economic situation is dire

[Gringo]

Great spot.

[johnvillan]

bloomberg.com

Japan Probes Report Two Seized With Undeclared Bonds (Update2)

Share | Email | Print | A A A

By Shunichi Ozasa and Makiko Kitamura

June 12 (Bloomberg) -- Japan is investigating reports two of its citizens were detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland.

“Italian authorities are in the midst of the investigation, and haven’t yet confirmed the details, including whether they are Japanese citizens or not,” Takeshi Akamatsu, a spokesman for the Ministry of Foreign Affairs, said by telephone today in Tokyo. “Our consulate in Milan is continuing efforts to confirm the reports.”

An official at the Consulate General of Japan in Milan, who only gave his name as Ikeda, said it still hasn’t been confirmed that the individuals are Japanese. “We are in contact with the Italian Financial Police and the Italian Public Prosecutor’s Office,” Ikeda said by phone today.

The Asahi newspaper reported today Italian police found bond certificates concealed in the bottom of luggage the two individuals were carrying on a train that stopped in Chiasso, near the Swiss border, on June 3.

The undeclared bonds included 249 certificates worth $500 million each, the Asahi said, citing Italian authorities. The case was reported earlier in Italian newspapers Il Giornale and La Repubblica and by the Ansa news agency.

If the securities are found to be genuine, the individuals could be fined 40 percent of the total value for attempting to take them out of the country without declaring them, the Asahi said.

The Italian embassy in Tokyo was unable to confirm the Asahi report.

link

Great spot.

The Government are not spending TARP money to support the economy. They are robbing the American people blind and laundering the money through switzerland. The Italian government stand to claim 40% of $134 billion in fines, for illegal transport of money. Trust greed to catch them out. This is a massive story, the illegal transport of USA TARP money.This is only being reported on a few news sites on the web.

[snowychap]

Peston today: Should we trust the regulators?

There is a remarkable similarity between reforms of the financial system that are likely to be proposed in the coming days by the US and British governments.

Which, in one sense, is both predictable and sensible - because in a world of globalised finance, it would be almost impossible to have our biggest banks subject to radically different regulatory constraints in different parts of the globe.

But what about the essence of what's recommended to prevent the excessive risk-taking by banks and other financial institutions that propelled economies from America, Europe and even Asia into the worst recession since the 1930s?

We may have uniformity between London and Washington - but are the chancellor of the exchequer and US treasury secretary being bold, far-sighted and wise or timid, myopic and ineffectual?

What's striking is that both the British Treasury and the White House are not contemplating the kind of structural reforms of the banking industry that the US adopted towards the end of the Great Depression.

There will, for example, be no formal prohibition on what the banks insured by all of us as taxpayers can do.

Those big banks that are so big and important to the economy and therefore benefit from a de facto guarantee that they won't be allowed to collapse, well those banks will still be permitted to engage in what the governor of the Bank of England (no less) has described as "casino" banking in wholesale markets.

Nor will there be a simple rule that says something like "the value of no bank's loans and investments should ever be bigger than the economy of its home country" - even though it's not exactly been comfortable for the UK that bailing out Royal Bank of Scotland, whose balance sheet was almost 50% bigger than our GDP, linked the credit-worthiness of the country to that of a bank (if RBS failed, the UK failed).

Instead there will be lots of new powers for regulators, like the Financial Services Authority in the UK and the Federal Reserve in the US. And there will be myriad new rules that endeavour to cut the financial industry down to an appropriate size by making it more costly to engage in certain riskier activities.

Thus the securities trading bits of commercial banks will be forced to hold lots more capital in respect of these supposedly speculative activities - which makes it more expensive for them to play in the governor's wholesale-markets casino.

Also there may be a simple so-called "leverage" rule, which says that gross loans and investments - unadjusted for the riskiness of particular asset classes - should not be more than a certain multiple of capital.

Which of course is common sense: it was the height of folly to permit Royal Bank of Scotland to lend and invest 50 times the value of its core equity; a mere 2% fall in the value of its assets wiped out the institution.

But here's the thing.

There was a grotesque failure of regulation and regulators over the past few years.

And one reasonable response to that failure would have been to dismantle and simplify a global financial industry that had become too complex and byzantine - to cut it down to size by government edict, by fiat.

Instead the leaders of the US and the UK, whose financial services industries are the world's most important, are arguing that regulators can and will do a better job than hitherto.

They are asking us to trust that a new generation of watchdogs, armed with new and improved rulebooks, will do a much better job than the last lot.

Some may say that they could hardly do worse.

But what may not reassure everyone is that the soundness of the financial system - a system, remember, which has held the global economy to ransom for the past 20 months - will remain dependent on the ability and zeal of a regulatory priesthood.

It would be better perhaps, you might think, to limit the human factor in keeping banks safe and sound: just possibly, a more reliable, long-term basis for sanitizing finance would be simplify it and shrink financial institutions.

[leviramsey]

From The Times:

Italian prosecutors were trying to establish yesterday whether US bonds with a face value of $134 billion seized from two alleged smugglers were real or counterfeit.

The bonds were found when the two men — said to be Japanese but as yet not identified — were arrested while attempting to cross into Switzerland from Italy by train at the frontier town of Chiasso this month. Prosecutors in Como said that the two men had hidden the bonds in the false bottom of a suitcase.

