economic situation is dire

[Awol]

On a lighter note this is worth a giggle from PMQ's yesterday..

Gordon's Superman complex

I'm glad he saved the world, he's spent everything else!

[snowychap]

Did he save the cheerleader first, though?

[snowychap]

Santander cuts 1,900 UK bank jobs

Spanish bank Santander has said it will cut 1,900 jobs in its three UK businesses - Abbey, Alliance & Leicester and Bradford & Bingley.

The bank said that the jobs would be cut in 2009 to reduce costs and did not rule out compulsory redundancies.

Unions reacted with dismay to the announced cut, which represents 8% of Santander's British workforce.

Santander is the eurozone's largest bank by market capitalisation and second-biggest in the world after HSBC.

[snowychap]

If we're going to spend, then let's invest in Britain's future

Rather than encourage people to squitter money on imports, the government should build us an infrastructure fit for this century

The Rawnsley family spent their most recent summer holiday travelling in the United States. It was terrifically good value, which is one of the reasons August already seems like such a very long time ago. Those were the happy days, the pre-crash days when a pound bought two dollars.

One of the highlights was the trip we took along the Blue Ridge Parkway, a fabulous road through the stunning scenery of the Appalachian mountains. Plunging ravines, glorious meadows, breathtaking mountaintops and wonderful waterfalls are all to be enjoyed. Running for 469 miles from Rockfish Gap in Virginia to Cherokee in North Carolina, it is the sort of drive about which songs are written.

Work on the scenic highway began in 1935 as part of the public works programme of Franklin D Roosevelt's New Deal. It did what it was designed to do, which was to generate jobs and draw visitors to one of the regions of the United States most devastated by the Great Depression. Here's the double beauty of it. This was a project to alleviate the economic distress of its own time which also bequeathed an achievement of enduring value to future generations. Some 20 million people visit the national park every year. The Blue Ridge Parkway is testimony to how crises can be turned into legacies by leaders with the requisite willpower, ingenuity and intelligence.

As the D-word again stalks the world, the current crisis will separate Prime Ministers and Presidents into two kinds of leaders. The unlucky countries will be those led by politicians who think only of how they might scrabble through the next six months. The lucky ones will be those with leaders who turn the emergency of the moment into an opportunity to equip their countries for the future.

When Gordon Brown and his fellow EU leaders met on Friday, they tried to make their agreement to a stimulus plan sound a lot bolder and more decisive than it really is. They wrote a cheque for €200bn but left it unsigned. It is entirely up to individual states whether they actually fund the plan.

That is a bit deflating of the Prime Minister's boast that the world is following his example. In a Freudian moment at the dispatch box last week, he even claimed to have saved the planet. Yet GB is not the role model for Barack Obama. The next American President prefers the example of FDR. The President-elect has just committed himself to a vast programme of public works as the centrepiece of his response to America's economic anguish. By contrast, Gordon Brown's answer to the recession has been focused on trying to prop up banks and prod consumers to keep shopping.

The risk of that approach was highlighted by the German Finance Minister, Peer Steinbrück, with his undiplomatic scorn that 'crass Keynesianism' may not do much to alleviate the recession but is guaranteed to leave Britain saddled with a national debt that 'will take a whole generation to pay off'.

His words have been gleefully seized on by David Cameron and George Osborne. Yet Herr Steinbrück's intervention also drew attention to their own failings. The most brutally succinct criticism of Mr Brown's approach to the crisis has come not from the leaders of Britain's Conservatives, but from a German social democrat.

He is wrong to suggest that nothing can be done to stimulate distressed economies. He's right when he points to the potential perils of throwing huge sums at consumers and failing companies with little guarantee that maxing out the nation's credit card will work.

The more I think about it, the more sure I become that there have to be smarter ways of using billions of pounds than encouraging people to go shopping for more foreign imports. If the government is going to spend like there is no tomorrow, better to use the money building things that might be useful when tomorrow comes. Better to invest in Britain. That way, when we do eventually emerge the other side of recession, we will be in a fitter place to exploit a resumption of growth. The case is even more compelling because this is a country crying out for serious investment to improve its creaking infrastructure.

