Sunday, 31 May 2009

Treasury spending 'at higher level than in First World War'

"The full scale of the Government's spending spree has been laid bare by research that shows the Treasury is now spending more than it did in the thick of the First World War. ...Spending will this year surpass the 46.5pc of private sector gross domestic product level it hit when the Government was spending millions on mobilising troops, building weapons and financing trench warfare in 1917."

Friday, 29 May 2009

Ireland rescues Anglo Irish with €4bn of state capital

"Ireland was forced to complete a hat-trick of banking bail-outs yesterday after revealing that it had no choice but to inject €4bn (£3.5bn) into stricken lender Anglo Irish Bank. ....Ireland was forced to take over the country's third largest bank in January after customer and shareholder confidence collapsed in the face of a string of scandals. The board was purged earlier this year after it emerged that former chairman Sean FitzPatrick had kept shareholders in the dark about €84m worth of loans he had received from the bank. Other directors had loans worth €95m at the end of the year."

Thursday, 28 May 2009

Dire warning of 350,000 job losses in manufacturing by mid-2010

Daily Mail
"Charlotte Hogg, Experian UK's managing director, said: 'Contrary to what some people initially thought, our analysis shows that this is certainly not going to be solely a middle-class recession."

Wednesday, 27 May 2009

Euro poised to inflict new wounds on Europe

"The overvalued euro, now brushing $1.40, is weighing heavily on an already fragile economy. The eurozone shrank 4.6pc over the 12 months to the end of March, compared to 2.6pc in the US. What's more, official interest rates are higher in the eurozone even though deflation is approaching."

Tuesday, 26 May 2009

Treasury warns of £70bn hole in Budget forecasts

"Alistair Darling faced fresh embarrassment last night when the Treasury's own survey of economic forecasts contradicted the Chancellor's and raised the possibility of a £70bn hole in the public finances. .....The survey predicts over the next four years the total borrowing figures will be £679bn. In the Budget Mr Darling said it would be £606billion, meaning the Treasury would need to find another £72.7bn."

Monday, 25 May 2009

World economies in dire states as OECD reports record GDP falls

Daily Mail
"Signally just how dire the global economic crisis is, gross domestic product (GDP) in the top 30 countries fell by 2.1per cent in the first three months of the year.That is the largest drop since records for the Organisation for Economic Co-operation and Development (OECD) - to which the countries belong - began in 1960."

Saturday, 23 May 2009

Labour must go if the economy is to be saved

"When the delegation of International Monetary Fund economists finished their annual survey of the British economy this week, they did not wait to be escorted out of the Treasury. The six men and women simply packed their calculators into their bags, handed in their passes and quietly walked out of the building, leaving an empty room and a trail of bemused officials in their wake. .....This leads us to a stark conclusion which, from an economic perspective, it no longer feels controversial to utter: vote Gordon Brown at the next election and you're voting for a real economic and fiscal meltdown."

Friday, 22 May 2009

Grappling with Debt

John Redwood MP
" How many more wake up calls does the government need, before they recognise the seriousness of the UK’s debt situation? In government circles it is fashionable to dismiss arguments that we need to control the deficit. They believe that spending whatever it takes will prevent or limit the recession. They think they can go on printing money to get them closer to the next election. They say that of course the UK will never default on its debt. All it has to do in their world is print some money so it can meet the debt bills."

Dollar under pressure as fears grow over America's AAA rating

"The dollar slid to a five-month low against major currencies on growing fears America's Triple-A credit status could come also be threatened if the US fails to address its budget deficit. ...Reassurances from US Treasury Secretary Tim Geithner failed to soothe concerns, with the greenback suffering its biggest weekly fall in two months as currency investors speculated that the US could follow the UK in receiving a downgrade threat from a major ratings agency."

Mortgage rates set to rise - and saver returns to fall - as lenders struggle to cover £1bn cost of failed banks

Daily Mail
"Mortgage rates are likely to rise and savings returns to fall further because of the expense of compensating the victims of failed banks.Six out of ten building societies said they could be forced to raise home loan rates to offset the almost £1billion demanded in compensation payments.And 53 per cent said their savings rates may have to fall, research found. Savers have already seen returns dwindle to practically nothing after a series of savage interest rate cuts."

Thursday, 21 May 2009

Quantitative Easing -where's all the money gone?

John Redwood MP
"We are now well into the Bank’s programme of quantitative easing. They have announced they will buy up to £125,000,000,000 of government bonds, with a few corporate bonds as part of the programme. The Bank’s own balance sheet, around £40,000,000,000 when the Rock crisis struck, was last seen at £215,000,000,000."