Police said that Chiasso was a notorious crossing point for currency and bond smugglers but the sums involved this time were “colossal”. The amount of $134 billion would place the two travellers as the fourth most important investors in US debt, well ahead of Britain ($128.2 billion) and just behind Russia ($138.4 billion).

The bonds were described as being 249 US Federal Reserve bonds each worth $500 million, plus ten Kennedy bonds with face values of $1 billion, in addition to various other types. Police said that the two men had stayed at a hotel in Milan last Tuesday. Instead of taking the express train to Lugano, they had boarded a slow commuter train from a suburban station to attract less attention.

Although Switzerland and Italy adhere to the Schengen accords on frontier-free travel, customs officers from both sides who still watch travellers became suspicious, Italian reports said.

Police said that there was cause for concern even if the bonds turned out to be forgeries, since it would amount to a counterfeiting scam “on an unprecedented scale”.

[snowychap]

BA asks staff to work for nothing

British Airways is asking thousands of staff to work for nothing, for up to one month, to help the airline survive.

The appeal, sent by e-mail to more than 30,000 workers in the UK, asks them to volunteer for between one week and one month's unpaid leave, or unpaid work.

BA's chief executive Willie Walsh has already agreed to work unpaid in July, forgoing his month's salary of £61,000.

Last month, BA posted a record annual loss of £401m, partly due to higher fuel bills and other costs.

Mr Walsh said BA's drive to save cash was part of a "fight for survival".

"I am looking for every single part of the company to take part in some way in this cash-effective way of helping the company's survival plan," he said.

"It really counts," he added.

BA has been in urgent talks during the past few weeks with trade unions at the company over other ways to save money.

Details of a large pay and productivity deal are expected to be announced on Wednesday.

Flexible scheme

A company spokesman said it did not have an exact target for the expected savings from its appeal.

"As much as possible, but we don't have a figure," he said.

The idea was first launched last month when the airline asked staff to volunteer for a month's unpaid leave, or to work for free for that time.

That attracted more than 1,000 applicants.

But the company's more recent version of its scheme, launched last week by e-mail and in an article in the internal staff newspaper BA News, is more flexible.

It asks staff to volunteer by the end of this month for between one week and one month of unpaid leave or unpaid work.

The lost salary will be spread over between three and six months.

BA said other airlines, such as Cathay Pacific, had launched similar schemes and a majority of their workforces had signed up for them.

[ender4]

BA asks staff to work for nothing

British Airways is asking thousands of staff to work for nothing, for up to one month, to help the airline survive.

The appeal, sent by e-mail to more than 30,000 workers in the UK, asks them to volunteer for between one week and one month's unpaid leave, or unpaid work.

BA's chief executive Willie Walsh has already agreed to work unpaid in July, forgoing his month's salary of £61,000.

Last month, BA posted a record annual loss of £401m, partly due to higher fuel bills and other costs.

Mr Walsh said BA's drive to save cash was part of a "fight for survival".

"I am looking for every single part of the company to take part in some way in this cash-effective way of helping the company's survival plan," he said.

"It really counts," he added.

BA has been in urgent talks during the past few weeks with trade unions at the company over other ways to save money.

Details of a large pay and productivity deal are expected to be announced on Wednesday.

Flexible scheme

A company spokesman said it did not have an exact target for the expected savings from its appeal.

"As much as possible, but we don't have a figure," he said.

The idea was first launched last month when the airline asked staff to volunteer for a month's unpaid leave, or to work for free for that time.

That attracted more than 1,000 applicants.

But the company's more recent version of its scheme, launched last week by e-mail and in an article in the internal staff newspaper BA News, is more flexible.

It asks staff to volunteer by the end of this month for between one week and one month of unpaid leave or unpaid work.

The lost salary will be spread over between three and six months.

BA said other airlines, such as Cathay Pacific, had launched similar schemes and a majority of their workforces had signed up for them.

thats better or worse than a pay-cut?

i'm not sure?

also surely everyone takes it or no-one? not just those gullible to accept.

[johnvillan]

Bloomberg

Insiders Exit Shares at the Fastest Pace in Two Years (Update3)

Share | Email | Print | A A A

By Lynn Thomasson and Michael Tsang

June 22 (Bloomberg) -- Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.

Insiders of Standard & Poor’s 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show. Amgen Inc. Chairman and Chief Executive Officer Kevin Sharer and five other officials sold $8.2 million of stock. Christopher Donahue, the CEO of Federated Investors Inc., and his brother, Chief Financial Officer Thomas Donahue, offered the most in three years.

Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects.

“If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,” said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets. “They’re taking advantage of this bounce and selling into it.”

Banks Downgraded

The S&P 500 slid 2.6 percent to 921.23 last week, the first weekly decline since May 15, as investors speculated the three- month jump in share prices already reflected a recovery in the economy and profits. Stocks dropped as the Federal Reserve reported that industrial production fell in May and S&P cut credit ratings on 18 U.S. banks, saying lenders will face “less favorable” conditions.

The S&P 500 slid the most in two months today, losing 3.1 percent to 893.04 at 4:05 p.m. in New York, after the Washington-based World Bank said the global recession this year will be deeper than it predicted in March.

Insiders increased their disposals as S&P 500 companies traded at 15.5 times profit on June 2, the highest multiple to earnings in eight months, Bloomberg data show. Equities climbed as the U.S. government and the Fed pledged $12.8 trillion to rescue financial markets during the first global recession since World War II.

