Mervyn King: “Blame us allâ€
It’s moot whether the whole of the Granite bond-issuing programme should be included in an assessment of the incremental support provided by the Treasury to Northern Rock this morning.
The Granite programme would implode if the Treasury had refused to guarantee the Rock’s mortgage-repurchase obligations under that programme.
Which could lead to colossal redemptions of bonds.
To that extent, the Treasury has today underwritten Granite – which is why I calculated that taxpayer exposure to the Rock has escalated from £40bn to £100bn.
And, to be clear, that number has not been knocked down by the Treasury, the Rock or its advisors.
However, the Treasury is not promising holders of the Granite bonds that they would receive 100p in the pound, in the way that it has given such a promise to other retail and wholesale lenders.
So I think, on balance, it’s reasonable to cite a different number for total taxpayer exposure in the form of loans and guarantees.
Having looked at the accounts and spoken to bankers, it's clear that taxpayer exposure is now between £50bn and £60bn.
In fact I'm told by a banker involved in the Rock rescue that the precise exposure, as of this second, is £57bn.
It’s risen by almost 50% from £40bn odd.
So each of us as taxpayers is exposed to the Rock to the tune of two grand.
Now there’s no possibility of all that being wiped out.
But in any prolonged housing recession, even impairment charges of a few percent adds up to meaningful losses for the Treasury and all of us.
For the Treasury today there was at least some comfort to be taken by Mervyn King’s enthusiastic show of solidarity with it and the , the City watchdog.
He has made the rational decision that they should all sink or swim together.
But their collective hopes of paddling off into calmer waters weren’t helped by his disclosure that all three of them had identified in 2005 and 2006 an urgent need to reform the mechanism for rescuing troubled banks.
The importance of such reform was minuted in 2006. But we’re still waiting for it.
And that, according to Mervyn King, is why Northern Rock is in the mess it’s in.
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Robert,
Do us all a favour and get a life and start reporting on other issues. The Northern Rock articles are soo.. boring now.
Nobody knows what the outcome will be so let them get on with it until the outcome is decided rather than "scare mongering"
Oh dear!
Where will it all end?
It looks as if NR were in a hole a lot deeper than anyone imagined. The house of cards is falling as we speak. They were very very exposed to short terms debt that has caused a death knell to the bank and much of it was off balance sheet.
I wouldn't want to be the directors & officers insurers for NR or their advisors for all the tea in China.
How long before the SFO get involved?
So , Robert , Mervyn King thinks the tri partite monitoring system is to blame for Northern Rock's woes ?
No , its the company Directors who have a fiduciary duty of care to make sure the company trades responsibly.
Only the decision to bale them out is hampered by the lack of reform
(and lack of clear leadership by the chancellor).
Of course we all know , (as Adam Applegarth said to the Treasury committee) its Robert Peston's fault for all this mess because his incisive reports have been explaining everything simply to us mere mortals and what the credit crunch really means to us.
I think what Robert has certainly achieved is to help educate us mortals and make us realise that in fact those that run our financial services industry are simply a bunch of self centred and greedy individuals that have no sense at all of the damage they have done and probably will carry on doing to our economy without a Govt that's prepared to pull them back into line.
What I would certainly encourage everyone to do is to copy me and when introduced to someone who tells you they work in banking or some other part of the financial services sector respond by saying "so nothing really useful then".. It really upsets them and upsetting them and knocking them off their undeserved perch needs to be done more often. They're on probabation now and they'd better start shaping up.
Robert,
to say that "each of us as taxpayers is exposed to the Rock to the tune of two grand" is really far more sensationalist - and plain wrong - than I expected of you. If the Rock goes completely bust and there is a 60bn run on it, its bonds etc - which you have the grace to admit is quite unlikely - there is nothing to suggest that I would be forced to pay out 2,000 (or, indeed, any amount) to HMRC. Conversely, if the Rock uses none of the money (far more likely - though in no sense 100%), I am not going to get a tax rebate either. So actually, my exposure to the Rock is pretty much zero at the moment.
