As I write this it appears that Stage two of the Global crisis is already under way, and indeed appears to be gathering pace. The FTSE has been sent tumbling by more than 550 points, it's third worst fall in history. The Dow Jones' slump has been partially arrested by some surprising 'good news' on the jobs front, but it seems highly likely this is a 'dead man's bounce', Hal Berstram is already advising people to stockpile tinned food, and this seems pretty good advice. The trigger for the crisis appears to have been, once again issues with the Eurozone (the subject of several earlier and one stillborn post - the phrase 'Greek tragedy' is just too good to resist)
It appears the contagion evident in Portugal, Ireland, Greece (and also little Cyprus) has now spread to Italy and Spain. The ECB seems unwilling (or perhaps unable to intervene) and it is revealed that the EFSF (European Financial Stability Fund) is expected to be increased to £440 billion to anticipate issues in those much larger economies. In the meantime, hang on to your hats, as the chickens are definitely coming home to roost. More on this later - but in the meantime, invest in John West and Princes, if you want to put your money anywhere!
Showing posts with label Son of Bailout. Show all posts
Showing posts with label Son of Bailout. Show all posts
05 August 2011
20 January 2009
My new favourite (UK) economics blog...
...is BBC Newsnight Economic Editor Paul Mason's "Idle Scrawl".
Why the hell this is squirrelled away so far inside the BBC website when Robert Peston's blog has a link to it seemingly on every business page is a crazy injustice. That's not to say that Peston's blog is bad; anybody who can get the right-wing blogosphere saying that he's "deliberately trying to destabilise the UK banking sector" (hilarious example here) must be doing something right. But it lacks the wide sweep and excitement of Mason's blog.
I came across Mason's blog by accident when searching for more in-depth analysis of the BBC (British Banking Crisis). Today's post is a classic, raising 4 key issues in a few hundred words:
Absolutely riveting stuff; and by the look of it previous posts are just as good. A classic. I'll try to come back in more depth on all 4 of those issues later this week.
Why the hell this is squirrelled away so far inside the BBC website when Robert Peston's blog has a link to it seemingly on every business page is a crazy injustice. That's not to say that Peston's blog is bad; anybody who can get the right-wing blogosphere saying that he's "deliberately trying to destabilise the UK banking sector" (hilarious example here) must be doing something right. But it lacks the wide sweep and excitement of Mason's blog.
I came across Mason's blog by accident when searching for more in-depth analysis of the BBC (British Banking Crisis). Today's post is a classic, raising 4 key issues in a few hundred words:
- There is a danger that the UK sovereign debt could be downgraded from triple-A status.
- There is some chance (albeit still a minor one at present) that Barclays could be following RBS into the 'lame duck nationalisation' stable.
- The Irish economy is looking so bad that the IMF may have to be called in to bail the country out.
- the intellectual firepower behind the plans for the UK bailout and Son of Bailout look woefully inadequate compared to the people Obama has assembled to work out the US equivalents.
Absolutely riveting stuff; and by the look of it previous posts are just as good. A classic. I'll try to come back in more depth on all 4 of those issues later this week.
19 January 2009
Son of Bailout: moving towards a good policy but not there yet...
So today, the markets reacted with horror to Son of Bailout (SoB): the government's new plan to kickstart lending by offering the stricken banks insurance for large-scale losses in exchange for cash payments or shares.
Royal Bank of Scotland, in particular, is close to worthless at 11p, and, while the bank insists that the previous bailout means it has more than enough operating capital to stay solvent, the tanking of its share price suggested that many market participants have already accepted nationalisation as a fait accompli.
As explained in my previous post, I'd also take that view. In fact it would be much easier for the government to get RBS lending if it did step in with full nationalisation. Perhaps it's hoping the bank will collapse and then it'll be able to snap up the remaining part of the bank for nothing. That's possible, but it's also short-sighted - while the govt waits for the collapse, hundreds of firms are going to the wall.
Other banks aren't faring much better. The newly merged, part-nationalised Lloyds Group is down to 65p and will probably join RBS in the state-owned pile before this is all over.
Most satisfying for anybody who dislikes arrogance and idiocy in financial dealings would be if Barclays was forced to go cap-in-hand to the govt for insurance after quixotically refusing assistance back in October, preferring instead to secure wildly expensive funding from the United Arab Emirates. Who will no doubt be less than happy that their investment has fallen so far and so fast... down over 50% since November.
Overall, SoB moves us towards a coherent strategy for resuming lending to UK business but we are still a long way from the endgame here. That will come when the govt takes full ownership of RBS, Lloyds and probably Barclays too. There has already been a turnaround at the already-nationalised Northern Rock, where the government is now planning to expand lending rather than gradually run off the loan book, which was the previous policy. Northern Rock on its own is too small to reverse the economic downturn. But put it together with the big three in a nationalised 'super-bank' and we might have something. Although, of course, co-ordinated international action would make this a lot easier. Let's see what line President Obama takes later this week.
Royal Bank of Scotland, in particular, is close to worthless at 11p, and, while the bank insists that the previous bailout means it has more than enough operating capital to stay solvent, the tanking of its share price suggested that many market participants have already accepted nationalisation as a fait accompli.
As explained in my previous post, I'd also take that view. In fact it would be much easier for the government to get RBS lending if it did step in with full nationalisation. Perhaps it's hoping the bank will collapse and then it'll be able to snap up the remaining part of the bank for nothing. That's possible, but it's also short-sighted - while the govt waits for the collapse, hundreds of firms are going to the wall.
Other banks aren't faring much better. The newly merged, part-nationalised Lloyds Group is down to 65p and will probably join RBS in the state-owned pile before this is all over.
Most satisfying for anybody who dislikes arrogance and idiocy in financial dealings would be if Barclays was forced to go cap-in-hand to the govt for insurance after quixotically refusing assistance back in October, preferring instead to secure wildly expensive funding from the United Arab Emirates. Who will no doubt be less than happy that their investment has fallen so far and so fast... down over 50% since November.
Overall, SoB moves us towards a coherent strategy for resuming lending to UK business but we are still a long way from the endgame here. That will come when the govt takes full ownership of RBS, Lloyds and probably Barclays too. There has already been a turnaround at the already-nationalised Northern Rock, where the government is now planning to expand lending rather than gradually run off the loan book, which was the previous policy. Northern Rock on its own is too small to reverse the economic downturn. But put it together with the big three in a nationalised 'super-bank' and we might have something. Although, of course, co-ordinated international action would make this a lot easier. Let's see what line President Obama takes later this week.
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