economic situation is dire

[snowychap]

How is it not party political though?

How could it not be party political, do you mean? By not being so.

It's an obvious "we seriously don't want these guys to get in" comment.

That's the inference that you and others are drawing and it is this that makes it 'obvious' to you and 'clear' to others.

I don't necessarily see it that way. I don't believe I've said at any time that it definitely wasn't (if I have I apologize as that wasn't my intention); I've suggested that it wasn't the unquestionable fact that was presented.

It's a comment against the policy of a political party, ergo it was party political.

I'm not sure I agree.

Taking it away from discussion of this specific subject, would commenting against a policy of a political party make a comment party political?

What do we mean by being party political? Is it being partisan with respect to party politics?

Is a tory select committee chairman who criticizes the policy of his own party being party political?

[TheDon]

That's the inference that you and others are drawing and it is this that makes it 'obvious' to you and 'clear' to others.

I don't necessarily see it that way. I don't believe I've said at any time that it definitely wasn't (if I have I apologize as that wasn't my intention); I've suggested that it wasn't the unquestionable fact that was presented.

If that implication wasn't there, why make that comment? In the context it was said, on eve of the election, it's pretty clear what was meant by it.

I think in many other situations I'd agree with you that it doesn't have to have been in that manner. Sent many weeks prior it would easily just pass as a message that they have to prepare for any eventuality. But on the eve of an election, when people will be going to the polls with that email fresh in their mind? In that context it takes on much more meaning than it otherwise would have.

I'm not sure I agree.

Taking it away from discussion of this specific subject, would commenting against a policy of a political party make a comment party political?

What do we mean by being party political? Is it being partisan with respect to party politics?

Is a tory select committee chairman who criticizes the policy of his own party being party political?

As for what we mean by being party political, that's something that's probably different for everyone. Some people will probably claim that it's only party political if you're for or against a certain party on principle, rather than based on actual policy at all.

I think when you're squeezing it down to a one policy issue like the inference is here though, that the two are synonymous. Generally it's possible to separate the policy from the party, and that's the case with select committees, it's the case in most instances. It's what leads to people being able to vote for parties where they don't agree with all their policies. But when you have a policy that is fundamentally opposed to your objectives, then surely it becomes party political as your aim then is to prevent that policy being introduced, and to do that you have to prevent the party being elected?

[JulieB]

BoE mulls rate cut to 0.25%/Odds shorten on more quantative easing

Speculation is mounting the Bank of England may be close to cutting base rates to 0.25% and pumping at least £50bn more into the economy through quantitative easing.

Ahead of this month's Monetary Policy Committee meeting on Thursday, poor figures for jobs and retail sales on top of the world economic crisis are piling pressure on the Bank to expand its programme of quantitative easing, the Daily Mail reports.

To date, the programme has been worth £200bn or 14% of gross national product.

Ben Broadbent, who joined the Bank's Monetary Policy Committee in June, said in a recent interview that he was 'reasonably close' to voting for increasing QE.

He said the international environment was 'clearly disinflationary' which provides support for further money printing, according to the Mail.

Meanwhile, a quarter point cut in base rates to 0.25% has been widely discussed, despite arguments as to whether the cost of borrowing is already so low this would have little effect.

The speculation has already hurt savers with the best fixed rate bond deals being pulled.

Rate Cut Speculation

I'm sure the banks will only be too glad pass any interest rate cuts onto SMEs and private individuals....... As if!

Credit card and loan debt interest rates have climbed whilst mortgage margins have stubbornly refused to dip below about 2% and fees have increased by 17% on average in the last couple of years, not to mention that the criteria for lending on house debt is far more restrictive.

Many start ups historically have been on the back of re-mortgages, yet the new MMR rules threaten to make it even harder for people to lend money on their homes particularly for the self-employed. Yet more expensive lines of credit remain much easier to access.

Still more expensive credit means bigger profits and bigger bonuses!

