Temporary breathing space?

Some good news on inter-bank lending rates over the last couple of days -they seem to be gradually trending down. But is this the end of the banking crisis, or just a breathing space?

For the pessimists among us, an interesting article by Ambrose Evans-Pritchard in the Telegraph a couple of days ago. "Almost every corner of the world is now being drawn into the vortex of debt deflation". Debt deflation is a theory originally invented by the economist Irving Fisher in the 1930s - the basic idea is that a crash in asset prices precipitates forced selling to cover debts, which reduces prices further, leading to more debt and more selling... etc. The details of the theory are described very clearly by Professor Steve Keen of the University of Western Sydney in his excellent book Debunking Economics. Professor Keen also has a blog looking at the specifics of the debt situation in Australia, which is a recommended read.

More big falls on the Asian stock markets last night - of course the general effect over the last month has been a rollercoaster rather than a straight downward path, but nonetheless the general trend is sharply down.

There's also a scary story from Eastern Europe: Hungary has raised interest rates 3 percent to maintain its currency peg against the Euro. A lot of Hungary's private sector borrowing (e.g. mortgage and car loans) is in foreign currencies (why?) and in these circumstances, a currency collapse of the Hungarian forint will raise the levels of Hungarian debt, exacerbating debt deflation. Other central and eastern European countries may be following suit soon.

Some good news when I manage to find it...

Votes and the Voting Voters who Cast Them: Franken up in Minnesota

Things have been a bit dull on the national politics front both in the UK and US over the last few days. The problem with the kind of near-collapse of financial markets that we've seen over the last few weeks is that, once the euphoria/fear factor has died down and normal service is resumed, it all seems a bit of an anti climax. Especially for those of us who were sitting waiting for the crisis, and then The Revolution. : -)

As an interesting diversion, I thought I'd alert people that US comedian and writer Al Franken is running for the US Senate in Minnesota this year (as a Democrat, natch), and latest polling has Franken marginally ahead. His campaign seems to have been slightly erratic - like Joe the Plumber, there have been allegations that he owes a lot of unpaid income tax, voters were apparently turned off by negative campaigning on both sides (but especially from incumbent republican Norm Coleman, and there is a third party candidate (Dean Barkley) drawing about 20% in polls on an 'independence for Minnesota' platform!. But I really hope Al gets in - BBC Four did a documentary following him around on the 2004 campaign (where he wasn't running for office, just having arguments with various right-wingers) and it was a classic.

If you haven't read it, I can thoroughly recommend Lies and the Lying Liars Who Tell Them - subtitled 'A Fair and Balanced Look at the Right' (parodying the Fox News slogan - and see 'Unfoxed' for the lowdown on that operation), it's an hilarious and razor-sharp attack on US right-wing pundits like Ann Coulter and Sean Hannity. In the UK you can normally avoid f***ers like this just by not reading the Mail, Express and the Telegraph (although at least most of the right-wingers in the Telegraph have a brain - excepting Janet Daley and Simon Heffer) but in the US they seem to be everywhere, although the decline of Republican fortunes makes them seem more shrill and pointless with each passing day.

Rounding up Round Three

Watched the last of the presidential debates early on this morning (on Youtube here.)

A lot of it was re-treads of familiar ground, particularly from the first debate. McCain actually did better this time than in earlier rounds. It wasn't that his argument on the economy was particularly strong - it's just that he managed to connect it to a simple example which people could understand. He used a guy called "Joe the plumber", a small businessman Obama met on the campaign trail who was worried about tax increases. Obama should have countered that argument by saying that the US government is massively in deficit, hence someone's got to pay more tax to re-balance the budget (over the business cycle) and it sure as hell ain't gonna be the people at the bottom of the pile. "Joe the plumber" is actually a fair way up the income distribution (is he paying corporate tax or personal income tax? It was never made clear) - so even if he's struggling, he's in a better position to pay than people on lower incomes. Obama did make this point to a certain extent, but it could have been clearer. In general Obama seemed more sluggish than McCain early on, although it evened up as time went on.

The Ayers (ex-Weatherman who Obama was on a school board with) issue was raised by McCain but came off as a bit of a damp squib. The worst bit for McCain was when he was defending the people who came to his meetings - "the finest people in America - war veterans" or some such thing. Does being a war veteran excuse someone being a complete fascist who calls Obama a terrorist? Apparently so if you're John McCain. Obama should have pulled him up on that a bit more.

I think it came off pretty much even Stevens, but the post-debate polls showed that independents were more favourable to Obama. That may be because Obama was more 'centrist' (detractors would say more vague) and less combative, whereas McCain was energising the Republican base but not really getting across to the swing voters. Or it may just have been that people haven't watched the debate and are just backing the person they think is gonna win.

Either way, there is no way this debate was a "game-changer", and it wasn't really worth staying up for, either. Definitely a case of quantity over quality in these debates. Having said that, it's nice to have something of this kind - we don't have anything like this in UK general elections despite frequent attempts to set one up, which is a real shame.

Boris the Keynesian?

A surprising article in the Telegraph yesterday by Boris Johnson, sounding like Old Labour , if anything. Get this:

We will beat this recession more speedily, and emerge in far better shape, if we make sure we put people to work in projects that boost the long-term competitiveness of the country.

That means investing in the things that can radically improve the transport, attractiveness and general liveability of the capital city, the motor of the British economy. We may be in a hole, but the lesson of history is that tunnels and bridges and dams can bring jobs and growth.

Is this the same buffoon who somehow managed to win the London mayor election? Well yes, probably, as Boris has probably realised he's unlikely to get re-elected if unemployment in London has sky-rocketed by 2012 and all he can do (other than handing out free tickets to the London Olympics for the unemployed) is tell people to get "on their bike".

But when Boris Johnson is making the case for Keynesian infrastructure spending to combat the slump, you know the political battleground has shifted.

So who's left in the rapidly shrinking camp of balanced budgets, fiscal rectitude, and the position the Americans are calling 'neo-Hooverism' - conspiring to prolong the slowdown by reducing demand for goods and services at the point the economy can least take it? That's right, it's our old friend Simon Heffer again:

The orgy of borrowing over which Alistair Darling now presides and which some Tories wish to continue — such as the Mayor of London, Boris Johnson, who recklessly calls for continued spending on capital projects for the capital that, pending economic revival, cannot be afforded — must end.

Nice use of "capital" twice in one sentence, there, but otherwise an intellectually negligible contribution. In the same article, Heffer recommends John Redwood - Klingon and one-time Tory leadership challenger - for the Shadow Chancellor post. This guy must have bubbles on the brain or something. I will have to resist the urge to post any more from Heffer this side of Christmas, as you good people need something intelligent to read, not rehashed monetarist bullshit.

Stock markets tanked again today - no real surprise, as the fact that the world economy's been saved from sudden death doesn't mean that it won't still face a long period in intensive care. Never thought I'd say this, but Boris Johnson is right: time to dig out those big public transport projects and borrow to pay for them.

Someone should make Gordon Brown a really big credit card - like those big cheques you get if you raise a large sum of money for charity. It would be a good gimmick at the next Budget.

Elmer Fudd in the last chance saloon

Just been over to fivethirtyeight - a regular virtual stopping post of mine - and the polling data goes from bad to worse for John McCain.

The site has a model based on state and national level poll data which runs 10,000 simulations - I think on some kind of Monte-Carlo basis using random draws from the statistical distribution of outcomes for each poll (with polls weighted according to the quality of the pollsters' methodology). Anyway, currently they predict that Obama is 95.8% likely to win the electoral college. That's pretty good odds.

If the prospect of a Republican victory wasn't so terrifying right now (OK, they'd be massively hemmed in by a Democratic Congress, but McCain could still declare as many wars as he likes) I'd be feeling a bit sorry for McCain. Based on polling from the Republican primaries he was probably his party's best bet for a win this year. Huckabee, for example, would probably be 30 points down in the polls by now if he'd won the nomination. But he has to contend with fascist extremists at every rally. Many commentators (apart from the BBC's Justin Webb, who is desperate to pretend it's still a close race out there - for reasons I don't pretend to understand) have given up on him - even on his own side. And Sarah Palin, who initially appeared to be an inspired choice of running mate, has turned out to be a liability, with a sequence of interview gaffes that makes George W Bush look like a master of the English language. She's also massively energised the Democratic hardcore, who hate her guts in a way it's tough to feel about McCain.

Also, McCain looks - and SOUNDS - more and more like Elmer Fudd from the Bugs Bunny cartoons with each passing day. Maybe when he referred to Obama as "that one" he meant to say "dat dirty wabbit".

McFudd's last chance of getting back into this race could be tonight's final presidential debate. On paper, he hasn't got a lot going for him. The 'town hall' format of the second debate was meant to favour McCain, but in the end he didn't do any better than in the first debate. Of course, anything could happen, but I think barring a Gerald Ford-like clanger from Obama, he's home and dry...