Executives at 252 companies in the S&P 500 unloaded shares since March 10, with total net sales reaching $1.2 billion, according to data compiled by Princeton, New Jersey-based InsiderScore, which tracks stocks. Companies with net sellers outnumbered those with buyers by almost 9-to-1 last week, versus a ratio of about 1-to-1 in the first week of the rally.

Bear Stearns

“They’re looking to take some money off the table because they think the rally will come to an end,” said Ben Silverman, the Seattle-based research director at InsiderScore. “It’s the most bearish we’ve seen insiders, on a whole, in two years.”

The last time there were more U.S. corporations with executives reducing their holdings than adding to them was during the week ended June 19, 2007, the data show. The next month, two Bear Stearns Cos. hedge funds filed for bankruptcy protection as securities linked to subprime mortgages fell apart, helping trigger almost $1.5 trillion in losses and writedowns at the world’s biggest financial companies and the 57 percent drop in the S&P 500 from Oct. 9, 2007, to March 9, 2009.

Insider selling during the height of the dot-com bubble in the first quarter of 2000 climbed to a record $41.7 billion on a net basis, according to data compiled by Bethesda, Maryland- based Washington Service. The sales coincided with the end of the S&P 500’s bull market and preceded a 2 1/2 year slump that erased half the value of U.S. equities.

‘Clouding the Picture’

Bill Latimer, the director of research at O’Shaughnessy Asset Management, says insider transactions aren’t an accurate barometer of stock performance because executives often reduce their stakes for reasons that have little to do with a company’s prospects.

“When you’re dealing with an individual’s buying or selling, you’re clouding the picture with what their specific financial situation may be,” said Latimer, whose Stamford, Connecticut-based firm oversees about $4.5 billion.

During January 2008, executives at New York Stock Exchange- listed companies bought more shares than they sold for the first time since 1995, Washington Service data show. The S&P 500 slumped 40 percent in the next 12 months.

Citigroup Inc. CEO Vikram Pandit purchased 750,000 on Nov. 13, paying an average of about $9.25 apiece, the New York-based bank said in a U.S. Securities and Exchange Commission filing. Citigroup closed last week at $3.17.

Unrestricted Stake

U.S. laws require executives and directors to disclose stock purchases or disposals within two business days to the SEC.

Sharer, the chairman at Thousand Oaks, California-based Amgen since January 2001, disposed of $1.76 million worth in the world’s largest biotechnology company on May 12, an SEC filing showed.

The sale of 36,411 shares trimmed his unrestricted stake by 13 percent and came three weeks after the company reported first-quarter earnings that trailed analysts’ estimates. Between May 22 and June 9, five Amgen officers, including George Morrow, the executive vice president for global commercial operations, and Roger Perlmutter, the executive vice president for research and development, sold a combined $6.4 million.

“From time to time, and within appropriate trading windows, Amgen executives exercise their right to sell shares for tax planning, to prevent stock option expiries and other purposes,” spokesman David Polk wrote in an e-mailed response to questions.

Eight-Month High

Federated’s Christopher and Thomas Donahue together sold about 65,000 for $1.68 million on June 4 and June 5 through a family trust, according to SEC filings. The transactions were the biggest outright sales for each since December 2005 and followed a 52 percent rally this year that recouped more than a third of 2008’s stock losses.

The executives began selling two days after the third- biggest U.S. manager of money-market funds, which was founded by their father, John Donahue, in 1955, reached an almost eight- month high compared with reported profits.

Federated said in a statement on June 8 that the officers sold as part of a “longer-term” diversification strategy. Ed Costello, a spokesman, said the Pittsburgh-based company had no comment beyond the news release.

“If these folks don’t have confidence in the company and don’t feel that it’s an attractive value, then why as a shareholder would I think it’s a good value?” said Jason Cooper, who helps manage $3 billion at 1st Source Investment Advisors in South Bend, Indiana.

Amgen shares dropped 2.6 percent to $50.99 today, while Federated slumped for a seventh day, tumbling 5.4 percent to $23.15, for the longest streak of losses since 2003.

Stock Options

Seven directors at CME Group Inc., the world’s largest futures exchange, disposed of almost $3 million since May. John Pietrzak sold for the first time since becoming a director of the Chicago-based company in July 2007, according to data compiled by InsiderScore. Board member Joseph Niciforo cut his stake by 28 percent. CME shares sank 7.4 percent, the most since May 7, to $303.48 today.

“It’s our policy to never comment on any executive sale of shares,” said Allan Schoenberg, a CME spokesman.

Nine insiders at TiVo Inc., the maker of digital video recorders, sold $10.6 million between June 3 and June 11, after the Alviso, California-based company jumped to a five-year high. That was the most by value over a one-month period in more than five years, InsiderScore data show.

A 53 percent jump in TiVo’s stock on June 3 initiated trading plans of some insiders such as CFO Anna Brunelle, who cut her holdings by 17 percent, according to regulatory filings to the SEC compiled by InsiderScore.

TiVo Director

The so-called 10b5-1 programs allow executives to cash out a portion of their holdings when stocks reach predetermined prices. Brunelle also sold through her plan from exercising options with average expiration dates about seven years away, InsiderScore data show.