Can you imagine what future generations are going to think looking back at all this and how the banks have been able to manipulate economies and stubbornly refused to look beyond their own balance sheets and work for the greater good to acheive some long term stability. No one seems to care about the long term future... it'a all about NOW!

[cheltenham_villa]

Julie, Im sorry but the majority of mortgage products sold by banks do not carry a 2% margin. Maybe some of the 90% LTV products but i can tell you than a standard 2 year fixed rate at 60% LTV is currently being sold by all banks at a negative margin.

Because of recent history most banks have to fit a particular risk profile. typically 60% of banks lending must fall into 60% LTV. This means they have to sell a large amount at a negative margin to be able to sell a decent volume of the high value stuff.

I wont defend the banks, they make a lot of money. But Bank mortgage pricing is not as simple as Base rate plus a bit of margin.

I know you have a good background in this sort of thing, but just wanted to offer a balanced argument.

[JulieB]

Im sorry but the majority of mortgage products sold by banks do not carry a 2% margin

I didn't say they did.

What I said was most mortgage products aren't dipping below 2%... and what's more if they are then there's normally

big fees to be paid even on a re-mortgage.

60% LTV is obviously much more competitive because it's much lower risk lending and cheaper obviously... but higher LTVs over 75% above

are much more expensive.

Also what annoys me is that banks introduced dual pricing post credit crunch so the public can get a better deal going direct than if they seek advice. Whilst there might be dodgy brokers who rightly should be culled... Mortgages are one of the biggest financial committments families

make in their entire lives and there are an enormous array of options normally where whole of market and expert advice can be invaluable.

The main point of my post though was that mortgage lending is getting harder to find, whereas unsecured debt is still not restricted. Who makes more money out of credit cards and loans with far higher margins than bog standard mortgages ?

[CarewsEyebrowDesigner]

Am I the only one who wants it all to just **** up completely?

Would be the best thing to happen since the defeat of fascism.

[tonyh29]

Am I the only one who wants it all to just **** up completely?

No I think Gordon Brown agreed with you

[JulieB]

Ben Bernanke at the US Senate hearing into the fiscal crisis earlier was sticking up for the Wall Street protestors and the ones who have followed suit in other US Cities - saying he could understand where these people were coming from and why people are unhappy about the economy.... also admitting greed and excessive risk taking on Wall Street was indeed partly to blame for the financial crisis.

I don't want the whole thing to go belly up and I love helping people sort their finances out but I really hate some parts of this industry,

that I am associated with.

[drat01]

Am I the only one who wants it all to just **** up completely?

No I think Gordon Brown agreed with you

Good to see Tony keep up with the Tory head in the sand mentality.

So this week we have seen the abomination of the Tory party conference, "I am not lying" seemed to be the message - ironical seeing how many of that particular party seem to make a habit of it.

"It's Labour's fault" - "It's a world wide crisis" - make your minds up

"We have fixed the economy" "we have down scaled our growth targets"

"QE is awful" "QE is something that may well happen and is needed"

The reality is still very much that any growth that this Gvmt saw came as a result of initiatives that were put in place before they started to squat in number 10. Since the measures put in place by Gideon, such as raising VAT, making many people redundant etc have started to hit, our economy has flat lined at best, and some analysts say has actually gone back into recession. Even parts of the Eurozone have better growth rates than we have. But still the Finance world look to screw people, while funding the Gvmt with massive donations so that blame and attacks can be made on the people who are actually the key to any long term success. The finance world is not bothered about medium - long term though it's all about the penny today and bollox to the pound tomorrow.

Maybe we should all "pay off our credit card bills now", but then again that was a mistake statement apparently :-)

What a shame that the LibDems continue to support this Gvmt and its crazy and scary ideas.

Plan B is no longer what is needed its a whole different set of idea makers

[Awol]

Am I the only one who wants it all to just **** up completely?

Would be the best thing to happen since the defeat of fascism.

Going on historical form then a total failure of the financial system is likely to be the catalyst for fascism or something similar.

