For Argyll will be coming back to this issue but here are some foundation issues.
The ‘agreement’ at the EU summit was less of an agreement to act than an agreement to try to arrive at a particular destination. This outlining of an intent to work towards such an agreement was today described by The Independent’s Economics Editor, Ben Chu - wonderfully succinctly. He said: ‘Like a desperate exam student, Europe’s leaders have responded not to the question they were actually asked, but the question they wanted to answer’. And Chu felt: ‘… even that they got wrong’.
The question they wanted to ask and, in their actions, answered, was on the readiness of member states to sign up to a common fiscal policy, with strict rules and disciplined conduct enforced by automatic penalties for breaches. The 17 members of the eurozone voted for this. For some of them this was a foregone conclusion. Why would Ireland, Portugal, Greece, Italy, Spain and France not vote for whatever security blanket they can get?
Six other states, on the periphery of the eurozone – Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania - signalled their intention to join a fiscal union. Three more – the Czech Republic, Hungary and Sweden are considering joining.
Presumably these three and possibly the intermediate six will have some consultation to carry out back home – and, for some, the cost of loss of sovereignty may be indigestible.
The questions Europe’s leaders were immediately being asked by the wider world were on approaches to internal debt management and to low or no growth.
These issues they simply ignored – with February 2012 as the general timescale for coming back with the answers to the question they want to answer; and with nothing on the questions they seem to have sidelined but are the urgent ones.
And meanwhile – what?
The market response to the initial harmony was positive. Borrowing rates for Italy and Spain fell – and their debt burdens rose.
The market will not stay in that position because there is nothing to sustain it there. Italy and Spain have already seen their borrowing rates move back up.
And where is the response of the canniest of all of the European countries – Switzerland?
Switzerland is not an EU or a eurozone member – but operates with a series of bilateral treaties that see it adopt EU law in order to participate in the EU’s single market. Now that’s the way to play it.
The Swiss clearly see their distance from the EU, the euro and the eurozone as constructive and self-protective. They are the EU’s fourth largest trading partner and the EU is Switzerland’s largest trading partner.
So what is wrong with the distance David Cameron has achieved? It is hard to stand alone against the many – and the Prime Minster deserves credit for showing that courage. To avoid this discomfort, some other states will have chosen to present a willing front while not committing. February will be interesting – as will the backstairs pressures applied between now and then.
The summit offered no substantial reason why the euro may not collapse. The low growth rate in Italy and the steady rise of its debt burden is a serious situation – and as for Greece, its ability to implement of austerity – as opposed to its adoption of the necessary measures – remains questionable.
The core fact is that if the euro collapses, the UK – along with the other European countries – will struggle for some time.
But if we are in for a bad time, it has to be better to endure it from a freedom to manage our own affairs to get through it than to be trapped in a collapsing black hole.
NOTE: For those interested, here is a useful set of tables showing international trading performances, focused on the view from the EU – as of 14th June 2011: tradoc_122529
Very well put .
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I think Cameron’s refusal to agree to this deal has more to do with protecting his pals in the City from the tax on financial transactions on shares etc. We’re all in this together, remember. Aye, right!
Hot debate. What do you think?
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Er….. we’re not actually. Last time I looked I was buying with pounds and pence not Euros!
And that is the point – well done Cameron for standing up to be counted and sticking his neck above the parapet on this issue. Time will tell whether or not he gets his head shot off!
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Andy – there is probably a lot in what you say, but do you seriously think Scotland would be better off if the UK had joined up.
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Pingback: US Worried IMF Loans To Europe Could Lead To Losses – Huffington Post | Financial News
Let me give the Scandinavian view on this one. Norway is outside the eu but for alignment purposes ( for export ) complies with a lot of the requirements and legislation. Norway does not to be affected by nit being part of the eu club and relishes it’s independence both fiscally and politically. It means it can take a stance as it feels it is morally obliged. For example the Nobel peace prize award to the Chinese dissident.
As a consequence china has stopped buying seafood from Norway and which is one of the reasons why so much Scottish seafood is now being sold to china.
Anyway back to the point we can at least be masters of our own destiny in the same way the Norwegians have been. Please bear in mind they also see themselves more closely aligned with the other scandianvian countries than with the eu. Perhaps this may be the future for the uk , independent national identies brought together by the common good of a fiscal, economic and social purposes. Aligned in key areas and having independence of thought where their distinct national interest requires them to.
