Britain to go the route of RBS?

Rhoda Klapp

Well, it IS a long journey, and it must begin with the first step. Which is deciding whether the idiot who got us into it is a fit person to get us out. Perhaps the nation should be making that decision?

TomTom

Since RBS balance sheet is bigger than the Uk economy you would expect a high correlation....it does not make it true.

I bet ABN/AMRO shareholders are pleased they got cash.....time to divest ABN/AMRO and let the Dutch Government take care of it

Why the Treasury permitted Short-Selling against the UK taxpayer beggars belief. They seem hellbent on destroying us all. Why didn't they ban short-selling and suspend ALL bank shares ?

David

So, basically, the banks have screwed us royally, and because we can't afford a collapse of the banking system, we have to prop them up. Which we also can't afford.

Austin Barry

There is, don't you think, the strangely exhilerating sense of an impending fiscal and social catharsis. What rough beast is slouching towards us?

William

'We cried doom months ago, and we were right.'

It must have been a different Fraser Nelson that wrote in The Business 18 months ago that politicians should stay out of the credit crunch, it was only the markets correcting themselves, and Gordon Brown wasn't to blame as he'd 'kept regulation and taxes light'. Ouch.

Fraser, I strongly advise you, for your own mental health, to go and lie down for a while. Stop getting excited.

Laura

It's just mindblowing. The country is falling to bits and Harriet Harperson wants to introduce more Looney Left legislation to wreck employers' businesses.

Britain's looney employment red tape needs burning - all of it - if we're to survive.

Alex R

The UK and RBS now have the same CDS rating. You might, as you say, have expected convergence. But then, you might have expected RBS's rating to have converged down towards the UK's rating. The fact it is the other way around, tells you all you need to know about the market thinks of the prognosis for UK debt.

Disillusioned

Tom Tom - This has nothing at all to do with short selling and everything to do with poor management of the economy. If these banks were fundamentally sound then short sellers wouldn't have a reason to sell.

C Powell

The fact that the pound is now buying c. 91 cents is one way of getting it across. Bluntly, the £ has lost 30% of its value in the last few months.

The reality is the markets would not be punishing us as they are doing if they felt that there was a reasonable chance of the government paying back this debt rather than inflating its way out. But because Labour is (a) sneaky about what it's doing re "quantitative easing"; and (b) refuses to do anything about cutting public spending, the markets (and anyone with savings and able to put them abroad) are calling our bluff.

Of course we need a GE because a change of government would at least show that we knew that the government which had got us into this mess was not the one to get us out. Until then, we're stuck and "sauve qui peut" is our best bet.

I grew up in the 70's with power cuts / people hoarding sugar / bolshy unions / stupidly high taxes / pips squeaking / the IMF being called in / rubbish on the streets and it looks as if my children will have all the fun (sic) of reliving those days......

Poor Britain.

TrevorsDen

"Why the Treasury ... "

Never mind the rest of the words ... the first three sum it up. Just what has been going on in the treasury these last 11 years. And I am, not referring to Browns by now self evident mismanagement - I am talking about the Civil Servants, the senior civil servants and economists paid so much by us in salaries and pensions.

Just what the blinking heck have they been doing these last 11 years apart from sitting in thrall before the Scottish Psychotic??

StephenDC

Britain still has a triple A rating. You are way way ahead of yourself here.

TGF UKIP

What you say to us here, Fraser, either in the Coffee House or fanzine doesn't really matter - there's just not all that many of us.

What does matter though is that you get the words and images right for your News of the Screws column and your next appearance on Question Time.

Best and most vivid depiction I've yet seen has been via your mate Guido a few weeks back when he drew attention to the disparity between pricing of CDS for McDoanld Corporation at (from memory) 76 bs and UK Govt at 121 bs. Guido's conclusion is the one that sticks though -your money is over 50% safer with Ronald McDonald than it is with Gordon Brown.

Whatever you decide to go with though, Fraser, I urge you to start practising without delay.

