Banks: The new welfare dependents

i love the way these guys forecast the future.....asked 18 months ago what would they have said about UK's prospects in 2008? None of the so called experts saw the present debacle, why do we think they know any more than a two year old with a pin!

Credibility is a major issue with anything this guy says.

Merv? What about the falling value of sterling,will the result of the fall not just fuel inflation.

After all we import so much whether its good times or bad times.

Once again UK PLC borrowed its way to this point,so how will things resolve by borrowing to get out of it.

There needs to be a reality check we need to rebalance the WHOLE economy and halt the cycles of tripolarisation.

UK PLC HAS A DISEASE ITS BIPOLAR DISORDER.

> Bankers detest their transmogrification into the
> welfare dependents of our post-bubble age, and
> they are desperate to pay taxpayers back

Yes, but they'll be wanting to pay us back with our own money! The trick is to make the owners/shareholders pay the full cost out of thier pockets, so that'll they'll think twice next time around.

The Bank of England have made a massive mistake with keeping interest rates high , well after it was obvious the oil price had blown its bubble . I understood any interest rate cuts takes 6 months to feed through , so the next 6 months are going to be very hard , but borrowing will become very cheap mid next year . Unfortunately / fortunately only customers with good credit scores will be able to benefit . Believe me there is plenty of people who will take on new debt if the maths work . In property a lot of cash investors are just awaiting for the bottom to become more apparent .

IF people have disposable income in order to borrow, a job and +aaa credit rating, the Banks will lend at the levels of 2007. Agreed?

Oh, but 83.7% of the working population have will fail on at least one of thos criteria.

So put that in your fan graph

Do we now have Capitalism working within a Socialist system?

Economic prediction is as precise as Nostradamus prophecies.

Given the current economic thinking and teachings, there is not a single expert in the field of economics in the World who has ANY IDEA of how this mess will pan out eventually - It's never happened before! All we are doing presently is 'sticking on Band-Aids, or firefighting each and every event.

The trouble is I think we're all starting to understand that we haven't seen the end of it yet - merely the end of the beginning!!

I would suggest that - just like the social environment in post-election USA - we are entering a whole new field of economics, which might just lay Keynesian philsophies to rest?

Economad

The Banks' timing of the bottom is similar to my expectation set a year ago. Getting there will be ugly and unpleasant.

Their expectation of recovery is optimistic according to my reading. There will be some sort of recovery in 2010 but it will be only because we will have sufficient strength to climb off the bottom. There will be a long time to wait for surging growth.

The government rescue of the banks last month was forced by market conditions of the time and was then perceived as an interim measure.

What may be forcing the bankers hands on this is the high, if not punitive, price The Treasury has put on that rescue. You are quite right to say that this is making the bankers meaner than they might otherwise wish to be. If this is having a deleterious effect on the economy then the price of the rescue has to be mitigated in some way.

This has to be the moment when Darling steps up to the plate and tells his boss that government policy is preventing the green shoots of economic spring from sprouting.

Any long term nationalisation of the banks, either partial or total, will be foolish and unnecessary. There will be a justfiable need for better supervision but there will be no advantage to be gained for the economy from nationalisation.

As we reach the end of the begining it behoves the government to understand that as the main player in this scenario it and it alone will determine whether the downturn will be a relatively short few years or a slump at least a decade in length or even longer.

Do they have a chaplain in the BOE?

They're going to need one.

GC

The "Fan Charts" of 2006 would make absolutely hilarious reading now if the outcome hadn't been so tragic.

I believe the only thing that can be said with any certainty is that the so called experts haven't got a clue what will happen in the future. Mervyn King got it so wrong recently that it would probably be better to expect exactly the opposite of what he and the BoE predict. For example, rampant inflation and an L shaped depression lasting many years.

The Great Depression only really ended with WW2. Hopefully what is shaping up to be the Second Great Depression will not end the same way.

This country's problem is that it does not create enough wealth and is over-reliant on imported energy.

Perhaps if the country were mobilised to become the world leader in renewable energy then we might have a chance. Anything else, in my humble opinion will cement Great Britain's decline into a mediocre world backwater.

Why do we continue to listen to the people that got things wrong?

We are continually told 'none of us saw this coming', and 'no-one could have predicted such a situation.'

But the fact is, actually there WERE quite a lot of people who saw this coming. Unfortunately they were labelled party-poopers or doomsayers, and brought down the mood of gleeful excess.

So now, lessons learned(!) why aren't we seeing the people who were RIGHT taking the reins? Or why don't we see Darling and King etc at the very least surrounding themselves with those with the ability to spot the problem instead of allowing the same mistaken fools to shrug their errors off and carry on in their roles?

I have no faith in these predictions, just as I had no faith in the previous published predictions from all manner of bodies (eg the Item Club, the IMF etc.) who just continually revise their errors (downwards) without ever admitting that, actually, they just haven't got a clue.

Recovery in 2010?

Storming ahead in 2011?

Back to no credibilty yet again.

Its got to take several years for the Banks to rebuild their balance sheets if not over a decade.

So pray tell where the next economic miracle is going to come from?

Maybe second hand washing machines will be worth 1500 pounds the bankers perhaps will be trading them with derivitive options.

#6 "Do we now have Capitalism working within a Socialist system?"

No !! It is just Bubble-ism gone mad !! Capitalism within a Socialist system is now called "Socialism with a Chinese face"; previously known as the "Singapore model" !!

Recovery in 2010?

Storming ahead in 2011?

Back to no credibilty yet again.

Its got to take several years for the Banks to rebuild their balance sheets if not over a decade.

So pray tell where the next economic miracle is going to come from?

Maybe second hand washing machines will be worth 1500 pounds the bankers perhaps will be trading them with derivitive options. .

I wonder if the fallout would be as bad if your public reportage and graphic symbols were not so inflamatory.
Why is it ,of all the hundreds of TV channels the BBC resorts to the downturn symbol at every turn??

Recovery in 2010?

Storming ahead in 2011?

Back to no credibilty yet again!!

Maybe we can have a return to 'SPITTING IMAGE'

The number one priority for Banks is going to be to repay the treasury because (a) they don't like getting pushed around by an incompetent and hypocritical government and (b) they can't make money on money borrowed at 12 %. I fear one of the consequences of the cack handed way the Government "rescued" the Banks will be to accelerate deleveraging further restricting credit until all the additional capital that the Banks (rightly or wrongly) said they didn't need is repaid. In these circumstances these projections of a relatively early recovery look as optimistic as the last projections of 2009 being broadly flat. This is going to hurt.