'Granite bond-issuing programme'?
I wonder how many of the general public are even aware of the existence of Granite. And now the Gov't is underwriting Granite bonds? This is getting beyond a joke.
The BoE and the Treasury must be CAKKING THEIR BANKERS BREECHES to do something like that. It just shows that the financial crisis is completely out of control - these are the last gasp actions of bankers realising they have been rumbled and are desperately fumbling about to quell the tide.
The finacial tsunami is at our door, and we have only the banks to blame for inflating property prices and allowing peoples to use their homes as ATM's to buy stuff they don't need. Ahh.. the beauty of the free market!
Re post 2 - why on earth should the SFO get involved?
Even Mr peston isn't saying any of this is dodgy or even clandestine.
I find it fascinating to read comments from Labour supporters. They are so fed up with bad news or anything potentially bad that they would like you to stop reporting it - Keith on this blog. I have noticed it on other blogs too. Please do not take any notice - report on the major issues whether they are positive or negative for the government.
Robert - Northern Rock is an important albeit rather small side issue. Can we have some real investigative journalism into the implications of the whole thing.
The fundamental problems are the house price bubble and subsequent default.
Latest estimates are for default to wipe out the order of $500bn in capital. But this is just for sub prime and just for America. If house prices continue their fall and the problem affects other groups and other jurisdictions, you can easily double this figure.
Under Basel II, capital for on balance sheet lending has to be provided at 8% of risk weighted assets, which for mortgages has a weighting of 50%. This means if you lend £100, you must have £4 in capital. Or in other words you can lend 25 times the value of your capital.
So you can see that a $ trillion of default would take $25 trillion out of the lending system....and then add in the off balance sheet financing which now has to have capital provided because it has gone back onto the banks' balance sheets as it should.
To put these figures into context, the total value of UK housing equity is about $5.5 trillion and the total value of UK household debt is about $ 3 trillion in dollar terms.
These deflationary amounts are not trivial and may affect house prices!
There seems to be parallels between what's happening now and what happened in the early 1970's when banks racked up 'bad' loans with dictators of developing countries. I'm not a expert but I'm sure the forerunner of Citibank had to be bailed out by the US government at this time.
I read recently we are moving from a consumer to a financial based economy founded on credit and debt.
The sting in the tail of the credit boom experienced in recent years is inflation.
Real inflation for the average family must have been 5% a year recently (Council tax, utility bills, housing costs). This ties in with construction inflation in real terms about 5% and probably inflation in the cost of professional services. Whilst most people have done well to get wage increases of 3%.
Is there a proper inflation index rather than the RPI, etc. It would be interesting to see what a real cost of living index shows.
I think there's no going back now. The credit boom has left some people asset rich and some asset poor and it will probably stay that way. There's also a bigger divide between high and low earners.
If interest rates go up economic activity could slow down. If interest rates go down asset prices start to rise even more....?
There must be a real art to setting interests rates in times like these.
To #5:
If it did all go pear-shaped, that (potential) £100b would have to be taken from other public spending, i.e. reducing NHS services, fewer teachers in schools, less policemen etc
OR
a tax increase which WOULD IN FACT take the money directly from your pocket.
Let's hope you're a big earner. I bet you're a banker (no rhyming slang intended).
Peter #5, exposure is just that, it means total potential payout, however unlikely. The public sector cannot make money at no cost, and we all own it. Its exposure is therefore our exposure, and its cost is our cost, either through loss of public services, inflation or extra taxes.
I deeply sympathize with #1.
We must move on. Liquidate NR. Sack the heads of FSA, BOE and All Top Treasury Civil Servants. They are all culpable - so they must go now. The politicians are 'wind' merchants who know so very little and have done even less so the poor things just have not got the understanding to know what they have overseen.
The Granite business was let happen by G Brown and his Tory predecessors they allowed the legal nonsense of these joke charitable trusts whose only purpose is to evade Tax (I know I should have said avoid! - but if yor or I did what they have done we would be prosecuted so I stick to evade.)
