There’s a scene from Superman: The Movie which sums up the problem with the banking bailout. As the eponymous hero catches Lois Lane falling from a skyscraper, he says ‘Easy miss, I’ve got you’. She replies ‘You got me? Who’s got you?’ So it is with the Gordon Brown and the banks. The bailout plan is intended to insure them against the sorts of losses that will spook their creditors. Don’t forget, the banks have to borrow every penny they lend us. If no one will lend to them, the taxpayer will be forced to. Don’t worry, Brown will say to the banks, I’ve got you. But who has got him? The taxpayer is broke, too. Brown is raiding money from future generations, by doubling the national debt. And if his own debt supply dries up, if the Arabs and Chinese get tired of lending to a country that has no stated intention of repaying this debt (see the Pre-Budget Report for details) what then?
There are many apocalypse scenarios. Peter Oborne suggests national bankruptcy in today’s Daily Mail. Another option is an IMF bailout, though it’s beginning to look doubtful that even the IMF would have enough money to bail out not just Britain but its disgracefully over-leveraged banking system. Third option is a national bailout: begging directly from Beijing or Riyadh – and just imagine the political implications of that. The fourth is to destroy the value of sterling (and, ergo, our debt) by printing money (i.e. quantitative easing). This means sending the pound hellwards, transferring wealth from savers to borrowers.
I won’t predict where we’ll go from here. But my gut feeling is the same of anyone who would have heard Alistair Darling stuttering and stammering on the radio this morning, while admitting he doesn’t even have a rough idea how much the bailout will cost (and that his regulation was so lax he didn’t even know how many overseas loans the banks were exposed to). The situation is now out of control. We are falling from that tall building. Brown’s falling, too. And despite all the assurances, no one is quite sure how we will land.
P.S. Before CoffeeHousers point it out, yes, technically Lois was falling from a helicopter which was caught on a skyscraper. As a reminder, here it is – 4:18 in:
Comments