...except if there is some major threat to national security over the last 3 weeks of this campaign. Another bombing? A bin Laden videotape (as occurred just before the 2004 election?) It's easy to be dismissed as a conspiracy theorist for bringing this kind of stuff up, but the possibility is always there. Of course, if Obama is far enough ahead, a slight swing back to McCain on the back of "terror" fears won't be enough (barring truly massive levels of electoral fraud.) Still, it pays to be cautious. Playing dirty doesn't really seem to have worked for McCain, so, like Windom Earle in Twin Peaks (an interesting comparison) he may have to start "playing off the board".

More moronic commentators

On a slightly different note, I heard perhaps the weakest defence of the "no-bailout" position yet today from Tim Congdon of Lombard Street Research. It was down there with Simon Heffer in the lameness stakes. Big props to me old mate "Foley" for finding this one - it was on the World at One, which I don't listen to much (normally having an afternoon nap around then).

Congdon essentially said that the government had stolen the banks from the shareholders. Effectively he accused the govt of creating the crisis to drive down bank share prices and then nationalising once prices fell below a certain threshold. The same accusations were levied at Tony Benn when he was Industry Secretary for the Labour Government in 1974 (not for banks but for other industries). It was b.s. then and it's b.s. now. Shareholders will actually gain a lot from this deal relative to what they would have had in the absence of the deal (which is little or nothing, as the banks would have gone bust, like Lehman Brothers). The Congdon interview will be available for the next few days from BBC iPlayer (World at One, 13 October - about 11 minutes in) but I couldn't find a permanent link on the web at the moment, unfortunately.

However, you can download some equally moronic commentary from Lombard Street's podcast page. There's 9 minutes of doggy-doo from a guy called Jamie Dannhauser (who looks about 17) which I couldn't find a direct link to, but it's called 'UK bank bailout - necessary help or dangerous govt interference?' Just guess which of those options Jamie puts his money on. The analysis is hackneyed 80s Thatcherite pro-deregulation, pro-private sector rubbish - exactly the kind of crap that got us into this mess.

See, that's why the arguments are so easy to win for the left at the moment - any time a right winger tries to argue with you, just point out the current economic crisis and the (Thatcherite and post-Thatcherite) policies that got us there. It's like shooting fish in a barrel at the moment out there. On Channel 4 news today, Labour left-winger John McDonnell totally annihilated an ex-director of Bradford and Bingley over the question of whether there should be democratic control of banking remuneration - because listening to a guy from Bradford and Bingley giving his opinions on the way out of the crisis is like getting advice from George Bush over how to stay popular in politics. They are busted flushes.

It won't always be this easy, but after 25 years when the neo-liberals seemed to be in the ascendancy most of the time, it's nice to watch these guys squirming around a bit.

A day long remembered

As Darth Vader says in Star Wars, "this will be a day long remembered". Most likely, anyway.

It's seen:

• the partial nationalisation of most of the UK banking sector (of the big banks, only Barclays and HSBC have escaped - at least for now). Looks like I was right when I suggested this a few days back.
  
• Paul Krugman awarded the Nobel prize for economics. Good choice.

Gordon Brown now has some pretty solid ammunition to use when painting himself as the saviour of the British economy in these trying times - a Nobel prize winner in economics says the British plan is a good 'un. Those props to Brown just get bigger and bigger every day.

Of course, the whole caboodle now hinges on whether the economy can now resume some semblance of 'normality'. Well the Dow Jones has gone back up, but of course you should never place much importance on any single day's trading - come back in six months and see what the indices look like then. The main issue is how severe the oncoming recession turns out to be. If it's just a severe recession - the politicians done well. If it's a severe slump - you can kick their asses.

McCain scrapes the bottom of the barrel and digs up some nasty bacteria...

With John McCain well behind in current polling with only just over 3 weeks to go, it's no surprise that his campaign is trying to play dirty. Just how dirty is a real worry.

Last week Sarah Palin was let off the leash to say that Obama was 'palling around with terrorists' (that's "pal-ing" rather than "palling" or "Palin", for those of you who've previously been confused by Palin's loose command of American English). The specific story is that Obama was on a public committee with a guy called Ayers who was once in a 60s/70s left-wing terrorist group called the Weathermen. None of this is new - it all came out earlier in the campaign. And by the time Obama knew Ayers he was long past being a terrorist.

But the specifics of the Ayers case aren't the real point of the exercise. The point of the exercise (and of McCain's phrase "that one" used to describe Obama in the second presidential debate last week) is to increase the "otherness" of Obama. To make him seem more 'un-American' and therefore more dangerous to swing voters who are receptive to Obama's general policy line (and particularly his economic policies) but worried about this guy with a weird name, who perhaps seems a bit of a risk. It's what the Tories in their 2005 UK election campaign called a 'dog whistle' strategy.

Except that the dog whistle is being heard by another group of voters who aren't swing voters by any means... but rabid right-wing lunatics.

If you do a search on YouTube for "McCain rally extremism" you'll find some worrying stuff. For example, here there are people shouting out "terrorist" and "kill him!" when McCain mentions Obama. There are plenty more examples like that.

McCain did speak out this weekend at one rally to say that Obama was a "nice family man" and didn't deserve these kinds of offensive insults from the crowd. But that was only one rally out of dozens.

I don't think John McCain thinks Barack Obama is a terrorist, but by failing to stamp on this stuff as hard as he possibly can, he's in danger of opening a very nasty can of worms - as veteran civil rights hero and Congressman John Lewis has pointed out.

There's a lot of worry on sites like FiveThirtyEight that Obama is in danger of being assassinated on the campaign trail. I'm not sure if this is an exaggerated fear or not because I don't know how well presidential candidates are protected. I assume that because George Bush has survived 8 years (almost), presidents are well protected, but I don't know enough about candidates. The people who aren't protected, though, are the many thousands of Obama workers on the ground. It's quite possible that someone might get beaten up, stabbed or shot by some of these Republican extremist goons. And if that were to happen, there would be a good case for saying that McCain was to blame.

Thank f*** there are only 3 weeks of this campaign left 'cos it looks like it could turn VERY nasty out there. It would be very nice to see Barack get through to polling day in one piece. After which, of course, the REAL danger starts. As many people have already pointed out, the extreme right in the US hated Clinton, who was a triangulating centre-right winger. So, given that Obama is perceived by the right-wingers as more radical, imagine what they are gonna try to do to him. Frankin Roosevelt was the subject of an attempted fascist coup: any bets against it this time round?

Nutters, real nutters and Simon Heffer

It's the end of the week and posting frequency has been pretty good these last few weeks - with any luck I'll soon be able to resurrect Hal's Friday evening blog review, last seen in 2006 or thereabouts.

But for now, with stock indices tumbling yet again today, I thought I'd take an opportunity to draw your attention some of the crap that's being written about the crisis from a select few right-wing media hacks.

I want to be fair here: a lot of the right wing have realised that, for the moment, the game is up for the capitalist system, and - at least temporarily - we need socialised banking, or at least some element of it, to survive. For example, normally annoying Telegraph economics commentators like Ambrose Evans-Pritchard and Jeff Randall have been reconciling themselves to the new paradigm. They don't particularly like where we've ended up, but they realise that not implementing any kind of bail-out package in the US or UK would have been far worse.

That may be hard to accept at the end of one of the worst weeks in stock market history, but it certainly could be much worse. Were it not for the bailouts we'd probably be looking like the Icelandic economy right now.

For some on the right though, even grudging acceptance of a role for the state is too much. Dominic Lawson, in the Independent today, was laughable, lambasting Gordon Brown for encouraging 'the boom in housing and the opening up of the mortgage market' whilst conveniently forgetting that it was actually his beloved Mrs Thatcher that started the whole shebang rolling in the eighties. But of course under the Tory government, banks only lent to responsible customers - so that nineties crash never happened... silly me.

Even more amusingly, Lawson blames the US subprime crisis not on lax regulation under the Bush administration, greedy lenders, or Alan Greenspan's low interest rate policy, but... Jimmy Carter. Apparently his "Community Reinvestment Act" forced banks to lend disproportionately to low income neighbourhoods. And of course, the 20 years of Republican adminstrations since Carter was booted out in 1980 have been unable to make any alterations to this policy? This is desperate blame-the-loony-left crapola journalism reheated from the eighties, and shows the sheer dearth of ideas on the hard Tory right.

Of course, one drawback of believing the market is always right is that if it does fail - and fail catastrophically - you've got very little to fall back on. You can blame the regulators - except that they were doing exactly what you told them to, which was to cut back on regulation. It's not a good time to be a right winger at the moment.

