Rolling UK Economy Into The Shitbin Thread

George Monbiot bringing the LOLs yesterday

In Russell Hoban's novel Riddley Walker, the descendants of nuclear holocaust survivors seek amid the rubble the key to recovering their lost civilisation. They end up believing that the answer is to re-invent the atom bomb. I was reminded of this when I read the government's new plans to save us from the credit crunch.

Privately, something close to desperation is starting to develop inside government. After watching the slide in bank shares on Friday, one cabinet minister did not altogether joke when he said: "The banks are fucked, we're fucked, the country's fucked."

BTW this is an in-joke ministers like to quote, making a reference to supposed unruffled elite mandarin civil servant Dick Mottram and his "You're fucked, I'm fucked, We're all fucked. The whole department is fucked. It's the biggest cock-up ever. We're all completely fucked" crisis management quote when he was locked into battle with Byer's special adviser.

yeah.

hey, you gotta laugh.

Gallows humour - helping to getting through grim times

it'd be funnier if it wasn't someone who was partly to blame, but yeah lol rofl etc.

[brief Dick Mottram diversion:

there's an anecdote in John Prescott's autobiog where he recounts how he blames (erroneously, I am sure) Dick Mottram for having the furniture removed from a 'Grace and Favour' Whitehall apartment shortly before Prescott took it over.

In revenge, some time later - when Dick Mottram joined Prescott's jumbo-Department, Prescott proudly recounts that in revenge he showed Mottram to a completely unfurnished Perm Sec's office. He was disappointed that Mottram took it completely in his stride and was completely unfazed (though he must have thought Prescott quite mad).]

For this generation to think about what it was like before the Great Crash of 2008 will take the same mental wrench as the 30s generation needed to see back before the Great Crash of 1929.

errrr, no.

http://www.guardian.co.uk/politics/2009/jan/25/creditcrunch

God, that article is awful.

Sanctimonious grandstanding journo plugs forthcoming book- full of great insights such as:

The best answer is also the simplest: Britain crashed because Britain did not have a Plan B.

Fortunately the Guardian still has some journalists that write more more balanced informative articles:

http://www.guardian.co.uk/business/2009/jan/25/uk-recession

Godalmighty, Nick Cohen...is there any more to be said about him? That article is all the things Bob says + confusing.

Only yesterday, City dealers in nightclubs threw handfuls of notes in the air for giggling girls to catch as waitresses marching to the theme tune from Rocky brought £500 bottles of vodka and methuselahs of champagne to their tables.

I thought that was the 80s? And the 90s?

Incidentally this, the 4th recession I've lived through, is the weirdest one I can remember. Huge queues to get into a out of town shopping centre yesterday (after the sales, in January) and I had to stand in a queue in Next this morning (on a sunday!). Someone is making a fortune out of this doom and gloom (and it's not just the short sellers).

this is only my second recession, and the odd thing is recognizing that the baseline of expectations/wealth is that much higher each time. (lord knows how this will all play out in the medium term, of course.)

Haha, yeah, I've already heard someone complaining that they're cutting down on the number of holidays they're taking abroad this year. Cutting down from 3 to 2. Shocking depravation.

Ooops, I meant deprivation. Or did I.

muggins 'ere hasn't had a holiday of any kind since 2005 :/

Someone is making a fortune out of this doom and gloom

It's early days still. The psychology will change before this year ends. But even in the Great Depression there were some people with good jobs and other people with plenty of money to spend.

I'm interested to know how many people were in this bracket back then. When you say some people, what do you mean percentage wise? Is there any way of knowing that I wonder. Personally I refuse to join in the doomsayers. What's the point? I have no savings, a crappy pension, if I lose my job (or worse if Mrs T loses hers) I'm fucked anyway, what difference will it make if I worry about it now? Serious question.

Serious answer. If there is anything you can think of that would strengthen your position, even a meager increase in your savings, then even though "worry" won't do you any good, such small actions as you may choose to take should do you some correspondingly small amount of good.

I wish you luck and I hope you both keep your jobs. That is really the most important factor. But you are right that worry is not a help.

Europe's economic slump deeper than expected
By Eric Pfanner

Friday, February 13, 2009
PARIS: Europe sank even deeper into recession than the United States in the closing months of last year, according to figures published Friday, as finance ministers of leading industrialized nations gathered in one of the worst-affected countries, Italy, for discussions on the crisis.

In the fourth quarter, the economy of the countries sharing the euro declined by 1.5 percent, according to the European Union's statistics office. That is even worse than the 1 percent decline in the U.S. economy during that period, compared with the previous quarter.

