Auf Wiedersehen Debt?
The market is already starting to react as if the worst financial fire in history is over. Up until now, more effort has been expended on arguing who is to blame, rather than trying to find the extinguishers.
Lets hope that the worst if over. Let's hope that we never again have to witness a Chancellor's vacant stare whenever asked a simple financial question, even as his eyebrows squirmed like engorged caterpillars in their death throes betraying his ignorance.
I feel almost embarrassed to say it, but maybe Gordon Frown has played this one as well as could be expected, under the circumstances?
It feels like we may now get away with a 45 degree slide into recession, rather than the full-blown Alton Towers 90 degrees downwards into Oblivion version.
I was going to call this article Bailout Winners And Losers, but swiftly decided that there were probably really only degrees of loss. It is interesting to speculate who may come off the worst out of all this.
The Irish were the first to leap to their feet with their (initially much-criticised, but inevitably swiftly-followed) blanket guarantee of all bank depositor's money. The fact that this "guarantee" in fact calculated out at nearly three times gross domestic product should not be overlooked. If these guarantees had been called, they could never have all been paid.
The subsequent rapid inflow of cash to the safest haven there was, may soon now turn into a mass exodus. Those depositors who acted like startled rabbits will soon work out they are better off and better covered in government controlled banks back home.
As the new rules bite runs may develop on smaller groups such as building societies that have not been invited to play with the big boys. Government guarantees do not and cannot extend to such groups. Banks like Santander and Commerzbank will probably end up absorbing dozens of these local mutuals.
Most major industrial countries therefore will end up with a handful of large semi state banks which will dominate the domestic deposit markets.
Many of the current problems have been caused by lets call it "creative accounting," some might call it over-optimism, some might call it other things. Institutions with much of their capital "invested" in unlisted property, private equity and other opaque vehicles, may be forced via legislation to be more realistic in the valuations of their portfolios. I've never been a big fan of pension funds and I certainly aren't warming to them now.
There isn't going to be enough money in the pension kitty for people to retire when they had planned due to the fact that many pensions have been mismanaged for years.
Welfare is another area that wants looking at. In the UK unemployment has sank from well over two million to under a million. Meanwhile, those of working age but permanently incapacitated soared from under a million to well over two million! Well it looks like unemployment is going to start rising again busting the budget even further. So this is an area where we need to toughen up.
It is worth recalling that in absolute terms European institutions own more of America's mistructured and bankrupt sub-prime debt than the Americans themselves! Where is it? Too much, many believe, is in Italy.
There there are a huge number of highly-geared cross holding companies, mystery nominee companies etc. In short another house of cards just waiting to collapse.
A post-Olympic China also looks a certainty to be forced to reluctantly join the world recession party. The collapse in commodity imports, from copper to steel, oil to iron, already shows that a slowdown is already under way.
The west is in a recession. We don't want, or more precisely can't afford, their plasma TVs, Nintendo Wii's and fridge freezers that can also bake you a cake.
If we want a new car and we can't borrow the money to buy it then we are going to have to save. Thus the impact on retail economic activity is dire, as governments tax more and cut expenditure, and the consumer is forced to save.
It is worth noting that in the 1970s and early 1990s recessions, savings rates in advanced countries rose dramatically.
Whilst liquidity and lending will gradually improve, governments will want to rebuild 'their' banks' balance sheets as fast as possible. Globally, official interest rates will be slashed; the unusually co-ordinated cuts last week by six major central banks is but the start.
Lets hope that the worst if over. Let's hope that we never again have to witness a Chancellor's vacant stare whenever asked a simple financial question, even as his eyebrows squirmed like engorged caterpillars in their death throes betraying his ignorance.
I feel almost embarrassed to say it, but maybe Gordon Frown has played this one as well as could be expected, under the circumstances?
It feels like we may now get away with a 45 degree slide into recession, rather than the full-blown Alton Towers 90 degrees downwards into Oblivion version.
I was going to call this article Bailout Winners And Losers, but swiftly decided that there were probably really only degrees of loss. It is interesting to speculate who may come off the worst out of all this.
The Irish were the first to leap to their feet with their (initially much-criticised, but inevitably swiftly-followed) blanket guarantee of all bank depositor's money. The fact that this "guarantee" in fact calculated out at nearly three times gross domestic product should not be overlooked. If these guarantees had been called, they could never have all been paid.
The subsequent rapid inflow of cash to the safest haven there was, may soon now turn into a mass exodus. Those depositors who acted like startled rabbits will soon work out they are better off and better covered in government controlled banks back home.
As the new rules bite runs may develop on smaller groups such as building societies that have not been invited to play with the big boys. Government guarantees do not and cannot extend to such groups. Banks like Santander and Commerzbank will probably end up absorbing dozens of these local mutuals.
Most major industrial countries therefore will end up with a handful of large semi state banks which will dominate the domestic deposit markets.
Many of the current problems have been caused by lets call it "creative accounting," some might call it over-optimism, some might call it other things. Institutions with much of their capital "invested" in unlisted property, private equity and other opaque vehicles, may be forced via legislation to be more realistic in the valuations of their portfolios. I've never been a big fan of pension funds and I certainly aren't warming to them now.
There isn't going to be enough money in the pension kitty for people to retire when they had planned due to the fact that many pensions have been mismanaged for years.
Welfare is another area that wants looking at. In the UK unemployment has sank from well over two million to under a million. Meanwhile, those of working age but permanently incapacitated soared from under a million to well over two million! Well it looks like unemployment is going to start rising again busting the budget even further. So this is an area where we need to toughen up.
It is worth recalling that in absolute terms European institutions own more of America's mistructured and bankrupt sub-prime debt than the Americans themselves! Where is it? Too much, many believe, is in Italy.
There there are a huge number of highly-geared cross holding companies, mystery nominee companies etc. In short another house of cards just waiting to collapse.
A post-Olympic China also looks a certainty to be forced to reluctantly join the world recession party. The collapse in commodity imports, from copper to steel, oil to iron, already shows that a slowdown is already under way.
The west is in a recession. We don't want, or more precisely can't afford, their plasma TVs, Nintendo Wii's and fridge freezers that can also bake you a cake.
If we want a new car and we can't borrow the money to buy it then we are going to have to save. Thus the impact on retail economic activity is dire, as governments tax more and cut expenditure, and the consumer is forced to save.
It is worth noting that in the 1970s and early 1990s recessions, savings rates in advanced countries rose dramatically.
Whilst liquidity and lending will gradually improve, governments will want to rebuild 'their' banks' balance sheets as fast as possible. Globally, official interest rates will be slashed; the unusually co-ordinated cuts last week by six major central banks is but the start.