Geoffrey Yang, a TiVo director since 1997, cut his stake by 8.4 percent, raising $1.5 million. The sale was the first by Yang in almost two years. Chief Technical Officer James Barton reaped an 89 percent profit from selling $2.8 million that he received from exercising stock options that were due to expire in four years, according to InsiderScore. TiVo shares dropped 5 percent to $10.50 today.

Whit Clay, a spokesman for TiVo, declined to comment.

Electronic Arts Inc. Chairman Lawrence Probst and two other executives sold a combined $1.2 million worth since May 28, after the world’s second-largest video-game publisher jumped 49 percent from an almost nine-year low.

‘Out of Steam’

Probst, who joined the Redwood City, California-based company in 1984 and was CEO between 1991 and 2007, trimmed his holdings by 25,000 shares on May 28, SEC filings show.

Frank Gibeau, president of the EA games division, slashed his stake by 66 percent after unloading about $538,300 worth the same day, the filings show. The sales came three weeks after Electronic Arts, which makes “Madden NFL,” the world’s most- popular sports video game, reported a narrower fiscal fourth- quarter loss than analysts estimated. Shares of the company retreated 3.6 percent, the most since May 7, to $19.97 today.

Jeff Brown, a spokesman for Electronic Arts, didn’t immediately return a telephone call seeking comment.

“It does make you wonder if the market rebound is running out of steam,” said Scott Leiberton, the managing director for the equities division of Principal Global Investors, which oversees $189 billion in Des Moines, Iowa. “If you see broad- based selling among the management team or large holders, that’s generally not a good sign because presumably who knows that business better than they do?”

link

By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) -- The top-performing letter that predicted the Crash of 2008 now predicts a confiscatory Franklin D. Roosevelt-style "bank holiday." But it's surprisingly sanguine about stocks -- in the (very) short term.

The Harry Schultz Letter (HSL) was my pick for Letter of the Year in 2008 because it really did predict what it rightly called a coming "financial tsunami." But its performance in 2008 was still terrible, albeit arguably for technical reasons. ( See Dec. 28, 2008, column.)

Now HSL has bounced back big-time. ( See April 13 column.) Over the year to date through May, it's up a remarkable 81.7% by Hulbert Financial Digest count, compared to 4.1% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.

Of course, simple arithmetic dictates that doesn't make up for 2008 -- over the past 12 months, HSL is still down 48.19% versus negative 32.63% for the total return Wilshire 5000. In fact, the damage inflicted by 2008 was so great that HSL is also under water over the past three years, down an annualized 14.89% against a drop of 8.18% annualized for the total return Wilshire 5000.

Still, over the past five years, the letter has achieved an annualized gain of 9.19%, compared to negative 1.26% annualized for the total return Wilshire 5000. This reflects its success in catching the post-millennium hard-asset bull market that caused me to name it Letter of the Year, for more conventional reasons, in 2005. ( See Dec. 29, 2005, column.)

And over the past 10 years, the letter still shows an annualized gain of 3.65%, against negative 0.86% annualized for the total return Wilshire.

In its current issue, HSL reports rumors that "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."

Yes, yes, it's paranoid. But paranoids have enemies -- and the Crash of 2008 really did happen.

HSL's suspicion: "Another FDR-style 'bank holiday' of indefinite length, perhaps soon, to let the insiders sort out the bank mess, which (despite their rosy propaganda campaign) is getting more out of their control every day. Insiders want to impose new bank rules. Widespread nationalization could result, already underway. It could also lead to a formal U.S. dollar devaluation, as FDR did by revaluing gold (and then confiscating it)."

HSL is still sticking with its 20-year "V" formation forecast, but emphasizes that within the current 10-year downtrend phase there will be rallies that will "last 1-2 years." It attributes its current success to "successfully trading almost daily, especially in commodity stocks (coal/potash/energy/ fertilizer/gold). Take profits constantly and rebuy on mini pullbacks. Prefer non-U.S. dollar companies; many such companies are listed in U.S. & Canada or Australia."

HSL says: "The world is staggering today between stagflation and net deflation right now; it varies widely around globe. Net deflation is a maybe 35% risk, due to toxics and/or deepening depression. Bit more likely, we'll slowly creep up to a dangerous 4.5% inflation on average, medium-term. But the wild card is the currency risk, which has a 50% (?) chance of boiling over and causing literally overnight (i.e. 24 hours) mega inflation in the asset markets."

link

[chrissmith921]

BA asks staff to work for nothing

British Airways is asking thousands of staff to work for nothing, for up to one month, to help the airline survive.

The appeal, sent by e-mail to more than 30,000 workers in the UK, asks them to volunteer for between one week and one month's unpaid leave, or unpaid work.

BA's chief executive Willie Walsh has already agreed to work unpaid in July, forgoing his month's salary of £61,000.

Last month, BA posted a record annual loss of £401m, partly due to higher fuel bills and other costs.

Mr Walsh said BA's drive to save cash was part of a "fight for survival".

"I am looking for every single part of the company to take part in some way in this cash-effective way of helping the company's survival plan," he said.

"It really counts," he added.

BA has been in urgent talks during the past few weeks with trade unions at the company over other ways to save money.

Details of a large pay and productivity deal are expected to be announced on Wednesday.

Flexible scheme

A company spokesman said it did not have an exact target for the expected savings from its appeal.