"Today's data wipes out any illusion that the euro zone is getting off lightly in this global downturn," said Jörg Radeke, an economist at the Center for Economics and Business Research in London.

Until recently, some economists had thought that Europe might suffer less from the recession, which started in the United States before spreading to most of the rest of the world. While some European economies, including Britain, Ireland and Spain, have seen U.S.-style plunges in home prices, housing markets have held up better elsewhere in Europe. Consumers have also cut back less on their spending in Europe than in the United States.

But instead, European industry has been walloped as businesses around the world, and particularly in the United States, cut back on new orders to bring down their inventories. That has hit euro-zone countries hard, particularly Germany, which relies on exports to fuel economic growth.

In Germany, the biggest economy in Europe, the economy shrank by 2.1 percent in the final three months of 2008, compared with the third quarter, when it had already contracted by 0.5 percent, according to the federal statistics office. In an effort to arrest the plunge, the lower house of the German Parliament, the Bundestag, on Friday approved a €50 billion stimulus plan that includes new spending measures and tax cuts.

Germany was not the only European economy to do worse than analysts had expected in the period. In France, output declined by 1.2 percent, while Italy contracted by 1.8 percent.

The data "confirm that the recession in the region is deepening at an alarming rate," said Jennifer McKeown, an economist at Capital Economics in London.

For the euro-zone economy, it was by far the worst quarter since the euro was introduced in 1999, and economists said they would have to go significantly further back in time to find a comparable period.

"For Europe, as for the rest of the industrialized world, this is surely the worst downturn since the Second World War," Radeke said.

Drawing precise historical comparisons for the entire euro zone is challenging because of currency fluctuations before the single currency was introduced and because of incomplete or incompatible data from euro-zone members like Slovenia, which was not an independent country until 1991.

But McKeown said she had run the numbers for the major euro-zone economies back to 1970 and found only one other quarter that was even close to as bad as the latest one: the fourth quarter of 1974, when the economy was reeling from the oil shock and a plunge in stock prices. In that quarter, the main euro-zone economies fell by a combined 1.2 percent.

The 1.5 percent decline in the euro-zone economy matches the rate of contraction during the period in Britain, which has been additionally battered by the crisis in the financial sector, on which much of its economy depends.

The report from Germany on Friday showed a sharp rise in inventories - indicating more bad news for the first quarter, economists said.

That will give finance ministers of the Group of 7, including the U.S. Treasury secretary, Timothy Geithner, plenty to discuss this weekend during meetings in Rome. Among other things, the officials were expected to look at proposals for new financial market regulations and concerns about rising protectionist sentiment in some countries.

As the G-7 representatives arrived on Friday, tens of thousands of workers marched through the streets of the Italian capital, snarling traffic and demanding action to ameliorate the crisis. With three straight quarters of declining output, Italy has been in a slump longer than some of its neighbors, like France, where the economy actually eked out a small gain in the third quarter.

"Compared to other countries, not enough has been done," Mauro Bianchi, a representative of the CGIL union, told The Associated Press. "They are trying to cure a serious illness with aspirin."

While Italy is in particularly bad shape, the severity of the downturn across the euro zone was driven home by the report Friday. On an annualized basis, economists said, the 1.5 percent decline in output would amount to a roughly 6 percent drop - a significantly bigger fall than the 3.8 percent annual rate of contraction in the United States during the fourth quarter.

On a year-over-year basis, Europe also performed more poorly than the United States in the fourth quarter, with gross domestic product falling by 1.2 percent from the fourth quarter of 2007, compared with a comparable decline of 0.2 percent in the United States.

Europe typically lags behind the United States in recovering from recessions, McKeown said, so any return to growth in the euro zone is probably at least a year away.

"We had hoped that the euro zone might not do as badly as the U.S.," she said. "As it turned out, the slump in the industrial sector has completely turned things around."

UK banking giant HSBC has said it is to cut 1,700 jobs in the UK.

The job losses will come from retail banking, but will come from support services rather than branches, an HSBC spokesman told the BBC.

The company also said it would create "several hundred" new roles next year.

LLOYDS BANKING GROUP is being kept afloat with £165 billion of loans and guarantees from the Bank of England and other central banks around the world, The Sunday Times can reveal.