Britain's AAA rating under review for first time in 30 years

"In a decision which sent shivers through the currency, gilt and stock markets, Standard & Poor's (S&P) announced that it had put Britain's AAA rating onto "outlook negative". The decision comes only a day after the International Monetary Fund warned that the Treasury needs to cut debt faster than promised in the Budget."
The FTSE 100 closed down 2.7pc on Thursday as investors reeled from rating agency Standard and Poor’s downgrading its outlook for the UK.

Wednesday, 20 May 2009

Credit Card Industry Aims to Profit From Sterling Payers

New York Times
"Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit."

UK road to recovery will be 'long and hard'

The Times
"“The economic recovery is expected to be subdued and gradual as banks and households go through a difficult balance sheet restructuring process,” the IMF concluded in its report this afternoon. ....However, the IMF raises question marks over prospects for Britain to enjoy an economic revival and points to a series of fragilities facing the country.
In particular, it notes that the banking system remains “under stress” and entered the crisis with a large overhang of debt and leverage."

UK government must do more to improve public finances, IMF warns

"In a wide-ranging review of the UK since the financial crisis erupted, the IMF said that the state of the public finances and the still fragile state of the banking system leaves the economy vulnerable despite its forecast of a slow recovery next year. ....In its report, the IMF said that the Government should focus on "putting public debt on a more firmly downward path faster than envisaged in the 2009 Budget."
IMF praises UK action on economy, but warns debt has left nation more vulnerable than most (Daily Mail)

Tuesday, 19 May 2009

Britain's economy staggers to a new record low as deflation figure plummets to -1.2%

Daily Mail
"The figures, from the Retail Prices Index, are the lowest seen since records began in 1948.However, the Government's favoured measure of inflation, the Consumer Prices Index, remains in positive territory, at 2.3 per cent, which is still above the Bank of England's target of 2 per cent.Experts said that while both measures would fall further this year, consumers may only be able to enjoy the benefits for another few months.But with interest rates unlikely to be slashed further, inflation could return with a vengeance next year, with higher costs of living coming as a shock to families who have become used to their housing costs falling, they said.Even now, many households are still experiencing painful rises in prices."

Monday, 18 May 2009

Bank of England makes £1bn profit thanks to crisis measures

"Because the crisis has involved the Bank lending far more cash than usual, profits increased more than five-fold from last year. After tax is paid, half the proceeds are to be returned as dividends to the Treasury, while the other half bolsters the Bank's own reserves. The Bank also made an income after tax of £573m on the special liquidity scheme."

Sunday, 17 May 2009

China's yuan 'set to usurp US dollar' as world's reserve currency

"Professor Roubini, of New York University's Stern business school, believes that while such a major change is some way off, the Chinese government is laying the ground for the yuan's ascendance."
US Treasury Secretary Tim Geithner shocked global markets by revealing that Washington is "quite open" to Chinese proposals for the gradual development of a global reserve currency run by the International Monetary Fund. (27.03.09)

Friday, 15 May 2009

Quantitative Unease

Frank Field MP
"£25bn in debt has been successfully sold this year - leaving about £200bn to be offloaded. What will happen if the Debt Office tells to the Treasury, then to the Prime Minister that the market is refusing to buy? ....Please God the day will never come, but if the Government cannot shift its debt even at higher interest rates, it will have to act that evening before the markets open the next day.Failure to do so will see the value of Sterling plunge through the floor. In attempt to safeguard the currency the Government will be forced into a slash and burn policy with respect to public expenditure. It might also be forced into forming a national Government. It may even have to adopt both approaches."

Thursday, 14 May 2009

Mervyn's strangely serene despite our worrying similarities to Zimbabwe

"It is a nasty dilemma for an independent central bank. Given that the Bank is printing money and buying gilts, the main thing that separates us from our Zimbabwean counterparts is that the Bank is not doing so expressly in order to keep the Government afloat. It is doing so because this is the best mechanism to pour cash into the economy.
However, it is difficult to see how this independence cannot be undermined when, next year or the year after, the Bank finally has to sell these gilts off. At that stage, with markets already engorged with UK government debt, the Bank risks setting off a capital strike by pouring more of them out there. This would have severe economic consequences for the UK, so it ought to be in the Bank's interests to avoid such an eventuality. But give the markets any impression that you are complicitly financing the Government's deficit and you risk setting off a hyperinflationary crisis of the likes we have never before seen."

Wednesday, 13 May 2009

Britain Warns of a Slow, Protracted Recovery

New York Times
"Britain’s recovery will probably be “slow and protracted,” the Bank of England warned Wednesday, tempering positive sentiment from recent economic reports suggesting that the end of the recession might be in sight."

