economic situation is dire

[snowychap]

Big fall in UK inflation to 3.1%

Consumer price inflation fell sharply in December to an annual rate of 3.1% from November's figure of 4.1%.

The biggest factor was the cut in VAT from 17.5% to 15%, announced in the pre-Budget report on 24 November, the Office for National Statistics said.

But high food, gas and electricity prices prevented the rate from falling as fast as economists had predicted.

The headline Retail Prices Index (RPI) measure fell to 0.9% from November's 3% rate, the biggest fall in 28 years.

...more on link

[chrissmith921]

Thank god I got the call on my visa application half an hour ago

[ianrobo1]

I do love the way the market causes headlins in falling pound but they were the words removed who helped us get here in the first place ...

[Gringo]

I do love the way the market causes headlins in falling pound but they were the words removed who helped us get here in the first place ...

So markets caused all this? Please elaborate on your theory?

[ianrobo1]

always said it Gringo, Markets place the emphasis on profits and increasing 'shareholder value'

this encourages greed

this encourages risk taking

the more unregulated the market is the worse it gets

and so we get to where we are now

[Gringo]

always said it Gringo, Markets place the emphasis on profits and increasing 'shareholder value'

this encourages greed

this encourages risk taking

the more unregulated the market is the worse it gets

and so we get to where we are now

So it wasn't the banks, wasn't the govts, wasn't the regulators - it was the markets.

"Markets don't place no emphasis on nothing"

People drove the profit motive.

Markets are required for trading from wheat to oil, from CDSs to CDOs.

[LJRM050389]

Could someone give me a brief description of what the AAAs rating system with regarding securities? Is that where there is very few sub prime mortgages in it etc?

[Gringo]

[table][row][col] Grade [col]Risk[col]Moody's [col]Standard & Poor's

[row][col]Aaa [col]AAA [col]Investment [col]Lowest Risk

[row][col]Aa [col]AA [col]Investment [col]Low Risk

[row][col]A [col]A [col]Investment [col]Low Risk

[row][col]Baa [col]BBB [col]Investment [col]Medium Risk

[row][col]Ba, B [col]BB, B [col]Junk [col]High Risk

[row][col]Caa/Ca/C [col]CCC/CC/C [col]Junk [col]Highest Risk

[row][col]C [col]D [col]Junk [col]In Default[/table]

[leviramsey]

We're all doomed Part 379b

Pound plunges to seven-year low against dollar as Britain faces spectre of deflation

Sterling has plunged to a seven-year low against the dollar as fears surfaced that Britain could be heading for a credit rating downgrade.

At least my trip to VP will be cheaper... unfortunately, it looks like it will be pushed back a month to v. Everton.

[snowychap]

Big fall in UK inflation to 3.1%

Though having just used the BBC calculator, my personal inflation rate is about 12%. Yep, that's 12%. :shock:

[snowychap]

I do love the way the market causes headlins in falling pound but they were the words removed who helped us get here in the first place ...

always said it Gringo, Markets place the emphasis on profits and increasing 'shareholder value'

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control ...

[Awol]

Gordon Brown brings Britain to the edge of bankruptcy

Iain Martin says the Prime Minister hasn't 'saved the world' and now faces disgrace in the history books

They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious.

Yesterday marked a new low for all involved, even by the standards of this crisis. Britons woke to news of the enormity of the fresh horrors in store. Despite all the sophistry and outdated boom-era terminology from experts, I think a far greater number of people than is imagined grasp at root what is happening here.

The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.

The political impact will be seismic; anger will rage. The haunted looks on the faces of those in supporting roles, such as the Chancellor, suggest they have worked out that a tragedy is unfolding here. Gordon Brown is engaged no longer in a standard battle for re-election; instead he is fighting to avoid going down in history disgraced completely.

This catastrophe happened on his watch, no matter how much he now opportunistically beats up on bankers. He turned on the fountain of cheap money and encouraged the country to swim in it. House prices rose, debt went through the roof and the illusion won elections. Throughout, Brown boasted of the beauty of his regulatory structure, when those in charge of it were failing to ask the most basic questions of financial institutions. The same bankers Brown now claims to be angry with, he once wooed, travelling to the City to give speeches praising their "financial innovation".

Does the Prime Minister realise the likely implications when the country joins the dots? He has never been wild on shouldering blame, so I doubt it. But Brown is a historian. He should know that when a nation has put all its chips on red and the ball lands on black, the person who made the call is responsible. Neville Chamberlain discovered this in May 1940 with the German invasion of France.