The bank’s reliance on state funding, detailed in a document released last week in connection with a separate £21 billion fundraising, gives the first insight into the huge scale of aid extended to banks during the financial crisis.

in lieu of the guardian's left-wing writers getting into it, simon jenkins is otm here:

http://www.guardian.co.uk/commentisfree/2010/mar/11/banks-lied-darling-puppet-city

He may be otm re: there should be questions asked/ inquiries held, but it's not a great article. In fact it dishes out the same kind of generalities (a trilion pounds spent! one in four shops might close!) that he usually criticises elsewhere.

idk ned, i think we have jizzed about a trilli on saving the bankers? give or take. the basic analysis, that we'll be paying for this, big-time, over the next few years, is true. a number not unlike one in four shops on my street have closed, and i live in a reasonably off area. and we've only just begun because the cuts to pay off the enormous deficit haven't arrived yet.

i think we have jizzed about a trilli on saving the bankers?

Not really.

It's 850bn and that figure represents all the guarantees and insurance that we offered ie it is the notional cost if the doomsday scenario happened. We haven't actually "spent" that money. It also includes the money spent directly on part-nationalising Lloyds and RBS, but doesn't count what they're worth, either now or when we eventually sell them (which will fingers crossed be at a huge fucking profit).

The commitments include buying £76bn of shares in Royal Bank of Scotland and the Lloyds Banking Group; indemnifying the Bank of England against losses incurred in providing more than £200bn of liquidity support; guaranteeing up to £250bn of wholesale borrowing by banks to strengthen liquidity; providing £40bn of loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme; and insurance cover of over £280bn for bank assets. From an independent article on the NAO report.

Also, Germany, Italy and Japan had worse recessions than us, last time I checked, so he makes two major fuck-ups in the first two paragraphs, at which point I can't be bothered to read the rest.

similarly tbh you guys are such labour stans im unlikely to believe yr posts: i've seen the bailout put at well over a trillion, for example:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0_DlDun684Q

even if it is a mere £850bn, no-one is being held accountable for encouraging it to happen

It depends what you mean by a worse recession - dunno about Italy but while Germany and Japan may have fallen further they've also recovered faster.

xpost - I'm not sure there's really a convincing argument against the bailout, and Jenkins going "pics or it didn't happen" certainly isn't it, but the failure to adequately control the banks in which the government is a majority shareholder is surely a huge fuck-up?

xp - i've taken such a time to write my post Jamie's done it for me. But just to emphasise.

We haven't SPENT a trillion, we've loaned it (I know, I can hear the hollow laughing of laxalt from here - maybe this revive will tempt him back?) and, of course, we may never see it again, but it's a bit different from what Jenkins says.

As for shops, I was thinking about this only this morning as I was driving to work along what is euphimistically called the "Golden Mile" in Leicester (google it if you like). This is a long road of various businesses ranging from takeaways to banks to sari shops to jewellers. I counted three new businesses along there to-day, a new restaurant, a clothes shop and, believe it or not, a bank. I've never known a street change so regularly over the years, but there's very few empty shops on it. This contrats with several more salubrious areas I've visited recently where I noticed various, er, "boutiques" were closing. So, yeah, you're right (and so is Jenkins) I can see a lot of shops closing, but I don't think it's going to be across the board, or that they might not replaced by something else (something people need for instance - I'm sure no-one would argue we had a glut of shops selling nice mugs in recent years). harsh though that may sound.

I'm really trying not to be such a stan these days HM but you know, it's hard, it's been a long time...

xpost

It might be over a trillion, god knows the numbers are so large it's unimaginable, but I think the same point stands, that that isn't all money that we have actually "spent", and it doesn't include all the fees and interest that the banks have had to pay to receive this support.

I dunno, the "narrative" to me seems to be colossal private-sector fuck-up followed by strong collective internationalist state action saving the day. I'm sure questions should be asked and people strung up, but as a leftist I'm pretty happy with how it went.

Matt - yeah fell further (just) recoverd faster is probably right. Not up on latest figures, though.

xp

HM even in that Bloomberg article it doesn't say anyone has spent £1 trillion.

The Treasury, in the budget submitted to Parliament yesterday, estimated the bailout may cost taxpayers 50 billion pounds. That contradicts with the International Monetary Fund’s estimate that the bill may climb to 9.1 percent of GDP, or about 132 billion pounds.

I dunno, the "narrative" to me seems to be colossal private-sector fuck-up followed by strong collective internationalist state action saving the day.

no -- this is too simple. it was a "private-sector fuck-up" colossally encouraged by the state. and the "day" may have been saved -- the stock market is doing well, bankers got their bonuses -- but in the next few years the people who suffer are the people whose money was used to prop up the banks. ie muggins ere.