The Tax system is hugely over complex - HHRC cannot possibly keep a track of it - it must be made simpler in an orderly manner and such nonsense an granite made unprofitable. Banks should hold charges over assets (mortgages) and borrowers should pay the interest etc. This trading in SIV's is the worst form of bubble - far worse that South Seas or Teapot Dome or speculating in Argentinian Railroads or Canals etc. The whole thing is out of hand. A readjustment to sound money is called for bring back Keynes (or even Adam Smith) all is forgiven. It will be very painful. Many innocent people will suffer. For Cranford viewers many more Miss Matty's will suffer.
We have to get back to sound money. Interest rates up a couple of points to counter inflation. Let the crap work its way through the economy and around the World. The Americans must pay their own way not borrow from the Chinese. The Chinese must substantially revalue the Yuan (by a factor of 7 or 8 times). Their internal wage inflation will do this eventually, but it we bite the bullet normality will return quicker. This will take ten - perhaps twenty years - let us hope we will not require the economic shock of a World War to fix it (as the last slump in 1929/32 was fixed!) Manufacturing would again be possible in the UK and Europe if skilled hourly labour rates are in rough parity around the World.
Oh - house prices at 3.5 times a single person's earnings - not a couples - without this household formation (i.e. children) and families are impossible. We have such a long way to go I doubt we will see it in most of our lifetimes - particularly if we continue to put off the evil day! Action is called for NOW.
"So each of us as taxpayers is exposed to the Rock to the tune of two grand."
The basis for this calculation? 30m UK (income) taxpayers?
Helps when discussing such matters to accurate? no?
oh?
"And, to be clear, that number has not been knocked down by the Treasury, the Rock or its advisors."
They're probably a little busy dealing with real work, to answer to the tabloid journalists like you, Rob.
It's not the first time you've been proven incredibly wrong, but they didn't bother coming out and saying it for months.
Merry Christmas, Rob. Hope Santa brings you a new toy or two.
While Northern Rock is a particular example, I constantly read about reducing liquidity in the banking system i.e. the credit crunch, but I never see this quantified. The only thing that is given a number is Libor and the difference between that and Base Rate. Surely this difference just reflects a perceived credit risk in lending to banks with an unknown exposure to sub prime instruments and does not necessarily reflect liquidity. The fact that money is more expensive does not mean that credit is drying up. Can someone enlighten me ? Are there any numbers that actually measure this so called credit crunch ?
Don't forget that the £57 billion exposure to the Rock is in addition to the billions sprinkled around the money markets to ease credit conditions. Note also that the collateral for these loans is of lower quality than they used to be. And could get worse if there's no let-up in the markets.
It's not just the Rock guarantees we need to worry about but big loans we're giving out on the security of US sub-primes (c'mon, there's gotta be some of those bundled in there!)
Robert,
Do Goldmann Sachs (or whichever bank it is involved in the 'rescue' as you put it) really condone their staff blabbing confidential information to journalists? Please tell us how much bonus your loose lipped banking chums are on for seeing through the sale of NR. Not enough to stop them blabbing information about their clients to you obviously- over a drink or two perhaps? How sad that you admire them so much....
To those who are bored...turn the channel! I for one like to know what is going on in my name. Keep digging Robert.
Base rates are falling, now 5.5% and yet some banks are offering 7% on 1 yr fixed deposits, this is very odd indeed. They are desperate for our cash for a reason.
I say, I say, I say...
What's the difference between a betting syndicate and...
The Internatioal Investment Banks
Barclays, HSBC, Abbey Nat, HBOS etc
Hedge Funds
Northern Rock
The Bank of England
The Fed
The ECB
And even The British Taxpayer
...the betting syndicates will admit they gamble for a living.
"10. Rob wrote:
I read recently we are moving from a consumer to a financial based economy founded on credit and debt."
That happened on August 15th 1971.
