The Great Depression ... Of 2010

[threegee]

Now that the politicos - led by honourable, great leader, Chairman Brown - have stopped slapping each other on the backs, the vote of confidence is coming in from the markets. There's blood on the streets; redundancies already occupy the news; they're jumping from (metaphorical) windows at Canary Wharf!

The true extent of the forthcoming disaster hasn't yet dawned on Joe and Josephine Public. Unless they are trying to get a mortgage or a loan to expand a business everything seems sort of normal. The representatives of the vested interests are coming on TV or radio and admitting a short recession before "the inevitable pickup in house prices again". We've been here before!

Err... no my overpaid pundit, we haven't! This is the BIG one. The once-in-a-lifetime (or two or three lifetimes) economic cataclysm some of us have been warning about for nigh on a decade. It's the one that will be remembered by future generations. The one that will make or break our characters. The one that will force permanent lifestyle changes. The one which will topple governments and end glowing careers in disgrace. The one that will expose the humbug and teach us the virtues of thrift. We've been living in an economic dream world for far too long; the quicker we adapt to reality the easier it will be.

The BBC is holding an on-line poll asking who is responsible for the mess. It's tempting to run a blame game here too - but ultimately pointless as the answer will undoubtedly be the same.

[Malcolm Robinson]

Gordon Bennet GGG, you walking around with bread boards on?

I do agree we are looking down the barrel though and see the continentals as a powder keg just waiting to be exploded. With the protectionism inherent in a lot of their economies any hopes of a holistic approach to this crisis by the EU is pie in the sky, they just don’t seem to get it? I think this could easily be the end of the Euro as we know it. I think the UK has a more versatile and fluid economy these days and should be able to get through, although I don’t like MR.B’s latest idea of borrowing more and more to finance public sector expenditure, that is storing up problems in the future and makes any recovery a long way off.

We either need a novel approach to the problem or strong leadership and I don’t see either at the moment.

I am going to come back to your BBC link when I have more time, it looks well worth viewing.

[Malcolm Robinson]

Well GGG looks like Italy is leading the Club Med euro zone towards implosion. They are now offering way more in percentage points to secure gov debt, something that shouldn’t happen in a single currency. If this impacts onto say the Germans and their ability to sell bonds then it will become a free for all and the Euro will collapse. Given the vast sums lent to the eastern block countries, which look like complete write offs now, it looks to me like just a matter of time..........

[threegee]

A fall in VAT to 15%, offset by rises in fuel, alcohol, tobacco duties etc. Only to be revoked in December 2009. Who is to say it won't be restored at a nice round-figure 20%, purely "in the national interest" of course! Yeah... well... because of this I'm going out to max my credit cards on Chinese goods, just to help the manufacturing base you've had a hand in destroying Mr Darling. Or, maybe, like any genuinely prudent person (and the Banks) I will take any meager and very temporary relief to try to help rebuild my own balance sheet.

Rises in National Insurance for all concerned - no doubt to encourage employment during the recession? A 45p tax band on the "super-rich", just to keep the few remaining deluded dinosaurs in the Labour party happy. On best estimates the latter will raise a paltry £700m, on worst estimates it will be counterproductive and cost jobs (unless you work in the booming tax avoidance industry).

At this point the phrase rearranging the deck chairs on the Titanic comes to mind.

Two simple facts:

1) You can't borrow your way out of debt.

2) There is no easy recovery mechanism - Keynesian economics don't now apply! That's because all this so-called fiscal stimulus will do is suck in a few more imports, and keep a few burger flippers in employment for just a few months longer. Ordering another round of drinks only defers the bill.

We pinned our flag to the mast of "financial products" and destroyed our real wealth-creating base. We spent everything and more during the good times. The workers from eastern Europe are going home where the prospects are brighter; and who can blame them.

But the biggest home truth is that it isn't an International crisis, as you are spinning whilst you jet around the world telling others how to fix their un-broken economies. It's a crisis that YOU - Mr Brown and Mr Darling - have had a very big hand in creating. Dr Death and nurse Darling are visibly busy administering the cure for their own poisoning. So, why should we be worried?

____________________

P.S. to Malc: I wouldn't extrapolate anything from Italy. It's not an economy in the real sense; just tens of millions of micro-economies riding around in exceptionally well-dressed and well-nourished people's back pockets. And, the Italians wouldn't have it any other way!