Economy is headed for biggest peacetime crash since 1931, Bank of England warns

Daily Mail
"Jonathan Loynes of Capital Economics said: ‘The Bank of England’s May Inflation Report injected a sensible element of caution amidst recent excited talk of the green shoots of recovery.'The clear message is that any renewed tightening of policy - be it the reversal of quantitative easing or a rise in interest rates - is a long way off.'
The UK saw larger economic slumps than the Bank’s forecast for this year in both 1944 and 1945, but figures from this period are commonly disregarded because we were on a war footing."

Tuesday, 12 May 2009

Cameron orders Tory MPs to hand back lavish expenses claims as he goes to war with party 'squirearchy'

Daily Mail
"Tory MPs who made extravagant expense claims will have to repay the money or face the sack, David Cameron declared today."

Biggest rise in jobless since 1981 as unemployment leaps more than 12% to top 2.2million

Daily Mail
"Unemployment soared by 244,000 between January and March to 2,215,000, official figures showed today.It represents a rise of 12.4 per cent on the previous three months - the biggest quarterly increase since 1981.The jobless total is the biggest since 1996."

Monday, 11 May 2009

Ministers 'to blame' for financial crisis

"Governments and central bankers must take the blame for the financial crisis - not bankers, investors and others in the market, according to a new study. ....In a comprehensive analysis of the causes for the financial and economic crisis, the Institute of Economic Affairs (IEA) has concluded that the disaster was caused by authorities' mistakes rather than market failures. .....The detailed analysis, Verdict on the Crash, will come as a further blow for Gordon Brown, claiming that the system he created to monitor the financial and economic system was found entirely wanting and is in need of a major overhaul."

Saturday, 9 May 2009

New York and London: Twins in Finance and Folly

New York Times
"“Should we have a new Glass-Steagall?” asked Liam Halligan, the chief economist with Prosperity Capital Management, a London-based asset manager, who also writes a weekly column for The Telegraph. He felt very strongly that the answer was yes. ...Every time I heard the phrase, it caught me up short. Glass-Steagall, of course, was an American law passed during the Depression to separate investment banking and commercial banking. It was dismantled 66 years later, in 1999, because it was viewed by the American political establishment, starting with Treasury Secretary Robert Rubin, as an outmoded relic of an earlier age. Glass-Steagall never existed in Britain.
.....“Gordon Brown instituted a lot of pro-City policies,” Mr. Augar said. “He cut the capital gains tax. He combined about nine different regulators into the F.S.A.” — the Financial Services Authority — “which adopted something it called ‘proportional regulation.’ ” Mr. Brown himself had a more apt phrase: “light touch regulation,” he called it. In other words, he consciously aligned regulation in Britain with the free-market, deregulatory approach being promoted by Mr. Greenspan and Mr. Rubin.
Mr. Augar says he believes that the regulatory environment helped bring about the “Americanization” of the City of London, and that it was ultimately ruinous. .....Besides, although no one will say this out loud, Britain can’t regulate unilaterally anymore — it is simply too dependent on American institutions. Its regulatory response will be to mimic whatever the Obama administration decides to do."

Gold: Does Gordon Brown's regret selling half of Britains' gold reserves 10 years ago?

"A decade ago Gordon Brown started to sell-off Britain's gold reserves - at the time the price of gold was $282 an ounce, today it is $900-plus. ....John Mulligan at the World Gold Council said: "The announcement that Gordon Brown was going to sell off (415 tonnes) of the UK’s gold reserves occurred on 7 May 1999, but the gold was actually sold in stages, totalling 395 tonnes, between 1999 and 2002. The price (pm fix) on the day of the announcement was $282.40 / oz. or £172.84.
"The announcement had a negative impact on the price which slid to a low of 252.80 in $ terms (on 20 July 1999; its £ low came a few months later), before gradually recovering and rising fairly consistently ever since. 10 years later, yesterday, the gold price (pm fix of 7 May 2009) stood at $912.25 / £606.43 per ounce (a rise in value of 223pc, or 251pc in sterling terms)."

Friday, 8 May 2009

Bad debts at part-nationalised RBS 'could soar to £12billion'

Daily Mail
"Bad debts at part-nationalised Royal Bank of Scotland could soar to almost £12 billion this year, the bank said today.RBS, which is 70.3 per cent owned by the taxpayer, posted loans losses of £2.9 billion for the first quarter of 2009 but directors said full-year bad debts could be 'at least' four times as high."

We're galloping into a mega-crisis

"The International Monetary Fund and the European Commission both expect Britain's output to shrink this year by more than the 3.5 per cent that was outlined in the April Budget. The National Institute of Economic and Social Research (NIESR) forecasts that the contraction will be 4.3 per cent, with unemployment continuing to increase until 2011, peaking at more than 3 million. ....The Chancellor says that his borrowing will top £700 billion over the next five years. If correct, that would stretch the country's credit rating to breaking point. But, without urgent remedial action, the total will almost certainly be much more, proportionally far exceeding that of any other G8 country. We are on course to spend annually a greater sum on interest payments (£43 billion in 2010-11) than on defence."