"As much as possible, but we don't have a figure," he said.

The idea was first launched last month when the airline asked staff to volunteer for a month's unpaid leave, or to work for free for that time.

That attracted more than 1,000 applicants.

But the company's more recent version of its scheme, launched last week by e-mail and in an article in the internal staff newspaper BA News, is more flexible.

It asks staff to volunteer by the end of this month for between one week and one month of unpaid leave or unpaid work.

The lost salary will be spread over between three and six months.

BA said other airlines, such as Cathay Pacific, had launched similar schemes and a majority of their workforces had signed up for them.

thats better or worse than a pay-cut?

i'm not sure?

also surely everyone takes it or no-one? not just those gullible to accept.

I just wonder - if you're a youngster, living at home, not a lot of outgoings (eg mortgage, kids) on your own shoulders - and you want to make sure you go far, what better way than getting your name known to top management levels with such a scheme?

Obviously, that will be the minority of people working for BA, but if they're wise....

[ender4]

I just wonder - if you're a youngster, living at home, not a lot of outgoings (eg mortgage, kids) on your own shoulders - and you want to make sure you go far, what better way than getting your name known to top management levels with such a scheme?

Obviously, that will be the minority of people working for BA, but if they're wise....

no-one has loyalty nowadays. BA won't care that you made the sacrifice, and top management will not notice.

[chrissmith921]

I just wonder - if you're a youngster, living at home, not a lot of outgoings (eg mortgage, kids) on your own shoulders - and you want to make sure you go far, what better way than getting your name known to top management levels with such a scheme?

Obviously, that will be the minority of people working for BA, but if they're wise....

no-one has loyalty nowadays. BA won't care that you made the sacrifice, and top management will not notice.

Top management would notice if there were say 20 people sacrificing themselves on the ground level.

There are always 'champions of the people' in board rooms who would harp about it for years.

All you need is for your name to get known in those circles and bang. 3 years later. cancer.

[Awol]

I think it's probably obvious why I'm posting this article but for the avoidance of doubt it appears Gordon's lies over "labour investment versus Tory cuts" has been exposed by the Governor of the BOE as so much crap.

Mervyn King warns that spending cuts and tax rises are needed

The "extraordinary" scale of Government borrowing run up by Gordon Brown will require spending cuts and tax rises after the next election no matter who is in power, the Governor of the Bank of England has cautioned.

'The scale of the deficit is truly extraordinary,' Mr King said Mervyn King issued his warning as the Prime Minister was forced to retreat on controversial Commons claims about Labour's spending plans.

Speaking to the Treasury Committee of MPs, Mr King dealt a serious blow to Mr Brown's political strategy of casting the next election as a choice between "Tory cuts" and "Labour investment."

Simply paying the interest on that borrowing will soon cost more money than the Government spends on schools or defence.

Mr King told MPs that whoever is in office after the next election will have to set out clear plans to reduce borrowing, something that could only be achieved by cutting spending, raising taxes or a combination of the two.

"The scale of the deficit is truly extraordinary," Mr King said. "There will certainly need to be a plan for the lifetime of the next parliament, contingent on the state of the economy, to show how those deficits will be brought down".

George Osborne, the shadow chancellor, is believed to be considering a two-day cabinet meeting to discuss binding spending cuts if the Conservative Party gain power at the next election.

Shadow cabinet sources said the idea is modelled on cabinet discussions held by the Labour government in the 1970s, and would force department heads to agree how spending will be brought under control.

The Government finances its deficit by selling bonds to international investors. Mr King warned that unless those investors are persuaded that spending will be reined in, they will refuse to lend to the UK.

He said: "Although we are finding it easy now to finance those deficit by issuing gilts, there could be funding challenges down the road."

Mr Brown has pressed ahead with his cuts-vs-investment attacks on the Tories despite the fears of Cabinet colleagues that it will backfire on Labour.

Those fears were compounded yesterday as the Prime Minsiter was forced into a climbdown on spending.

Last week, Mr Brown told MPs that under Labour, capital expenditure - Government spending on new buildings and equipment - will rise until the London Olympics in 2012.

That statement drew accusations that he was misleading the Commons, because Treasury documents show capital spending will fall from next year.

At Prime Minister's Questions, Mr Brown conceded that he had been wrong.

David Cameron challenged the Prime Minister over the claim.

He said: "Last week he told the House that capital expenditure will grow until the year of the Olympics. The Government's own figures show that is just not the case. Will he take this opportunity to correct what he told the House last week?"

Mr Brown replied: "Yes."

To mocking laughter from Tory MPs, he continued: " In the building of the Olympics capital investment will rise very substantially.

"Capital investment is rising from £29 billion to £37.7 billion and then to £44 billion in 2009-10 and that is to help complete the building of the Olympics. Thereafterwards it will fall."

George Osborne, the Shadow Chancellor, said yesterday had been "demolition day for Gordon Brown's tax and spending policies."

He said: "At lunchtime the Prime Minister's attempts to defend himself in the Commons ended in ridicule; and in the afternoon the Governor of the Bank of England delivered the final blow by demolishing for good any claim that this discredited government ever had to a credible plan for the recovery."

Bang goes Labour's election strategy. This must be what Gordon meant when he said he would bring in a new era of transparency, like trying to hold the Iraq war enquiry in private...