But Jenkins's argument isn't really "we have spunked and wasted a trillion", it's "we have committed a trillion so why are the government not taking a firmer line on how these banks are run?", which is fair, surely? Especially if we're looking to restore the banks to health and get them off the public balance sheet as soon as is sensibly possible.

as a leftist I'm pretty happy with how it went

!!!!!! You do know what this has done to the consensus on public spending don't you?

idk where our exciting "printing money" policy comes into the whole question of how much this has cost

everyone basically agrees that

- hiving off the casino functions of banks
- creating a transaction tax on all trades
- regulating derivatives just like everything else
- increasing capital leverage ratios

are the answers, right? any chance of these things happening?

i mean fuck, the tobin tax alone would plug the deficit bigstyle

Matt - In reply, while we're linking Guardian articles ... http://www.guardian.co.uk/commentisfree/2010/mar/11/defeatist-nonsense-leftwing-thinking

I don't agree with everything, but I kind of feel like the intellectual argument has moved in the left's favour. It's just capitalising on it ...

xps

No-one seems to have any idea what the cost of not bailing out would have been. I'd be very interested to read a good analysis of that scenerio if anyone has one to hand?

On the US Shitbin thread, I made the point that in the States there seems to be this mix of hatred of banks/big business AND hatred of the state that fuelled the anger at the government intervening in the banks, or bailing them out or whatever, but that that didn't seem to be the case here. More a general anger at incompetence.

I don't know if that's still the case, and certainly articles like the Jenkins one seem to be an attempt to whip up that kind of fervour.

Part of it has to do with the fact that in the US you had guys like Paulson and Geithner who literally a year or so before were running the companies that were now getting handed blank checks. It was like Halliburton all over again.

Ned - I think the argument is that the cost of not bailing them out would have been a collapse of the whole financial system, which on one level would have been a laugh, but on many others would have been quite shit.

I can't quite imagine what that would mean. Maybe others can help?

similarly tbh you guys are such labour stans im unlikely to believe yr posts:

Charming as ever

Part of it has to do with the fact that in the US you had guys like Paulson and Geithner who literally a year or so before were running the companies that were now getting handed blank checks. It was like Halliburton all over again.

― Tracer Hand, Friday, March 12, 2010 3:07 PM (49 minutes ago) Bookmark

true. here we have... lord myners! and a mania for paying city consultancy firms. and a relatively supine media -- at least on matters of substance. there *ought* to be more fervour against the government over what just happened here. and there probably will be once the cuts really begin. but it's too late for it to have any purpose.

I hardly think Lord Myners is equivalent in importance and influence to Geitner and Paulson. Not that I'm disagreeing with you, by and large.

The thing is Myners is wandering around slamming people for ludicrous salaries whenever he gets the chance, Adair Turner is basically working out what exotic financial practice to ban first for not being "socially useful" and even Mervyn King is arguing for a Tobin Tax. Hell, even the IMF is calling for exchange controls and higher inflation targets. I feel that to a great extent, the left has won loads of the arguments.

That's why it's particularly galling to have people nominally on the left essentially parroting Dan Hannan or whoever.

The thing is Myners is wandering around slamming people for ludicrous salaries whenever he gets the chance

slamming people is all well and good but the bonuses were paid. if you're right, great. but i don't personally think there's a snowball's chance of anything much happening: the political agenda for the election is about who will cut when. if there is movement towards regulation it's being kept very quiet.

Yeah anyone who thinks all of this represents this represents a triumph for the left will be celebrating a pyrrhic victory, and losing the argument over welfare and public service funding strikes me as defeat bigger than the 'victory' represented by state intervention in the market.

Why is there such a huge deficit in the public finances? I'm sure this has been covered before, but I can't remember.

Obviously there have been a lot of one-off costs over the last 18 months or so where the government has had to step in to stop the collapse of the banking system, but presumably these aren't costs that will continue to be paid each year (and so don't contribute projected future deficits) and presumably also a lot of it is effectively equity in the banks which can be sold in the future (perhaps at a profit) and so isn't really money which has disappeared down the drain.

In terms of the actual deficit, I can appreciate that in a recession tax receipts fall and benefit payments rise and this can lead to a shortfall, but this must have been true in every other recession as well, and unemployment is nowhere near 1980s levels at the moment. So what is the problem?

lol overpaid public servants

lol equity in banks

Since the last recession, the government's become more reliant on tax generated by the financial sector and its problems have contributed to the hole that's opened up in the public finances. Probably a huge fall in the amount generated through stamp duty as well.

Also the interest payments on that debt have to be enormous.

Also the interest payment on that debt have to be enormous

Ah, yes. That's probably the big thing I forgot.

Lol Glazerite.