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Beware climbing into bed with Panda bearing communists -Scotland doesn’t want to be selling her integrity to China as well as her seafood!
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Isn’t Norway slightly different from Scotland in that for a similar population size, it’s GDP is three times as big (and that’s including all North sea oil and gas revenues in Scotland’s figures)? Being master of your own destiny is fine when you can afford it.
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Clearly our Norwegian neighbours are doing something right then and perhaps we need to be looking across the North Sea to learn some valuble lessons on responsible fiscal independence rather than across the English Channel to the European ‘Fat Boys’ Club!
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So where would you rather be (1) on the sidelines of imminent Euro collapse or (2) in the middle of imminent collapse?
Why be European when we can be international entering into Free Trade Agreements with whoever is willing to trade with the UK? Media frenzy and political agendas are masking the reality of what really needs to happen next….. a return to values, investorism and a focus on the value generated for society and impact of the environment before worrying about GDP.
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Anyone interested in such nonsense, a trend analysts view of the euro / pound relationship currently is shown at ;
http://www.myprophecy.co.uk/tw3.html
I guess time will tell but Kats #7 above suggests it will probably be ‘better’ watching a ship sink rather than clambering aboard to be part of the experience.
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It’s not just about America…. it’s equally comparable to the UK & Europe. The best explanation I’ve seen/heard of how we get out of the current mess! Well worth watching.
http://www.youtube.com/watch?v=7qIhDdST27g
The Secret of Oz (by Mr Bill Still)
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Sorry, I don’t have time to watch the whole thing Barmore2, but think I have the jist of it. Strangely enough was reading a book about this kind of stuff a couple of weeks ago as well.
It all comes back to the Banks really. Makes you wonder if we actuallty would be worse off if we got rid of them all completely.
I’d go further than L. Frank Baum’s vision of the world and suggest perhaps we start looking at Gene Roddenberry’s vision of our future.
“The economics of the future is somewhat different. You see, money doesn’t exist in the 24th century.”
“We work to better ourselves”
A future based on need and not greed. If only…
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Make it so.
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The amount of money circulating the globe is enough to more than take people out of poverty.
But aid to those in greatest need goes to pay the debts!
It is simple,LET THE BANKS FAIL,then we can begin to feed the world.
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School Defender.
Scotland has the second highest GDP and GVA of all the regions of the UK, second only to the South East of England whose figures benefit hugely from the apportioning of a huge amount of revenues generated in other parts.
Norway’s accounts, which dwarf on a per capita basis the figures of nearly all other countries, include revenue for gas and oil. Scotland’s accounts do not but if they did they would rival Norway’s.
The UK is the most indebted state in Europe, worse than Greece and Italy and oil revenues (providing presently over 20% of the Uk’s corporation tax) are providing the collateral for the UK’s huge debts which are still climbing daily. Nver mind the Euro, if Sterling goes down who does the UK turn to I wonder? America? China?
Having just put the people who have burst the World’s economy back in charge of the rescue why should we be surprised that their first interest is to continue saving themselves and why should we be surprised when a Tory government springs to their rescue by sheilding them from a real hard judgement – which is what the EU plan is all about.
Not that I hold out much hope of that working.
We should just have done what Iceland did. They told their banks to go jump and let them go bust and put the executives and the politicians responsible on charges.
Instead of sinking huge loans into bust banks they used the funds to support their businesses and peoples. Iceland is posting over 6% economic growth at the moment. Ireland should probably have done the same but they were bullied out of it as their banks’ collapse would have probably brought the UK banking systen down with it as it was mostly UK banks money (illusory money of course)that supported the Irish housing and property bubble.
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It is difficult to find fault with your analysis Dave. The bankers have persuaded the politicians to put a plaster (and expensive one at that) over the suppurating sore that is the financial sector. But what is needed is a red hot needle to lance the sore then a good scouring of the wound to remove the infection.
Why is it that the poor, the vulnerable, the elderly, the savers, the families, the children, the honest hard working people – well in fact pretty much all of us – have to pay the price for the reckless folly of these gold plated parasites?
What do you call 10 investment bankers against a wall?
A start.
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Morag
Exactly!
Meant to say so In my last post.
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Dave – sorry I’m being lazy and not googling myself, but could you give me a bit more information on how Iceland dealt with their economic woes?