We have yet to see the full effect of the recession and credit squeeze on the real economy. All the statistics like unemployment are lagging indicators. The B of E got it completely wrong before. I suspect that a lot of what they say is wishful thinking. They might say the economy will contract by 2% and then recover but they really have no more idea than you or I. I suspect that there will not be a bottom till house prices start to rise again and there is no sign of that yet. Until then the spiral of job losses, foreclosures and the inability to refinance loans will feed through to the high street in sharply lower sales causing job losses, foreclosures and the inability to refinance loans. I hope Mervyn is right but I doubt it.

#12

"Mervyn King got it so wrong recently that it would probably be better to expect exactly the opposite of what he and the BoE predict."

Whilst I totally agree that the so called experts have got it wrong, that does not mean you can immediately assume that anything they say now is exactly the opposite to what will happen.

I agree that many people did predict this was going to happen but then we all know (excluding Gordon Brown) that the economy naturally fluctuates between boom and bust. Therefore, it was hardly difficult to predict we'd enter a recession at some point. What is notable is how long it took before these people's predictions became reality; in that sense they got it wrong.

I'm going to predict that, at some point in the next decade, we'll see another boom. Whilst a lot of people disagree with me right now, akin to those who claim to have predicted this current recession, I look forward to being hailed as successful prophet in the future.

Can't we just accept that nobody has a clue what is really going to happen in our current predicament?

Forgot to say in my previous post...

I'm simply amazed at how the BBC continue to allow their chief business editor to churn out this negative piffle each and every day. If there is a negative angle to attach to a story, you can be sure that Peston will be all over it.

I believe the BBC are abusing their power by allowing such a one sided view to be published. It is a disgrace and, quite frankly, morally wrong. Just as morally wrong as the people (greedy bankers and dumb politicians) who've got us into this mess from day one.

"Bankers now have perhaps exaggerated fears of making losses...."

Now they haven't, they have made big losses and UKplc has bailed them out.

They maybe exaggerating fears of the extent of bigger losses? UKplc will bail them out again - unless the next tranche is enough to bankrupt the company?

the fluctuations in the markets are like that of a geiger counter except we have not had the earthquake yet.

bankrupt the country***whoops

I'm not sure whether I've more confidence in The Bank of England or Jersey Police.

Regardless of timing exactly how is the UK economy expected to "bounce back with a vengence"?

Aside from the arms manufacturing industry the UK has a very small manufacturing base, and this is unlikely to change.

The City has been greviously wounded and will take years to recover - surely no-one will buy into any more asset price bubbles for a goodly while.

North Sea oil and gas (used to mask problems for a good 25 years) is well past it´s peak, and is on an irreversible downward spiral.

Pretty much everything that could be sold, from fishing rights through to telephone companies has been sold.

You cannot have a sophisticated economy predicated on everyone cutting each others hair or offering each other pedicures or beauty makeovers.

Maybe foreign investors will be keen to locate in the UK - perhaps a major selling point could be the soon to be unveiled large scale power blackouts. The Govt. might be be able to lie to the average Joe in the street, but anyone with several $ billion to invest will surely do their homework first - and they will certainly understand that power shortages are now almost a given certainty.

If levels of economic activity are in part linked to confidence why doesn´t someone just come out and clearly identify the range of sectors that are going lead us all back into the economic sunlight of the future?

There is nearly always a presumption in the replies to these blogs, that our great leaders, whether they be political, financial or whatever, are either stupid or criminal. This is not the case. At the moment they are simply living in desperate hope that things will get better, as the prisoner did in the famous anectode as follows ...
"A man had offended the king, and was sentenced to death.
"Oh your majesty!" he pleaded. "Allow me but one year, and I will teach your
horse to talk."
Astonished, the king agreed.
The man's friend took him aside and asked, "why did you make such a foolish
promise?"
The man shrugged. "In a year, the king may die. In a year, I may die. In a
year, the horse may talk."

There were plenty of people who saw this coming even the Bear Stearns knew this was coming, here is a Business Week article of an new IPO Bear Starns were trying to launch in May 2007 the assets that would have made this IPO look very similar and probably were the assets that were in the 2 failed hedge Funds whose going under sparked the intense volatility of August 2007 that preceeded Northern Rock Going under.

https://www.businessweek.com/bwdaily/dnflash/content/may2007/db20070511_093244.htm


It is obvious that Bear Stearns were not confident in holding these assets under it's own name and were keen to get out of this business. Had Merrill Lynch not forced a valuation of underlying assets in the funds in July 2007 by auctioning off their collateral chances are Bear Stearns would have got away with it and foisted these (later discovered) Worthless assets on the American Pension Funds.

I suspect there were plenty of people in the banking sector who knew the value of their books but hoped they would have another year to squeeze out one more good bonus and then it's someone else's problem.

And Merv and his mates were not just paying lip service to the government and genuinely did not see this coming then they are in the wrong job and while they are there we do not have a chance.

It strikes me there's an awful lot of wishful thinking still going on. In the real world people, businesses and countries live within their means. They are as self sufficient as possible and don't waste their resources.
They don't live on borrowings. In the UK we import just about everything on a mountain of debt. Isn't it about time we stopped listening to all the dysfunctional people in power who seem to live in a bubble of their own making?

For a start we could get back to a more realistic type of agriculture where we grow more or less all the food we need but not by treating animals as commodities put on this earth for our convenience. Actually we'd all be better off financially as well as environmentaally if we became more or less vegetarian (but this is an argument for another day). We should also start treating our agricultural land with a bit more respect and not always be wanting more and more unsustainable production. We could also stop wasting so much perfectly edible food.

Again from an environmental perspective it's ridiculous to be overproducing new cars. Let the American car companies go to the wall or let them switch their production to something more useful like building wind turbines. Why can't they adapt to changing circumstances? It surely isn't beyond the wit of man to be able to do this. I have seen images of rows and rows of unsold new cars in this country as well as in the US. By increasing productivity and efficiency car manufacturers have become victims of their own success but there are plenty of other things they could turn their hand to. (Sorry this bit should probably have gone into the previous blog!)

Has it ever struck anyone that actually we are mostly worse off financially than the poorest people on earth as if each individual did a balance sheet for themselves they would see that they are mostly in the red (credit card debt/mortgage/student debt etc) with all their debts whereas most of the poorest in other thirld world countries are at zero or close to it. Of course there are others in this country and elsewhere who are massively in the black with more money than they know what to do with......quite a few of them are (let me see)......bankers!!!

