Banking and Credit
The debate upon banking reform in the UK has so far been woefully inadequate. The various commentators have been discussing narrow aspects of the issue, when what is required is a holistic plan. The long term outcome of reform needs to present a balance between two imperatives: on the one hand global economic and social development can benefit enormously from constructive credit provision, and this should not be thrown away; on the other hand the cost of a failed credit system is too great for us to allow it to be repeated.
August 7th, 2009
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As expected, the G20 leaders all smiled for the cameras and said what clever folk they had been. So what did they achieve? Probably two things: first, by bolstering the IMF, they have underpinned international trade, and alleviated concerns about weaker trading partners in general, and Eastern Europe in particular; second, the psychological effect has been to boost confidence, where none previously existed, among those looking for an end to global financial travails.
Coincidentally there were some other shots in the arm. Economic statistics reported last week broadly suggested that a deceleration of the bad news is occurring. The agreement between Obama and Medvedev to restart nuclear arms reduction talks is also very positive. And in America so-called mark-to-market rules have been suspended, taking some pressure off the banks.
May 17th, 2009
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With whom does one start? Self-acclaimed "prudent" Gordon Brown is now exposed as not understanding husbandry at all. The Government finances enter recession already substantially overdrawn, without including their off balance sheet items of PFI debt and unfunded state pensions. The combination of this week’s stimulus, falling tax revenues and higher social security payments have at least caused the admission that taxes will have to rise. In the medium term, new issues of government debt will flood the market.
November 28th, 2008
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The extraordinary banking debacle may have reached its endgame. While it is difficult to feel remotely confident of this, it is positive to see globally coordinated actions rather than just words or narrow national agendas. Concerns have now moved forward inevitably to the outlook for global growth, which has been exacerbated by the paralysis of lending.
October 16th, 2008
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While western financial and legislative authorities strive to contain potentially excruciating outcomes from the banking crisis, what have we been doing?
In our view the economic impact of the crisis is initially deflationary; we also believe that the danger of shorter term inflation is past. Thus interest rates in the UK and elsewhere should begin to fall soon, and they should continue falling for some time. We should not be surprised if they reach 3½% by mid-2009.
October 6th, 2008
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A summary of what the $700 billion bail-out is, putting it into place, effect upon banks and the likely impact upon the wider economy
"The bail-out reduces the probability of a deflationary spiral. Inflation becomes a risk only if the increase in money supply is accompanied by an acceleration in monetary velocity, which seems improbable given the fact that the economies remain highly leveraged, and that banking rules will become tougher."
September 22nd, 2008
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In the US Fannie Mae and Freddie Mac, the largest American mortgage institutions, have been nationalised; Lehman Brothers, the fourth largest investment bank, has failed; Merrill Lynch has been sold to Bank of America; and AIG, one of the world’s largest insurance companies, has been kept afloat by a credit line from the Federal Reserve, and the US Treasury has taken an 80% stake in exchange. In the UK our largest mortgage provider, HBOS, is believed to be in merger talks with Lloyds TSB. A few months ago Northern Rock was nationalised.
September 17th, 2008
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