We're some way from a similar event. But do not underestimate the gravity of the emergency and potential for disgrace.

The Government's bail-out of the banks in October with £37 billion of taxpayers' money was supposed to have "saved the world", according to the PM, but now it is clear that it has not even saved the banks. Our money kept the show on the road for only three months.

As the Liberal Democrats' Treasury spokesman Vince Cable asks: where has the £37 billion gone? The answer, as Cable knows, is that it has disappeared down the plug hole.

It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. Unfortunately, the Treasury is pledged to honour those

liabilities because it has guaranteed not to let a British bank go down. RBS has liabilities of £1.8 trillion, three times annual UK government spending, against assets of £1.9 trillion. But after the events of the past year, I wager most taxpayers will believe the true picture is worse.

Meanwhile, the assets are falling in value. This matters, because post-nationalisation these liabilities are now yours and

mine.

And they come piled on top of the rocketing national debt, charitably put at £630 billion, or 43 per cent of GDP. The true figure is much higher because the Government has used off-balance sheet accounting to hide commitments such as PFI projects.

Add to that record consumer indebtedness and Britain becomes extremely vulnerable. The markets have worked this out ahead of the politicians, as usual, and are wondering what to do next. If they decide our nation is a basket case, they will make it so.

The PM and the Chancellor , both looking a year older every day, tell us that for their next trick they will buy more bank shares, create a giant insurance scheme for bad debt, pledge to honour liabilities without limit, cross their fingers and hope it all works. The phrase "bottomless pit" springs to mind for a reason: that is what they have designed.

In this gloom, the Prime Minister has but one slender hope: that somehow, by force of personality, the new President Obama engineers a rapid American recovery restoring global confidence, energising the markets and making us all forget this bad dream.

Obama is talented but he is not a magician. Instead, Gordon Brown's nightmare, in which we are all trapped, is going to get much worse.

..I predict a riot..

[snowychap]

Railway firms ask Hoon for state aid as years of growth hit the buffers

Britain's train operators face a "potentially devastating" blow from the economic downturn and need government assistance to stave off disaster, public transport chiefs warned ministers yesterday.

The heads of the five largest train companies – Stagecoach, National Express, Go-Ahead, Arriva and FirstGroup – urged the transport secretary, Geoff Hoon, to consider shortening trains, rewriting the financial terms of franchise agreements and putting up state funding for an extra 1,000 staff across the rail network.

The unprecedented call for state help came in a meeting with Hoon in which the rail operators warned that rail contracts forged during an economic boom could soon become untenable. Under that scenario, the government would be forced to strip train operators of their contracts and take control of the franchises.

According to a briefing document seen by the Guardian, the industry expects passenger volumes to fall over the next two years, bringing years of growth to a sudden halt. An industry source said some franchises had seen falls in season ticket renewals of up to 10% in January.

"The more pessimistic forecasts will result in significant impacts on all train companies," reads the briefing document.

"At the most pessimistic end of the range, the severity of the downturn would be completely unprecedented and have potentially devastating effects on the finances of some train companies. Given that forecasts seem to be continually worsening, this must be a material risk."

According to the document, the rail executives want the Department for Transport (DfT) to fund 1,000 extra "customer-facing" staff for the railways, in the same month that the industry has announced plans to shed 1,500 people.

The most critical section of the document lays out "contingency plans" for a "very challenging environment", which include: shortening off-peak trains by removing carriages; easing borrowing rules so train operators can offset poor ticket sales; demanding that the government shoulders a larger share of losses on contracts; and requiring that Network Rail cuts some of the costly expansion programmes.

The contingency plans are likely to cause controversy among passenger groups and commuters with their suggestion that trains could become smaller despite years of protests over overcrowding. It also poses a serious challenge to ministers by explicitly asking for a renegotiation of franchise terms – taboo at the Department for Transport.

The government is determined the train operators should honour contracts that, in some cases, are worth more than £1bn each to the transport ministry. National Express East Coast, South West Trains and First Great Western have pledged at least £1bn each to the government over the next decade, but the latest industry data indicates that they face a struggle to meet the payments.

Passenger growth slowed sharply last year, according to figures revealed to the Guardian, with commuter numbers increasing by less than 5%, down from 7.8% in 2007. Fare income has risen by just 4% in recent months, far below the double-digit increases that are thought to be vital for some franchises to meet their financial targets.