That explains why we have the normally confident Guido Fawkes - never the brightest LED in the 70s digital watch when it comes to economics - reduced to a sad whimper of "where have all the capitalists gone?" on his blog today. Guido mate - they've all either (a) pissed off to the Cayman islands with the big bonuses they got before the going got tough; or (b) they understand a little basic economics and realise that if the banking system fails, it could make the 1930s look like a mild slowdown. It gets funnier though... Guido quotes Simon Heffer approvingly as "the lone strident capitalist tool" left in the media.

Well the tool part of that is right... recommending Simon Heffer's writings on economics is a bit like recommending Fanny Craddock as a model for today's gastropub cooks, or Joe Kinnear as the future of England football management. The guy is a bit like a cross between Enoch Powell and Keith Joseph on crystal meth, a "new right" hack preserved in aspic from the early 80s. By now he is probably the last person on earth who thinks that monetarism was a good idea and that Thatcher had it about right in 1979. He is an economic ignoramus who should really be too embarrassed of his own lack of knowledge to keep bringing it up in his comment pieces, but like a Big Brother contestant, he just can't help exposing himself at the worst moments. His piece "we are all socialists now" is the most laughable nonsense written by anyone in a British newspaper this year - it makes Lawson look like Larry Elliott.

The idea that because the banks were given an injection of capital by the government (without which the banking system would have almost certainly collapsed within weeks, if not days) we are now living in a pre-1989 Soviet bloc economic system is the most laughable piece of hyperbolic distortion I have ever encountered in the British press. Really, it's amazing that this guy even has a contract to write for a newspaper. I'm glad he does in a way, because I'm all for an easy target - especially at 10.30 on Friday evening.

The final lunacy is when Heffer approvingly quotes the American libertarian writer Ayn Rand. The same Ayn Rand whom Alan Greenspan (one of the architects of the crisis according to many on both left and right was great friends with. "The difference between a welfare state and a totalitarian state is a matter of time..." Yeah, right. The difference between Simon Heffer and a complete imbecile is non-existent.

It would be great fun to plunge Heffer into a parallel universe where his peculiar vision of free market capitalism reigned supreme - where the banks hadn't been bailed out, and civilisation had collapsed into anarchy. He'd enjoy that. No nasty government to tell him what to do. I doubt he'd survive long though. Lots of people don't like him, there would be no police around to protect him, and like many of us in journalism and the blogosphere, he's not the fittest person around - probably because he spends most of his time on the computer finding more evidence for what a bad person Gordon Brown is. And of course, without government, what's left except survival of the fittest? Good luck, fatboy.

The nuclear option?

No, I don't mean dropping a bomb on Iceland - although the UK government rapidly seems to be moving towards tougher measures where those pesky Icelanders are concerned. "What do you mean, the country's bankrupt? We need £20 billion of British money now!

I mean what the f*** to do about the paralysis of financial markets. It's obviously very early days since the UK bailout package was announced; slightly longer since the US package was announced. But so far the signs are not good. According to the Telegraph,

yesterday there were few signs that Mr Brown's bail-out gamble was paying off... there was little evidence that banks were prepared to lend to each other and no British bank has requested any of the £50 billion available.

If this statis persists into next week, there may be only one option left to the UK government: complete nationalisation of the UK banking system. Following the principle "if you want something done... do it yourself."

The logic is obvious. Capitalism can't function without bank lending. So if the banks won't lend, the government has to do the lending for them. The Bank of England could - theoretically - do this directly, but it doesn't have the infrastructure or the personnel to do that. Private sector banks do. Therefore, private sector banks should - for a period of time - become public sector banks, under direct control of HM Treasury.

Once the crisis has been averted and stock market and housing prices start to rise, the government can sell them off again (properly regulated, of course, to prevent another crazy bubble happening like we've had for the past decade). And the taxpayer will make a big profit.

It seems to me that unless banks start lending in the next few days, this is the only way to go - unless some kind of huge international bail-out is organised, like Paul Krugman suggests. But can that happen? Europe can't even organise its own collective bailout. It's every country for herself out there.

So maybe it's time to stop pissing about and carry out that 1983 Labour Manifesto in full. Michael Foot was right all along... and future generations will thank us for it.

Krugman: big props to Brown (the puppeteer)

Big support for the UK bailout plan from Paul Krugman today. He does refer to it as the 'Brown plan' (together with a great double thumbs-up picture of Gordon), which Alistair Darling probably won't be too happy about. But then, from the picture it's pretty clear who's pulling the strings.




One is reminded of Martin Landau as Bela Legosi in the brilliant Ed Wood:

"Pull the string! Pull the string!"

US electoral fraud - could it swing things?

I'm not going to report yet on the second US presidential debate, as I haven't had time to watch it yet. For what it's worth, post-debate polling numbers look very similar to the first debate, i.e. Obama a modest winner. And that wasn't good enough for McCain, who needed a big win.

Or did he? Last night's newsnight had a piece by Greg Palast, author of The Best Democracy Money Can Buy, examining the extent of electoral fraud in the US. Really frightening stuff, including such horrors as the following:

• huge numbers of (mainly low income and/or African American) voters turning up at the polls only to find that they weren't registered to vote. This was especially likely to happen in states like Colorado, with a Republican Secretary of State.
• Voters whose houses have been foreclosed (i.e. repossessed) being disenfranchised
• Voter intimidation at the polling station (which is apparently legal in some forms in the US - what the hell?)
• shortages of voting machines in polling stations in low-income neighbourhoods
• rigging of electronic voting machines (many of which have no 'audit trail', i.e. no means of establishing whether the votes counted tally with the votes actually cast.)
• new legislation requiring photo ID for people to be able to vote - people in the US without any form of photo-ID (e.g. no passport or driving licence) are overwhelmingly from the poorest section of the population.
  

Greg Palast has several earlier short films for the BBC on his website, so hopefully this one will be put up there soon, as it's a must-view. The big questions arising from this are:

1. How much worse is voter fraud now than in 2004, when it is widely acknowledged to have cost John Kerry the election?
2. Given that it looks like (hopefully) Obama will be a lot further ahead this time in terms of voting intentions than Kerry was in 2004 (or Gore in 2000) how much fraud would there need to be to 'flip' the result to McCain?

In the comments on the fivethirtyeight website I found a link to this site which claims to reveal "a [Republican] plan to steal the next election by 51.2% of the popular vote and three [electoral college] votes."

Also something even more extraordinary: an interview with a Republican "cyber-security expert" who claims that foreign hacking of voting machines could decide the election... watch that one here. I haven't had time to watch it yet but will do soon.

One thing seems obvious: the exit polls from the 2004 election was pretty close between Bush and Kerry - and although it was surprising that a number of swing states went to Bush, the overall reported share of the vote was not that far out of line with what was predicted. It was a real bummer, but it took some time for the truth to emerge that the election was rigged. And by then it was too late.

By contrast, if Obama is (say) 8% in front in the polling in the run up to election day, but the actual votes show a 2% lead for McCain, it is very likely that all hell will break loose. At the very least you could see large-scale civil disobedience, and in the most extreme scenario, civil war. I hope that Greg Palast Newsnight film gets shown in the US before polling day, so that people know what they're up against.

Towards mass nationalisation of the financial sector... welcome, Comrade Treasury.

Great news kids... we're all about to become bank financiers, courtesy of £50bn(? sum as yet unconfirmed) from the UK Government. Partial nationalisation, in other words. At least we're getting 'em pretty cheap... although it'd probably be a better deal for the taxpayer if we waited for them to get to the brink of insolvency and then picked them off one by one. That seems to be the Icelandic strategy at any rate.

The way they've performed under private ownership, it may well make sense to hang on to 'em in the public sector for a while. Or indeed permanently. Just don't let McKinseys and the other management consultants loose on them the way they've been allowed to run riot in the NHS.... aaarrrgh.

Well, we shall have to see whether this latest bail-out fares any better than the US bail-out, which . The rule book is being rewritten at the moment.... and by people who only vaguely speak the language. That is, HM Treasury, who spent the last ten years (and indeed decades before that) arguing for free-market economic policies. Yes folks, HMT is now leading the drive towards a socialist UK - parallelling our friends in the US, where Paulson and Bernanke are leading the revolution.

As I said a few weeks back, Jon Voight was almost right when he said that Obama would introduce socialism in the US - except that George W Bush got there before him.

Today's 1970s LP choice: "Crisis? What Crisis?" by Supertramp. Seemed appropriate somehow.

OK, now the "bailout" has arrived, we can get on with the crash

New lows in the stock market today... a record 1-day percentage fall in the FTSE 100. The BBC headline is instructive: "stocks slide despite reassurances."

Perhaps because the reassurances were coming from the likes of Angela Merkel, Alistair Darling, the government of Iceland, and of course the US Government.

We have got to the stage that William Burroughs in The Naked Lunch called 'that frozen moment when everyone sees what is on the end of every fork.' People have realised that b.s. is b.s. and there is no real reason to believe any economics minister in any government in the developed world.

