The formative reality in the referendum situation is that, whichever choice it makes, Scotland is in no mood to stand still. Continue reading
Tag Archives: Bank of England
Bank of England prints another £75 billion empty money – and this does matter in Argyll
The Bank of England’s Monetary Policy Committee had been expected to print another £50 billion Continue reading
Scotland’s growth and UK fantasy money
Scots of all political persuasions are prey to the guerilla war Continue reading
EU warns UK National Debt to double in 4 years
(Updated below) The European Commission is predicting that by 2011 Continue reading
UK Government may start printing money today
They call it quantitative easing and they say they won’t actually be running the prsses at De La Rue where the notes are printed, but this is effectively what is about to be done.
The Bank of England is expected to cut interest rates to 0.5% today and to start ‘increasing the money supply’, ‘quantitative easing’ or ‘printing money’ – it’s all the same thing. The amount concerned is £150 BILLION. We’re using capitals to emphasise this because the sheer scale of Government borrowing since Autumn 2008 has been so vast that we now hardly notice that these days the figures are always in BILLIONS. This itself is – subtly and profoudly – inflationary.
Japan is the most recent country to have tried printing money – around the turn of this century when its economy was facing a deep recession. The impact of this has not yet been fully assesssed but the most that can be said is that it had no more than a limited success. This underscores the sense that the Westminster Government is simply trying anything and that this is Brown’s fiscal version of Custer’s last stand
A serious problem is that the two actions expected today – lowering the interest rate even further and starting to print money – will see the value of people’s savings markedly affected. This tends to hit hardest those who have retired and have no opportunity to make up the shortfall in their slender personal cushions against hardship.
And this matters a lot in Argyll with its population skewed towards the upper age range.
The UK Government is burying bad news by making Sir Fred’s pension the headline issue – and Peston is the Patsy
The row over Sir Fred Goodwin’s pension is the distraction the UK Government’s spin doctors literally ordered in the leaks they engineered yesterday. The real story is not Sir Fred’s £693 THOUSAND annual pension but the £24 BILLION annual loss that RBS declared yesterday (the biggest in UK corporate history), the £300 BILLION of toxic debt RBS insured yesterday with the taxpayer (us) and the £2 TRILLION national debt we now carry.
This was yesterday’s real story – and today’s – and for more tomorrows than we dare count.
But the Government threw Sir Fred into the road – a meaty bone the news media hounds seized on savagely, too blinkered in the rush for blood to see the real carrion, the carcase in the shadows – as the spin controllers knew they would. The carrier pigeon for news on the road-kill decoy was the government’s new trusty, the BBC financial journalist Robert Peston who makes John Redwood – aka The Vulcan – seem normal.
Peston blew the whistle on Goodwin’s pension on cue on Wednesday night’s 10.00pm news – in good time to lessen media interest in the profoundly bad financial news to be released the following day.
There are major issues of policy and principle around what we are learning of the way people in certain sectors are paid and rewarded but these are far less pressing than the genuinely frightening level of debt the UK is now committed to carrying.
Even Mervyn King, Governor of the Bank of England has now said that if Britain had not gone into this recession with the level of public borrowing it had already taken on under the Blair/Brown governments, the Treasury and the Bank would have had more scope for effective action to resist the economic slide. This criticism of Government performance by the head of the Bank of England is unprecedented and is a sign of the seriousness of the UK’s current position.
Sir Fred’s pension is not the issue. His unregulated actions on behalf of RBS are the issue. The UK Government decided to go for ‘regulation with a light touch’, which of course meant little or no regulation of the banks by the feeble FSA. This was a tacit invitation to the banks to go bald-headed for profit – which led to the current collapse of the banking system.
This collapse resulted in the government going in for panic-driven progressive borrowing, all caution thrown to the winds in the interests of political survival. And the presses of the Royal Mint are due to start rolling next week in the interests of ‘quantitative easing’.
So let’s keep Sir Fred in our sights for later on but let’s not take our eyes off the cosmic cloud of ordure that’s hovering above our heads.