Dr Mckenzie – I have a horrible feeling that I am going to be shouted at here but it wasn’t just the investment bankers that developed parasitic tendencies, it was all of us.
Yes of course it was those lovely people in Canary Wharf who waved their wands and cast the evil spells but most people were already entranced before the final wicked spells were cast.
A whole generation of our people had already come under the spell of buying things on credit/loans/cards etc., it’s all they have known. How can we guarantee that they wouldn’t want to continue this trend in an independent Scotland?
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Robert Mac
Take some time to digest the following….the answers you seek are near the beginning of the programme.
http://www.bbc.co.uk/iplayer/episode/b0183l0t/Storyville_20112012_Inside_Job/
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Morag – thanks for all the links, present and past. I wish I could say that I am dedicated to following politics but when I see a political programme is 1 hour 41 minutes long I immediately turn over for fear of brain death. I know I shouldn’t but hey-ho.
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Robert: well not me. I was spouting off about this sort of thing years ago: mostly about the madness of welcoming increasing property prices. All of our wealth being sucked into bricks and mortar so we have nothing left for the good things in life. And who benefited most? Bankers (and estate agents). We had plenty of warnings: the collapse in the value of pensions (it costs 10x in fees for a pension in the UK as it does in Denmark and any male retiring anytime soon who contributed the same as his dad (corrected for inflation) in the previous generation will receive 50% of what his dad did). 50%! – mostly because of fees and poor performance. Let’s no forget endowment mortgages, PPI, PFI,, the list goes on.
More and more of the UK’s wealth goes into the hands of fewer and fewer people. This means less and less is actually spent on goods so the economy goes down the tubes.
Just let me pause for a second partly to wipe the outraged spittle for my lips but to also to say that I don’t have a problem with wealth. I admire the Rowlings, the Souters, the Bransons, the Hunters, the Farmers: they earned their money, created value and jobs and are an inspiration to all of us. But these bankers gambled with our money and when they lost they lost our money. But who pays, who suffers? The bankers? No – us. We pay outrageously high interest rates while they can borrow (our) money at a huge discount; they continue to pay themselves bonuses that dwarf what the average person can earn in their lifetime; they increase the charges on our pensions. How come so many nations actually ow so much money to private banks despite having bailed the banks out?
But of course, some voice will come on telling us how vital the financial sector is to the UK (and Scotland’s economy); how it is necessary to pay these obscene bonuses so that the banks can afford the best talent; how taxing this income is bad for the country as we will drive talent away…
Just how stupid are we???
Yes, you are right in that people were weak to accept the easy credit from the banks, the expanded mortgages, the 0% balance transfers. Caveat emptor and all that. But who is to blame for the world crisis? is it Joe punter? No it is not.
Adam Smith warned of this sort of situation. Ironic that one of Scotland’s greatest thinkers should be the pin up boy of those who ignore his basic tenets and instead focus their energies into how best to screw the rest of us so they can secure their blagging rights in Soho bars.
They make me sick.
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Ye I get all that and agree with most of it but look at the position you are in yourself. You are at the cutting edge of technology. You are currently working on all sorts of clever technology which includes developing diesel from sea creatures, I think!
As an MD, for you it is probably about taking research in the direction that you want to take it but you still need to turn over a profit to pay salaries and pay your mortgage or rent.
Would you seriously complain if your company was making millions? Of course not, because it would mean your ideas were being rolled out worldwide.
So if in ten years time, when your company is at the fore front of renewable technology would you still be arguing the same argument. I’m sure you probably would but would everyone?
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I think you missed my point Robert. I have nothing against people making money: the people I listed (and it would be nice to join their hallowed ranks) made their money by creating capital. Capital is wealth and a nation needs to create capital to survive. The Chinese are doing so well because they are creating lots of capital through working hard making lots of stuff that we buy. This is good economics.