MK isjust talking the economy up.

No-one has the faintest idea where the merde will show up - so everyone is deleveraging like mad - with the effects you describe.

Problem is that with this deleveraging, the main economy has no liquidity to invest and grow, the financial services sector will be destaffing like mad as will the building & property sector (small crumb of comfort estate agents feeling pain - no more gel for them!)
To correct the economy and to ensure that we do not repeat the bubble we need to redeploy thousands of bankers and estate agents doing something productive at a sensible level of remuneration.

If Gordon pulls that one off we really will have cause to celebrate.

Meanwhile pity the poor pensioners and investors in pension schemes.

Sit tight and prepare the bumpy ride ahead.

I had the pleasure of attending an investment conference to which some of the leading industry experts were at and they were all predicting a slowdown/recession in the not to distant future, and it's finally arrived.

the two outcomes were that we would hit recession soon (August 08) or later (December 08) - the thinking was if it happened sooner then it would not be a long drawn out affair, if it was the later one then it could be a long recession.

We're entering the latter it looks like if growth is not expected to pick up till 2010! - the BOE had/have the remit along with the chancellor to avoid this, the right decisions look like they were not taken at the appropriate times.

The key aim that you have during this recession is hold onto your job. Job retention has to be your priority.

I'm not sure were this perception that Inflation in the UK is gone and we actually have to worry about deflation.

You have to be a bit slow if you don't realise that although commodity prices are weakening so is our currency which in turn increases the GBP cost of buying commodities. The more we lower interest rates the more we are likely to weaken the GBP and therefore the cost of commodities of the UK purchasing commodities will increase.

Not withstanding everything else we import is also getting more expensive in the last 3 months we have seen GBP weaken against the JPY by approx 50% coming into christmas that makes the cost of importing Japanese products such as Sony, Toshiba etc. expensive and I would hazard a guess that the retailers might pass that cost onto the consumer. Also given that the Chinese currency is pegged against a basket of currencies all of which are strengthening against the pound it means everything that is imported from China will be more expensive. The only benefit we will get from a weak pound is that our exports will be more competative but i'm scratching my head to think what we actually export.

On what basis exactly will we be storming ahead in 2011? From where I'm sitting (I own a business) and reading some of the more serious, apolitical analyses of our future economic prospects I see absolutely nothing (repeat, nothing) to indicate anybody storming anywhere in 18 - 24 months time. What do the bankers smoke?

The UK economy is in shreds (nice one Gordon). Public sector debt and contingent liabilities (including all that hidden, off-balance sheet stuff) are not only of galactic proportions, but also now driving a rod through the heart of the UK's future wealth creating capabilities. We've all but reached the end of the era of cheap energy. The UK's energy security is a joke. Our economy (such as it is) was built on that well known, er, flaky sector know as "services" (ie moving wealth about, not creating it) ...

... and the BoE says it'll be over by Christmas 2010. Pull the other one Mervyn.

No wonder most of us ordinary folk have zero confidence in the competence and integrity (and, now, futurology) of the terrible twins: bankers and politicians.

Dear Robert

This is Socialism at its worse, it is actually bailing out Capitalism, Thatcherism, and Globaliastion, by Nationalisation.
IT IS THE FAULT OF GLOBALSATION THAT THIS HAS HAPPENED, and it has been advocated by one group of people in Particular, THE BILDERBERGE GROUP, of which the worlds elite Bankers are members.
They are now receiving tax payers money to bail them out, it is No wonder Governemts are advocating this as this Group has Massive influence at Government level, in fact the reason they are doing this is to regain their losses.
No associated with this group of people will loose out.

Dear Robert

This is Socialism at its worse, it is actually bailing out Capitalism, Thatcherism, and Globaliastion, by Nationalisation.
IT IS THE FAULT OF GLOBALSATION THAT THIS HAS HAPPENED, and it has been advocated by one group of people in Particular, THE BILDERBERGE GROUP, of which the worlds elite Bankers are members.
They are now receiving tax payers money to bail them out, it is No wonder Governemts are advocating this as this Group has Massive influence at Government level, in fact the reason they are doing this is to regain their losses.
No one associated with this group of people will loose out.

Robert

On a lighter note, I am looking forward to Mandlesons resignation.

When will you be challenging him regarding his recent confession to speaking about EU Tariffs with Oleg?

Most pages on the BBC website regarding corfu, still only have one line on mandleson and pages on osborne.

I think it needs about at least a weeks worth of heavy coverage of Mandlsons 'economy with the actuality' to start to make the BBC look even handed.

#8

"we are entering a whole new field of economics, which might just lay Keynesian philsophies to rest?"

You seem to be mistaking Keynesian for Freidmanism (aka Thatcherism/Reganomics), it's the latter which is being put to rest - even in the US, it's failed in a way that only eastern European Communism can better...!

The "intelligensia" are still deluded. Last night I listened to a respected economist telling me that the "injections" would "stabilise consumer confidence" and lead us out of recession.

When I asked whether it was time to stop measuring the health of the economy by what people CONSUME and look at the value of wealth we CREATE he wasn't really impressed.

Fact is, we have this weird idea that by shopping till they drop, consumers somehow create a healthy economy. They don't, they create very healthy economies in China and whoever else is banging their exports into Britain, and create catastrophic debt levels in Britain shortly to be followed by a collapsing currency and eventual national bankruptcy.

I don't know many good businesses who measure their success by that yardstick so I will stick with the idea that the consumption-based economic measures are the problem. It's just a pity that this seems to include the inner circles of government.

#22 "I'm simply amazed at how the BBC continue to allow their chief business editor to churn out this negative piffle each and every day."

You might think it's negative gaffe, I think it's an attempt at balanced and realistic analysis. It's negative in tone because we are in a major economic crisis in case you hadn't noticed. When RP reports HMG thinking, others accuse him of being a mouthpiece for Gordon Brown. RP didn't say Mervyn King was wrong, he just raised the possibility and possible consequences of him being over optimistic. (Very politely too - not in the style of the Daily Wail or Daily Excess!) Not to do so would be irresponsible. Irrational optimism is one of the things which has got us into this mess. We don't want the BBC turning into a modernised version of Pravda. Disagree with RPs views if you wish, but be glad that we live in a society where correspondents are allowed to think for themselves.

Mervyn King sees

"But it also shows the economy recovering in 2010 and storming ahead in 2011."

How come he didn't see the recession coming 18 months ago, or even two months ago?

Cred. is what the Bank lacks in bucket loads.

