Archive for Economy

Bank of England reduceds rates by 1.5%

The Bank of England has reduced the headline rate of interest by 1.5% to 3% – the lowest rate in 53 years, apparently.

All of which is good news to those people struggling to pay the stupid mortagages on their stupid houses that they can’t afford to pay.  Assuming, that is, that the banks pass on the full 1.5% rate cut and soon.

Dropping the interest rates is a proven way of giving the economy a nudge when it’s looking a bit poorly and if and when the rate is passed on it might just ease the decline into recession slightly.  It won’t stop it happening, it’s too late for that, but it will probably help.

Of course, it won’t do anything unless the banks pass the rate cut on to us plebs which raises an interesting question – will the Treasury use the golden shares it’s brought in the main high street banks to force a cut in the interest rates if they are unwilling to take the hit on their earnings?

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It’s time to tighten those belts

The governer of the Bank of England has said that we might be entering into recession which is don’t panic the plebs code for “shit, how am I going to keep up the payments on my yacht”.  Of course we’re in a recession, we’ve known for months that it was starting and that things were only going to get worse.

All of which means we need to tighten our belts and when I say “we” I’m including the state.  We can’t afford to throw billions at banks but Alistair Darling has done it anyway.  But it might not end there – El Gordo told the world that they’d look at letting banks that have had taxpayers money paying dividends after 12 months after investors told him what a crap investment a bank that can’t pay dividends for a couple of years is.  But then Federal Europe poked its nose in and said that the banks can’t pay a dividend for 5 years otherwise they’ll class the money the banks have had as state aid and then the British government will get fined and the banks will have to pay the money back as a penalty for having been given the money before Federal Europe decided to move the goalposts.

But it’s not just bailing out banks by the Treasury that has got to stop – local authorities spend billions collectively and they need to do their bit to save cash as well.  There was a story in the Shropshire Star last night, next to the story about Daisy the cow going missing (don’t worry, she was later found in farmer Jones’ field), was a piece on Telford & Wrekin council’s accountants warning the council that they’re facing a funding gap fo a couple of big projects.

Telford & Wrekin have committed to part funding a rail freight terminal to the tune of £3.6m.  They intend to fund this by selling council-owned property.  It’s a lot of money but they can comfortably dispose of £3.6m worth of property, even though the property market has fallen on its arse.  But they’re also ploughing ahead with a massive “regeneration” programme from the Borough Towns Initiative which requires an investment from the council of £21.4m to be funded almost entirely from selling property and topped up with a load for about one and a half million.

You can see where this going can’t you?  Shame the council doesn’t seem to be able to.

There are several large house building projects under way in Telford and they’ve all scaled back building to almost nothing.  The council owns lots of land and property that’s ripe for housing or commercial development but the housing market has dried up and companies aren’t splashing out on new buildings because nobody has got any money.  To raise that kind of money through property and land disposal is going to mean selling a damn sight more than they would have done as little as three months ago and in doing so they will have sold assets at a cut down price that will, in all likelihood, return to their previous value in a year or two.

I’m all for regeneration and god knows some parts of Telford desperately need it.  I expect the promised regeneration of the estate I live on is all hanging on this Borough Towns Initiative money but we simply can’t afford it.  The previous Labour administration pioneered the scorched earth policy they seem to have adopted nationally increasing spending, cutting council tax and spending a third of the council’s cash reserves once they realised they were going to lose the next election.  There is very little money in the kitty, the economy is on its knees, the cost of borrowing is high and committing the council taxpayers of a borough with a mere 160,000 residents to £25m of spending on the day the governer of the Bank of England admits we’ve entered into recession is bordering on criminally irresponsible.

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Three different letters, three different papers!

Well, what a bumper day this has been for letters.

First of all there’s this one in the Shropshire Star, in response to the council announcing that they’re going to put in average speed cameras on one of the safest roads, relatively speaking, in the borough:

Average speed trap not fair for motorists

Councillor Bentley wants average speed cameras for the A442 in Telford because they’re “fairer for motorists”? Fairer than what? There’s aren’t any speed cameras on the A442 in Telford and these new ones aren’t designed to be fair, they’re designed to catch more motorists than traditional speed cameras.