Plan B is no longer what is needed its a whole different set of idea makers

I wouldn't disagree, particularly as it also rules the failed Ed's out of equation.

Plan A seems to have been focused almost solely on keeping the markets of our backs by showing willing in terms of tackling the huge debt we face, however if all around are going to tumble down anyway I'm not sure anymore what value there is in being the last man standing.

As peterms said a few pages ago, Iceland let their banks go down and the sky didn't fall in. Growing numbers of our American cousins now seem to be getting the message too..

[peterms]

Am I the only one who wants it all to just **** up completely?

No I think Gordon Brown agreed with you

More like Mr Cameron, with his utter confusion about whether to exhort us to repay all our debts, hastily amended to noting that we are in fact repaying debt. In either case, does he understand the implications for demand and what that means for the economy?

Presumably people have explained to him what would happen if everyone did suddenly repay their debts. Possibly they have even tried to take him on a voyage of the imagination to a world where there are some people who can't just write a cheque to repay them.

But I wonder if he has the slightest glimmer of understanding that private rather than government debt is on the one hand the big problem facing us, and on the other is also the (unsustainable) means by which the economy has continued to grow?

[andyjsg]

I actually agreed with Cameron's first statement and for people to get away from the New Labour Buy Now, Pay Later culture which has spread through this country like a cancer. I was sadly one of the mugs who was taken in on the credit wave and at the point of a relationship break-up found myself 55k in the red. Now 3 1/2 years of cutting back on everything like sky tv, cars, drinking, smoking etc and taking on a 2nd job in my spare time I am debt free and every penny was paid back.

Sadly others including the last government don't take responsibility for the money they spent and in some cases still think it's okay to keep up a higher standard of living even when they can't afford it.

[peterms]

I actually agreed with Cameron's first statement and for people to get away from the New Labour Buy Now, Pay Later culture which has spread through this country like a cancer. I was sadly one of the mugs who was taken in on the credit wave and at the point of a relationship break-up found myself 55k in the red. Now 3 1/2 years of cutting back on everything like sky tv, cars, drinking, smoking etc and taking on a 2nd job in my spare time I am debt free and every penny was paid back.

Sadly others including the last government don't take responsibility for the money they spent and in some cases still think it's okay to keep up a higher standard of living even when they can't afford it.

I wonder why you assign responsibility for personal debt to "New Labour"? It is much more to do with the finance industry as a whole (which if you want to be party political about it, is far more closely aligned with the tories than with labour).

The vast wealth of banks has been created by persuading people to get into debt on a scale which is unsustainable. That's not just a UK phenomenon. There has been a culture of rampant consumerism for many years, fuelled by the advertising industry, with people buying shite they don't need and can't afford; and our economy has become dangerously dependent on this perpetual-motion fantasy.

Your example of repaying debt by cutting right back on spending is exactly the point. It makes perfect sense for you to do that, and you are now in a better position because of it. But if everyone did it, at the same time, what would happen then?

[LondonLax]

Am I the only one who wants it all to just **** up completely?

Would be the best thing to happen since the defeat of fascism.

Going on historical form then a total failure of the financial system is likely to be the catalyst for fascism or something similar.

Plan B is no longer what is needed its a whole different set of idea makers

I wouldn't disagree, particularly as it also rules the failed Ed's out of equation.

Plan A seems to have been focused almost solely on keeping the markets of our backs by showing willing in terms of tackling the huge debt we face, however if all around are going to tumble down anyway I'm not sure anymore what value there is in being the last man standing.

As peterms said a few pages ago, Iceland let their banks go down and the sky didn't fall in. Growing numbers of our American cousins now seem to be getting the message too..

The thing about Iceland is that they are a country with a population of a few hundred thousand people. A whole country a third the size of Birmingham. Their bankruptcy was relatively painless (they still had inflation of 14% and interest rates at 15%!) because they were gifted money from Norway to keep the country running. Unfortunately bigger countries in Europe don't have that wealthy backer to take care of them when they run out of money.