[threegee]

So, after being let off the hook by a statistical blip, the government (I use that for want of a better word) has to declare we are in recession today.

http://news.bbc.co.uk/2/hi/business/7846266.stm

The average recession in the UK since 1955 has lasted for three quarters, but the past two recessions have lasted for five.

In fact, many forecasters believe a recession could stretch into 2010 and be as severe as that of the early 1990s.

Optimists all! Gordo is hoping that things will be improving by the time he's forced to seek election (I nearly said re-election!) in May of next year. It won't! All the circuit breakers have been tripped, and there's no fuel in the standby generators. In fact the standby generators were auctioned off at silly prices.

This is not a recession in the normal sense. It will slowly get worse. Its a crisis brought on by the fiat money system (SEE THE MOVIE HERE), and in which Gordo had a huge hand in!

Have you noticed the number of times he and Darling use the word "global"? It's almost as if they were working to a spin-doctor written script. The intention is to convey the - no folks this is nothing to do with me it's a global problem - message. Untrue, indeed a massive con! He created the regulatory system he currently blames. He presided and set the agenda for the banks creating massive and unsustainable amounts of credit. Other countries are only to blame only insofar as they followed his lead.

When will it end? Longer than anyone currently cares to imagine, and certainly long after Dr Death and Nurse Darling are forcibly removed from the patient they have been consistently poisoning. A full recovery may not even be possible in any time-scale we can seriously contemplate.

[Malcolm Robinson]

GGG,

I agree this one looks like a long hard slog. The problem I have is that I think innovative and exciting solutions are needed but for them you need strong leadership, something I cannot see anywhere on the political stage at present. The problem, as I have said many times, is that the current crop of political leaders have no real world experience and in fact are just career politicians who might talk a good fight but when the chips are down run around like headless chickens. I am not even sure the down cycle can be managed because untill you get back to sound economics you just throw good money after bad. Everything which the Gov have done is to get us back into the positions which caused this problem in the first place but saddled with another colossal debt mountain we don’t really have the prospect to repay.

If we are to get rid of ‘boom and bust’ we need a different economic model and I would hope that will mean a different political structure to oversee it.

I still think S&P’s re-rating of the PIGS and the now possible re-rating of UK and French debt will have real impact because the bond market pays for every major initiative they undertake, be it a war or economic stimulus!

(BTW gone through all the stuff we talked about and it looks like there is a blocker! Timing will be critical of course, powder dry for now!)

[threegee]

GGG,

I agree this one looks like a long hard slog. The problem I have is that I think innovative and exciting solutions are needed but for them you need strong leadership, something I cannot see anywhere on the political stage at present.

True. Not even dusting off Ken Clark is going to produce someone of the right calibre. I wonder if they'd even recognise someone of the right calibre if they had one!

The problem, as I have said many times, is that the current crop of political leaders have no real world experience and in fact are just career politicians who might talk a good fight but when the chips are down run around like headless chickens. I am not even sure the down cycle can be managed because untill you get back to sound economics you just throw good money after bad. Everything which the Gov have done is to get us back into the positions which caused this problem in the first place but saddled with another colossal debt mountain we don't really have the prospect to repay.

If we are to get rid of 'boom and bust' we need a different economic model and I would hope that will mean a different political structure to oversee it.

It's not possible to get rid of boom & bust. It's intrinsic in capitalism. It's a natural mechanism to encourage growth, then get rid of the resulting bloat and inefficiency elements. If you tamper with it you can only make things far worse. Something the amateur economists of NuLabour are about to learn - at our expense! All you can do is to make sure the booms and busts are mild ones. And you do this by keeping credit and public spending within reasonable bounds, and putting something away for a rainy day. This hasn't happened under Brown's tenure; we've had an unnaturally long boom produced by staggering levels of excess credit, and so the market is about to ruthlessly do the job for him. To borrow from Monty Python: He's not the saviour [of the world], he's just a very stupid boy!

BTW you were wrong about gold - or so it seems! "It was the right thing to do."

[Malcolm Robinson]

True. Not even dusting off Ken Clark is going to produce someone of the right calibre. I wonder if they'd even recognise someone of the right calibre if they had one!

The problem is that none are with the right in-crowd!