Will these speed cameras catch drivers that crawl down the outside lane at 40mph causing tailbacks and preventing other drivers from safely moving between lanes? Will it catch the drivers who undertake on cross-hatches?

Will it catch drivers who veer across from the outside lane at the last minute to exit the road? Will it catch drink drivers, erratic drivers, people weaving between lanes and cutting people up?

Like most drivers I sometimes break the speed limit and like most drivers I manage to do it without mowing down pedestrians or driving into other cars. The fact is, Telford & Wrekin Council changed the layout and speed limit of the A442 and made it more dangerous.

The number of accidents is down but the number of casualties is up which means that since they “improved” the road, the average accident is more serious and involves more people. Yet despite the best efforts of Telford & Wrekin Council, the A442 is still one of the safest roads of its type in the country.

Rather than install speed cameras at great expense to Telford taxpayers, the council should accept the fact that they made the A442 more dangerous by changing the lanes and reducing the speed limit and put it back to how it was a couple of years ago, complete with the 70mph speed limit.

Stuart Parr

Then there was this deliberately provocative letter in the Scotsman, in response to all the whinging letters about “Scottish banks being given to the English”:

If RBS and HBOS are Scottish banks and your average man on the street in Edinburgh is furious at losing “oor banks” to the English, can I respectfully suggest Scotland bails its own banks out?

It seems that when Scottish banks fail, the English end up paying to bail them out. It started with Darien and now the lion’s share of the £37 billion has gone to two Scottish banks.

We pay for your free prescriptions, your cancer treatments, and your free school meals and we pay to care for your elderly when they can’t look after themselves – all the things we supposedly can’t afford for ourselves. And what do we get in return? Anti-English bile and insulting, spurious claims that the Scottish oil industry, which English taxes paid for, even comes close to plugging the funding gap north of the Border.

If you want Scottish banks to remain Scottish then bail them out yourselves. If you don’t like the idea of relying on English money all the time, don’t take it. It’s not rocket science.

Stuart Parr
Telford, Shropshire

Finally, there’s this cheeky one in the First Post in response to some muppet who thinks the deputy editor of Prospect Magazine will be responsible for the Scots leaving the union because he upset them with an article about RBS:

Either Dave Bowen (above) has been on a really long holiday without access to news for the last decade or so or there is another country called Scotland that I was hitherto unaware of.

He says that if Scotland leaves the union then it will be because of “opinionated bigots” like Jonathan Ford. I wasn’t aware that Mr Ford had had such a long and illustrious career writing magazine articles dating back to 1934 when the seperatist Scottish National Party was launched.

I think that perhaps a generic dislike of the English and never buying into the whole “British” thing might have more to do with the Scots’ desire to leave the union. That and the belief that a few thousand barrels of oil will make Scotland the richest country this side of Saudi Arabia despite the gaping budget deficit the English plug every year.

And I did have a litle chuckle to myself when Mr Bowen said he wasn’t aware that being Scottish meant that you were automatically unsuitable for running anything more important than a chippy. If Gordon Brown, Alistair Darling and the chief execs of HBOS and RBS are anything to go by then a chippy is probably asking a bit too much of them!

Stuart Parr

They should get a few people worked up. 🙂

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Iceland now wants to join the EU!

The Bank of England is loaning £100m to the UK arm of Landsbanki so that it can repay its UK customers.

Landisbanki was nationalised by the Icelandic government last week and its UK arm closed down leaving customers here unable to access their money.

The Icelandic foreign minister has responded to the economic problems there – national debt at 500% of GDP and their top 3 banks nationalised – by saying that their long term goal is now to join the EU and the Euro and get bailed out by the European Central Bank.  No, that’s not a joke.  He said:

In the short term, out defence is co-operation with the International Monetary Fund and in the long term EU membership, adoption of the euro and backup from the European Central Bank.