Jon Snow on Channel 4 News looked to be really enjoying himself (and that's not meant as a negative remark at all - Jon is great.) Just being able to have a steady stream of interviewees in the report footage and in the studio saying, "we haven't a clue when it's going to end." Even the economic collapse of the mid-70s doesn't have anything on this.

More and more financial institutions - and other companies - are having to be rescued by national governments every day. The UK government is now seriously considering partial nationalisation of the entire UK banking system. It's intervention on a level that Tony Benn never got anywhere near in the 70s.

Is it frightening? Yes, certainly. But seeing the Reagan/Thatcher economic model that we've been following for the last 30 years unravelling so quickly and so completely is not an unpleasant experience. The only problem, of course, is what we replace it with. And that now becomes the really big issue for what now looks increasingly like it's going to be an incoming Obama adminstration in the US. (So far there's little evidence they've thought about this - which is very worrying. But that's an issue for another day).

In the EU, who the hell knows what's going to happen. The two different perspectives I've identified from media commentators are:

1. The crisis could fracture the Euro and maybe the EU itself (Larry Elliott says this for instance);
2. The crisis could lead to an expanded EU with greater powers (at the extreme, a federal Europe). For example, it looks like Iceland is now desperate to join... and if the pound collapses, the UK could be forced into the Euro.

So it's the big crash, folks. (Of course stocks may bounce tomorrow, but in the current climate that won't last for long. Casino capitalism is crumbling to dust, and this is the biggest opportunity for the left (and unfortunately for the extreme right) since the 1930s. The only problem is working out exactly what the f*** is going on enough to work out (in turn) what to do about it. Good luck, everybody.

Just when you thought Brown was digging his way out of a hole...

...He puts Peter Mandelson back in the cabinet.

Lunacy, just plain lunacy.

The best news from the reshuffle was that Digby Jones was bailing out. He should never have been there in the first place, of course, but it's reassuring all the same.

Also, Andrew Adonis, who has done his best to wreck the UK education system over the last ten years, goes to transport - presumably on the basis that the UK transport network is so terminally f***ed that he can't do any more damage there.

Likewise, John Hutton has been moved to a real cabinet turkey - defence. It's a really interesting question which of Mandelson or Hutton is worse. I think Hutton's probably worse, if only because he speaks with the zeal of the true convert to neo-liberal economics. Mandelson has been in the right-wing camp for far longer, and so may have had some time to reflect on the idiocy of his beliefs. We can but hope.

Ed Miliband steps in as the Secretary of State for a new department - Energy and Climate Change. In general I think the more power to Ed the better (no pun intended) as he is one of the best people in the Cabinet and could be good as a future leader. However there are dangers in this position for him. He'll be pushing (whether by choice or not) a deeply unpopular programme of new nuclear power stations and the inevitable public backlash could cause him big problems. On the other hand he will be able to push for renewables and (hopefully) against coal, so it's not all bad news.

One overall comment: this 'all hands on deck' schtick is really beginning to bug me. We've heard it from Mandelson, Brown, Cameron and anyone even vaguely involved with the US Government. And the net result is that the economy is still collapsing - just a little slower than it would have done otherwise. No-one really seems to have grasped the fact that the game plan which has defined the last 30 years - the belief that deregulation, free markets and maniac capitalism woud secure perpetual prosperity for the western world (and converts from the east) is very close to being over. It's like we're still trying to play football, but the playing field has been tilted through 90 degrees, and we haven't realised we'll need a pick-axe and climbing spikes to stay on it.

Given that pretty much all hands failed to anticipate the kind of mess we find ourselves in (the only exceptions I can think of are Guardian chief economist Larry Elliott and UCLA Marxist historian Robert Brenner), add a load of clueless people together and you get the same result as adding a bunch of zeroes (i.e. zero).

The 'big tent' strategy has been a disaster for Brown. It's emasculated his political campaigning and made it impossible to drop the tarnished legacy of Tony Blair. The departure of Ruth Kelly, with no ill-effects whatsoever, should have been a clue to the way forward; dump the dorks, and kick some Tory ass. Instead we have welcomed back the enemy within... Mandelson. Maybe I'm wrong and the guy is a genius who will mastermind another election victory. But remember that's what Blair thought about Alan Milburn in the run-up to 2005, and where is Milburn now? (Don't answer that one... we'll probably find next week that he's back in the cabinet.

"A time in America, back in the day, when men and women were free..."

Great post on Paul Krugman's blog about Sarah Palin's quote of Ronald Reagan in the V-P debate. Apparently Reagan said in the 1960s that the US Medicare programme (their tax-funded health insurance programme for pensioners) would lead to totalitarianism. Well people said the same thing about the NHS prior to 1948, of course.

But what's most funny/chilling is the final line from the Reagan quote:

we have to fight for [freedom] and protect it... or we’re going to find ourselves spending our sunset years telling our children and our children’s children about a time in America, back in the day, when men and women were free.

Which is of course, what's already happening in the US. Parents are now telling their kids "back in the day, you could be sure that your vote would count and there wasn't massive institutionalised fraud. Back in the day, we didn't have indefinite detention of immigrants, mass surveillance with no legal oversights, and any of the rest of the drift to a police state. Back in the day we weren't the slaves of entrenched corporate interests..."

(Do take Alex Jones with a large shaker of salt by the way - he may be both insane and distateful to many people, but does at least raise some real issues, even if you don't agree with the conclusions he draws).

Not that I'm feeling in any way superior to the US, of course: the UK ain't much better. I mean ID cards, ferchrissakes.

But it was a good example of the mythical bullshit that passes for the 'received' view of the USA in the media over there (and to an extent over here. The BBC's North America, Justin Webb, for example, seems to swallow this crap wholesale).

The USA held up as the defender of freedom whereas in fact it's probably one of the least 'free' countries in the developed world on any index... and set to become even less free if John McCain gets in. And probably even if Obama gets in, because the Democrats seem to swallow this nonsense wholesale as well - whether because they really believe the hype, or they're just playing dumb to avoid criticism by a reactionary media, I don't know.

The two-party system in the US (and indeed the two-and-a-half party system here) has a lot to answer for, in terms of stifling dissent.

But at least, the global economic system lives to fight another day as Congress has passed the bail-out. Whether it'll do much good in the long run (which could be a matter of weeks rather than years) is an interesting question.

No surprises

Just watched the Biden - Palin debate on Youtube, where the kind people at CSPAN have placed it.

My verdict: not interesting enough to recommend watching it if you're not a political junkie. I'll try to sum up in 100 words or less.

Palin: fixed plastic smile, reading from cue cards, cutesy sub-Bush linguistics, gee folks, isn't it great the cameras are on me and I'm not f***ing up. Iraq: the surge is working.

Biden: variety of expressions, talking style ranging from punchy to verbose, sometimes I trips over my own sentences. Earnestly frank rather than belligerent. Iraq: them guys was wrong, wrong, wrong.

If this changed anybody's mind I'd be very surprised. It did show that Palin can get through without making any major gaffes on a good day but rumours from one of her Alaska opponents that she was a formidable debater were not substantiated in any way whatsoever.

As I say, not exciting. I'm getting more kicks out of the BBC's predictions for Gordon Brown's reshuffle. Of which more soon...

More on skid row...

Great article by Thomas Friedman in the New York Times here about why the House of Reps was mental to vote the bail-out down, making pretty much the same points I made but more eloquently!

The Senate passed the bail-out this morning, but it's still anybody's guess whether they'll get it through the House on a second try (Friday morning). And if it doesn't get through, what happens? Do they just keep trying again and again until George Bush runs out of different ways to make the same speech, or the economy collapses so badly that they can't pay anyone in Congress anymore?

Questions, questions.

saver switching confusion

Headlines from today's news stories

The Beeb: 'No floods' of switching savers

Savers are remaining calm about their savings and not switching banks despite uncertainty in the sector, an industry body has said.

The Telegraph: Savers move billions to safety amid banking panic

Panicked savers are moving billions of pounds from high street banks into accounts that guarantee their deposits.

Confused? Us?

Conclusion: no reporter has a bloody clue, and the media continues to perform at its usual level of competency. (Remember Monday, when all the news channels were telling us the US House of Representatives was certain to pass the bail-out plan - until it didn't? That's why I'm not believing anything they're saying about the Senate. The Telegraph, for what it's worth, thinks that even if it does pass in the Senate, the bail-out plan will fail again in the House.

McCain says Palin is underestimated like Reagan: well part of that sentence is correct...

One fun side-effect of digging around for stuff about just how bad the oncoming global collapse is, is that you get to read a lot of amusing stuff about Sarah Palin.

Here's a Telegraph report that John McCain has argued people are underestimating Sarah Palin like Bill Clinton and Ronald Reagan - both of whom went on to serve two terms.