It's not possible to get rid of boom & bust. It's intrinsic in capitalism. It's a natural mechanism to encourage growth, then get rid of the resulting bloat and inefficiency elements. If you tamper with it you can only make things far worse. Something the amateur economists of NuLabour are about to learn - at our expense! All you can do is to make sure the booms and busts are mild ones. And you do this by keeping credit and public spending within reasonable bounds, and putting something away for a rainy day. This hasn't happened under Brown's tenure; we've had an unnaturally long boom produced by staggering levels of excess credit, and so the market is about to ruthlessly do the job for him. To borrow from Monty Python: He's not the saviour [of the world], he's just a very stupid boy!

That was my point GGG, if we are to get rid of boom and bust we have to get a new economic model.

[threegee]

I say make this guy our new PM:

http://www.liveleak.com/view?i=b0a_1232747931

Anyone who can be ridiculed by peers like in these 2006/2007 recordings, and stick to his guns, is a better bet than the entire brainpower of Westminster and Washington combined! If only our own "part-time lecturer in economics at a third-rate polytechnic" had had half the grasp of basic economics!

[threegee]

At your local book store now: the Book of the Post:

[Monsta®]

At your local book store now: the Book of the Post:

bah could you run the country probably not!

[threegee]

Don't look now but nobody is running the Country, and hasn't been for several years.

And... I'm sure even you could make less of an a&** of it than Gordo!

I wouldn't have bailed out Northern Rock - which was what precipitated the collapse, and sent all the wrong messages to other financial institutions. And.. we wouldn't now be up to our eyes in debt for generations to come!

I've done more than Gordon has in running a successful business for decades, and there are a another thousand people in our town alone who are more competent to "run the country" than the incompetents who are currently in power!

[Malcolm Robinson]

I think if you walk into any corner shop up and down the country and ask the Asian gentleman there to run the country they will do a better job! They all show a much better understanding of economics, marketing, work ethic and supply and demand than any shown in government these days!

I disagree GGG I would have baled out the banks but I would have let them go bust first and taken them over the next day thereby not honouring scandalous ex director’s golden handshakes. The economy would go on irrespective of where the money comes from, public or private sector, it doesn’t differentiate so why do we need to pour unlimited cash into it to keep it private? It now looks like billions have been wasted bolstering banking assets when the same cash could have been used to provide mortgages and investment capital which would produce domestic returns straightaway. I just don’t get why a government with this as a ‘stated aim’ didn’t have the bottle to actually do it?

Anyway GGG get with the program the recession is all but over isn’t it, or is that just what we are led to believe?

[threegee]

So you'd have bailed out Northern Rock? Economists (real ones, not part time polytechnic lecturers like Gordo) warned what would happen. It's called moral hazard in the trade.

You can't both let the banks go bust and nationalise them! What we have now is the worst possible of all worlds. They should have all gone down the pan with their shareholders. And I say that as a bank shareholder who sold all his bank (and Northern Rock) shares some years back when he sensed this coming!

Allowing the banks to fail and protecting both depositors (and the economy) are two entirely different issues. Here the Lib Dems seem much closer to reality than either of the two major parties. The recession is the result of a government (principally the UK one) allowing the banks to create too much debt by ludicrously low marginal reserve requirements. Decades back we had government controls on credit to stop this happening at the consumer level. As I said earlier: you can't borrow yourself out of debt.

No, the recession isn't over. Investors call it deadcat bounce - where people are foolishly lured back into a falling market. Future tax receipts have been pledged to cover previous foolish borrowings. And those future tax reciepts probably won't come in anything like as fast as they'd like you to believe. There's nothing left for future investment in the creation of real wealth and real improvements in living standards. We're in the state of a third world country burdened by debt and with a clueless government who can think of nothing but retaining power.

None of the fundamental problems have been addressed. They will come back again and again. Bust and Bust to replace Boom and Bust!

[Symptoms]

GGG wrote: "I've done more than Gordon has in running a successful business for decades ..."

then

Malcolm wrote: "I think if you walk into any corner shop up and down the country and ask the Asian gentleman there to run the country they will do a better job!"

does this mean that GGG is from the Indian Sub-Continent or from somewhere else over there?

[Monsta®]

how the hell can you say that! have you been to a third world country? take pakistan what a dump full of mud huts and terrorists, no thank you gordon brown is doing just fine

[Malcolm Robinson]

GGG,

I wouldn’t have exactly baled them out but I would have taken them into state control once things had run its course. With considerable high street presence they could be used to deliver what is needed, and maybe one set for toxic assets, instead of all that cash disappearing into a black hole to maintain them in the private sector. You can’t allow them to all go bust, unless you advocate returning to a bartering system?