Their solution to a low-interest fuelled credit bubble and crunch is even lower interest rates - even an idiot must see that there is just a bit of a logical problem here - but perhaps Mervyn King does not.

If he does not see the problem perhaps he should be asked why, and forced to explain himself. Remind him he works for us, the country, not a load of now mainly foreign owned or nationalised bankers.

Isn't it about time we had some house cleaning and fired the failed three - Head of BoE, FSA and Treasury. It will be a national disgrace if they hang onto their jobs.

The pound is plummeting, not because of the interest rate reduction but because the Bank has said that many more are to come - twits! (But it is probably all part of the 'cunning plan' to impoverish the British people but to rescue the Bankers.)

King has to be as positive and optimistic as possible, despite the clear evidence of a long and deep recession, as he believes that what he says will actually have a material effect on that recession. Though there may be some truth to this, the underlying factor here is that we have now entered a prolonged down-turn in the economy of the kind identified by Kondtradtieff in the 1920s in which the prolonged autumnal boom, financed by leveraged spending and asset bubbles, has given way to a long winter depression. This will probably last - if past experience is anything to go by - for another 7-10 years. Of course there will be short term-business cycle recoveries within this downward trend, but the trend will be inexorably downward until over-production and consumption have been squeezed out of the system. This will only happen from some time around 2018-20 in my opinion. We are in for a long freeze which last time led to fascism, Stalinism and WW2. Let's hope this time we have the power to see it coming and the intelligence to prevent its worst excesses.

27.

Ok, perhaps it's because that's how they behave.

I have retained a copy of my post (38) in moderation and it contains no profanity, abuse, insult or libel. It breaks no rules.

I am baffled by your decision to put it to moderation.

It's just no good.

The UK will have to stop hoarding all those things that Brown made world famous and start exporting them.

Then we can earn a bit of foreign currency to pay the Import Bills with.

Now let's see, what has Brown made us world famous for that we can export ?

Economic Forecasts ?
no, not many people will want to buy those

Financial Regulation ?
no, same as above

Fiscal Prudence ?
not since that one went out of the window

Quangos of Important People who think they know a lot, but they actually know not very much ?
no, that is a non-starter

Bin Police ?
What ! - who would buy that one in their right mind

Bureaucracy expansion to increase the tax burden ?
Getting closer but not there yet

Inflation, Recession and Pension Destruction ?
At last, something Brown can proudly export and say
'I did it my Way'

I think he has taxed everything else out of existence, so the end-customer has to finally pay for all the tax add-ons that Brown drempt up.

Hence, no spending for a couple of years. Essential replacement stuff only.

If it sounds like a Depression and looks and acts like a Depression....
....well it isn't exactly the feel good factor looming on the horizon, is it now ?

I think it is fairly self evident that the BofE, the Treasury, and definately not Darling and Brown have any idea what the future holds for us. I don't really see any point in discussing the matter- this post is to counter ther criticism of Robert Peston. For how long had we heard the experts, I'm thinking especially of Evan Davies the BBC Economics Editor as was, now decamped to the Today radio programme, telling us all how well things were going and what a great bloke Brown is. No thanks give me Peston's realism anyday.

#41

I just can't see why people waste their time making such ridiculous comments! I'm not saying you're wrong (you might be right) but how on earth can you make such wild predictions? Whilst this current crisis may share some similarities with past downturns/depressions, it has it's own unique life blood. I'm not sure making historical comparisons is going to do us any good.

Commenting on this blog has simply turned into a competition with a bunch of people trying to get one up on their peers by showing off their limited understanding of economics.

I may be in danger of repeating myself over and over again about this but why do people keep making stupid predictions? Yes, we could be facing a cataclysmic meltdown but we really just don't know that for sure. I'm not trying to be all positive and say it won't happen, I'm just trying to point out that predictions are futile and may even contribute to a worse situation than would be the case without them.

Only satirists can predict the future ,economists and politicians even have difficulty predicting the past, in fact they are so short sightit they have difficulty wreckognising their Dorian Gray pictures in the mirrors and would put bars on it if they could .

The welfare state is a typo and should read farewell state ,as first pointed out by Terry Thomas in" im allright Jack "nearly fifty years ago, with the film summericing up the inevitability of it . [A Phaoroah well ,fairywill state with a clear intension to make complete tutts out of itsef and a fitting mammorial to silly co.n valley banking .to be or not to bequeethed to the future generations of suckers co necktied to the keynesian roller coasterrs economy waiting for Moses ,another basket case ,to lead them to the promiced land

The Shanghai motor company probably based their buisiness model on TT's insights ,whilst we were struck with Keynes, that is until the Chinese were suckerrs enough to mop up surplus milkquidity and redirect it through the booby prized in the city back to the original tutts via the purchase of treasuries


Britain now exports its Debt rattle ,with a tut tut here a tut tut there, here a tut, there a tut everywhere a tut ....eeyaye eeyaye owe ,[eiou] to those who will eventuaqlly thro w it out of their pram

Terry Thomas is gone but Peter [the Rock ]Sellerrs can still bring the house down

Robert, I agree with most of things you say here, but you don't mention that King's speech was barely more than a PR exercise. He simply has no data on his claims, maybe only what his subordinates' models produce.

The data does not support a short recession - it is based on a rather insular view of the world economy.

Nobody yet knows what will happen if all the bailout moneys start to function (in particular on inflation). How does the devaluation of the pound affect (I guess the largest effect will be on inflation and not on exporting). How would a Chinese slowdown to 4% affect social processes in China and in turn how it would affect the rest of the world (in economic terms too). How would the cheap labour model of the British economy established in the 1990s would cope with the downturn. Etc.

But I do understand that you need to report on the soundings of the president of the Bank of England, and I also understand that you cannot really say from where these soundings come from (not from his mouth), and also that you need these guys. Thus although I like your general technique of building your arguments on parallel panels, I really expected a bit harsher words.

'Or to put it another way, if the chancellor wants to be confident that we will eventually bounce back with a vengeance from this economy misery, he and the banks may have to accept that massive taxpayer funding of the banks is the new norm, the new status quo.'

In other words, the Great and Good on both sides of the pond have painted themselves, and us, into an interesting corner!

How long before the taxpayers decide they've had enough, or are no longer able to sustain this practice?

The UK has the advantage of the vote of no confidence, and the call of an early election.

We, on the other hand, have just locked ourselves in for four years of a new Administration, and won't have another bite at the voting both until 2010.

Advantages to both systems to be certain, but you folks have more immediate remedy.