[leviramsey]

I found this piece interesting, but being as I'm thousands of miles away and some of you are presumably closer, I figured I'd post it for your potential responses

This week I received an email from a group called ‘Redundancy Survival’, offering me the opportunity to buy an e-book that will help me cope if I am made redundant. The e-book is for ‘the average individual who is told their job no longer exists’ and who might be ‘in shock and suffering depression because of a lack of support’. The email quoted one worker who had been made redundant – ‘I didn’t know what to do at first and was like a rabbit in headlights’ – and encouraged the rest of us to try to avoid suffering a similar fate by coughing up some of our redundancy cash for its therapeutic e-book.

The email perfectly summed up today’s strange, muted response to the prospect of job losses and mass unemployment as a result of the recession. Unemployment in the UK rose to a 12-year high of 2.261million in April, and it is predicted to reach three million soon. The unemployment rate increased by 30 per cent in the first 12 months of the current downturn, compared with 22 per cent in the first year of recession in the 1990s and 29 per cent in the first year of the 1980s downturn. Yet there are no mass uprisings, no marches for jobs; instead there are atomised individuals apparently feeling like ‘rabbits in headlights’ and being offered advice on how to cope by the usual suspects of the therapy industry.

In the past, individuals thrown out of work or forced to take pay cuts might have had face-to-face meetings to organise some kind of resistance; today they receive advice on how to cope through that most individuated form of communication: the email. During earlier economic downturns, people were less interested in finding out how to ‘survive redundancy’ than in devising ways to overcome it – either by demanding their jobs back or marching for the right to work. Things have clearly changed, enormously. As Janet Street-Porter asked in typical shrieky fashion: ‘Why don’t we take to the streets over job losses?’

The truth is, unemployment is no longer a political issue. It is still a very severe problem for individuals and families, many of whom will have to find new ways to make ends meet and rein in their hopes and expectations. But it is no longer a politically galvanising issue, one that draws people together into a collective, conscious expression of anger. Having been perhaps the defining concerns of twentieth-century politics, today gainful employment, wage levels and living standards do not provoke political action or mass protest in anything like the same way. There are a number of reasons for this new, peculiar state of affairs.

The depoliticisation of unemployment can be glimpsed in various events of the past week. At the Lindsey oil refinery in North Lincolnshire – from where Tim Black reports for spiked today – there is currently an admirable, principled strike in defence of 647 workers who were sacked. Other construction workers around the country have walked out, too, in solidarity with the sacked workers. Yet this protest stands out because it is so unusual today. The Sky News reporter at Lindsey scoffed: ‘They looked like they had walked out of the 1980s…’ But he had a point. Serious industrial action is so increasingly rare that it does look to many people like an archaic oddity.

Indeed, such is the lack of political agitation over job cuts that, even as the recession increases its grip over people’s living standards, the leaders of big business can openly boast about workers’ compliance with wage cuts and hours cuts. This week John Cridland, deputy director-general of CBI, claimed there has been ‘a revolution in industrial relations’. ‘There has been a remarkable solidarity of employers and their employees during this recession’, he said. ‘We have seen workers working with their employers to make the best of a bad job in these circumstances.’ Where in the past there might have been ‘resistance from workers to what their bosses were doing’, today there is a new ‘commonality of interest’, Cridland claimed.

According to the CBI’s survey of more than 300 employers, more than half of them – 55 per cent – will institute pay freezes in the next 12 months, 30 per cent have imposed a recruitment freeze, and many are planning to cut people’s working hours or lay them off. Yet as part of what Cridland claims is a ‘newfound understanding between staff and their bosses’, most workers are not protesting against these cuts; instead, in the words of one newspaper report, ‘desperate staff [are] signing up for reduced hours or less pay, instead of risking their job’. British Airways has asked its staff to work for a month for free, and other firms want their employees to make similar sacrifices.

Meanwhile, the government clearly doesn’t see the newly unemployed as a political threat, but rather as sad and wounded individuals: it is planning to give victims of the recession free therapy, in order to stave off ‘a depression and anxiety epidemic’. The government is not concerned about mass marches on Whitehall or a general strike, but rather ‘that there will be a surge of people who become mentally ill’.

One key reason for this non-conflictual, almost quicksand-like state of affairs in contemporary industrial relations is the naturalisation of unemployment. In recent decades, particularly from the 1980s onwards, unemployment has been transformed from a political issue – where an individual was being denied the right or ability to earn a wage – into a mental- or physical-health concern. Unemployment has been turned from a political category defining a person’s inferior relationship with society into almost a state of mind, a natural state of affairs for certain individuals who are simply incapable of working. Indeed, slowly but surely, the label ‘incapacity’ has replaced the word ‘unemployed’, to give the impression that the central problem is some individuals’ inability to work rather than society’s failure to provide full and gainful employment.

The welfare state, still so beloved of many left-wing radicals, has cynically redefined huge swathes of the British population as sick rather than unemployed. As one striking study points out, in the last 20 years of the twentieth century, from 1981 to 1999, the number of individuals of working age in Britain – mostly men aged 16 to 64 – who were claiming Incapacity Benefit (IB) rose exponentially. IB is the social security benefit paid to individuals who are ‘unable to work because of ill-health, injury or disability’. In April 1981, 463,000 men of working age were receiving IB; by April 1999, that had risen to 1,276,000. It rose every single year between 1981 and 1999, apart from 1997. In addition, 710,000 women were receiving IB, meaning that at the start of the new millennium, more than two million people of working-age in Britain were defined as ‘unable to work’.