What the bankers did was transform money from a useful medium for the exchange of capital into a form of pseudo capital. Making money from money is bad economics because no new capital is being produced. At best what is happening is that the bankers (shorthand for a wide swathe of those working in the financial industry)are making their squillions by top slicing the pensions, savings and mortgages of the rest of us. Some of this is necessary but the UK financial sector in particular is greedy – hence the overly high cost of financial services in the UK. However, what has happened recently (and also happened in the 20′s and 30′s)was that the bankers were not content with mild parasitism of us as individuals, they went on to create vast piles of pseudo money by collateralising (is there such a word?) debt. This vapour capital grew and grew until one day the little boy shouted that the emperor had no clothes on and the whole edifice collapsed: or it would have had not the pliant Western governments not poured trillions of pounds, euros and dollars of their citizens money into propping the banks up. Suddenly whole nations were in debt, partly to each other (as in the case of the US and China) and partly to ….the banks! Banks are the only “businesses” that are allowed to do such things with their balance sheets. Directors of real companies end up in prison if they try this sort of thing (look at Enron).
This of course has solved nothing and the bankers have learnt nothing. Instead they seek to bolster their balance sheets by taking more capital (the real stuff) from governments (via the central banks). This money that should be going into creating new capital is thus stifled and creates nothing but security for the bankers who make huge profits on the back of our capital and they reward themselves handsomely for it.
Adam Smith will be birlin in his grave over this: this is not capitalism it is speculative parasitism and a good worming is what is required to free up our economy so we can get back to making things – real things – selling them and creating genuine, lasting wealth.
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Due to the fact I’m posting under my own name and clients may read this, I shall refrain from adding much to this debate beyond suggesting the cause of the mess in which we find ourselves lies with the fabric of society itself.
If we simply blame the bankers for providing cheap loans to all and sundry, what produced the ‘all and sundry’ who took advantage of opportunity.
It’s a real chicken and egg situation though I’m amused to note the ‘fix’ for the problem was alluded to in one of the posts previously. (wipe the vulcan grin away CrazySB !)
Back to lurking…
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Alastair: I don’t buy the line that this is all our fault. True people ran up more debt than was healthy but much of this was in relation to mortgages and these became larger and larger due to house price inflation. This was partly fuelled by banks being prepared to lend people silly multiples of their income. This was indeed the model of the Halifax where they believed that this behaviour was not risky as house prices would always rise so even if they were left with a property because of repayment default the asset was always worth it.
The problem with house prices is that people need housing and so were forced into taking out these huge mortgages.
However, personal debt was not what brought about this crisis. Nor was it national deficits (though these should have been turned to surpluses during the good times). The problem was the bundling up of various debt classes together and then using these to raise more debt. Many people will be familiar with the joke about the buying and selling kipper (as in you didn’t try to eat that kipper did you? that was not an eating kipper, that was a buying and selling kipper). The banking crisis was caused by creating a kipper and selling it on and on until one day somebody unfortunately tried to eat it and found that it stank.
It is convenient for the Masters of the Universe to try and shift the blame for this crisis onto ordinary individuals (credit cards) and onto national governments (structural deficits) but these were manageable as the debt was secured on real assets. The problem with the derivatives was simply that the asset base underpinning the debt was much smaller than the debt itself.
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Dr Douglas McKenzie
Me too.
I have heard what has happened being described as “feral capitalism” and I can think of no better description.
Capitalism, when used as a controlled tool to, for instance, faciltate manufacturing production was a constructive force.
What has happened over the past several decades however is that it continued making money when in fact we were producing less and less wealth and producing money became the object of the exercise.
When banks and Estate agents and brokers and insurers and all the other paraphenalia of the financial services were given lax regulation and encourgement from Government they started inventing vast sums of money to lend. Rising house prices were exactly wha they liked. The fact that house prices in UK no longer bear any relationship to their actual physical value worried then not at all. Supportive Goverments took a huge tax take off the profits of what was the absolute absurdity of buying and selling debt as an asset and lots of other basically fraudulent practices concerning non existent monies and the whole house eventually came down. Those who had pocketed millions (and almost billions in some cases)out of this nonsense however got to keep their money and have now been put in charge of organising the rescue. The rest of us are paying for this.
The Icelandic banks (partly British owned) were borrowing vast sums and lending them out on bad deals, but were in reality doing exactly the same as everybody else only more so.
With a total population of less than Edinburgh however and their banks lending out more money several times over than the whole of the Icelandic economy they fell first.
When they went down the Icelandic people were given a referendum and they decided that their government should not mortage the country’s future in borrowing to save the banks. They let the banks go under.
Which is what we should have done – except it would have washed away the City of London and its tribes of moneylenders. Am I bothered at this prospect?
Short term pain would have been worth that.
I suspect that the world will be long time in learning the fundamental flaws in capitalism because those who profit most from capitalism and have most of the money govern us and, by and large, own the media.