Absolutely pointless waiting and hoping for your useless, hopeless Cameron Tories to land any meaningful blows on Gordon. You, Fraser, are our only hope!

AngloWelshDragon

'There is, don't you think, the strangely exhilerating sense of an impending fiscal and social catharsis.'

No Austin I do not find it exilarating, I think it is terrifying. This country needed a shake up but what we are getting is a catastrophe with good firms going down as well as bad, good workers being made redundant as well as bad.

May be you are sufficiently cushioned to sit back and enjoy the ride, those of us at ground zero are not so lucky.

My only solace is knowing that one day we can vote Labour out. Oh happy day!

pinch me

Austin Barry, yes indeed, I can't wait to live in a caravan somewhere on Exmoor whilst getting up at six every day to try and find work whilst my wife and children starve.

PayDirt

So Spain has a low credit rating and so does UK, Spain however is in the Euro. So can someone explain to me which is better off now, UK or Spain? Basically would the UK have been better off if we'd been in the Euro?

Verity

C Powell says "Poor Britain", and I agree. But they voted in someone who was clearly an egotistical nut job three times, and then they allowed someone who is genuinely deranged to take over. They know that every time the socialists get in, they wreck the whole country for everyone. But they voted for Bambi Blair - no relation, except ego - to Bambi Ombama - three times. Once, OK, fed up with the Conservatives. Twice, after he had already begun to destroy our ancient civil society, verging on insanity. Three times ... grotesque.

Tiberius

Despite all the depression that accompanied the realization that Labour was going to win the 1997 GE, the state that it is going to leave the country in when it's gone still couldn't have been predicted.

Who remembers Michael Heseltine's at the time very empty, but now massively understated comment, that Britain was sleepwalking into a Labour Government.

I hope those who had a visceral dislike of the Tory party from 1994 to 2005 can live with themselves.

And at the moment, I couldn't give a flying fig what's going on in Washington DC.

Andy

If this was china those responsible would have been arrested tried and shot before lunch.
What do we do knight them let them retire with a pension and blame others.
I am incandescent with rage on behalf of my children when will we wake up and make real change happen in this country

Hysteria

Tiberius - "And at the moment, I couldn't give a flying fig what's going on in Washington DC."

I know what you mean - but it is still true that the US is the engine house of the global economy - we all have a vested interest in hoping Obama succeeds -

Whether he can turn his rhetoric into action is another question - but frankly we must hope the US pull us out of this crap - again!

chris

It is clear that Brown and Darling should resign by Friday. Unfortunately it is not clear who would take over the leadership - and this in itself is terrifying. Possibly a very brief "National Government" could carry out the duty but clearly we need a new start with a new mandate, as we are seeing today in the USA.

What is particularly disgraceful and makes us ashamed of our government is the way that Brown and Darling are blaming the banks for this, presumably the main culprit being Royal Bank of Scotland, run by fellow Scot Fred Goodwin, made "Sir" Fred by Blair and Brown in 2004 for his "services to banking".

This is all disgusting.

Blackstone

What all this has done, apart from the economic mess that is, is to highlight the weakness of our constitution. We simply cannot rid ourselves of rulers who are manifestly, incompetent, mad and/or hellbent on destroying our country. Time for a constitutional conference I think and big changes to Parliament, elections and the role of the media.

lion rampant

So much for Scottish independence. Why didn't the Scots bail out their Royal Bank themselves?

Simon Stephenson

1. From Michael Saunders' analysis:-

"In turn, total sterling and FX assets of UK banks surged from £188bn (240% of 1996 GDP) at end-96 to £754bn (521% of 2008 GDP) in early 2008."

1996 UK GDP was approx £700bn, and 2008 GDP was approx £1,300bn, so either the figures for the total sterling net assets, or the representation as percentage of GDP, is wrong in each case by a factor of about 10.

2. Michael Saunders' final paragraph:-

"And, further ahead, if and when the recession eventually ends, there are uncertainties as to whether the authorities will be able to manage the withdrawal of massive policy stimulus at an appropriate pace to avoid both a massive upsurge in inflation and a renewed dive into recession. It will be a long journey — probably many years — back to economic stability."