I don't think that computes...

As the authors of the study point out, this increase in ‘incapable’ people was not linked to real health problems; ‘the general standard of health in the population is known to be improving’. Rather, the rise and rise of the incapacity category from the 1980s to today has occurred in tandem with the routing of trade union militancy by the Thatcher government, the demise of working-class politics, and the subsequent treatment of the unemployed as objects of pity rather than potential fury. Indeed, the low-down nature of the welfare state’s promotion of incapacity is revealed when one looks at an IB map of Britain. In the 1980s and 90s, there was a massive take-up of IB and an ‘exceptional incidence of sickness-related claimants’ in South Wales, Merseyside, Manchester, South Yorkshire, North East England and Clydeside – areas where there had been ‘a loss of coalmining jobs’ and a ‘rise in economic inactivity among men’. Thrown out of work by the recession, treated as the ‘enemy within’ by the Thatcher government, and let down by their trade unions and the left, these isolated individuals could easily be redefined as unwell rather than unemployed; a sick group of people rather than a political group.

This redefinition of unemployment had a huge impact on the way that a lack or absence of work is experienced and understood. Many claim that successive governments cynically ratcheted up the IB numbers in order to make the overall unemployment figures look better (IB claimants are not officially counted as unemployed). No doubt there’s some truth in that, but more fundamentally the redefinition of much unemployment as incapacity spoke to a shift in the balance of power between organisations that represented workers and the state, and to the demise of class politics and its replacement by new therapeutic relations between the state and the individual. Increasingly, individuals, especially in collapsed industrial towns or areas of poverty, are actively invited by the welfare state to define themselves as pathetic and useless and unable to exist without financial and emotional handouts.

As a consequence, the politics of unemployment has changed dramatically. Unemployment tends now to be seen as something that springs from a lack within the individual rather than a lack within society. And being unemployed no longer involves the expectation of work, since hundreds of thousands of people are now defined as naturally unable to work; this encourages individual accommodation with the state of being unemployed. The political edge to unemployment, the individual anger at being unemployed, has been defused by these developments.

A second reason why unemployment is no longer a galvanising issue today is that unemployed people are less likely to experience the extreme austerity measures associated with earlier economic downturns. The welfare state, for the most part, tends to shield people from the worst economic consequences of recession and unemployment. As a result of various forms of benefit – from the Jobseekers’ Allowance to Incapacity Benefit, from the Social Fund to Tax Credits, from payments made to young people in education to government-supported ‘job-training schemes’ – individuals are provided with numerous economic safety nets.

Many will argue that this is a good thing; none of us, after all, wants to see people live in poverty. Yet it is important to recognise that the welfare state has changed and grown over the past 20 years, not in response to what individuals really need and want, but as a means of redefining society’s failures as individual failures and encouraging people to lower their horizons in the understanding that, while they might never have long-term employment or a life of plenty, they at least will not experience absolute poverty. This, too, has removed much of the politically agitating element from the issue of unemployment. Those who still defend, or even celebrate, the welfare state ought to ask what kind of solution it is to have an immense bureaucracy that encourages people to adapt to unemployment, actively lowers people’s horizons, and masks economic inequalities with emergency-measure cash.

Most importantly, however, the depoliticisation of unemployment shows how deep-seated has been the impact of the 1980s on contemporary politics.

There has been the obvious impact of the Thatcher government’s war against trade unions, which weakened or destroyed the institutions that many workers relied upon to represent their interests. There has also been the clear redefinition of unemployment as a natural state rather than a political problem. But more imperceptibly, and more crucially, there has been the impact of the politics of ‘Tina’ – ‘there is no alternative’ – on society, debate and political expectations.

First uttered by Thatcher in the early 1980s and restated in that moment of Western triumphalism over Soviet communism at the end of the 1980s, the dictum of Tina both expressed and intensified a powerful sense in the West that society could not be changed for the better, only managed so that things were kept ticking over and chugging along. The rise to supremacy of the Tina sentiment both copperfastened the collapse of the left and the defeat of workers’ organisations through the 1980s and heralded a new era of the psychology of low expectations: a capitalism that won’t enthuse or inspire you, but will at least keep you alive and fairly healthy. The ideological impact of Tina, and of the events that elevated that outlook, was devastating, cultivating a negative and narrow view of human endeavour across every level of society. When, today, apparently ‘desperate workers’ agree to work for free for a month, it is because ‘there is no alternative’.

This new situation demands some thoroughgoing debate, and a new approach to the problems that afflict people’s lives. It is not good enough to become a strike-chaser and hope that every blast of workers’ action – from the Tube in London to the oil refinery in North Lincolnshire – represents a return of the combative class politics of old (though of course strikers should be supported). There is no point fantasising that class politics can somehow be rescued or re-energised. Instead we need to think of new ways to oppose unemployment and the denigration of people’s living standards, and to stand up to a state which is not smashing strikes or forcing people into poverty but rather is enticing us into a new therapeutic relationship where we must confess to being useless or mentally ill in order to be protected by the powers-that-be from serious economic hardship - in other words, sacrifice our subjectivity for the promise of relative financial security.