And by the way, it’s not over yet. The Lloyds Banking Group will only say that it is in discussions with the UK Government, which are progressing well. These discussions are thought to relate to the group’s wish to follow the RBS into insuring another welter of toxic assets with the taxpayer. And what they want to ‘insure’ (Alistair Darling’s term for this liberating manoevre – ‘asset protection’ – is even more laughable) is said to be around £250 billion of toxic debt.
£2 trillion of a national debt already looks like a very conservative estimate.
UK economy hits the skids big time
Gordon Brown just got the ‘R’ word out in time. He obviously knew something we didn’t – until now. In evidence that the UK is now entering a recession it has just been announced that the UK economy shrank for the first time in 16 years between July and September this year. The Office of National Statistics confirmed that output fell by 0.5% in the period, a bigger fall than expected.
This news weakened the pound, seeing it fall to $1.5889 – the first time for five years that it has been below $1.60. UK shares also took a tumble, dropping by 7% in early afternoon trading.
The Deputy Governor of the Bank of England’s interest rate-setting committee, the MPC, has described the situation as a ‘once in a lifetime crisis and possibly the largest financial crisis of its kind in human history’. His name is ‘Charlie Bean’. We have to hope he’s counting!
Darling to make announcement before markets open tomorrow morning
After the emergency meeting tonight, reported below, UK Chancellor Alastair Darling has made a brief appearance to say that he intends to make an announcement tomorrow morning before the markets open.
It is understood that the plan agreed will allow for around £50 billion of taxpayers money to be used to stabilise the UK banking system. Much as the ‘gang of three’ banks (RBS, Lloyds & Barclays) had asked for last night, the money will be used for an immediate cash injection and an additional reserve fund to be applied as necessary. It is also probable that, as we reported earlier, the announcement will contain some arrangements for funds given to be exchanged for non-voting shares in the recipient banks. This is the ‘partial-nationalisation option’ we referred to before.
It is not yet clear whether the plan is to include a full bank deposit guarantee and an interest rate cut, as Scotland’s First Minister has suggested. Mr Salmond sees these, along with assisted bank liquidity, as necessary elements of a successful regeneration of the financial system.
Mr Darling’s promise of a statement in the morning before the markets open – and the filtering to the media of early indications of the content of the statement to come – is strategic. Such moves are necessarily designed to reassure and to damp down any more of the panic selling so destructive yesterday and parrticularly today.
At some point there will be a reckoning on the UK government’s reaction time in this crisis. There can be no doubt that the confusions, the half-measures and the delays have heightened a damaging lack of confidence in the market and made a bad situation much worse.
It is said that the proposals to be unveiled in the early hours tomorrow have been in discussion between the Treasury and the Bank of England for some time. If this is the case, it is a failure of management to be unable to bring forward an announcement of action when that has so obviously been required. In the world of the theorist there is time to reflect and perfect. In the world of the living it is crucial to be able to judge the needs of the moment and to act quickly.
It has to be said that speed has not been of the essence and that the cost of this has been heavy for Britain – and Scotland – with a long haul to recovery ahead.
Brown and Darling meeting Bank of England as RBS and HBOS lead shares plunge and Salmond calls for interest rate cut
The Prime Minister, the Chancellor, the Governor of the Bank of England and the Chair of the Financial Services Authority (FSA) went into what can only be described as an emergency meeting at 5.00pm this evening.
As we have reported earlier, it is accepted that the urgent requirement is to come up with a plan to restore liquidity to the banks.
Today saw HBOS lose 42%, Royal Bank of Scotland (RBS) 39%, Barclays 9% and Lloyds TSB 13%. This decline in bank share values has been catastrophic. Action really cannot be delayed much longer. Some statement of agreement is expected tonight but there is no indication that it will be in more than general terms.
Across the pond the rescue deal for the American banks, ratified late by Congress, has made little difference to the stability of the financial markets. Today the Federal Reserve, the United States Central Bank, has been buying securities issued by finance companies to shore up short term debt. In modern times this is unprecedented. The Federal Reserve is doing this through powers not used since the Great Depression of the 1930s.
With the Scottish banks deeply damaged by this crisis, Scotland’s First Minister, Alex Salmond, has just (18.00, 7th October) called for a cut in interest rates, a full guarantee of bank deposits and the extension of liquidity from the Bank of England to commercial banks.