A better comparison would be Argentina 10 years ago. They went through a lot of pain when they bankrupted with 25% unemployment, people still in jobs who had worthless wages, cash controls limited to $250 per week able to be wihdrawn to live on and thousands of people made homeless collecting cardboard to get food.

Eventually they got back to strong growth do to the commodities boom of the 2000s coinciding with their commodities wealth from being a huge country in South America.

There is a real danger that default for countries like Greece or Portugal will get the painful bit at the start without the subsequent boom to follow. The worst of both worlds in effect.

[JulieB]

The best bit of news to come out this week IMHO that might stimulate some activity is that the UK government are going to start

buying corporate debt for SMEs.

That's a pretty big step that the government are going to start lending effectively directly to businesses and not leaving it to

the B of E and by-passing the banks altogether.

Not sure how this is going to work in practive but it looks like SMEs are going to be able to issue corporate bonds, perhaps

loan notes etc although the regulatory burdens, may be horrendous for a small businesses, so surely there would need to

be some simplification?

Alistair Darling tried to twist Mervyn King's arm to buy corporate debt but he shyed away from this because he didn't see the B of E

being able to assess risk... ie which companies were a good bet.... which weren't.

How it will all pan out, we'll just have to wait and see, but this does go on in other European states.

[peterms]

A better comparison would be Argentina 10 years ago. They went through a lot of pain when they bankrupted with 25% unemployment, people still in jobs who had worthless wages and thousands of people made homeless collecting cardboard to get food.

Eventually they got back to strong growth do to the commodities boom of the 2000s coinciding with their commodities wealth from being a huge country in South America.

There is a real danger that default for countries like Greece or Portugal will get the painful bit at the start without the subsequent boom to follow. The worst of both worlds in effect.

Argentina was going through a lot of pain before default - unemployment, riots in the streets - and the default was a consequence of the economic crisis that was already happening, not its cause.

As well as commodity prices, other factors leading to recovery cited in the article you quote are

...The government encouraged import substitution and accessible credit for businesses, staged an aggressive plan to improve tax collection, and set aside large amounts of money for social welfare, while controlling expenditure in other fields...

During the economic collapse, many business owners and foreign investors drew all of their money out of the Argentine economy and sent it overseas. As a result, many small and medium enterprises closed due to lack of capital, thereby exacerbating unemployment. Many workers at these enterprises, faced with a sudden loss of employment and no source of income, decided to reopen businesses on their own, without the presence of the owners and their capital, as self-managed cooperatives...

The reference to "social welfare" I think refers to the active job creation programme the government launched.

The lessons for Greece seem to be ignore the IMF and similar voices; dump the debt; have your own currency; devalue; hit the taxdodgers hard; and pursue strongly interventionist and directive government policies. Oh, and take ownership of the means of production, rather than allowing your wealth to be sucked out of the country.

[LondonLax]

Argentina was going through a lot of pain before default - unemployment, riots in the streets - and the default was a consequence of the economic crisis that was already happening, not its cause.

So pretty similar to Greece then?

It would be interesting if we could some how play out both scenarios and see which is better.

I think default and issuing a new currency will be disastrous for the majority of the population who didn't get their money out quick enough. If I were Greek I would be opening a bank account in Germany and transferring all my savings there already.

Also there would be a massive black economy opening up where people in Greece who had the means would continue to just use and accept Euros as before rather than taking on a worthless drachma. This would make tax collection much harder for the government.

I think that when you have structural deficit like Greece does and an open market with the rest of Europe allowing free transfer of money and people, defaulting would leave them in a very vulnerable position.

[peterms]

The best bit of news to come out this week IMHO that might stimulate some activity is that the UK government are going to start

buying corporate debt for SMEs.

That's a pretty big step that the government are going to start lending effectively directly to businesses and not leaving it to

the B of E and by-passing the banks altogether.