'Scuse me, I have to go back to my 18 hour day. I have to earn money to be taxed to be sent to bail out General Motors, whose products I have never chosen to purchase....along with millions of my fellow taxpayers and car purchasers.

A well balanced article.

As you (in)famously reported a few days ago, banks are still having to pay way over Base Rate to attract deposits - if they are paying savers over 6% how can they be expected to lend at close to Base Rate without exacerbating their current difficulties?

The banks were stupid for getting themselves into such a mess in the first place but expecting them to lend at a loss because the taxpayer has had to bail them out would only make matters worse. Hopefully ministers/shadow spokes(wo)men will avoid making lazy comments about 'fat cat bankers only wanting to protect their bonuses' just to grab a headline.

#15

I think you are mistaking communism for socialism, you're not from the USA are you as they seem to do this quite often - surely a Keynesian economic policy is capitalism within a socialist system?

Robert, many a time you hit the nail on the head but your aim is drifting badly and you are starting to talk absolute piffle.

The problem is that too many decision makers are in denial of their ultimate responsibilities to the mess we are all now in and refuse to believe there is either 'another way' or see no reson to resign -without compensation- because they are the 'only ones' who know how to run their banks or companies!

Absolute trash, until they are replaced we have the blind leading the blind in a downward spiral of incompetance and ineptitude.

There will be no Bretton Woods simply because the political scenary is nothinmg like it was after world war 2.

China the Middle East and Russia have their own alteria objectives and the USA rightly always puts the USA first.

We pretend we make a difference but the governance of the last 11 years has led us to be Europes first civilised banana state.

We need another way, we need to realise what was will not return and that the wheels of power have shifted iretrevably from Western Economies save the USA

Brown and Co, only know how to redistribute and tax, that way is as dead and the trickle down theory.

We need fresh faces and realism as against over paid and pampered has beens. Only then will be move ahead into the new working era.

So Robert cut the usual stupid turns of phrase you add to give some flavour to very downbeat news and start addressing the real issues and what needs to be done.

We all need to think outside the box and stop any further damage hurting this great nation by selfish politicians, regulators and CEO's.

Will my hopes ever happen? of course not because the system is so embeddeed in the gravy train no one will get off it. ortunately we still have elections and Brown will realise he is no Bean just a Dodo

As I said yesterday, when an economic expert in either the government or the government's master, the city, tells you that things are going to be okay, you should be very worried indeed.

They lie. They lie again. And they lie some more. It's what they do and it comes to them as easily as breathing.

Storming ahead in 2010. Right. Of course. And whilst house prices were going to keep rising for the next twenty years, Iraq was brimming with WMDs.

The fact that their credibility is non existent is beyond even a joke.

But our journalists, bless 'em, keep slurping up the BS like it was wine.

I know what would make a good BBC programme. How about an under cover expose of how the City, the major banks and hedge funds are run, in the style of the show, the Secret Policeman, that outed racism amongst police recruits.

A few secret cameras hidden in a few boardrooms would make some fine viewing.

Got the stomach for a bit of investigative journalism BBC? Or would that be too close to biting the hand that feeds?

#22 "I'm simply amazed at how the BBC continue to allow their chief business editor to churn out this negative piffle each and every day."

RP is a great journalist. You really need to educate yourself in what a journalists job is and what their ethical and moral standards are. It is easy to chortle but if they make a mistake they get sued, a la Moseley. They pay for their mistakes in court.

Unlike Bankers it seems...

I heard a program on the radio this morning, talking about home repossessions and the banks eagerness to go to the courts ‘at the first sign of trouble.

For me this is an even more worrying sign in that, the banks are obviously keen to get back whatever they can get for repossessed houses. Presumably, before the whole lot comes down.

Would you want to be the nicest bank in UKplc at the moment? If you wait until the assets are really depressed you may end up handing out a begging bowl to HM treasury. The banks should have been nationalised (every one that required funding), the problems are so serious that the social implications could bring widespread unrest.

no.47

I agree wholeheartedly with your comments and commend you to the Chancellor.

yours sincerely

Terry Thomas

22 Andreweaster. Whilst I may not like or agree with what Mr Peston prints in this blog.. Note: BLOG. I will defend his right to pen what he wishes. He is a respected journalist (leaving aside whether one respects journos or not) works hard to get inside the closed circles to provide information that is both current and interesting (mostly).

If people wish fluffy kitten stories, or news items ofn the success of the Mrs Miggens pie empire then there are other sources. The leading national papers have blogs as well - but there only around 20 people post per article, too sanitised perhaps or not enough stimulation in the posts to elicit critical thoughts & comment from readers?

(And please note, I am not a RP fan)

"If the chancellor wants them [banks] to lend more to all of us, he probably has to persuade them that a state of semi-permanent nationalisation is a good thing - and that they mustn't even think about paying taxpayers back for many many years.

But if he wants to wean them off state support as soon as possible, he can't expect them to grease the wheels of the economy effectively, to end the contraction of credit that's been doing us so much harm.

Or to put it another way, if the chancellor wants to be confident that we will eventually bounce back with a vengeance from this economy misery, he and the banks may have to accept that massive taxpayer funding of the banks is the new norm, the new status quo."

What is the likely effect on the UK economy of non-repayment of the Treasury loans vis-a-vis repayment looked at not just from the point of view of the UK banks, but also from the point of view of the sources of the funds with which the Treasury intends to recapitalise the banks?

Or am I being over-inquisitive? Whether repaid or not repaid, is the reaction of the providers of the Treasury "rescue" funds of little relevance to the future performance of the UK economy? If this is the case, then I think there will be some who'd be delighted to have your assurance of this. If not, then don't you think it's something you should have mentioned in your post?

Recovery in 2010 and even better to come in 2011.

Did Merv get this reading from the same crystal ball he used when he told us with confidence that we would avoid a recession. I seem to remember in 2005 when he was warned about the dangers of the housing bubble comenting that 'it was not the job of the Bank of England to attempt to influence asset prices'

His remedy of using the same low interest rates to solve the problem caused by his low interest rates reminds me of an episode of 'The Dukes of Hazard' when Bo Duke speeding towards a wide precipice in the General Lee, realising that there was no way he could stop before he reached the edge puts his foot to the floor in the only hope left; that he could go so fast that he could clear the gorge.

Yeaaaa Haaaaaa.

Bo made it. Merv will never get our busted old banger fast enough.

They're still not prepared to admit the real rate of Inflation.......