I think this is the key point that UK insiders are not fully taking on board. For dispassionate outsiders, the downside of committing to the UK is not so much that there is no practical way for us to deal with our problems. It's that our mainstream outlook has become so adolescently unrealistic that the democratic process will not bring about a national leadership capable of doing what needs to be done.

We're becoming a basket-case not because of our banks or our available politicians, but because of the collapse of intellectual understanding and involvement of our people.

3. Your point, Fraser

"I wish I could find a way of getting across, in plain, non-hyperbolic English, the sheer scale of what's going on right now, and what this means to our country's ability to finance itself. I just can't: the size of our problems defies my powers of expression. Journalistic language can't do it justice"

When it comes to being exasperated by your inability to persuade people of the seriousness of the situation you're rather a Johnny-come-lately to this feeling. Some of us have been warning for 15-20 years that de-intellectualisation and the replacement of historical wisdom with contemporary dreamland would and could lead only to human calamity.

Colin

Not wishing to add to the general air of doom and gloom, but...

http://ftalphaville.ft.com/blog/2009/01/20/51379/rogers-the-uk-is-finished/

Given this chap's past track record, I think we should take him seriously.

I've heard a few pundits saying that the UK is looking like Reykjavik on Thames. I would say that the UK could look more like Buenos Aires on Thames.

Verity

Chris, couldn't we just coast along without a government for a few weeks? We might find out that we like it.

Austin Barry

A mad Government, a collapsing banana republic economy, a sullen, inert, resentful populace and, importantly, a disaffected military. What odds is Paddy Power making on a coup d’état?

Fraser Nelson

William, I still believe that Brown's light-touch regulation was good and that the City becoming a world finance hub was a great benefit to London and the UK. We reverse that at our peril now. Tolerating the non doms was also, in my view, a good idea - it attracted wealth creators here with a low-tax system. I'm not denouncing capitalism nor do I believe regulation should have been more burdensome that that of Wall St or the Eurozone. The problem was not light touch regulation - it was wrong touch regulation. The UK should have imposed leverage ratios on the banks and, say, a 75% LTV max on mortgages like Canada. Brown's error lay not in failure to have enough regulatory tools, but failure to use the ones he had effectively.

Simon, my exasperation was due to my inability to express, not persuade (which is why, TGF, the case must be made by a better man than I). I write about this fairly regularly, and sometimes it just feels like you run out of vocab. I'm interested in your second point that there are practical ways out - can you elaborate?

Susan Hill

All this, and we are fed hour after hour after hour of hysteria about the election of an American President whose lack of experience is truly frightening and who agenda is precisely the agenda we were given in 1997 by Blair and have been paying for ever since.
I wonder who in our government has some alarming bit of information they are letting slip today, when the entire news media is focused on The One ? A day to bury bad news indeed. I`ve been trying to find a channel on TV or radio with ANY news other than the blasted inauguration and failed. Even something about Kaka would have been a relief.

C Powell

Verity: I have never voted for Blair so please don't lump me in with those who are responsible for this rotten government. But I will be one of those who will suffer, unless I get out in time....

AlexM

Fraser Nelson said:
"William, I still believe that Brown's light-touch regulation was good and that the City becoming a world finance hub was a great benefit to London and the UK. We reverse that at our peril now. Tolerating the non doms was also, in my view, a good idea - it attracted wealth creators here with a low-tax system."

Wrong on both counts.

1. Light touch regulation is fine, but the FSA wasn't light touch, it was and is very heavy-handed. The trouble is that it concentrated on the wrong things - heavy on money laundering to the n'th degree, but completely hopeless on bank supervision (liquiidity risjk management, AIG's capital=free CDS book).