I guess you could compare her with Clinton in that both have been governors of fairly small (population-wise), perhaps even inconsequential, states beginning with 'A' (Alaska and Arkansas respectively.) But Clinton was certainly no fool either in interview or debate.

I mean, can anyone imagine Bill Clinton (or Hillary Clinton for that matter) delivering a performance like this in a TV interview. The link is to Palin's performance in an interview on the CBS network and it's unbelievably, laughably, shit. If this had cropped up on Brass Eye it would have fitted in very nicely. (It would explain a lot if Chris Morris turns out to be the Republican campaign manager...)

The Reagan comparison has a bit more merit to it. The guy was a cheap punk who was refused membership of the US Communist party in the 1940s for being too stupid, and who enjoyed high-quality policy advice from his astrologer (call David Icke NOW!!!). But undeniably he was (sometimes) good on TV and had a certain knack for nailing a catchphrase which resonated with the US electorate; one can perhaps imagine Palin being able to do that if circumstances were right (i.e. probably not in the middle of the biggest economic crisis for 70 years).

The fantastic parody cartoon from The Onion of the Carter-Reagan contest in 1980 sums up Ronnie's appeal; Carter saying "let's talk better mileage", and Reagan saying "kill the bastards". That sums it up; a cold-blooded, simple, fascistic message that many of the voters could identify with. In the right circumstances I believe Palin could do that. But these ain't the right circumstances. At best she will manage one or two killer one-liners. Now if Joe Biden is completely shit that could be enough; but I don't believe he is that shit. At the very least, he showed considerable good taste by stealing Neil Kinnock's speech on being the first of his family in a thousand generations to go to university... etc.

I think a more appropriate comparator for Palin is Dan Quayle, widely acknowledged to be the most crap Vice-Presidential choice of the last half-century or so. But don't forget that Quayle was seen as a real turkey well before the '88 election and it didn't stop George Bush snr. winning by a landslide. I think the V-P debate is kind of irrelevant, except for the fact that McCain is not a man with a good record of health, and he is 72 years old. So the question of the fitness for duty of the V-P may weigh more heavily in this case. But in any case, it's fun to blog about.

Skid row, here we come...

...not the early 90s heavy metal band, fortunately, but the imminent collapse of the entire US (and perhaps the entire Western developed world) economies.

The US bailout plan has been defeated.

As that was pretty much the only thing holding global stock markets up, stand by for a financial bloodbath. It'll probably unfold as a domino effect over the next few weeks, with bank after bank failing - and dragging various other companies down with it.

What seems to have scuppered the bailout plan is three things:

1. hardcore opposition from the right wing of the Republicans. The official line from these guys is that a bailout is inimical to capitalism; we need to let the irresponsible corporations and investors fail, and the responsible ones will prosper. Which would be fine - except that the more banks fail, the worse the situation gets for everyone else. What looked like good investments up until recently suddenly turn bad as asset values fall further and further, asset values are hiked and your debtors default. The idea that capitalism is some kind of atomistic system where my fortunes don't depend on external market conditions, or anyone else's actions, is pure unadulterated bullshit that anyone with a brain, even on the right wing, should be able to see through.
   
2. hardcore opposition from the left wing of the Democrats. These guys don't want to bail out Big Corporate America, and that's a viewpoint it's very easy to have sympathy with. But again, the problem is that Big Corporate America takes a lot of people down with it - in the US and elsewhere - if it goes down. Again, it's all interlinked. Letting the big corporates collapse is the wrong remedy to corporate abuses - we need more effective (and more substantial) taxation and regulation of big capital, both here and in the US.
3. the fact that there is an election in 5 weeks and many politicians were worried that their constituents wouldn't forgive them for supporting the bailout. Again, many people are worried about the bailout for the best of reasons, but see 2. above.
   

There may also be a more sinister factor at work for the Republicans - which is that the worse the economic crisis gets, the worse John McCain's poll ratings seem to get as well. Many Republicans may have decided that there is simply no way McCain can win in November - so it's time to adopt a 'scorched earth' strategy, f***ing up the economy as much as possible so that Obama has a complete 'mare when he gets in, his poll ratings collapse and that clears the way for an extremist right wing nutter to take over in 2012. Well, it worked for the GOP in the late 70s. Jimmy Carter was unable to sort out the tremendous mess that the Nixon and Ford administrations had made of the economy in time to avoid going down to Reagan in 1980.

And I think that unless Barack Obama gets his shit together on the small matter of a fundamental shift in US economic policy before taking office (if he does win), there is a real danger of his presidency running aground big-time on the economy. Four years is normally a fairly long time in the economic cycle, but if we are headed for a 1930s-style depression... maybe not.

That's assuming the pundits are right that we are headed back to the 1930s. I've had my doubts before, but the new crop of data coming out from the UK is so weak that it's getting hard to maintain any faith in the system's ability to right itself without taking a huge hit. For example, mortgage lending has collapsed by 95% in one month. And that was before Lehman/AIG! Jesus Christ, we are f***ed.

Remember the barter economy... start storing those valuable non-perishables now. And a stock of food to eat, if your bank goes under and you can't withdraw any money from the cashpoint. Yes, you've got £35,000 covered by the Deposits Scheme but how long will it take the govt to give that to you? Gotta play it safe at the moment.

We're OK for a few days... got a vegetable patch. Beetroot is gonna be on the menu... a lot.

The US Presidential Race: debates, half-wits, and poll tracks

This is gonna be a long one, as I'm getting back to blogging out the US Presidential Election after several months out of the loop - I enjoyed the mammoth struggle between Obama and Clinton in the Democratic primaries, but once Obama won it, things got a bit boring for quite a while.

Then we had the whole Sarah Palin thing for the Republicans - a huge bounce, with McCain leading for a couple of weeks, then gradually slipping away as more and more Americans seemed to realise that whatever the glamour factor of having Palin on the ticket, she was a dangerous lunatic along the lines of Stillson from The Dead Zone (in many ways the archetypal Republican politician), most likely to lead the US into nuclear war with Russia (or whoever) at the first opportunity.

In 1996 I was standing in the British Rail (now National Express) ticket office at Walthamstow Central buying a ticket with a couple of mates, and a guy ran in and out the ticket hall at top speed. Five seconds later another guy weilding a bicycle chain ran in, stopped for two seconds to shout at us "who wants it?" then ran off again in pursuit of his poor victim. Politically speaking, Sarah Palin is the equivalent of that guy with the bicycle chain. Initially scary but then you realise she's a small time villain jumped up to the big stage. Although of course she is really no worse than Bush (Jnr) or Reagan, each of whom were, for my money, equally clueless... to say nothing of Dan Quayle.

I don't know how Palin will do in the V-P debate next week, or if it matters much given that her star seems to have fallen so fast. I don't know much about Joe Biden but if he can walk and answer his Blackberry at the same time he should be OK. Palin's performance on various chat shows recently seems to have been so lame that the Republican campaign managers are doing everything they can to keep her out of the spotlight lest she drop yet another clanger. Of course it could be the old Dubya Bush tactic of playing dumb and then progressing from no-brain to half a brain at just the right moment to exceed public expectations. (This apparently is what happened in the sequence of Bush-Kerry debates in '04: Bush was total shit in the first one, then marginally less shit in the others - giving the impression that he was on a roll. Clever stuff.) In any case, it will be interesting to see if Biden can find a killer line to equal Lloyd Bentsen's "Senator, you're no Jack Kennedy" against Quayle in '88.

But more interesting than this is the first Presidential debate, which took place on Friday - despite earlier assurances from John McCain that he would not show up. My impressions (and see for yourself on the BBC site) were:

Obama: competent without being amazing. Did fairly well on the economy although in the current situation it would have been almost impossible for him not to. I thought he was good on foreign policy - McCain seemed to think that the only way to assess a situation in Iraq/Afghanistan was to go there oneself, in which case presumably we can get rid of all military intelligence personnel and just parachute the President in whenever we need to find something out. Yeah, right. (Of course, there are good grounds for wanting to see with one's own eyes what's going on, given that the Bush administration lies all the time - but on foreign policy, McCain supports the Bush administration. In fact he's even more wedded to crazy militaristic adventures in foreign policy than Bush/Cheney were, if that's possible.)

It seems to me that Obama's more open and conciliatory demeanour will go down well with voters - he called McCain "John" a lot, said when he thought McCain was right about something, gave credit where credit was due. Some would say this is too "nice guy" an approach and he should have got down and dirty more but remember that the job to do here is to win over the swing voters. No point playing the tough guy to please your hardcore support - this is a good time to try to convince people who may not be wanting to vote at all 'cos they are so f***ed off with the whole thing (and there are tens of millions of people like that in the US). Obama did lay into McCain at strategic points, and it worked pretty well.