"no more boom and bust"
hahahahaha all the way to the bank (only to discover it's closed)

Is it true that I hear despite the bank troubles and the multi BILLIONS of £££ we, the Taxpayers have given them, they are still cheeky enough to give themselves massive bonuses?!

HOW DARE THEY!

Strip the of their assets, savings, bonuses and see how they like it in the real world where they could loose their home, their job, have no pension, no future.

They should hang.

ps. Moderators, sorry if this post sounds angry but thousands of pounds of MY money went to stop them from collapsing so I feel I have a RIGHT to be mad!

So with Deposit rates falling, Sterling losing value against nearly every currency.

No plan forthcoming to rebuild Britains manufacturing base.


Britain will just get poorer.

Low quality cheap goods in the Shops (those shops that are left), more restricted choice of foods.

Low Pensions (so many Pension Funds have been badly burnt by the Bank Share collapses) for those who might get a Pension, etc, etc.

Don't expect any turn around until more manufacturing businesses are set up.

And set up to export.

So will the Govt leave the brakes on Public Sector pay ?

Keeping their pay rises below Inflation does of course hold back the economy.

So compensation for the Bank Shareholders who were Nationalized and a proper pay rise for the much maligned but very necessary Public Services !

Say ten percent for the Public sector, that would boost the economy , immediately and at a grass roots level.

Public sector workers would spend their pay in Shops, local businesses etc etc.

Good for everybody.

It must be remembered that the £5000 bn support of banks by Central Banks is mainly in the form of loans and that these loans are held against collateral judged adequate by the Central Banks.

This may well be the financial structure of the banking systems of the future. Banks will only lend from deposit funds and from wholesale funds acquired from Central Banks who have vetted the offered collateral.
Over time an efficient and stable banking system should evolve and interbank lending will resume.

How is Santander getting on ?

In the same boat as RBS, except of course for the gift of Bradford and Bingley and Alliance and Leicester.

The best bits of those businesses without of course the risks associated.

Mind you Santander has a lot to cope with with the Spanish property collapse!

The only way the Gov't can get out of this hole is to Inflate the money supply.

Stagflation is on its way !!!


Ps Which Housebuilder will go bust first ?

I ask only out of curiosity.

I wonder what it will be like in Britain when the bills become too big for the government, when the NHS has to be scaled down and the power cuts kick in?

I guess people will turn nasty, probably blame immigrants and so on, rather than face the truth; as a nation we have grown fat and lazy for 40 years and here comes the payoff.

I love economic migrants; for a fair days pay (same full package as for the English) I get back from them reliable attendance at work, a decent level of application, committment to doing a good job and a smile when I chat with them. Hell, we even thank each other for the deal. I find the English people I employ the same, but only because I now have the chance to only take the nice ones, leaving the lazy sods who abused full employment to watch Jeremy Kyle.

Our government is tragic and pathetic, but they are only what we deserve. It's all our own fault really.

2% growth in the worst year for 50 years.

Am I the only one thinking that is not so bad?

Can we really expect the economy to keep growing every year ad infinitum?

The real test will come when oil runs out, then we'll see how the economy copes.

Actually the Nationalization of the Banks has made it that bit more difficult to reduce Govt involvement.

No investors are happy with the way they have been treated over the Banks fund raising.

No Investors will support or buy Bank Shares when they can be arbitrarily taken off them a week or two later.

If the Bank of England had acted properly as lender of last resort to Northern Rock, the situation would have been a bit different today.

With more Investor confidence. Northern Rock shares would still have fallen, hedge funds saw to that, but crucially it would have remained a private trading company and not an arm of Gov't.

Of course giving Spanish friends the best bits of bradford and Bingley doesn't help the crisis either.

In fact it shows the UK Stockmarket to be far too dangerous for any sensible investors.

Santander does protest its credentials on television a lot. Perhaps they are worried !

Why does everyone assume that after this recession the economy will grow again? We haven't invented anything significant since the mobile phone...Things will get bad and stay bad until a new invention attracts investment and jobs. The western economies have been bumbling along for years fuelled by cheap credit from ultimately China. The UK economy is forced to follow the US lead or else it will lose out to competitors. This problem has to be solved between the US and China, probably by either continuing to borrow indefinitely or by cancelling it's own debt. An economic war indeed.

The Government and BOE seem to have a Faustian Pact going together to talk down sterling

A VERY dangerous game with speculators such as George Sorus wathcing the game carefully and shorting the Pound

Sterling just fell again, over 3% this afternoon, as New York opened.

Brown will not be given the chance to borrow Billions more by going to the Gilt Market for funds. No one is going to buy Sterling Gilts falling in value at some 10% in a month, which has just happened.

This Government and the BOE are gertting themselves into a very nasty corner, with no way out. ( except an Election?)

#55

Several lenders need to reduce the value of the loan books inorder to reduce the amount they need to refinance due to having used cash from the money markets and not deposits to originate the loans.
The banks traditional mechanism to get customers to move has been a high SVR at the end of the initial fixed rate/tracker period. So if the lenders weren't able to refinace they thought they could get enough people to move elsewhere by making themselves uncompetitive.
But this is no longer working due to pressure to drop SVR in line with BoE base rate cuts and that mortgages aren't available elsewhere so people can't move.

Comments that deflation is terrible are wide of the mark as all G-7 countries amd especially Brown have wallowed in their self congratualtions that they have kept 'inflation', that is the colloquial for price rises, low.

This has been solely because a significant segment of the CPI is devoted to imported consumer durables and other goods and services sourced from overseas particularly low wage economies of Asia. That was according to the experts 'good'.

So why is deflation bad?

It is because incomes of MPs (Peston) and others might unbelievably be cut making affording their 'over the top' life styles less affordable.

The UK has outsourced much of manufacturing and we need a decade or two now of deflation to reset the overbloated economy. The Banks should keep interest rates high, sterling might be higher and benefits should be cut. If people wish to emigrate that nmight be sensible.

Will any of this occur- no. Brown wants to ve re-elected and that is the "only game in town."

@10
Rahere first met Messers King and George when we were all very much younger in the Jesus Centre in Birmingham. They scarcely need their own chaplain, but should they feel differently, perhaps they should contact me.

1.49 Dollars to the Pound at the moment.

Them Pounds look overpriced to me.

Given that, as things stand, it is unarguable that banks are unstable because deposits can be withdrawn before corresponding assets mature, like it or lump it, it is not so silly for Governments to have stakes in them.

Rather than painting a dire picture, is MK just telling it how it is. Sterling is certainly taking a battering but is the strategy now to just put their hands up to the mess the economies in, take the punches and hopefully come out of it quicker rather than prolonging the pain?