"13. John from Hendon wrote:
A readjustment to sound money is called for bring back Keynes (or even Adam Smith) all is forgiven."
Keynes? He's the one who got us all here. Try Mises instead.
#5 -If you dont know how all this works then you shouldnt make such farcical comments. Do you really think he meant we would literally pay 2k?? Zero exposure? More like zero idea.
I can see this playing out like Rover a few years ago. Some clever Harrys will come to the rescue. Unfortunately staff will have to lose their jobs. Assets will be switched around like a shell game. Now you see it, now you don't. Taxpayers will quietly lose a couple of billion. "Could have been much worse. Lessons will be learned" will be the utterance from Government. Then in a year or so's time we'll read that now the dust has settled the rescuers trousered something like £175 million each.
If NR does not hold illiquid risky mortgage assets, who is supposed to? Retail depositors? NR is the natural holder, by its nature of business.
You can call it (temporary, direct) Open Market Operation or Intervention during crisis. Look what FED and ECB are doing. But "Nationalisation" is sensational and it sells.
The Board are approved by all relevant parties, who maintain daily control of the Board.
Why are the banking system not lending? What happened to the system?
Given that this is MY money as a UK taxpayer, how can I stop the Government doing this ?
If there has been no debate in Parliament about this, and indeed the only way I find out about it is via your good self, is this legal ??
I am no expert but is NHS spending not around £100bn p.a. so we are in danger of losing the equivalent of 6 months NHS spend.
Dear Robert
One thing stands out above all this Scandal regards Northern Rock, and thats the fact that £100 billion can be found to keep it solvent, YET police and public sector workers have their pay slashed by Brown, Darling and Smith.
The leeches THE BANKS, are showing their real colours, its just a big boys club, playing dominoes with Public money, and because its public money, they do not care one iota.
Northern Rock should have beeen allowed to go down, and be bankrupted, because the loan is unacceptable in view of the economic reality now facing the Uk.
The crude (but easiest) way of checking which financial institutions are probably in trouble is to check which ones are offering the highest interest rate on savings. I hope the government is paying attention....
I wonder if a similar situation will arise in about 15 years or so, when after building a whole new bunch of nuclear reactors, the companies that own them go bust because new forms of generating electricity come into use and we turn to them for our power needs. Just like NR, the government of that future day will have to keep the nuclear power stations going with public money. This whole affair would not have happened if the Labour government was not happy to see their popularity held up by debt.
11, 12, 22 and any honorable mentions I missed out:
1) delighted to have provoked a response.
2) Robert's language in the example I cited is the trouble-stirring language of the tabloids, not of the ´óÏó´«Ã½, hence my suirprise. There would never be a 2k income tax hike, politically or economically, and all of you know it. A 2k per person (even using the number of people who Robert thinks pay taxes in the UK) loss to the Treasury is not the same as a 2k loss to me personally, no matter how left-wing and kolhoz-loving you might be. No-one really benefits when such emotive your-kids'-lives-are-at-risk-because-of-those-shady-types-in-the-City language gets used; it's lazy and more than a trifle sensationalist. I have no idea how the government would make up the unlikely shortfall - maybe they'd pull out of Iraq, maybe they'd pull out of CAP, maybe they'd pull out of ID Cards or the Olympics. None of them is likely, but they're a damn sight likelier than Gordon Brown announcing a Northern Rock tax.
And FR - close enough; am a City lawyer.
NR has finally admitted that its SIV is in serious trouble. Citibank's move to bring its SIVs back on-board was a sound move in the long-term. But Central Banks flooding liquidity into the markets reveals a strange split-minded state: do they want to prop-up other banks' failed SIVs and thuc collude with those banks still seeking to conceal the true scale of their losses, or do they want them to 'own-up' to their losses and take the situation on from there. These SIVs stand or fall by the property balloon, but honesty SHOULD be the way forward.
Granite is the new frontier. Beyond it is the wild world of unbacked debt and system failure.
