An admission of failure?

Jim

More trouble at The Crock:

http://ftalphaville.ft.com/blog/2008/11/20/18468/stony-broke-fresh-rumblings-from-northern-rock/

Short the UK

The Tories must attack the idea of a fiscal stimulus:

Amity Shales - 20/11/08:

'Keynesian solutions often fail to deliver good or even acceptable results.

The limits start showing up with the tiniest of stimuli, those government checks Americans received in the mail last spring. The idea was that having the cash would cheer up consumers so that they would start shopping again, helping retailers. That in turn would revive wholesalers, shippers, suppliers -- on up the production line.

But that stimulus failed, as the University of Michigan's Joel Slemrod and Matthew Shapiro noted. Interviews with consumers showed that only a fifth said they would spend their cash.

Savings rates tracked by the Bureau of Economic Analysis seemed to confirm that, with personal savings rates rising about the time the checks were mailed. Slemrod and Shapiro weren't surprised. They have spent much of their careers documenting failed stimulus plans. Their study of the effects of the 2001 Bush stimulus was so damning you might think that Washington would never repeat it. But Washington did.

Long View

One reason consumers don't want to spend is that they don't react instantaneously, as Keynes posited they would. They follow, rather, the theory of an economist oft-presented as the anti-hero of the moment, Milton Friedman. Friedman's permanent- income hypothesis said that consumers consider their entire future, and not just their mood, when they shop. If expectations of lifetime earnings drop, then so will spending. That too tracks reality. Many of us are beginning to wonder if we will ever get back the price we paid for our houses.'

Terry

The government injected share capital into the banks but then told banks to increase the capital required to support their current level of lending. This effectively nullified the effect of their capital injection. Raising the level of capital required needs to happen, but it should have been in place before. In the current downturn it can wait until better days.
We still don’t know the extent of the banks’ exposures unless the government do but are keeping it quiet. Until we know that it is difficult to determine whether the government was right to take on all the risks it has. Perhaps once we know, we can then decide whether we need to inject more capital or look at other options, effectively putting some banks into administration under a special resolution regime and sharing the risk with other unsecured debt holders.

Lance Grundy

So, as I pointed out on your previous post on this subject, Gordon Brown has given the greedy banks a free lunch with the British people’s dinner money.

Tim Carpenter LPUK

All three parties are in the same hole and they keep digging.

Someone has got to have the cojones to admit that they screwed up. The alternative is to keep digging away until we hit rock bottom, i.e. State intervention and a de facto State bank issuing loans at the micro level.