Taking things further, one might soon begin to see banks calling in loans prematurely - the first occasion being during or shortly after the results season starting February, when various loan commitments may be triggered. This is, however, a high degree of pots calling kettles, as the loss of confidence, one hardly needs reminding, started within the banking sector itself. Of course, the results season may be most interesting when it comes to the banks themselves.
I use the term "soon" in the sense that any sensible Treasurer is busy burnishing his borrowings at this very moment ahead of year-end so they don't sink the ship...and that too will cause movment between now and then.

Holy smoke Robert.............

Not going to be as bad as the early 90,s recession ?????

Have the aliens landed

What I find interesting is the optimism of the bankers and government!This recession is going to be absolutely horrid for the UK!!! And this because of the monstrous decision to bail out the banks(The deadest of all horses!). Somebody told me that the banking institutions had created pure hot air concerning their massive growth>They had managed to deceive everybody else including themselves that they were making money(that was 3 years ago). Now the UK a country which has always preached liberal capitalism has bent the rulebook for the most crooked institutions...At least 20 years ago everybody knew what the coalmines were for and nobody ever said that the miners were overpaid(except gov). So they were considered non competitive and shut down but for the banks which should suffer a similar faith no such action and worst of all we all know they are overpaid!!!The money should have been injected in small businesses enough said...

Comments 1 and 2 are spot on and really are all you need to read, rather than the BoE inflation report.

That chart on page 7 has as much credibility as the growth forecasts by the BoE and the government in the first part of the year. It definitely looks like the brainchild of a two year old with a pen. The only credible part of that chart is up to the dotted line, i.e. the black line with the arrow ‘ONS data’ (the actual figures).

To say that the economy will bounce back with a vengeance to the 3% average growth that was the norm before the credit crunch is just to negate the obvious. It’s like saying: we’ve got it hopelessly wrong up to now. It’s pointless denying that the recession is going to be nasty, but guess what: It will be amazingly short and the bounce back, wait for it: back to the good old times! But, hang on a minute! The 3% growth up to the middle of 2007 and the growth of the previous ten years were largely built on debt and a gravity defying property price growth. So now the central projection of the ‘experts’ at the BoE is that from the second half of 2010 the economy will make a speedy return to that 3% growth. How? Why? Are they planning for a return of a property price bubble of 10% a year and banks pushing people to pile on the debt again? If not, what is going to drive that amazing bounce back? Exports? Foreign investment?

Talking about exports, the BoE joins the wishful thinkers who have been saying that the freefall of sterling is good for manufacturing and exports, something which will help the economy through the downturn. Not much sign of that happening, is it?

The figures seem to change on a day to day basis at such an alarming rate.

What you hear today you can double or treble them over the coming year.

They can't even get them right on a day to day basis so what hope is there when they are trying to project ahead.

They may as well admit it. None of them have a clue. But they have to be seen as saying something.

Wouldn't it be nice to see a well thought out plan that showed us where the problems are and what will happen if the right moves are made.

Gordon Brown seems to think only a global solution will work.

That's really bad news 'cos it sounds like he doesn't have a clue and is waiting for everyone else to tell him what to do.

Seeing as they don't know either the country will continue to drift into an irreversible state of oblivion.

Implode time? Probably twelve months at the most.

Other than Profumo.

In my life time i dont think theres ever been a case for the mass resignation of numerous senior regulators and politicians.

Mr King must resign,the government must stand down.

We must have an election.

EACH DAYS REVELATIONS JUST CONFIRMS THEY ALL MUST GO.

Mervyn King is a busted flush.

Bear in mind that Mr King's destiny is now totally bound up with that of Mr Brown. The BoE is not an independent central bank now, any more than it was in 1997.

In the event of a change of government, Tory policy is a wholesale change in the functions of the BoE, FSA, etc. Undoubtedly that will include changes at the top.

Both Brown and King face the prospect of losing office as a consequence of the worst recession this country has ever seen and neither can avoid their implication as architects of this mess.

Hence, any forecast by BoE must assume things will improve over time, ideally and helpfully, in a timeframe that fits with the timetable for a general election.

Nothing more to it than that.

"Bankers detest their transmogrification into the welfare dependents of our post-bubble age, and they are desperate to pay taxpayers back" - Robert Peston

They are not upset, they are laughing all the way back to their bank. And why don't you give us an update on how the taxpayer debt repayment schedule is looking for Northern Rock.

Welfare dependents?! What a disgusting comparison. Why don't we put bailed out bankers on the minimum wage and use the cost savings to repay the loans faster, and if they feel their talents are worth more, they can try their luck in today's job market along with the rest of us. Then we will see just how essential to talent retention those salaries and bonuses really are.

Going on past experience, these lads always look at the best case scenario when they make these predictions. Whatever they come out with, you can bet it'll actually be worse.

It won't matter who is in Gov't the nationalization fiasco with the Banks has already done far too much damage to investor confidence.

Wise stock market investors will steer clear of the Uk stock market for the next few years.

#23 FYI Geiger counters count radiation. Seismographs chart earthquakes !!

Both are usually more accurate at what they do than financial predictions and charts !!

#29 "Actually we'd all be better off financially as well as environmentaally if we became more or less vegetarian (but this is an argument for another day)."

We could also turn carnivore and live off the fat (or should that be obese) of the land !!

The Banks are introducing a number of Tracker mortgage options. You see they are still eager to lend to credit worthy people, they need to. However, the downward push of rates towards zero means, Joe public wont commit to a fixed rate, in fact many are paying 200+ more on their fixed rates now.

Additionally, and more pertinent, is the lack of new fixed rates since the 300 point cut. They know as well as we that the rates will surely rebound out of the other side as the worlds debt is inflated away.

So if you need to change your repayment plan what do you do? Track it or fix it? The short term gain of tracking might come back and bite you on the backside quicker than you think.

In an economy that relies almost solely on a combination of exponential lending and increasing house prices to grow, what is the scenario if the wise vote note to borrow, the unwise are unable to borrow and people are not able to use equity release to buy that new car?

Bounce back in 2010? I do not think so and nor do I think the BoE does either.

Assuming they come up with a plan to inflate the money supply gradually, the sheer size of the problem will take five years at least. This is with keeping sustainable inflation of between 10-15 %. Any attempt to print it quicker and it would render the project worthless.

Whatever happens, part nationalisation will not cut the mustard here. Full and only full nationalisation and control over the Treasury and interest rates will be paramount.