If the government hadn't guaranteed Granite, the contagion would have leaped out of control, exposing the lack of solvency in the banking system.
But the policy of throwing money at banks is just stupid. If it 'works' it will have succeeded in recreating the conditions which gave rise to the crisis in the first place - banks offering cheap credit in order to keep the upward cycle of worldwide production going.
But it can't 'work' anyway. We are at a turning point in the cycle and trying to extend it is Cnutish.
The only long term solution is public control of the financial industry - either through direct ownership or much, much, tighter outside regulation and control over banking activiy and capital deployment at home and abroad i.e. an end to global free markets and unplanned credit expansion and contraction.
We have a world to re-tool in order to survive climate catastrophe. The starting point is to equip ourselves with a financial industry which serves us all and allows us to invest where we need to, rather than filling the boots of the recklessly greedy and beggaring the rest.
I wish the ´óÏó´«Ã½ could report on financial matters in a more considered manner.
How many more times are we to be told the meaningless £2000 per taxpayer calcualtion for Northern Rock? Is the ´óÏó´«Ã½ in 'finanial meltdown ' ( another favoured phrase along with credit crunch) as it does not seem to have funding to film the Northern Rock as it is today - without homing in on long queues on several weeks ago.
Please can we have more analysis based on facts, less rumour reporting and less irresponsible speculation ( which seems to have got us where we are).
The ´óÏó´«Ã½ should report not speculate -which inadvertently may make matters worse.
Finally another ´óÏó´«Ã½ favourite reporting question not just on finance - how worried should we be? Just be aware of how many times that that is uttered in a day. You would think the ´óÏó´«Ã½ had shares in undermining confidence.
NR has finally admitted that its SIV is in serious trouble. Citibank's move to bring its SIVs back on-board was a sound move in the long-term. But Central Banks flooding liquidity into the markets reveals a strange split-minded state: do they want to prop-up other banks' failed SIVs and thus collude with those banks still seeking to conceal the true scale of their losses, or do they want them to 'own-up' to their losses and take the situation on from there. These SIVs stand or fall by the property balloon, but honesty SHOULD be the way forward.
I hate to say this: The BOE actions look increasingly like the actions of a very bad trader in the face of mounting losses.
We are risking a lot of capital with a low probability of even capital protection.
Unless we have a dozen NRs with the same business model, the risk of contamination isn't that great. Preston, do your job and rally the good-news gang to smooth the nerves of the hoi polloi.
The central banks and monetary authorities have been pumping in a lot of liquidity in the market. Tell NR shareholders to take a hit and get on with it.
It's the market, stupid.
Dear All,
Has anyone considered what is really at stake here. How can there be a shortage of money?? WE print it on paper made from Trees or move digits from one screen to another. Money has no value and is a tool to keep us controlled and enslaved.
Regardless of how much the NR problems are costing the tax payers is this not jsut antoher way of taking our time and energy away from us, making it harder for some of us to live, whilst significantly making it easier for others.
We shouldnt be asking why the Treasury is guarenteeing these loans, we shouldnt question whos moeny will do so, we should question why we are all unde rthe impression that if the moeny were actually worth anything then interest would be impossible. If there were only 100 gold coins in the world and i lent them all to you for 5% interest you would owe me 105 gold coins. As there were only 100 gold coins to begin with you will never be able to pay it back. ON this basis money is detached from the Gold depositied in the treasury that back it up. Were not injecting more money into the system, we put more digits ona screen print more paper, and devalue the money that we circulate.
There is limited resources in the world, money is not worth a thing, but while we argue about who pays what, the GOLD backing all this money up is syphoned off under our noses. The US FED is able to create more liquidity in there market place yet there depositories run dry under the guise of wars. Agian all moethod to leech us of anything of value and to tkae our time and energy away for the further exploitation of man.