McCain: body language and general posture was pretty bad - he looks like he's been taking lessons from Andrew Green of Migration Watch. Certainly not the complete moron that some pro-Obama commentators have been claiming - but not brilliantly articulate, either. Very negative in most of the exchanges. Did a reasonably good job of criticising the Bush administration where he felt things needed to be done differently (e.g. the pork barrel - I've no idea if McCain really would get rid of substantial amounts of pork-barrelling - it seems unlikely given the corporate domination of US politics - but to the uninitiated voter it probably came across well.)

One thing is - McCain just looks really old. This may not matter - from footage of the Reagan-Mondale debates in '84 Reagan looks half dead and he still won - but I get the feeling the guy is a US Brezhnev and could drop dead at any minute. If that happens, of course, you guys get President Palin. The Democrats should be running scare stuff on this all the time.

The general media consensus was that it was close-run with Obama just shading it - and I'd go along with that. Anything less than a big win for McCain in the last two debates is disastrous for the Republicans as the economic crisis has come along at just the right time for the Democrats, who must be very relieved that real issues are under discussion now, rather than whether Sarah Palin is a pig with lipstick or not.

My feeling now is that barring some sort of major tragedy (another terrorist attack? Joe Biden revealed to be Barney the dinosaur in disguise? etc.) the Democrats have got this sown up. The excellent polling site FiveThirtyEight agrees with me, at least at the moment. Even so, I'll be a little nervous come election day in November (probably with a beer in my hand.) There's always a danger this could be like Labour in the UK in 1992, after all. (Someone should tell Barack Obama about the Sheffield rally). And I'll be more nervous afterwards if Obama gets in - what's he gonna do about the economy? Because he said very little on Friday to make me think he had any idea what to do about the onset of recession, let alone depression... are we looking at a Jimmy Carter Mark 2 here? I leave you with that thought.

Brown: the unexpected (but fragile) fightback

Well, Gordon Brown, eh. Just when everyone's started to agree with the likes of Guido Fawkes that he's out for the count, he rebounds with what was generally reckoned to be the best speech of his career. OK, so I couldn't be bothered to actually watch it - I was a party conference-free zone this year, after 4 years of traipsing round the awful things in my previous job. And the people who said Brown was doing well are the very same people who were saying we were "over the worst of the credit crunch" 2 months ago - so take them with a salt shaker or three.

But Brown's line "it's no time for a novice" seems to have found some temporary resonance with the electorate. Guardian / ICM has Labour up to 32% - only 3 points shy of where they were in 2005. Now, of course, that ain't enough to win, or even to prevent losing. Labour had 32% at the 1987 election and the Tories still got a majority of 100. Also, parties usually get a post-conference bounce - so it is very likely that Labour will go right back down the week after next, once the polling numbers come through from Dave Cameron's speech (in previous years Dave's conference speeches have been minor miracles of cosy vacuity which the public, sensing the reincarnation of Tony Blair, has warmed to for some reason).

However, even if the recovery is transient, it does offer some slim hope for Labour. Firstly, Brown can make a good speech on occasion. Secondly, there are still swing voters out there who could return to Labour if the conditions were right. Thirdly, the economic crisis might help Labour, as it did the Tories in '92, if they think Labour has a better chance of handling it than the Tories. I'm not sure why they would think that, given that New Labour was absolutely complicit in getting us into the present mess, but hey - don't look a gift horse in the mouth. The 'no time for a novice' line seems to have some traction...

...But on its own I very much doubt it'll be enough. Brown has bought himself some time and none of the challengers for the premiership has decided to pounce. Miliband has tested the water and decided to play it safe, whilst Johnson has (sadly) ruled himself out. Any other names on the table are too duff to contemplate (Harriet Harman, ferchrissakes....)

So what can Brown do to build a revival? Well, the resignation of Ruth Kelly may have pointed the way forward. It's not clear whether the timing of Kelly's departure was her attempt to stick the knife in or whether it was precipitated by bungled leaking from Number 10 - but for the purposes of this post, that is irrelevant. What matters is that a leading Blairite left the cabinet and the impact was... extremely minimal. She has of course been briefing about the need not to "shift to the left" and all that crap... yes Ruth, let's stick with the failed centre-right policies of the last 11 years. Great idea, there.

But if one Blairite can depart without any negative consequences, why not kick out all the useless bastards? Not Miliband - for one thing it's far from clear that he actually is 'Blairite' and for another thing he's too dangerous to have outside the Cabinet. And not Johnson - again he's not really 'Blairite' or 'Brownite' - just very effective, and a good communicator. But useless idiots like John Hutton, Hazel Blears and James Purnell can safely be jettisoned at this point. They're just dead wood and are getting in the way.

Brown needs to build on the revival and assert his authority. The statesmanlike 'govt of all the talents' idea - relying on odious morons like Digby Jones and Andrew Adonis - just confused people and looked bureaucratic and unfocused. The further he strayed from core Labour values, the weaker the govt has looked - the 10p tax rate debacle, for example, was a disaster.

He should broaden his base on the left, not the right - John Cruddas, for example, would be a massive asset to the Cabinet. And given the collapse of the Thatcher/Reagan economic model that we've been in hock to since 1980, some serious consideration of alternative economic strategy by the Number 10 Policy Unit and the Treasury is absolutely vital. Given that the Tories have very little to offer on economic policy (that's why they've been so quiet in the current crisis), and that Nick Clegg seems to have shifted the LibDems to an extreme right tax-cutting agenda, there is more room to manoevure on the centre-left and left than there's been for some time. But Gordon Brown needs to seize the initiative and not sleepwalk from crisis to crisis as he's been doing for the last 12 months. Come on son. You know you can do it.

Good news and bad news

Well there is some good news and some bad news.

On the good side it looks like the version of the plan drafted on Thursday does contain provisions for the Government taking equity in the assisted firms and for some additional oversight of the Treasury - see Paul Krugman again.

On the bad side, a lot of rank-and-file Republicans are saying they can't support it as it stands because it involves the Govt playing too large a role in the financial system. (Doh! I thought that was the whole point?)

I thought the bipartisan approach of the last few days was too good to be true - we almost never get it in the UK, and it looks like it's a rare thing in the US as well. What would be most amusing at this juncture would be if the plan failed due to Republican intransigence, and then the crisis really did escalate into a wave of banking failures on the eve of the US election. Given that the more the economy takes centre stage, the more Obama pulls ahead in the polls, if he can blame the Republicans for collapsing the plan, we could be looking at an Obama landslide.

Of course the consequences of a major US slump wouldn't be at all amusing... looking forward to mass unemployment anyone? Probably the BNP is rubbing its hands with glee but the rest of us will be in a bit of a pickle.

Of course, one explanation for the Republicans' intransigence is that they figure the McCain/Palin ticket is a lost cause and they have abandoned hope of winning the Presidential election, instead opting to be the wrecking crew. Trying to make economic conditions as difficult as hell for Obama in the next 4 years so that the electorate will blame him and they can come back with a landslide in 2012.

That is a real concern, actually: the US is gonna need some very tough medicine after the economic lunacy of the Bush years, and the question is whether people are still going to blame the Republicans even after Obama gets in (if he gets in), or direct their anger at the incumbent. The US could still be in a deep slump by 2012, and the prospects for a right wing demagogue - a Huckabee/Palin type, or even worse (Stillson from The Dead Zone) could look real strong. Or am I just being too pessimistic?

An incredible gamble with the global financial system

Well, it looks like the US Congress is close to agreeing a $700bn bailout package for the banking system - provided the White House agrees. Given that Bush went on the TV yesterday to say that the US banking system would collapse unless there was a deal, it would look bizarre, to say the least, if he turned the package down. So it's probably going through.

Many politicians in Congress - both Democrat and Republican - were severely critical of the initial Paulson/Bernanke bailout plan, which proposed sweeping powers for the US Treasury to administer the $700bn fund. In particular, the Treasury wanted complete discretion to acquire assets as it saw fit, and very limited oversight - twice-yearly reports to Congress. Also, in the original plan there was no provision for the US Government to take an equity stake in firms that received bailout money - so unless the bailout fund can sell off its book of bad loans at a higher price than it pays the banks for them, the US taxpayer was facing very big losses under the original scheme. The problem is that the lower the price the bailout fund pays for the bad debts, the less effective the bailout is likely to be in boosting confidence. Paul Krugman's blog has a really good explanation of why the numbers don't add up on this original version of the bailout plan.

So what's the difference with the new plan? There are provisions to cap executive remuneration in firms which receive bailout money - which should make the plan more popular with the public - but as far as I can tell based on the limited information available so far, the revised plan doesn't include provisions to take equity stakes in the assisted firms. So far I have been unable to find out what is on offer in terms of additional oversight.

Really, given the rushed manner in which this has been done, how can anybody be sure (or even have a reasonable degree of belief) that this plan is going to work? Undoubtedly there was a strong case for drastic action, but it needs to be credible and effective action rather than something half-baked. This whole thing feels like it's being bounced through with Bush and the US Treasury holding a metaphorical gun to Congress's head - saying "pass this law or we'll blame you for the collapse of the global financial system".