The anger at the people who have promoted the con trick of the last decade plus is tangible on here, and actually the only thing about it that cheers me up.

For at least 6 years now I have had to put up with friends telling me I didn't understand the new global economy. As a manufacturer myself (and a very successful one I might add) I have grown up valuing tangible things like efficiency, added value, competitive advantage and resilience; I thought these things mattered to the country too but everyone I met (including letters from Government Ministers) suggested I was a dinosaur.

I'd be a liar if I said I didn't get some satisfaction from watching it all kick off now. Like the ant that worked through the summer to be secure in the Winter, I feel no regret for the Grasshoppers who are about to feel the cold.

88. At 5:56pm on 12 Nov 2008, ishkandar wrote:

#23 FYI Geiger counters count radiation. Seismographs chart earthquakes !!

Not when the earthquake is being caused by a financial model exploding from its nucleus

#51 "I think you are mistaking communism for socialism, you're not from the USA are you as they seem to do this quite often - surely a Keynesian economic policy is capitalism within a socialist system?"

No, I have not mistaken one for the other. Having seen both systems at work at first hand, I think I know the difference.

Keynesian economics is just theory that has never been successfully implemented anywhere. The "Singapore model" has been and still is successfully implemented and is now being adopted by two major remaining Communist states - China and Vietnam.

In China it is called "Socialism with a Chinese face". I don't know what the Vietnamese call it except possibly "Oh goody, now we can get rich too" !! Neither of them have given up their Communist Party.

Singapore has been accused by many as a dictatorship by, hey, they run the most profitable and efficient airline in the world on a purely commercial basis. Their people purchase State subsidised housing from the government and their health and pensions are taken care of through an enforced contribution scheme that also allows borrowing from it to pay for their (State managed) mortgages. Much of their wealth is generated in Capitalist environments but are taxed to pay for a Socialist system of benefits for the people. However, they have no time for the idle (a prevalent Oriental thinking).

So that is Capitalism within a Socialist system that is successfully implemented and working to the extend that its Sovereign Wealth Fund, Temasek, was once thought to be a threat to the profligate. It now owns serious chunks of various banks in the West e.g. HSBC and Citigroup.

However, being a human organisation, it is not all milk and honey and its blemishes are there to behold. The government can be pretty heavy-handed at times. Flogging and hanging are still handed out for the nastier crimes. But, on balance, it is a pretty successful nation.

BTW, no, I am not from the US of A.

#70 "We haven't invented anything significant since the mobile phone..."

It's strange you should mention that. There are three or four *British* inventions that I'm tracking right now. They may turn out to be the NEXT BIG THING for Britain. Only time will tell.

POST 83 Prof Umo was caught trousers down together with Mandy R D who was also associated with some east euro peon naval spy ring ...this sounds so familiar ,where did i hear this before ?


Prof Umo claimed he had said kismet R D , later Mandy famously said "he would say that wouldnt he "

All this was happening when the pound in Mandys pocket was going down ,which brings us back to today where the...........is only worth 1.19Euros

I love symmetry in figures, it smacks of a balance in life that doesnt really exist.

-0.75% the variance in accuracy of the IMF forcast for growth in 2009. Actual Eurozone/US growth predicted -O.65%, somehow I think that will be closer to -0.75

US Bailout 500bn (pop close to 300m) working
UK bailout 500bn (pop close to 70m) failing

BBC News - Unemployment reaches 11 year high
2008 starts a new a New 11 year solar cycle.

At least maybe if the UK is the 1st western economy to dive into the recession trough (and hard) just maybe we will be first out too.

The point of this post? Statistics mean nothing.

If those rogues in the energy and petrol retail businesses trimmed their prices, to reflect the fall in upstream costs, then we’ll have a decent bit of deflation. I don’t buy into the idea (we’ll not until next year) that we’ll all hang on to our cash in the hope prices come down. Some things are necessities and other prospective purchases - “fancy dan electricals and nobby cars etc . . . ” – always come down in price, pending the shovelling out of the next gimmick.

As I commented at the time, the Government may live to regret the usurious 12 percent coupon on the preference shares they are obliging the banks to sell to them. Gordo and Darling are quick to suggest the banks "pass on" the 3 percent rate they occasionally may borrow at overnight from the Bank of England. I have yet to hear them propose the banks should "pass on" to their borrowers the 12 percent they are borrowing at from HMG medium term. In fact the government spin machine is quite happy for the financially illiterate (i.e most) amongst the population to believe that the government has GIVEN billions of "taxpayers' money" to the banks. The 12 percent coupon on the preference shares obliges the banks to seek to buy them back at an early date. This means a serious attempt to become profitable institutions, VERY profitable. Obviously they must, therefore, price risk properly in their lending, and even in the case of their safest debtors charge a substantial premium over LIBOR. That is why tracker loans have been withdrawn, to be replaced with products at a higher rate. That is why, however low the BoE rate may fall, it cannot be business as usual in the mortgage market. It would not have been in the public interest (though maybe in the government's short term political interest) fior the housing bubble to have been re-inflated. The 12 percent dividend on the preference shares has made certain that the banks will not return to business as before. For the government to posture regarding "passing on rates" and "normal lending to home-owners and businesses" is political cynicism in spades.

In China it is called "Socialism with a Chinese face". I don't know what the Vietnamese call it except possibly "Oh goody, now we can get rich too" !! Neither of them have given up their Communist Party.

In Britain it's called New Labour

And yes, we have not given up our socialist party either. They were just kicked into touch for 15 years.

Before the next election you will see a rekindling of the socialist way in Labour. Tactics that will drive a chasm between the two main parties for the 1st time in as many years.

The socialist values, as seen with the current nationalisations, will be at the forefront of the general populous and ensure a socialist labour has a winning hand in two years time.

I see optimism all around , King, Peston and the bloggers. Why doesn't anyone look at the fundamentals.

We seem to trade fairly freely with China. Assuming all else is equal, eventually the wealth of the average Brit will be the same as the wealth of the average Chinaman. (For thoe who can do sums note :- There are many more Chinamen than Brits)

The flaw in this argument is that all else is not equal. We do not value education as highly. Mostly it is used to keep the hoards off the dole by letting them "read" media studies and the like. The polytechnics and technical colleges have been abolished.

As all nine members of the standing committee of the Politburo are trained Engineers, I conclude that we will end up even poorer.

For some years I have forseen this rebalancing of wealth but I could not see the mechanism for it to happen. Now I can observe it day by day.

History shows us that the world is never the same after a recession as it was before.