So what he is, in fact, saying is that the English taxpayer will be bailing out one of their now state-owned banks and then bailing out the entire country if it joins the EU and becomes a net recipient of EU funding.  Not what I would call a good deal for the English taxpayer and if they do go down the route of joining the EU, not a good deal for Icelanders.  Their economy is up shit creek now but if they join the EU their paddles will be confiscated and given to a French farmer to use as kindling to set fire to his fields.  The Icelandic economy was, until recently, reliant on fishing, banking and services.  Banking is a no-brainer from now on, services are looking a bit dubious but fishing will at least let them feed themselves.  But not with an EU fishing quota though – they’ll end up throwing more back in the sea than they take home and that’s assuming the Spanish don’t get the quotas first like they did in our waters.

I wonder if the Icelanders have an equivalent phrase for “out of the frying pan and into the fire”.

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My name is Gordon Brown and I’m a fucking hypocrite

For the last year or so El Gordo has been encouraging fuel prices to increase, rubbing his hands gleefully at the prospect of an extra few billion in bonus cash flowing into the slush fund.

But now the arse has fallen out of the economy and he’s spent a decade’s worth of slush fund on bailing out banks, he suddenly wants fuel prices down.  The one-eyed wonder of wankistan decided to take five minutes off from rearranging deckchairs to feign concern for us peasants who are spending an increasing percentage of our income on electricity, gas and petrol.  Hypocritical twat.

The price of oil is down to almost $80 a barrel but the price of petrol has only crept down ever so slowly and nowhere near in line with the drop in the price of oil.  Of course, El Gordo wouldn’t think about dropping tax on fuel.  Something like 80% of the price of petrol and diesel is tax but why would he care?  He gets a chauffeur-driven limo paid for by the taxpayer.  Thanks to Federal Europe we’re getting charged VAT on gas and electric but why would he care?  He gets his gas and electric paid for by the taxpayer.

Reducing the cost of fuel will give the economy a bit of a kick but it won’t work by itself.  Throwing taxpayers money at banks, paid for by increasing taxes, isn’t going to fix anything.  What is needed is a wholesale cull of taxes and government.  So much money is wasted shuffling round bits of paper and moving money from one place to another when what is needed is to get back to basics.  Government has become like a cancer, multiplying at a terminal rate and spreading throughout society.  Less government, less waste, less legislation, less tax.  That’s a message that will stimulate the economy but until this bunch of faux-Marxists are dragged kicking and screaming out of Westminster, it’s never going to happen.

Come the revolution …

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Darling loans banks 50% of GDP

Alistair McDarling has announced details of his master plan to save the banking sector.  He’s going to loan them 50% of the GDP of the UK.

I kid you not.  The taxpayer is stumping up £50bn now for the eight biggest banks and building societies and another £200bn is being given to the Bank of England for short term loans.  That’s a quarter of a trillion pounds in cash now.  Then a company is going to be set up – presumably along the lines of the DTI’s Small Firms Guarantee – to offer guarantees on £250bn of loans to banks and building societies.

Half a trillion pounds.  In 2006, the purchasing power parity GDP of the UK was $1.93 trillion – just under a trillion pounds at todays prices.  The Chancellor is loaning 50% of the Gross Domestic Product of the whole country to the banking sector.

Official national debt is £512bn.  The Centre for Policy Studies says that if Northern Rock liabilities and state pension liabilities (they’re taking money to pay into the state pension, it should be reasonable to expect it to be paid out) are added to the official figure then it’s more like £1.3 trillion or 103.5% of GDP.  Add this half a trillion on top and national debt is more like £1.8 trillion.  Count the zeroes – 1,800,000,000,000.  That’s 180% of GDP, 22% higher than Japan at the height of recession when banks were failing every few days and they were knocking zeroes off the Yen every couple of months.

What was it El Gordo said about not magicking money out of thin air?

But you know, when it comes to public spending you can’t just wave a magic wand to conjure up the money – not even with help from Harry Potter.