Not sure how this is going to work in practive but it looks like SMEs are going to be able to issue corporate bonds, perhaps

loan notes etc although the regulatory burdens, may be horrendous for a small businesses, so surely there would need to

be some simplification?

Alistair Darling tried to twist Mervyn King's arm to buy corporate debt but he shyed away from this because he didn't see the B of E

being able to assess risk... ie which companies were a good bet.... which weren't.

How it will all pan out, we'll just have to wait and see, but this does go on in other European states.

It will interesting to see some hard information about this, but I doubt the banks will be bypassed. I imagine SMEs won't be able to issue their own bonds, and government won't be able to assess their plans and the associated risk. There will be intermediary roles for others to group a lot of SME loans into some sort of package, get it assessed and risk-rated, with the loan coming from the banks. The government is guaranteeing the loan rather than making the loan, from the very little we've heard. Securitisation with the government underwriting the risk?

[LondonLax]

Speaking of Greece, I read an article yesterday in a Swedish newspaper that the Greek government, despite the attempts at austerity, have just ordered 400 new tanks from the US.

From here (It's in Swedish).

Sounds ominously like they are getting ready for the next stage of the crisis!

[peterms]

Speaking of Greece, I read an article yesterday in a Swedish newspaper that the Greek government, despite the attempts at austerity, have just ordered 400 new tanks from the US.

From here (It's in Swedish).

Sounds ominously like they are getting ready for the next stage of the crisis!

‘The raison d’etre of the state today is the same as that of the financial markets that rule the world and produced nothing but speculation. Subcommandante Marcos, the spokeson for the Indians of Chiapas, described the process aptly: we are witnessing, he said, a striptease. The state takes off everything down to its underwear, that indispensable intimate garment which Is repression. The moment of truth: the state exists only to pay the foreign debt and guarantee social peace.’ - Eduardo Galeano in Upside Down

From here, alongside an interesting comment linking Greece, our own likely quantitative easing, and the alternative which no-one dares mention:

After weeks of rising political rhetoric the outline of a plan for the Eurozone appears to be emerging. The road that involved further debt guarantees from the wealthier nations of the EU, primarily Germany, and a consolidation of all Eurozone debts into one Eurobond, appears to have been abandoned. This was presumably because Chancellor Merkel refused, or argued successfully that this was politically impossible and might lead to a less market-friendly government in her country—perhaps even a Green one.

Since the debts cannot be absorbed the new plan is that some will be turned into losses, with a negotiation between the banks that unwisely took on Greek bonds and the Greek government that cannot repay them: the so-called hair-cut, which is now moving down to a number 2 on that automatic machine that muscular men with early hair loss so often favour. It was the Argentinians back in 2002 who taught us that it takes two to tango: serious debt crises require losses to creditors as well as pain to debtors.

The other side of the plan is more interesting: a larger bailout pot, now tastefully renamed the European Fiscal Stability Facility. This will be available to support governments whose national debt is so large as to undermine market confidence. It is assumed that it will never be used: its existence is intended to be enough to underpin confidence. This means it will have to be a very large pot indeed. And once the money is in the pot you can guarantee that the financial market makes will find some way to provoke a crisis and make it their own.

The argument now seems to be about where the money will come from to fill the pot. We must keep very close attention on this. If the money comes from national governments then our obvious question should be: 'How can there be money to put into a bailout pot when there is no money to pay for hospitals or children's services?' If, alternatively, the money is created directly by central banks—in a process akin to quantitative easing—then our question should be: 'Why not create enough money this way to repay all the national debt and so remove the need for the pain of spending cuts?'

This is the most interesting question of all. We know that the Bank of England is under pressure to quease more money into the economy at any time. Some of that money has previously been spent buying back our own debt; a similar process has been undertaken by the European Central Bank to buy Italian debt. So why not go the whole hog? Could it be that this would make it clear that there really is no need to create money as debt in the first place? That money could be directly spent into the economy as needed. The reason for resisting this is the power of those who live by lending money: without debt they would have to go to work like the rest of us.