And the untimate irony is that the world’s last communist monolith – China – now will determine the capitalist future. Were it not for the fact that China owns the vast majority of US dollars I’m sure it would have already sunk the US.
As a matter of interest think what David Cameron did is extremely troubling but probably forced as a direct result of the UK’s ambivalent attitude to the EU.
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Now you see Dave you went and buggered it all up there. Capitalism with a big C, is one thing but capitalism in a small scale is a prerequisite for a country surviving, unless of course you want to live in a communist state.
Why in Scotland in 2011 do we still see private entertprise as some sort of disease? Why is it that when the vast majority of SME’s are struggling to keep their heads above water do we keep on trying to knock them?
Should we seriously keep on relying on the state to pay for everything?
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Here’s an easier one for you Robert!!
What’s not to like about the content of the following link?
http://www.newsnetscotland.com/index.php/scottish-opinion/3846-when-a-pound-isnt-a-pound
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Thanks Morag – to be honest it wasn’t much easier but I think that has more to do with the hour rather than the article.
I would say though that the report says a lot about how the situation is at present rather than how it could be.
I think you posted a similar link to this website before and when I looked at it all I got was a report by Alan Smith MEP telling us how we should embrace the European union and throw ourselves into head first!
Personally I don’t get that one. How can we whinge about England taking all of our sovereignty and then say we will happily pass sovereignty over to Brussels (or wherever they decide to base Euro HQ)
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I have just come across this
http://www.google.co.uk/url?sa=t&rct=j&q=an%20idiots%20view%20of%20why%20western%20capitalism&source=web&cd=1&sqi=2&ved=0CB0QFjAA&url=http%3A%2F%2Fwww.sott.net%2Farticles%2Fshow%2F238668-An-Idiot-s-Overview-of-Why-Western-Capitalism-is-Crashing&ei=7FPlTrGnA86U8gOkm83sAw&usg=AFQjCNG_jwwiAm-D2qq6B0N27uKhuujH-Q
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Dave – your article is just the same as the article that Morag highlighted. We know the world is in a mess but instead of telling us where it went wrong how about giving us articles on how we can put it right!
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Robert Mac
“Why in Scotland in 2011 do we still see private entertprise as some sort of disease”
Where did I say that?
You obviously haven’t understood what I was saying or perhaps I didn’t make it clear enough.
As I’ve been in business (or in many businesses) since 1985 I am more than aware of the benefits of private enterprise but capitalism without the neccesary constraints imposed on it by responsible government is amoral and inherently damaging. Capitalism is,as I said, a useful tool as long as it is properly utilised. But even Adam Smith recognised the dangers of the money traders getting control of it and made these dangers plain
It served the UK well when it was in the 20% of well-off countries as we stripped the third world of its resources and impoverished millions in far away lands. Whether that can be judged a good thing I’m not sure. But these days are past and we are moving into the 80%. We have maintained a fantasy of an impossible infinite capacity to increase trade and markets by the simple expedient of inventing and spending money we don’t have. Sadly, or perhaps fortunately, most people in the UK have no idea of the depth of do we are actually in.
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To be specific about Iceland they set up an organisation to take on internal Icelandic debt and allowed the banking divisions holding their huge foreign deficit to go to the wall.
They then invested in their own economy.
They are now into sturdy economic growth.
(And they won’t ever allow the money men to seduce them again. They’ve made bloody sure of that)
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Have just posted this on another thread but I think it’s equally valid here as well!
The best explanation I’ve seen/heard of how we get out of the current mess! A good path for Scotland to follow come independence!
Well worth watching even though you’ll need approx. 2 hours to do so!
The Secret of Oz (by Mr Bill Still)
http://www.youtube.com/watch?v=7qIhDdST27g
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I’m sure it’s been mentioned elsewhere before, but for anyone that hasn’t seen it yet the multiple award winning US documentary ‘Inside Job’ on the sub-prime scandal is still available on BBC iplayer (in the Storyville series) until 10.39 wednesday morning. Utterly rivetting, particularly when some of the looters suddenly realise they’re not bullshitting some sycophantic tv interviewer. Mind, you need to keep a supply of ‘calm down’ medicine handy.
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First class analysis, Robert, and truly frightening. Thing is they all got away with the money and they’re mostly still in charge.
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