The moral hazard is now the likes of NR, RBS etc repossessing houses and putting people on the streets, with government control now it is Gordo who is actually throwing these people out and refusing lines of credit for erstwhile profitable small companies while at the same time lending vast amounts overseas. It is a mess of his own doing. Darling’s budget is going to be a corker; I wonder how much he will admit to getting wrong even in the pre budget report a matter of months ago.

Sym,

I think your are mixing ‘metaphors’! I mentioned the corner shop brigade only by way of extolling their financial acumen as against the distinct lack shown by the treasury team. I think you will find GGG has Bedlington running through him like a stick of Blackpool rock!

Monsta,

I hope that is an ironic smiley!

[Monsta®]

Monsta,

I hope that is an ironic smiley!

whats ironic about Mr B

[Denzel]

how the hell can you say that! have you been to a third world country? take pakistan what a dump full of mud huts and terrorists, no thank you gordon brown is doing just fine

As sweeping generalisations go, that's one of the best.

[Symptoms]

Malcolm wrote: "I think your are mixing ‘metaphors’!" Technically correct - I was trying to directly connect apparently unrelated subjects in this instance for the purpose of humour, ... I think sucessfully. I'm in good company using this device; Euripides, Sophocles, Aeschylus, Shakespeare, all the great poets, and of course, Blackadder.

I think we can now add Malcolm to this list of greats for: "I think you will find GGG has Bedlington running through him like a stick of Blackpool rock!" Yeh, but who gets to lick the end?

[threegee]

I'm not for licking! I'm for handing out to people to prove you've "been there".

[Malcolm Robinson]

Malcolm wrote: "I think your are mixing ‘metaphors’!" Technically correct - I was trying to directly connect apparently unrelated subjects in this instance for the purpose of humour, ... I think sucessfully. I'm in good company using this device; Euripides, Sophocles, Aeschylus, Shakespeare, all the great poets, and of course, Blackadder.

I think we can now add Malcolm to this list of greats for: "I think you will find GGG has Bedlington running through him like a stick of Blackpool rock!" Yeh, but who gets to lick the end?

Ah ha, now we know who writes those Obama speeches! Nice use of classic literary and oratory skills Sym!

As for the other, sobriety refrains me from mentioning anyone who might have their lips GGG bound!

[Malcolm Robinson]

http://www.telegraph.co.uk/finance/newsbys...-downgrade.html

[threegee]

A further inducement - if one were needed with depositor rates at sub 1% - NOT to put your money in a building society. Then Gordo wants us to spend spend spend, just like him - so that's OK then.

The telling article there is:

A 'Copper Standard' for the world's currency system?

"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years." "The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.

The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).

While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.

At the monent they have too much tied of in dollars to see it slide too far. But as a medium term strategy seeing it no longer be a prefered trading currency is clearly their aim. Then no point in holding them, let simple market forces take their course..

The Chinese may well have gone up a blind alley with Mao, but they are ace capitalists at heart, learn fast, and plan well ahead. So when the dollar takes other western currencies down with it there's roaring inflation ahead for the UK to cap our stagnation. Enjoy the deflationary phase of the recession whilst it lasts!

[Malcolm Robinson]

I was shocked and dismayed listening the Darling’s pre budget report in November, which I think was overwritten by Gordo, but the budget of yesterday was even worse as it included at least some figures. If there was such a thing as GB LTD and this was its accounts would you buy into the company? If not how is the gov going to get its bond issues away to provide the capital needed? Ah yes you can always print more of the stuff! Dear me we are really in the crapper. The massive debt overhang will draw down any, much heralded, recovery and mean everyone will have less and less disposable income as any and all taxes have to go up to try and repay this debt. Interesting to hear Darling say basic rates of income tax will not go up for the next year or two but afterwards “we will all have to make a contribution!” The headline grabbing rise to 50% for anyone earning over 150K might produce about 10 billion over the next few years, as long as those people don’t pay tax avoidance lawyers, while the gov increases PSD by 750 billion. Anyone want to guess who will have to pick up the shortfall of 740 billion and that doesn’t include what has been thrown at the problem already.

Its not about politics anymore its about survival!