MPs' expenses

"MPs' expenses: The Telegraph's investigation into how politicians - from Gordon Brown and his Cabinet to backbenchers of all parties - exploit the system of parliamentary allowances to subsidise their lifestyles and multiple homes."

Thursday, 7 May 2009

Bank of England to pump another £50bn into economy as it steps up recession fight

"The Bank has been authorised by the Treasury to spend a total of £150bn on quantitative easing, so by announcing an extra £50bn today, it still has £25bn left to spend on gilts should it deem the move necessary. ....."The Bank of England was always going to keep interest rates down at 0.5pc, but by expanding its quantitative easing programme by £50bn to £125bn indicates that the MPC believes that the economy still needs support despite recent mounting signs that the rate of economic decline is moderating," said Howard Archer, economist at IHS Global Insight."
Comment:"quantitative easing" is devaluation in all but name: So Sterling is devalued even further.

Wednesday, 6 May 2009

Britain in depression territory

Daily Mail
"Few budgets have been rubbished so quickly and comprehensively as the Chancellor's effort on April 22. ....In rapid succession, we have seen the budget numbers questioned by the International Monetary Fund, the European Commission, and today the National Institute of Economic and Social Research."
House prices continued to fall steeply during April, suggesting that talk of a recovery in the market may have been premature, the latest figures show. (Telegraph)

Sunday, 3 May 2009

Gordon Brown, the political dead man walking

Daily Mail
"..He can do nothing important. He can make no significant decisions. Even the Budget has rapidly been revealed as a petty partisan exercise aimed at trapping the Tories. ....We must now live in the gap between the official constitution - which allows Mr Brown to continue in office for another year - and the unofficial one, which has robbed him of any real power. We face 12 months in which our Prime Minister is a dead man walking - and the Government a corpse still twitching."
Gordon Brown - why a clever man ends up making a fool of himself (Guardian)
The Brownouts pushing Brown out (The Times)

Saturday, 2 May 2009

Benefits of new money go abroad

"Billions of pounds "printed" by the Bank of England as part of its quantitative easing programme have been leaking overseas, it has emerged. ....However, the figures, published deep in a Bank document on Friday, shed light on the fact that the system has fallen short of expectations in its infancy.The statistics show that the Bank spent £15bn on gilts in March but that the biggest sellers of these in that period were overseas investors, who cut their gilts portfolios by £7bn. Investment banks, meanwhile, sold £2bn, while non-bank investors, which includes the pension funds and insurance groups which the Bank had intended to be the chief recipients of the quantitative easing money, sold only £5.9bn."

Banks to lend to the Government

John Redwood MP
"Under new “liquidity” rules the main banks are going to have to lend loads of money to the government. Convenient that, for the government, at a time when it is short of a pound or three. .....That is not the way to strengthen the banks, or return them to health. That is a cheap way to finance the government deficit, at the expense of a dear way for the taxpayers to be running their banks. In the end taxpayers pay both lots of bills. So who do the government think they are fooling?

US economy shrinks by a shock 6.1%

Daily Mail
"The world's biggest economy shrank a worse-than-expected 6.1% in the first quarter of the year, following a 6.3% fall in the final three months of 2008.Taken together, the six-month contraction is the worst since 1957-58 and the second-deepest slump since the war."

Why Informa's Swiss move should send a shiver down our spines

"After seeing the detail of last month's Budget, Peter Rigby, Informa's chief executive, concluded he had no choice but to put a stop to the Treasury increasing its take of his shareholders' money. By moving to Switzerland he can avoid paying at least £10m in additional tax. ....What Informa and the others have shown is that it's relatively easy for UK companies to sidestep new taxes. It proves that threats by UK companies are not empty. ...But the final feature offered by Switzerland these days that the UK does not is a "highly stable political and economic environment". Given the political meltdown we're witnessing while enduring economic hardship, it's not hard to see why Rigby intends to move from cloud cuckoo land to the land of the cuckoo clock for a bit of stability and certainty."

Friday, 1 May 2009

Flu pandemic could wipe 7pc off UK economy, warns Bank

"A flu pandemic could wipe more than 7pc off Britain's economic output, and trigger the worst recession since the early 1920s, according to Bank of England calculations."

Gordon Brown has lost it, say ministers

"Labour is heading for an election defeat as heavy as that suffered by John Major because Gordon Brown has lost control of the parliamentary party, two senior Cabinet ministers have privately warned."
Britain is in a terrible state. Our people are losing their jobs, their homes, their businesses, their livelihoods. The Prime Minister should call an election