If once Great Britain was a company, you would have sold the shares long ago. We are doomed, finished, the game is over. There is no way back for the economy and now it is a fast gathering slide down a slippery slope. Optimists who would have you believe that this is a "recession" need to get out the economic history books. As I have repeated endlessly for years, we are heading into "The Greater Depression." What comes next? Unemployment, riots and, not long after, the New World Order. ALAN FRANKLIN.
Now Christina Speight comments:
I called yesterday ‘The Day of Real Reckoning’ and I was right. After every cliche has been trotted out and every metaphor explored I will try a few more!
The plain fact is that we have now fallen over the ‘edge’ and are in the ‘abyss’ we have been facing so long.
This is a moral question as well as an economic one. To watch (British Prime Minister) Gordon Brown fulminating against dreadful bankers is nauseating in its sheer hypocrisy. It was he that let loose the flood tide of cheap credit and easy money, it was he that set up the system intended to regulate the economy and it was he that let it fail and it was he that didn’t notice until it was too late. And it was he that failed to reduce state borrowing in the 'easy' years, leaving us with no 'rainy-day' provision.
This morning’s news of the crash is overwhelming in its breadth so in this message I will restrict myself to comment as to the origins and the responsibilty for the national disaster.
But still nobody is doing what must be done and the opposition shy away from it. Two things are essential.
Firstly there must be drastic cuts in government expenditure. All sorts of policy changes will be necessary. an example - the whole Olympic project is now unaffordable. Grandiose transport plans must be shelved. Cuts must fall on hitherto sacred cows. For make no mistake - if we do not do these in a controlled manner now we will be forced to so more later.
Secondly there must be full disclosure by all the banks of all dubious assets. This must be comprehensive and public.
Is there any way to persuade the wretched BBC to stop calling it a “downturn” ?
1. [LEADING ARTICLE] Don't bank on Brown's latest rescue package
Since the run on Northern Rock began in September 2007, we have become punch drunk as calamity followed upon calamity while the credit crunch unfolded. Yet even by the standards of these remarkable and perilous times, yesterday stands out as a landmark.
It was the day it became clear that the Government that helped land us in the banking crisis is struggling to find a way out of it. Gordon Brown and Alistair Darling are grabbing every lever within reach in the hope that it will pull us out of the nosedive, now that it is evident that October's £37 billion bail-out has not worked. Will yesterday's prove more successful? Don't bank on it.
Elements of the latest package are helpful, notably the Bank of England asset purchase scheme. And the Prime Minister argues that the nature of the crisis requires an evolving series of measures as new problems appear. Downing Street also expects other countries, including the US, to adopt similar policies.
But throughout this crisis the Government's response has not been smart enough, fast enough or big enough. It is constantly playing catch-up, and doing so with incomprehensibly large sums of taxpayers' money being put on the slate for future generations to clear.
Its handling of RBS has been an object lesson in making a bad business worse. It bought 58 per cent of the bank for £15 billion last November without glancing under the bonnet and now finds that it is burdened with toxic overseas liabilities and heading for a £28 billion loss, the biggest in corporate history.
RBS shares were worth 53p when the Government bought them; yesterday they fell to 13p (two years ago they traded for £20.80). As night follows day, yesterday's raising of the Government's stake from 58 per cent to 70 per cent will not be enough and further interventions will be required until RBS is put out of its misery, probably by being fully nationalised.
Yet the Government appears to be in denial. The collapse of the country's most important industry has not taken place in some hermetically sealed vacuum. The bubble of toxic loans and excess credit was inflated on Mr Brown's watch as Chancellor; the regulatory regime that allowed it to happen was designed and constructed by him. He was not only at the scene of the crime – he was complicit in it.
It makes his anger at the greed and recklessness of the banks, which we all share, ring hollow. It is not, however, in Mr Brown's make-up to acknowledge his part in this catastrophe, let alone to apologise. Yet the penny has dropped with the voters, as the disappearance of the Brown bounce in the opinion polls testifies.
Voters should have the opportunity to give vent to their anger at the ballot box. Governments have fallen for far less than this. It is time Mr Brown was held to account and sought a mandate for his Government's future management of this crisis.
2. Gordon Brown brings Britain to the edge of bankruptcy
Iain Martin says the Prime Minister hasn't 'saved the world' and now faces disgrace in the history books
By Iain Martin
They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious.
Yesterday marked a new low for all involved, even by the standards of this crisis. Britons woke to news of the enormity of the fresh horrors in store. Despite all the sophistry and outdated boom-era terminology from experts, I think a far greater number of people than is imagined grasp at root what is happening here.
The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.
The political impact will be seismic; anger will rage. The haunted looks on the faces of those in supporting roles, such as the Chancellor, suggest they have worked out that a tragedy is unfolding here. Gordon Brown is engaged no longer in a standard battle for re-election; instead he is fighting to avoid going down in history disgraced completely.
This catastrophe happened on his watch, no matter how much he now opportunistically beats up on bankers. He turned on the fountain of cheap money and encouraged the country to swim in it. House prices rose, debt went through the roof and the illusion won elections. Throughout, Brown boasted of the beauty of his regulatory structure, when those in charge of it were failing to ask the most basic questions of financial institutions. The same bankers Brown now claims to be angry with, he once wooed, travelling to the City to give speeches praising their "financial innovation".
Does the Prime Minister realise the likely implications when the country joins the dots? He has never been wild on shouldering blame, so I doubt it. But Brown is a historian. He should know that when a nation has put all its chips on red and the ball lands on black, the person who made the call is responsible. Neville Chamberlain discovered this in May 1940 with the German invasion of France.
We're some way from a similar event. But do not underestimate the gravity of the emergency and potential for disgrace.
The Government's bail-out of the banks in October with £37 billion of taxpayers' money was supposed to have "saved the world", according to the PM, but now it is clear that it has not even saved the banks. Our money kept the show on the road for only three months.
As the Liberal Democrats' Treasury spokesman Vince Cable asks: where has the £37 billion gone? The answer, as Cable knows, is that it has disappeared down the plug hole.
It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. [There’s a good example! The Banks published their accounts and Brown and his regulatory bodies didn;t read them -cs]
Unfortunately, the Treasury is pledged to honour those
liabilities because it has guaranteed not to let a British bank go down. RBS has liabilities of £1.8 trillion, three times annual UK government spending, against assets of £1.9 trillion. But after the events of the past year, I wager most taxpayers will believe the true picture is worse.
Meanwhile, the assets are falling in value. This matters, because post-nationalisation these liabilities are now yours and mine.
And they come piled on top of the rocketing national debt, charitably put at £630 billion, or 43 per cent of GDP. The true figure is much higher because the Government has used off-balance sheet accounting to hide commitments such as PFI projects. [’Off-bance sheet accounting’ landed the American directors of Enron in gaol. Brown thought he was so important he could do it! -cs]
Add to that record consumer indebtedness and Britain becomes extremely vulnerable. The markets have worked this out ahead of the politicians, as usual, and are wondering what to do next. If they decide our nation is a basket case, they will make it so.
The PM and the Chancellor , both looking a year older every day, tell us that for their next trick they will buy more bank shares, create a giant insurance scheme for bad debt, pledge to honour liabilities without limit, cross their fingers and hope it all works. The phrase "bottomless pit" springs to mind for a reason: that is what they have designed.
In this gloom, the Prime Minister has but one slender hope: that somehow, by force of personality, the new President Obama engineers a rapid American recovery restoring global confidence, energising the markets and making us all forget this bad dream.
Obama is talented but he is not a magician. Instead, Gordon Brown's nightmare, in which we are all trapped, is going to get much worse.