There are plenty of needs to be met. Let me suggest three projects that would provide much better value for money than squittering away any more billions on electronic toys from the Far East. The first and most screamingly obvious candidate for investment is Britain's outdated railways. We are now in that dreadful season when a centimetre of snow is capable of paralysing our antediluvian rail network. It is as bewildering as it is shocking that our railways are so bad. Britain invented the train. We live in a compact, temperate and relatively flat country with no mountain ranges like the Alps or the Rockies to negotiate. Nature gifted us geography ideally suited for a fast, efficient and green rail network. We blew it. When one of his cabinet urged Tony Blair to take railways more seriously, the then Prime Minister fatalistically responded: 'There's no point. There's nothing that can be done.'

That attitude, shared by British politicians of every stripe for many decades, has left us with the most embarrassing railways in western Europe. France, Germany, Spain and Italy all have high-speed rail networks. The only high-speed link in Britain are the tracks that take you out of the country and through the Chunnel. We belatedly invested in that only because the French shamed us into it.

The government is humming and hawing about whether to commit to building a high-speed rail link connecting Heathrow, London, Birmingham, Manchester and Glasgow. If it makes the decision in the way that has been historically typical of British governments, it will spend half as much money as is required to do the job properly and it will take twice as long as it should. For around the same sum that the Treasury is throwing at consumers to spend on plasma screens made in China, Britain can have a high-speed rail link connecting its industrial spine.

For more immediate results, and for a pretty modest net cost, work could be begun quite quickly on the modernisation of the inter-city network. Smelly and expensive diesel trains still ply the Midland mainline and the Great Western mainline. For a fraction of the money which has been spent on a VAT cut of uncertain effect, those lines could be electrified.

A programme to modernise the railways will generate work for key industries such as construction, steel and engineering. It is a big job creator. It will have an excellent multiplier effect feeding the stimulus through to other industries. It will help move Britain away from its addiction to the car. It will lift the long-term growth potential of the economy. It is a no-brainer.

Modernising our antiquated railways is a catch-up project to haul Britain's transport system into the early 21st century. We will also need get-ahead projects which will equip the country for the rest of the century. My next candidate for investment is the creation of a national fibre optic network capable of connecting everyone to super-fast broadband. More and more economic, social and political activity is happening on the internet, but the digital plumbing is struggling to cope with the volumes of data. If you want to download a film, for most people that means leaving the computer running all night. This is because nearly all households and many businesses are still connected to the net by old-fashioned copper wiring. There's a big, essential and urgent job of work to do replacing the outdated wiring with fibre optics. This is another project which is too large for the private sector to take on by itself, especially during a recession. A fibre optic network would allow every firm and household to enjoy and exploit the potential of the broadband speeds currently available only in swanky offices. This is the sort of project that intelligent government would invest in.

My third candidate is green energy. We know this recession will end one day. The oil price is not going to be low for ever. To prepare for the day when it soars again, to make good on commitments to reduce carbon emissions and to be free of dependency on the likes of Russia and Saudi Arabia, we have to get much more ambitious about renewable energy. For a blowy country surrounded by sea, Britain has been pathetic at harnessing the energy of wind and wave. One pressing need is to start laying power lines which will allow the energy from wind and wave turbines in the North Sea to be plugged into the national grid. That will cost a fraction of the billions which have been committed to the feckless banks. Ministers should commit to that essential investment for a greener energy future.

A modernised rail system, a national fibre optic network and a renewable energy grid: all have the triple merit of generating business in Britain, creating jobs in Britain and enhancing Britain's competitiveness. They are not make-work schemes of the sort that can give infrastructure projects a bad name when money is spent building bridges to nowhere. All these projects meet a national need and will leave a profitable legacy.

Our politicians need to be thinking not just about how to get through the next six months, but how to make Britain fit for the world after the slump. If we are going to spend billions, better they are spent leaving future generations with a legacy which amounts to more than just a mountain of debt.