[Gringo]

There has been the obvious impact of the Thatcher government’s war against trade unions, which weakened or destroyed the institutions that many workers relied upon to represent their interests. There has also been the clear redefinition of unemployment as a natural state rather than a political problem. But more imperceptibly, and more crucially, there has been the impact of the politics of ‘Craig Gardner’ – ‘there is no alternative’ – on society, debate and political expectations.

First uttered by Thatcher in the early 1980s and restated in that moment of Western triumphalism over Soviet communism at the end of the 1980s, the dictum of Craig Gardner both expressed and intensified a powerful sense in the West that society could not be changed for the better, only managed so that things were kept ticking over and chugging along. The rise to supremacy of the Craig Gardner sentiment both copperfastened the collapse of the left and the defeat of workers’ organisations through the 1980s and heralded a new era of the psychology of low expectations: a capitalism that won’t enthuse or inspire you, but will at least keep you alive and fairly healthy. The ideological impact of Craig Gardner, and of the events that elevated that outlook, was devastating, cultivating a negative and narrow view of human endeavour across every level of society. When, today, apparently ‘desperate workers’ agree to work for free for a month, it is because ‘there is no alternative’.

FIXED

[leviramsey]

[Gringo]

Economy struggling worse than thought

Sharp contraction for UK economy

The UK economy contracted 2.4% in the first quarter of 2009, a decline not exceeded in 51 years, according to the latest official data.

The decline was more severe than the earlier estimate of a 1.9% fall, and worse than analyst expectations.

The Office for National Statistics (ONS) blamed the sharp revision primarily on weaker output in the construction and manufacturing sectors.

The scale of revision comes as a real shock, and highlights the extreme weakness of the economy in the early months of the year

Andrew Goodwin, Ernst & Young Item Club

It also said the recession started earlier than first thought last year.

The ONS now says the recession began during the second quarter of 2008 rather than during July to September, so that the recession has now been running for a whole year.

The ONS said economic output shrank 4.9% during the first quarter of 2009 compared with the first quarter of 2008, the biggest year-on-year fall on record.

The figures will make it more difficult for the Treasury to reach its forecast of a 3.5% decline in the UK economy for the year, made in the April Budget.

But the Chief Secretary to the Treasury, Liam Byrne, said it would not be revising its forecast.

"There have been some tentative signs that the fall in output is moderating and I remain confident but cautious about the prospects for the economy," he added.

I wonder how much faith the treasury have in the predictions or whether they think trying to revise their forecasts again will only make them look silly when the next set of figures come out.

As per the post on t'other thread - this will be having a major impact on tax revenues.

So is it a case of we can't afford to spend, or we can't afford not to.

[ender4]

sensible choice - spend less

Labour choice - spend more.

hmmmmm.....

[Gringo]

Indeed, labour always make silly choices and the tories very smart ones......like this mess the tories created

National Express loses rail route

The government is to take the East Coast rail service, run by National Express, into public ownership.

The troubled rail franchise, which is expected to have lost £20m in the first half of the year, is suffering from slumping passenger numbers.

Ministers have refused the company's requests for its contract with the government to be renegotiated.

The Department for Transport said that all East Coast services would continue and that tickets would be honoured.

Existing operational staff will transfer to the new state company which will be set up to operate the route.

The government added it intended to put the franchise out for tender from late next year.

Labour's real problem in this case is failing to learn from the mistakes of the blue party

[ender4]

are you saying that they shouldn't have privatised the railways?

I've always voted labour in every general election, but even i can see that privatisation is beneficial in most (not all) industries.

[Gringo]

are you saying that they shouldn't have privatised the railways?

Only slightly

#1

#2

#3

And there would be many more examples if the forum didn't get pruned

I've always voted labour in every general election, but even i can see that privatisation is beneficial in most (not all) industries.

Rail privatisation didn't benefit customers

Water privatisation didn't benefit customers

Electricity privatisation didn't benefit customers

Telecoms privatisation didn't benefit customers for the first 15 years and then only because of new technology forcing the old dinosaurs to learn a new dance

Health privatisation isn't benefitting customers

Ediucation privatisation won't benefit customers but both blue and red parties are trumpeting in that direction

Postal privatisation won't benefit customers

[ender4]

Rail privatisation didn't benefit customers

Water privatisation didn't benefit customers

Electricity privatisation didn't benefit customers

Telecoms privatisation didn't benefit customers for the first 15 years and then only because of new technology forcing the old dinosaurs to learn a new dance

Health privatisation isn't benefitting customers

Ediucation privatisation won't benefit customers but both blue and red parties are trumpeting in that direction

Postal privatisation won't benefit customers

Rail - 50/50 - pretty good, i think it'll be a success long-term

Water - 95% success

Electricity - 90% success (the fail was the regulators becoming too soft)

Telecoms - 100% Success

Health - i think it'll be a success (as long as the governemnt still pays for it through general taxation)

Education - i agree it won't. 100% Fail.

BP - 100% success

British Airways - 100% success

Britsh Gas - 100% success

British Leyland - 100% success (though no longer exists, which is what a free-market should do to rubbish companies).

Thomas cook - 100% success

Air Traffic - 100% success

Rolls Royce - 100% success

British Steel - 100% success

British Energy - Fail (conceptually should have succeeded, but totally cocked-up)

Buses - 100% Fail.

Council-houses - 100% success.

Ports - 100% Success.