If the Govenor of the Bank of England is saying allof the infamous Tripartite agencies: The Bank of England, H M Treasury and the FSA are responsible and equally culpable, particularly in the light of a need for necessary review of banking that was minuted in 2006 then it is clear no party should still have the same people doing their respective jobs as they clearly are incapable of doing them well or efficiently.
If The Govenor is now admitting fault then he must do the honourable thing and resign, of course he wont becauae no one does anymore! just as the then head of the H M Treasury now our Prime Minister and master of creating the tripartite "managment group" must also resign as must the head of the FSA who maintained that Northern Roack was solvent right up to the point where the Treasury injected £20 billion to keep it on a life support system.
Clearly none of them can add up or know the difference between truth, honesty and obscene spin.
If this is what our esteemend Financial system of "Prudent funding and management" is all about then heaven help us all. It's time to put our money either under the bed or into a country where supervision really does have its act together. For such a country I recommend the USA, galling as it may be given I am British, they don't stick with the old boys network and get the job done unlike here where we will just slowly end up gracefully sliding into oblivion.
Thank you Gordon Brown, Callum McCarthy and Mervyn King. You have successfully decimated the British economy and can now go on and retire on your huge pensions paid for again by UK plc.The only compensation we will all have is that your names will be ingrained on our memories for ever as total incompetants.
Robert,
Can you find out if it is possible to make a claim for my £2,000 when the Rock is Nationalised and the Treasury has lost our money?
I want to issue a summons in the small courts?
To Mike #31
"But it can't 'work' anyway. We are at a turning point in the cycle and trying to extend it is Cnutish"
LOL. I couldn't agree more. And it's also like trying to hold back the tide!
#24 - The banks are lending money, but they're charging more for it because the risks of default are higher. This is *normal* - if the market 'seizes up' it's just because nobody wants to borrow at the price they want to charge.
Central banks trying to keep a boom going once it becomes clear it has turned into a bubble is also normal, but it's wrong, and results in inflation and a more painful recession in the long term.
But we never learn.
Keith (1) you are quite obviously retarded if you don't realise the significance of the bank of england ledning the same ammount of money that the UK spends on education a year.
This credit crunch is now costing the taxpayer directly. There is no justification for bailing out a business, otherwise we are not in a capitalist society but operating a kind of socialism for the very rich.
The housing bubble is definetly over. Get used to this idea now.
The BoE and other central banks are pouring liquidity into wholesale markets like there is no tomorrow. Its supposed to help banks secure lending which I'm sure it does.
However, there seems to be a problem that governments cannot address.
Traditional prime markets for lending seemed to have stalled or saturated forcing higher risks and returns with sub prime lending. This in turn has stalled or diminished.
So what happens next?
A nationalised NR or a privatised one would still have to deal with these issues. How to generate growth in a market that has become less confident with risk?
Not so the government it seems. It is using our money to encourage lending when nobody wants to borrow on the same scale anymore.
If it cannot restart the spending engine public finances will come under pressure with the prospect of tax rises on the way.
I thought the role of a government was to intervene in times of trouble?
In this case it is simply illiquity from a lack of confidence. By injecting cash they may have put a brake on wasteful inactivity, and have tried to restore confidence in the financial markets which underpin the whole economy. The loans and guarantees involved are backed by a strong mortgage book. Absolute minimal risk.
The Conservatives have said very little on the issue. Does this hint that they would have done exactly the same?
Perhaps the BOE, Brown and Darling have got it right after all?
#31
Interesting but the issue for me is what does UK Plc get in return from these banks...
For example can we now insist they back away from supporting private equity deals and put more into real venture capital so we can create and nurture some more new companies? Can we also insist that they don't lend any more than say 2.4x salary on mortgages?
Or - if and when this current fiasco is over will Govt just do it's Nelson act again?
Am i the only person in Britain who is coming to seriously doubt the inflation figures being provided to the Bank of England? Apparently vegetable prices fell with the onset of winter and gas prices are falling while oil prices are rising Have you been to a supermarket recently to buy food? Perhaps someone is cooking the books?