Cleverly done, big can be beautiful. If you remain to be convinced, let me recommend a drive down the Blue Ridge Parkway.

I'm not sure of the practicality of the projects suggested but I share the sentiment. I would also like to throw in house building as part of any plan though I doubt that would fit comfortably into either main party's agenda because, at least initially, it would require a suspension of the desire to reinflate the housing bubble.

[snowychap]

Pound’s plunge is expected to limit cuts in UK interest rates

STERLING’s fall could limit the Bank of England’s scope for further aggressive cuts in interest rates, analysts warn, following the pound’s drop to a record low of ¤1.11 against the euro last week.

Members of the Bank’s monetary policy committee (MPC) have in the past said sterling’s performance still plays a role in rate decisions and some of those concerns may emerge this week.

The Bank will publish the minutes of the MPC’s meeting earlier this month when it cut Bank rate from 3% to 2%. In its November minutes, the committee said that the future path of rates would be partly determined by the reaction of the currency markets.

Sterling has dropped 13% against the euro in the past two months, since the Bank started cutting interest rates aggressively. UK interest rates have dropped below those in the eurozone and there are concerns about Britain’s outlook.

A survey of UK exporters, to be published by Euler Hermes tomorrow, will show little benefit from the pound’s fall. It will reveal export growth has slowed to its weakest for nearly 18 months as a result of a sharp downturn in Britain’s markets.

Growth fears are not limited to Britain. Bild am Sonntag, the German newspaper, will today report that the Berlin government is preparing a prediction of a 2% drop in the country’s GDP next year, which would be the worst performance since the Federal Republic was founded in 1949. It would be in line with a prediction last week from the Ifo Institute.

Sterling’s weakness is not expected to prevent further rate cuts but to slow their pace. MPC members are likely to opt for more gradual reductions in the early months of next year, following the dramatic cuts since October, which saw Bank rate drop from 5% to 2%.

Figures this week will show that inflation is less of a constraint on the Bank’s actions. Consumer price inflation is expected to show a fall from 4.5% to 3.9%, while retail price inflation, the most important measure for wage bargainers, is likely to fall from 4.2% to 3.1%.

In America, the Federal Reserve is set to cut its key Fed Funds rate from 1% to 0.5%, the lowest for decades. Analysts think it is reluctant to cut further to maintain a small margin above a zero interest rate.

The focus will be on additional measures such as “quantitative easing” — boosting money supply by steps such as buying Treasury bonds — or committing itself to keeping rates low for an extended period.

The Bank of Japan is set to leave its key rate unchanged at 0.3%. Attention will focus on whether the authorities are preparing action to slow the yen’s climb against the dollar.

[blandy]

It amazes and stuns me that there's just no political will to make the investment in things like rail and so on as per the Observer article above.

I mean it joins together so many things that are so often started to be "commitments" the country needs to make, yet even when the logic for it is even more supportable, they still can't get their heads round it.

Capital expenditure to help give people work

Green travel

Cutting CO2 emissions

Upgrading dilapidated transport

Getting cars off the roads

Investing for the future

I guess there's no party donors likely to benefit personally from it, so the Gov't thinks it's pointless.

[ED]

Pound is now below the Euro????

[ianrobo1]

totally agree Pete but Obama i his election was very clear on doing those things we will see

Ed it is for tourists and it is inevitable

there again helps our exports as always with the market sometimes it is good and sometimes bad

[snowychap]

totally agree Pete but Obama i his election was very clear on doing those things we will see

Is Mr Obama planning to do something about the infrastructure in the UK? :?

there again helps our exports as always with the market sometimes it is good and sometimes bad

From the Times article a couple of posts above:

A survey of UK exporters, to be published by Euler Hermes tomorrow, will show little benefit from the pound’s fall. It will reveal export growth has slowed to its weakest for nearly 18 months as a result of a sharp downturn in Britain’s markets.

