dimbleby) depend on some international
symmetry if they are not to be (a) inflationary and (b) a cause of
natiobal indebtedness. Lord Stern gives us an assurance that the
increasing gravity of the global warming process is understood
politically. The question now is: does the Treasury understand finance,
fiscal and monetary science in the 21st century here on planet Earth.
They don't seem to have had a clue throughout the 20th centrury,
proceeding by trial and error and making every one in the book; but
MARCH 24th 2009
The action we need is being taken by Obama, Geitner and Brown. They are
being criticised by the usual morons.
or not Gordon Brown has got everything done in the right order so far,
one thing is certain; the Governor of the Bank of England is an utter
dork. [I should not have said
that but I make it a rule as I write everything here as a stream of
consciousness not to delete it with hindsight]. Of
course we cannot go on expanding the money supply without
carefully targetting it, and of course we cannot get it to work unless
the other developed countries in the world in Europe and America
coordinate their policy and do the same. That is the only way currency
inflation can be avoided and future debt too. But to give that little
twit Cameron ammunition to derail Brown's international initiative is
about the stupidest thing he could have done. Obama and Geitner
understand exactly what has to be done. If the international plan
proposed by Brown and Obama is not implemented there is no way forward
at all for the global economy and we shall end up with full scale
Perhaps in the end it will be best if they do cock it all up and then
we can prove the point, but it will be unnecessary and the painful in
The Obama-Geitner 3 Trillion plan has produced an upward bounce in the
US Stock Market but that is meaningless. That is just opportunisitic
dealing by those on the inside and a few big players tellung their
game-players to pick up a bit as the market twitches. It is going
nowhere, and it won't, except in a few cases. Obama will put the money
where it needs to go and the banks have had their chance. They will now
try to grab onto the federal coat-tails of course and there will be
private-public initiatives, but the task it just to get what needs
doing, particularly those things the market was not doing when it was
booming, and to get employment going in the green economy, education,
health and improved sustainable transport both public and
I really do think the UK Tory party is a collection of some of the
worlds biggest idiots and has been with a few exceptions for many
years. Utterly clueless.
I have left the ACTION THIS DAY file alone for two years in order to
gauge the results of the actions I deemed necessary being taken and not
taken. Some have been taken, but others not, because we had a change of
The new government has decided a complete international programme of
cooperative global financial management is for the birds, that
basically we are on our own, and we shall have to slash and burn our
economy including the military in order to retain the confidence of
international investors and bankers who finance the UK's borrowing
That is indeed the alternative to a complete application of my previous
recommendations. It is the alternative to 'forced green growth',
international defence solidarity and a revision of the global economic
model. OK then, this file can start again based on where we are.
Some of my recommendations were applied, particularly the one they
called Quantitative Easing (I had called it the organised, regulated
printing of money, though of course the supply of banknotes was not the
issue here). I have disussed the propriety and non-inflationary
legitimacy of this elsewhere and the conditions that apply).
However, although there is growth in parts of the world economy it is
extremely uneven. Political pressure-points are rumbling ominously. The
middle-east and north African countries are undergoing a mixture of
social revolutions against authoritarian systems, whether they are
oil-rich or not. In essence, these revolutions are based on a perceived
collapse of western power and a rise in people-power achieved through
the Internet. MIddle-classes and young people with aspirations learned
through the new global media and communications systems are uniting
with poorer elements of society as the trickle-down or paternally
stabilized economies are under strain from an economic pincer movement.
They wish to remove the autoritarian regimes which until now had
supplied subsistence for some and opportunities for the privileged.
Democracy is the name they give what they want, but in many cases they
do not know how that can be established, applied and sustained, or what
infrastructure has to be developed first.
Growth in some areas is driving food prices up, aggravated by harvest
problems in others. Recession in some areas is cutting trade in others.
The G20 is being urged to tackle the issue of price inflation affecting
basic goods ahead of a two-day meeting. At least it appears that the
extreme dangers we now face are appreciated.
Earlier this week, the World Bank said food prices were at
"dangerous levels". Forty-four million people have been pushed into
poverty since last June, it said.
It is interesting to see how poverty is
related to the price of food. 100 years ago, and even quite recently
but in very much fewer places, poverty in terms of dollars per day was
not related to food in the same way. Large rural and island populations
lived on locally growing vegetable, fish and an animal sources of food.
Most of these economises have been destroyed by a varierty of economic
and other forces.
Behind much of this rumbles the never-ending Sunni/Shia division in
Islamic communities. It is as if the whole Islamic world has another
enlightenment and reformation to come as part of its development, a
stage Europe has been though.
So, ACTION THIS DAY is now very much in the hands of the G20 meeting.
Unfortunately, sticking-plaster will be the order of the day. Sarkozy
is in the chair and will be trying to get them focussed on the
Sarkozy told the ministers that economic policy
coordination was the only way forward. "Giving priority to national
interests would be the death of the G20," he said.
FEB 19th 2011
Little progress so far at the G20