If we are to believe the sudden show of solidarity amongst the tripartite band of the Bank of England, H M Treasury and the FSA. What was all the mud slinging about before?
Something has gone terribly wrong at the heart of our financial regulation and monitoring systems and an urgent basis change is required.
Which ever way we look at it as soon as politics got involved all logic went out of the window and now we are all up the creek without a paddle.
Over zealous lending, greed, insufficient capital all obvious observations, all once again, too late in being effectively controlled.
This happens when initial legislation is drawn up off the hoof and serious thought never gets a look in.
Present leaders of all thre members of the tripartite group should resign to bring back credibility and honour to the financial sytem here. Will they? of course not.
Duplicity, rhetoric, spin and plain incompetance have decimated any future respect that should be held by all representatives of those high offices and before they cause more damage they shoudl go and quietly.
Onl;y such a thorough clean out of all the present incumbents might alleviate the mess every person in this country is now part of, and totally by default.
In this season of goodwill let those who have hashed things show some and go now to let us all see the future with some level of security before we sink into oblivion.
#42 - 'intervening in times of trouble', yes. Giving someone a bottle of vodka because they've got a hangover, no.
The central banks have just done the latter. The Rock's strong mortgage book is a myth. Lending 120% of the value of a property at the peak of a market?
The longer this is propped up for, the more huge it will be when it unravels.
Inflation is more than 2.5% for normal UK citizens; just look at the food prices (butter, milk, cheese, vegetables), council tax, fuel, utility bills. OK so the DVD player and Plasma TV have crashed in price but those are not essentials!
Preston; you should look at the situation when unemployment kicks in which is inevitable if their is no monies for bankers to play with and consumers to borrow and spend.
Don't forget, mortgage interest is not paid out by Social Security for the first 9 months of unemployment and is restricted to a £100k mortgage.
Quite obvious that Bank of England interest rates have no relationship to real inflation. The BOE know they can not put interest rates up because people would not be able to pay their mortgages, house prices would crash. With 100% plus mortgages and credit card debts, it would make financial sense if made redundant to go personally bankrupt, get a Housing Association Home, rent paid by DHSS and a clean slate in a year.
The whole point of all this aid is to provide more scope for improvement so hopefully we don't have to get stuck in this "blame" and/or "feel blamed" mode.
Also Robert, I hope you remembered to submit your ideas about reform mechanisms, if you have any, to the recent "Banking reform" consultation?
Excuse my ignorance but I only recently learned what reserve banking meant. I naively thought that a bank could only loan what it had on deposit. This idea that they can loan £25 for every £1 they hold is worrying to say the least. Of course without this I suspect that few of us would ever be able to get credit. But it does appear that the financial abyss that we are confronted with, has been built on too cheap and too available credit. House prices have risen to where mortgages at 3 times salary no longer buy anything. No problem a bank comes along and offers you 5 times salary. A little while later after the bubble has inflated further. First time buyers are offered 105% mortgages interest only just to keep the market moving. More inflation...... and so it goes.
What gets me is that the people who built this system get paid a lot more than me and most other people. I don't get a big (or even small) bonus every year.
This is corruption and market failure on a grand scale. A lot of little people stand to lose everything due to the actions of a few shortsighted greedy individuals.
I do fear that our institutions lack sufficient knowledge and expertise to manage this crisis.
no. 44 M.Davis.
No, you're not the only person who believes the latest inflation figure has been 'massaged' to allow a reduction in interest rates, for political reasons.
The housing market is the key to the whole economy and that market depends on confidence.
I work in the food industry and I know from first hand experience that food/agflation is very high.
This is compounded by the high deisel and petrol prices to get these foods to the retailers.
If you have an old receipt from your weekly shopping from 6-12 months ago, compare prices to the current cost and you'll be in for a shock.
To Trevor post 49;
Why on earth are you talking about 'corruption'? As you rightly
say, lending more than they have in reserve is the way the banking system works- always has been, always will be. Just because you didn't realise this before, doesn't make it illegal!