The DfT has the right to strip a train operator of all its contracts if it defaults on a single franchise. Between them, the so-called "big five" train operators control most of the UK rail network, so under that scenario, the state could effectively renationalise the franchise system.

[Gringo]

Passenger numbers increase - rail firms demand more money through above inflation fare rises to pay for new trains

Passenger numbers stop increasing - rail firms demand more govt money with menaces to to prevent them laying off workers

.Note. beardie banked over £25m last years for virgin trains, arriva £14m, firstgroup £30 odd million.

[ianrobo1]

The DfT has the right to strip a train operator of all its contracts if it defaults on a single franchise. Between them, the so-called "big five" train operators control most of the UK rail network, so under that scenario, the state could effectively renationalise the franchise system.

sounds quite positive to me ....

is the era of nationalisation on us ?

[Gringo]

is the era of nationalisation on us ?

Nope

Privatisation alive and kicking

[snowychap]

Some good news in amongst all the muck:

British Gas in 10% gas price cut

British Gas has announced it will reduce its standard tariff gas prices by 10% from 19 February.

It said the move would benefit more than 7.5 million homes and cut £84 from the average annual gas bill.

British Gas said it was the first UK major energy supplier to announce such a cut since 2007. Rivals are expected to follow suit.

In July 2008, British Gas raised its gas prices by a record 35%, while other firms lifted prices by more than 20%.

Wholesale falls

British Gas, which is part of the Centrica group, trades as Scottish Gas in Scotland.

At the end of last year the "big six" energy companies were urged to pass on lower wholesale gas prices.

The cost of wholesale gas is linked to the price of oil, which has fallen significantly from the peak it reached in summer 2008.

At the beginning of January, Scottish Power, one of the major suppliers, said it was relaunching one of its fixed-price gas products with a reduction of 10%.

The average UK household energy bill is £1,293, some 42% higher than the same time last year.

Better deal?

The move was a "positive first step" towards lower prices, said Tim Wolfenden, head of home services at price comparison website USwitch.com.

"It's going to give some customers a bit of respite at a time of year when they are going to be spending significant amount on heating their homes," he said.

"But by only cutting gas prices and leaving electricity alone, British Gas are being cautious and waiting to see where wholesale prices are going."

Other firms were likely to cut prices fairly swiftly, Mr Wolfenden added.

And he urged people to see whether they could get a better deal on their energy bills - especially if they had never swapped supplier before.

Slightly surprised by this especially as the spot price rose quite heftily during the Russia/Ukraine spat.

When do Centrica announce their profits? Some time next month?

Perhaps they might be looking pretty healthy...

p.s. I think the Scottish Power reduction was for their PriceSure tariff and only for people signing up for their new tariff so I don't think it affected any customers on any other tariffs (i.e. the majority of their customers).

[tonyh29]

Expert on radio said he was surprised as he was ecpecting Brit Gas to cut it by 20 - 30 %

All about the companies buy their gas in advance and thus the price is already known .. win win for BG I suppose , customers think they have had a result with a 10% drop , BG rub there hands because they got away with the other 20%

[Gringo]

so the short sellers at it again ...

after a break it starts again

FSA Chairman Says No Evidence Short-Selling Led to Share Falls

Jan. 22 (Bloomberg) -- The chairman of U.K. regulator the Financial Services Authority said there was no evidence that short selling had led to significant falls in banking shares, and he is ready to re-impose a ban if necessary.

“We have no evidence whatever that the lifting of the ban on short-selling has had a significant effect,” Adair Turner told BBC Radio 4’s “Today” show. “We haven’t seen something that suggests that short selling and the abuse of short-selling has a significant role in what has occurred.”

Royal Bank of Scotland Group Plc has fallen 64 percent since Jan. 16, when the FSA lifted the ban on short selling U.K. financial stocks. Shares in Barclays Bank Plc have fallen 45 percent in the same period. John McFall, a political ally of Prime Minister Gordon Brown, yesterday asked the FSA to reconsider the ban.

“So far we have seen no sign that short selling or abusive short selling is a major role, and if there is we will re-impose that ban without warning immediately,” Turner said.

[tinker]

So the highest risk bonds are now government backed, do you think these will now be traded/sold on? Sounds very much like it's all starting again.IMO