Whilst I'm sure that if there is a deal in the next 24 hours or so it will be trumpeted with a big fanfare, and stock markets will rise for a day or two, as the hangover sets in we may well find that we aren't in a much better position than we were before the plan was hatched. Except that US taxpayers will be several hundred billion dollars worse off.

And what happens after that?

We're goin' down.

I'm writing this at the end of a 72-hour period which has been the weirdest time I can remember in financial markets.

The merger of Lloyds TSB and HBOS to create a high street uber-bank, with the competition regulations bypassed. AIG bailed out by $85bn of US government funds. $100 bn pumped into the system by central banks to provide extra liquidity. And suggestions that the US government itself may have its credit rating downgraded due to the huge extra liabilities it has taken on.

The whole system seems to be on the verge of collapse, held up by a variety of sticking-plasters pasted on by the increasingly desperate policymakers. Unless confidence returns to the market in the next few days (and is there any particular reason it should do?) it looks to me like the US government will end up nationalising most of the American banks. Paul Krugman's blog has more detail on the US situation, including the remarkable statistic that the interest rate on 3-month Treasury bills has gone negative. Does that even make sense? Why would someone hold an asset with a negative rate of interest? Perhaps because there is a small risk that the US financial system might collapse? But then, wouldn't US Treasury Bills be worthless too? On the face of it, it doesn't make sense. But in any case it looks 'real bad'.

Big news on the Telegraph site (which I'm increasingly turning to as it seems to update more quickly than the BBC) - the FSA has banned short-selling of stocks by hedge funds and other investors. But that's a bit like insulating your house by closing the door while leaving all the windows open. Short selling is only one mechanism by which prices are driven down. Actual selling of stocks by the people who own them can do just the same thing - and presumably can't be outlawed without outlawing all transactions. Russia has indeed done this temporarily by suspending its stock market.

These are insane times. Grab food, clothing and a selection of items to barter; at this rate you're gonna need them.

The credit crunch may have just gotten a whole lot crunchier

Breaking news: the Lehman Brothers investment bank has failed to find a buyer, and as things stand it will have to file for Chapter 11 bankruptcy protection in the US tomorrow morning. That is unless :

(a) a buyer is found (and it looks like all the obvious avenues have been exhausted on this front), or
(b) the US government steps in with a financial support package.

BBC Business Editor Robert Peston suggests in his blog that US Treasury Secretary Henry Paulson is reluctant to do another Freddie Mac/Fannie Mae and bail Lehman out. I'm not sure what source Peston bases that assertion on, but if the bank really does go under, the knock-on effect on other banks could be substantial. On the other hand, bailing the bank out sends a signal to other financial institutions that the US taxpayer will pick up the tab if they run into difficulties. It's a tough quandary but I think Paulson is probably bluffing and will step in with a rescue package at the eleventh hour. The danger of a bank the size of Lehman collapsing is simply too big for the authorities to contemplate.

Strangely, the Bush administration seems to be succeeding in moving the US economy towards a nationalised financial services sector - one of the key elements of a socialist economy. Actor-turned-nutter Jon Voight claimed earlier this year that Barack Obama would introduce socialism into America if elected. But the way things seem to be going in the banking sector, maybe America won't have to wait that long.

Update: well I was wrong and not for the first time - they let it fail. Hold on to yer hats folks - sounds like the gigantic insurer AIG could be next in line... and then...?

Reflections on the start and end of a dead month in UK politics - and economics

My official excuse for not posting for almost the whole month is that nothing really happened this month - at least in UK politics. (US politics was of course quite different - but hopefully I'll get a bit more time to blog on that after the Republican convention next week).

At the start of the month, Dave-2 (Miliband) appeared to be testing the waters for a move against the PM; those waters are probably still being tested as I write this. A putsch in the autumn seems a distinct possibility. Brown seems to be doing his best Leonid Brezhnev impression; I figure Gordon is a particular fan of the later Brezhnev, where the Soviet leader had been certified brain dead but was being wheeled out at public holidays and international summits anyway. A bit like the mid-seventies Elvis Presley, or Bono today. The problem is, Brezhnev didn't have the difficulties of the electorate to contend with; whereas Gordon, in about 18 months, does. Someone will surely slip him the (metaphorical) sleeping pills well before that date.

At the end of the month, Alistair Darling has been spotted drinking deep in the waters of economic gloom; some great comments by him in a Guardian interview reported in the news yesterday. Voters are "pissed off" - OK, so it's hardly post-watershed stuff (even though yesterday's Daily Mail bleeped out the word 'pissed' - how anal do they think their readers are?) but it's not the kind of language we've associated with Darling in the past. And the economic crisis is 'the worst for 60 years'.

This kind of statement gets batted about a hell of a lot at the moment and I wonder if the people making it - politicians, economists in the media, anybody fronting a property market programme like Location, Location Location or Property Ladder or any of the other crap - have really thought about what they're saying. In the early 80s unemployment went up to 3 million and we had negative growth for at least 2 years - probably 3. Is it really going to be that bad? Worse than the early Thatcher years? Do any of the people making the statement really remember those years? Or have they just watched Ashes To Ashes on the TV recently?

I would have to say the jury is still very much out on how bad this economic slowdown is going to be. A house price crash would actually help a hell of a lot of people in the UK - all the poor f***ers who have been renting or living with their parents for seven or eight years because they couldn't afford a house. Most of the recent opinion poll research on this shows that a large proportion of people actually want prices to fall. I think it's called 'bursting the bubble' or a 'market correction', depending on who you talk to. There was no way the economy could have continued with house prices rising at the rate they were in the early 2000s. The question, of course, is how big the knock-on from this correction will be to the rest of the economy. And no-one really has any good estimates of that.

I need to start running some more in-depth economic analysis, either on this blog or a parallel site, to debunk a lot of crap that is flying around at the moment. But the one thing I would say most of all is, DO NOT believe anyone who says that interest rates have to rise to head off a huge inflationary threat. Believe Bank of England Monetary Policy Committee economist David Blanchflower. Like Ben Bernanke in the States, he says interest rates have to fall to stave off recessionary pressure, and the inflationary 'spike' will be short-lived. He's right, and the rest of the MPC are misguided. The other guys aren't necessarily 'wrong' in formal terms, as they are acting on a crazy remit of controlling inflation no matter what (that's the target they were given by New Labour in 1997) but, like the early 80s, there is a danger that an obsession with inflation will inflict huge and unnecessary damage to the economy through high interest rates. Bernanke understands this and has cut rates really aggressively; the latest US output figures show a rebound to positive growth, although it's unlikely this strong growth will last once the temporary bosst from the latest round of unsustainable Bush tax cuts works its way through the system. Still, the US is in better shape than if it had whacked up interest rates, for sure.

In short, we're headed for a recession but it's not clear to me - yet - that it's gonna be a really bad recession. I think the current hysteria runs the risk of turning a slowdown into a slump. Whilst I wouldn't accuse Alastair Darling of hysteria per se (on the face of it a less hysterical-looking person would be hard to find), I think he should highlight on what basis he's saying things are the worst they've been for 60 years. A volte-face of such magnitude, coming out with a statement like that after a year of denying the problems, seems irresponsible in the current climate of fear and apprehension.

No-one really knows what the hell's going on, so what's your best move? Hal's advice: avoid the bullshitters (I'll tell you more about who they are over the course of the next few weeks) and read people like Blanchflower and New York Times columnist Paul Krugman. (I've just spent 30 minutes or so reading Krugman's columns and blog and they really are excellent - some of the best analysis of the US economy you'll read from a centre-left perspective. Very accessible to non-specialists, too.) These guys are still a little mainstream for my liking but they are still streets ahead of most 'orthodox' economists plying their trade these days - including, it seems, most of the UK Monetary Policy Committee.

Dave-2 gears up to making a move - "Hit It"

Unless you are in the political braindeath category (and who can blame you, given the shit we've all had to put up with over the last year, indeed the last thirty years or more?) you won't have missed David Miliband's bid for the leadership of the Labour party. As my previous nickname for Miliband, 'microBlair', is somewhat old hat now, I've switched to 'Dave-2' to distinguish him from everyone's favourite politician 'Dave-1' on the other side of the House.

OK, I'm exaggerating a bit. But only a bit. Can anybody imagine a senior cabinet minister publishing an article calling for a complete overhaul of political strategy - making no reference at all to the current PM - at any point under ANY previous post-war Prime Minister? Excepting the 1975 referendum on EU membership (when collective cabinet reponsibility was suspended) and maybe Geoffrey Howe's resignation speech in the late eighties, I can't think of anything along these lines. This is as near as a direct and open challenge to Prime Ministerial authority as you will ever see in the UK.