Quite.  So where the fuck did you find half a trillion pounds to give to the banks, eh?  Just to put a piggy bank-raiding session into perspective – half a trillion £1 coins weighs 2,090,000,000lbs.  That’s a seriously big piggy bank.

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WTF are the Americans playing at?

Lehman Brothers, the third largest investment bank in the US, has gone bust. The US authorities refused to bail them out because Lehman hadn’t taken advantage of previous chances to sort themselves out. The word on the (Wall) street is that the regulators were making an example of Lehman to show American banks they aren’t going to flash the cash when things go tits up.

Meanwhile, the Bank of America has bought Merrill Lynch for $44bn rather than let it go under. Merrill Lynch said, only a few days ago, that it had 110% of the capital it needed to remain solvent.

AIG has asked the Federal Reserve for a $40bn emergency loan to stave of bankruptcy and has been given permission to borrow $20bn from itself. Not quite sure how that works but it sounds suspiciously like the kind of pyramid scheme that comes back to bite you in the arse when it’s rather inconvenient.

The FTSE fell nearly 213 points on the back of these American banking disasters and shares in UK banks have been badly hit. The Bank of England has responded by magicking another £5bn worth of currency out of thin air to stabilise the banking sector. The problem with this, of course, is that it devalues the pound making imports more expensive at a time when cheap imports start to become more important than exports – an economy in recession becomes more insular. Federal Europe has only put in €30bn (about £23.7bn) to shore up the euro which is unlikely to make a significant difference to the eurozone economy which has been pulling itself apart for a while now but will help to bring the pound and euro closer to parity.

Now is not the time to start buying shares in banks!

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How long until Darling resigns?

I’m in the strange situation of feeling sorry for Alistair Darling.  Yes, he’s a fucking cretin.  Yes, he looks like like he’s got two caterpillars on his face.  Yes, he’s one of the English-hating jocks who signed the Scottish Claim of Right and then done what they can to make sure that England gets screwed over.

But putting that aside, he’s not in a very good position at the moment is he?  El Gordo spent a decade selling the family silver, cleaning out the bank accounts and borrowing the gross domestic product of a small African nation every year to make ends meet.  Now the One Eyed Wonder of Wankistan has got the top job, Darling is left with a set of accounts that would make an Enron executive shake his head and tut in disapproval.

And to top it all off, McBroon is still trying to spend money like it’s going out of fashion in a desperate attempt to bribe people into voting for Liebour.

This week Darling told us, in a roundabout way, that the economy is up the shitter and we’re not to expect things to get better any time soon.  El Gordo then went on to announce that it would be a jolly good idea if local authorities were to spend taxpayers money buying houses that are being reposessed.  This is in addition to their plans to offer cheap mortgages to people who are struggling to get on the property ladder or pay their mortgages.

So where’s the money coming from?  I don’t think Darling has a clue and El Gordo certainly doesn’t care.  The housing market has fallen on its arse, banks and building societies are announcing record losses and we’ve just entered a recession.  Yet the British government is still spending like there’s no tomorrow.  The 2012 Olympics were supposed to cost just over £3bn but the cost has now risen to over £9bn.  The war in Irag and Afghanistan is costing billions with no end in sight.  Federal Europe is fleecing us for billions of pounds every year and the price goes up every year.

There isn’t enough money to support the spending that El Gordo is committing.  Mother Hubbard has just had a quick look in the cupboard and it’s bare.  We’re fucking broke and the Goblin King is still coming out with all these batshit ideas without giving so much as a second thought to the cost.  All those people who nicknamed him the Iron Chancellor must be looking in the mirror every morning and thinking what a dick they sound now the shit is hitting the fan.

I can’t see Darling putting up with this for much longer.  The number two job has turned out to be a steming pile of number two and it isn’t going to get any better.  Assuming they aren’t cancelled in the interests of national security, there will be elections either next year or the year after.  Liebour stand about as much chance as a ghosts fart in a force ten gale of winning the next general election so Darling has two options – either tough it out and firefight as best as he can until the next election or resign before things get much worse and let someone else dodge the bullets.  My money is on the latter.

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