2. Most of the non-doms that I know, and I know quite a few and one or two (probably ex-) billionaires, haven't really benefitted the UK economy except to buy a fancy house and pay UK accountants and lawyers to keep them out of the tax net. It is surprising how many people in London who would probably pay UK tax when their earnings are modest suddenly find it convenient to find a family link with Australia, India or Israel when they start making money. By definition it doesn't make sense for non-doms to invest in the UK because they pay tax on that income. The tax status only makes sense if their investments are outside the UK tax net.

seb

I read this on Conservative Home and was impressed by the neatness of the sentiment. To paraphrase - The West, Britain included, has lived beyond its means. A crisis has arisen because the West must now pay the bill and dreads discovering what its real standard of living must henceforth be.

Brown's difficulties, like those of Obama's, are mere paragraphs in the story of this self-willed débacle.

Reg Varney

Susan, I was reduced to watching Emmerdale Farm (as it was called when I last watched it).

I don't care if he is the messiah. Moods are not news.

Hoolio

The newswire Reuters is not noted for hyperbole, but this morning, as the pound is trading down again (at $1.3750 just now), Reuters reported:

"The country's public finances deteriorated sharply in December, putting them on track for their worst year since records began after World War Two, while the number of Britons out of work approached two million. The official data released on Wednesday dealt another blow to the pound, still reeling from the previous day's dramatic collapse, ..." (read the full article at http://uk.reuters.com/article/businessNews/idUKTRE50K2AZ20090121

Fredrik Ingemarsson

Gordon, Gordon , Gordon , Out,
Out, Out

Dave, Dave, Dave, In , In , In

Michael

On the question of bank assets raised by Simon Stephenson, they were £1877bn at end-96 and £7540bn at end-Q1 2008, and hence the pct of GDP data are correct.

Simon Stephenson

Fraser - practical ways out : elaboration

I'm not going to get involved in detail, but I think you'ld gain some light by reading Sean Collins' Spiked review of the Obama inauguration speech.

http://www.spiked-online.com/index.php?/site/article/6129/

The points I found particularly compelling are where Collins refers to the cultural problem as one of immaturity, and the suggestion that Obama is a "more nuanced thinker, with a greater appreciation of the complexity of the issues of today, than many of his supporters are."

However, Collins complains that Obama was "unable to present a clear diagnosis of our current problems, or to point to a way out of them." As far as the economy is concerned, Obama " flippantly and unconvincingly referred to ‘greed and irresponsibility on the part of some’, as if these timeless traits can explain a downturn of what looks like historic proportions."

(Now where have I heard another world leader make more or less the same point?)

Collins asserts that "Problems cannot be addressed if they are not defined properly. In particular, if today’s problems are not explained as being the result of human agency, they are unlikely to be thought of as susceptible to human intervention and improvement. Without such an understanding, today’s crisis can appear fatalistically like a natural disaster ... And when hit by a natural disaster, it’s not a question of transforming a system of social organisation. Instead, the best you can do is to pitch in and help out ..."

The point being, I think, that if there was a remedy to this situation from within the fashions and prejudices of the mainstream, we'd have found it by now. Today, there's much talk of Keynes, but we need to understand that to the mainstream of the 1920s and early 1930s, Keynes was a total heretic. Could it be that something as heretical to today's thought-patterns is what is required now?

hadrian

It will come as no surprise to anyone who's on here regularly to discover I too did not vote for Tony or his cronies and never would vote for anyone with the slightest taint of socialism. However, I am not alone in frustration at how utterly limp the Opposition have been in pointing out Brown's sheer guilt in all this mayhem. When he pontificates so piously about how anry the 'irresponsible bankers' and thw USA are all to blame and the Tories just let it pass in prgramme after programme, one wants to sling a shoe ( Iraqi style!) at the screen.
Cameron possibly has done some good in restoring Ken Clarke but far far more effective would have been getting Redwood back in there. Such talent neglected is utterly reprehensible.
Read Simon Heffer's piece in Wednesday 21st Telegraph. It puts the case beautifully and I can assure him there a good number of us Tory Scots who do not resent his attacks on our profligate bankers but prefer the more toxic, socialist politicians to be slated.