Miliband's article was actually bland as hell, really. He's hit on a good strategy of attacking Dave Cameron as 'New Labour Mark 1', ten years too late - which is a line that the government should be pushing a lot more - but he had no positive vision to offer beyond the extremely vague rhetoric of 'giving more power to communities' etc. - which seems to ignore the huge centralising forces of the UK state machine on one hand, and multinational corporations on the other. The aim of 'power to the people' is laudable but you're gonna have to do better than what you've outlined so far to get there, Dave. Maybe worth ringing up Tony Benn or Zac Goldsmith for some sage advice.

But Miliband is out there and on the line - possibly indeed "over the line" and "entering a world of pain", as the hapless bowler did in The Big Lebowski. This is a tough one for Brown. How to respond? Demotion seems most likely, but would make him seem vindictive (which he is) and paranoid (which he is, even more.) Various commentators have come up with reasons for Miliband not to stand in a leadership contest, all of which are pretty spurious to my mind: let's go through them one by one.

• The public doesn't like back-stabbers. Says who? If Gordon Brown is as unpopular as polls suggest, then getting rid of him should help quite a lot - a necessary (though hardly a sufficient) condition for a recovery.
  
• There would need to be an immediate general election if Brown were deposed. Says who? A change of prime minister hasn't precipitated a general election for decades in British politics.
  
• Miliband would lose the next election. Possibly true (even Miliband seems to think so - he says "the odds are stacked against us" in the Guardian article. Where's your fighting spirit, Dave-2?) But as an argument against standing it misses the point. Even if Miliband only gains (say) 5% in the polls, he could make the difference between a crushing, landslide defeat for Labour, and a narrow defeat - or even a hung parliament. That puts Labour in a far better position to beat the Tories next time out, and makes it far less likely that Miliband will be the next William Hague. Even if Labour loses fairly heavily, Miliband will be safe as leader of the opposition as he can very reasonably argue that the defeat isn't his fault.
  

So I would say to Dave-2 "go for it". Even though he is not the best choice to take over from Gordon. The best choice is Alan Johnson - but current reports suggest Alan doesn't want the job. Please reconsider, Al - if John Major could do it for 7 years then surely it can't be that difficult. You'd probably prefer it to being health secretary. Miliband is probably the second best option but he's a long way behind. He looks too nerdy and too out of touch with voters. He might be able to at least beat Cameron on number of seats in an election (given the bias in the system even after boundary changes) but I would not put money on it. I think Johnson is an experienced politician who would see Cameron off fairly easily provided that the voters can see that he's prepared to make genuine policy changes and drop most of the New Labour crap. There is also the small matter of the impending economic collapse, but oddly enough, Johnson might just be able to turn that around in Labour's favour. The Cameron-Osborne team is inexperienced and lacking any real substantive ideas on economic policy. Whereas even now, Labour can make a case that it's done well on the economy overall and that the current slowdown is largely driven by the US. Dave Miliband would be a good choice for Chancellor under a Johnson administration.

This is all still highly speculative, but the post-Brown era is about to come upon us, if we're lucky. And thank f*** for that.

The realest of turkeys

I hadn't even bothered blogging about the Glasgow East by-election because it looked like such a shoo-in for Labour that it wasn't that interesting. Or so I thought... and then the SNP went and won the damn thing.

Make no mistake, this is a turkey as real as they come for Nu Labor. The only way Gordon Brown can survive is if no-one wants to take him on in a leadership contest because he's got the Labour party and the government into such bad shape that taking over the election would be a poisoned chalice. The putative challengers will think: don't risk it now, take our chances after the election, in opposition. The problem with that strategy, of course, is that if Labour gets wiped out at the election then the next Labour leader will be in a William Hague 1997-style situation, Hardly appealing.

At the end of the day it needs someone with enough grit to step up to the plate before Christmas. In my view, the only contender who would stand even a reasonable chance of performing well in the next election would be Alan Johnson. But I don't think he actually wants to do it. Still, if John Major did the job once then it's not exactly off-limits to anybody.

The best thing for Labour would be if Gordon could somehow resign on ill health grounds, or to spend more time with his family. Or something. That would provide a fresh start without someone having to knife him in the back. But the clean handover is unlikely, and so it looks increasingly likely that he will indeed be deposed. But... by whom?

The most interesting thing to come out of the Haltemprice & Howden by-election

I haven't bothered to post anything in particular about the David Davis by-election as the results were stultifyingly boring. About the best you can say about it is that the Greens finished in second place. The only really interesting thing that happened was when a friend of mine decided to run a sweepstake on the candidate that would end up with the least number of votes (which he went on to win. Very suspicious!)

However I did find one useful side product from the campaign - a 2 hour 53 minute lecture by David Icke, available on the website of something called Edge Media TV.

I've just watched 45 minutes of this and it's certainly an impressive public speaking performance. If you are sympathetic to Icke's conspiracy theory schtick, it's a very good (if somewhat long) outline of where his thinking's at nowadays. If you think he's talking total balls, then it's one of the greatest sustained comedy efforts you are likely to see (complete with bizarre micro-second jump cuts to an alternative camera angle - what's going on?) Either way, you can't lose.

Edge Media TV broadcasts on Sky Channel 211 and I'd love to tell you more about what the rest of their schedule is, but I can't pay money for something owned by Rupert Murdoch, so I can't.

Wanna be a bigoted reactionary? Better go hide in the church then.

Firstly people, sorry for the infrequency of posting at the moment. Having gone self employed I find that many waking moments are spent trying to do various stuff I am being paid for, and this blog gets filed under the 'remainder', if you like. Nonetheless Friday evening often presents an opportunity. For the next few weeks I'm gonna use a reasonably serious end-of-week post as an opportunity to catch up on big issues that have been bugging me lately, and intersperse that with short mid-week bursts of comedy wherever possible.

I'm gonna post on religion this week - not my usual topic of conversation, for sure, as a reasonably committed atheist (although not in the rabid 'anyone with religious sensibilities is a dribbling imbecile' Richard Dawkins camp). Nonetheless I did venture onto this fertile new territory a couple of months back to suggest that Tony Blair was a twat, and I'd now like to take the opportunity to give the good ol' C of E some advice.

For the benefit of anyone not from the UK reading this (well you never know), in Britain (well 'England' actually) the official religion (i.e. established church) is the Church of England. Started in bizarre circumstances (King Henry VIII wanted a divorce and the Pope refused so Henry said "OK, see ya"), it is a "broad church" in a very real sense - encompassing all sorts of punters including die-hard 'Anglo-Catholics' , radical quasi-Marxists and tub-thumping evangelicals plus just about every other combination.

The C of E is now facing a possible 'schism' because one group - call them the 'modernisers' - want women to be allowed to become bishops (they're already allowed to be priests) and another group - let's call them the 'reactionaries' (biased language, but then I am biased, so let's have cards on the table here) think they shouldn't be allowed. What's more, the reactionaries want to be allowed to have a special 'male-only' bishop category so that any of them who wants to opt out of worshipping under a female bishop should be allowed to do so.

What's amazing about stuff like this is that the reactionaries' stance is so obviously sexist that it's amazing it's even legal under human rights legislation. If any secular group wanted to mount a campaign in favour of women being debarred from taking a certain type of job, they'd be laughed out of court. But because this is a religious grouping, they're allowed to get away with it.

It's the same with the reactionaries' stance on homosexuality. Their anti-gay stance would be indefensible, indeed would have overtones of fascism, if it came from a non-religious source. But because they are religious, their arguments are seen as somehow defensible - even though their only justification is from The Bible, a book which no-one outside the Christian faith would accept as an authoritative source, and even within the Christian faith there is no agreement whatsoever on its correct interpretation.

The logical conclusion to draw from this is that if you want to be a right-wing fascistic misanthrope, go hide out in the C of E - because the modernisers haven't got the guts (or, more charitably, they pity you too much) to kick you out and expose you for what you are - miserable scum. Of course even if they do kick you out, you have several other options:

• start your own non-aligned church.
• Join the Roman Catholic church (which is even more hardline reactionary on this than most of the C of E traditionalists, and where the modernisers are in a far weaker position since the Pope runs the thing like the Soviet Union circa 1950).
  
• join another religion that has a proportion of homophobics and misogynists who get themselves taken seriously (radical Islam and orthodox Judaism spring to mind, although it can be difficult to get into the latter unless you have the correct ethnic background).
  
• Start your own religion. Worked very well for L Ron Hubbard for example...

So, reactionaries of the Anglican communion, don't feel too down that the Synod voted for women bishops on Tuesday. Because of society's remarkable tolerance towards irrational hatred of gays and women - as long as it is claimed to be religiously motivated - you have many alternative hiding places.

Johnson deserves to be extended: religion, as well as patriotism, is the last refuge of the scoundrel.