[ianrobo1]

well the last bit is affecting all

of all the things to be worried about at the moment the value of the £ is the least of them

as for Obama what they do we will follow

[Awol]

totally agree Pete but Obama i his election was very clear on doing those things we will see

Is Mr Obama planning to do something about the infrastructure in the UK? :?

Quite, and the UK and US econmies do not stand any meaningful comparison anyway so an argument based on "well Obama's talking about doing 'X' so we should too" is a false one. An economy much closer to ours in size is Germany who have of course berated the Government for the "utter failure of Labour's economic policies" and "crass Keyensianism".

[Awol]

of all the things to be worried about at the moment the value of the £ is the least of them

You do understand mate that the reason inverstors are losing confidence in the UK which has led to the subsequent devaluation of sterling is due to a recognition that the UK ecomony is in such a poor state compared to other nations?

A tanking pound is far from the 'least' of our worries Ian, it is an indicator that UK Plc is in deep shit.

[ianrobo1]

so is the world PLC or you missed that ?

the euro is see as a more safer investment yet within it Ireland and Spain are doing worse at least and France is not healthy

Italy been i a recession before us

Germany will suffer from its exports not being wanted

[snowychap]

of all the things to be worried about at the moment the value of the £ is the least of them

I disagree - maybe it is not at the top of the list but it is quite important (not least for its impact upon BofE decision making but also for its relevance to energy costs).

as for Obama what they do we will follow

I'm not so sure we will.

Blimey, he's not the messiah, you know.

[ianrobo1]

snowy if the states invests in green energy we will have no choice but to follow but we should have done it anyway !!

[Gringo]

so is the world PLC or you missed that ?

yes yes, we know - it's a global problem.

But the fact that the £ is falling against the rest of the major world currencies shows that the problems in UK plc are much greater than those in 'world plc'.

The £ is falling as the UK debt balloons and still further unfunded spending commitments are announced. As much of the debt is going to be funded by offshore funds, the pressure on the £ will continue and the cost of this debt increases (relative to the position where a strong pound existed).

[ianrobo1]

so how come the Dollar is not collapsing then the amount of debt they are taking on in % terms is about the same is it not ?

[Gringo]

so how come the Dollar is not collapsing then the amount of debt they are taking on in % terms is about the same is it not ?

No it's not - from another thread

However it will probably drop a little further as the govt struggles to finance it's bail outs and the fact the as a share of gdp, the uk bailout is far bigger than the us requirements. A larger share of the wealth generation in the uk is tied to the financial services as well meaning cash generation will be tight thus the imf prediction that it will be hit hardest by the downturn.

[villal]

The Federal Reserve has bluntly refused a request by a major US financial news service to disclose the recipients of more than $2 trillion of emergency loans from US taxpayers and to reveal the assets the central bank is accepting as collateral. Their lawyers resorted to the bizarre argument that they did so to protect 'trade secrets.' Is the secret that the US financial system is de facto bankrupt? The latest Fed move is further indication of the degree of panic and lack of clear strategy within the highest ranks of the US financial institutions. Unprecedented Federal Reserve expansion of the Monetary Base in recent weeks sets the stage for a future Weimar-style hyperinflation perhaps before 2010.

On November 7 Bloomberg filed suit under the US Freedom of Information Act (FOIA) requesting details about the terms of eleven new Federal Reserve lending programs created during the deepening financial crisis.

The Fed responded on December 8 claiming it's allowed to withhold internal memos as well as information about 'trade secrets' and 'commercial information.' The central bank did confirm that a records search found 231 pages of documents pertaining to the requests.

The Bernanke Fed in recent weeks has stepped in to take a role that was the original purpose of the Treasury's $700 billion Troubled Asset Relief Program (TARP). The difference between a Fed bailout of troubled financial institutions and a Treasury bailout is that central bank loans do not have the oversight safeguards that Congress imposed upon the TARP. Perhaps those are the 'trade secrets the hapless Fed Chairman,Ben Bernanke, is so jealously guarding from the public.

More on Link

[ianrobo1]

and now the fed has cut interest rates to basically zero, nowhere left to go