Why is Gord fighting for the interest rate gamblers?
October 10th, 2008
They placed a bet, they lost and should be hung out to dry?
One thing that nobody seems to be saying about the Icelandic saving bank situation is that those who invested with the banks were either stupid or greedy or both.
Didn’t any of the individual or institutional investors stop to think and ask why the banks were ready and willing to pay interests rates that were way ahead of anything else that was available in the UK? Didn’t they consider just for one moment that this might have meant that their investments were more risky?
Those who handed over their cash to these banks were not normal savers but gamblers who were getting odds of up to 2/7 that their money would be safe. Alas they lost so if it had been Ladbrokes and not Kaupthing it would have been tough shit.
Surely Darling and Brown have got to think of those who were not seduced by the amazing returns that were being offered who now through their taxes and the costs of the industry bail out scheme will be forced to fork out to help cover the losses of the interest rate gamblers who were stupid enough, in many cases, to put their life savings on.
I’m a gambler but this was too risky a bet for me. Late last year I took early retirement so I could work full-time on PB and now look partly to the interest from my pension lump sum to live on. I checked out the 7% with Kaupthing which simply did not make sense compared with the 5% that was available from HSBC. The result was a big cut in my possible income but a much safer bet.
But those who took the Icelandic gamble have been enjoying the vastly inflated returns and now, thanks to Brown and Darling, could get most of their money back.
There’s something wrong somewhere and what an appalling example.
Mike Smithson
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Errr I believe there were those on this site who said the government was wrong to ban short selling, look how right they were, they took the ban off in the US, it had no affect at all, we should follow suit.
There were also those who were convinced that oil would soon be $200.0 dollars a barrel, right again!
Oh! As the US government seems to have gorn’ to sleep, would someone have a word with the Japs, get ‘em to attack Pearl Harbour, it woke ‘em last time!
Apparently you have to offer higher interest rates if you are a crap risk. Doh. no bailout for these clowns
Apparently you have to offer higher interest rates if you are a crap risk. Doh. no bailout for these clowns
Mike
I’m glad you said that. I keep meeting people who made the same decision as you for exactly the same reasons. It was well known that the Icelandic economy was running 15% inflation with alot of debt. It is not even as if Iceland was even in the EU and that does make a difference to the risk in investing there. Would people expect a bail out with the collapse of a South Korean, Malaysian or Indian savings bank?
“I checked out the 7% with Kaupthing which simply did not make sense compared with the 5% that was available from HSBC. The result was a big cut in my possible income but a much safer bet.”
I am much younger than yourself Mike, and therefore still saving for retirement rather than reaping the harvest, but I made a similar choice about 3 years ago. It seems (seemed?) to be the common wisdom that young people (under 35ish) should be investing their pension money almost 100% in equities. I had been doing so, but began to form the opinion that equities were becoming far too risky.
Thanks to the constant nagging about the benefits of gold and the idiocy of the equity markets from Scottish libertarian blogger David Farrer…
http://freedomandwhisky.blogspot.com/
… I started looking at gold, and put a significant chunk of my pension into it. So, I just want to say: thanks David!!
But the thing is, I took a big risk with that decision, because I was foregoing a potential big increase in my possible income. You pays your money and you takes your choice.
I will be looking at small, boring, conservative, local institutions like the Airdrie Savings Bank, Dunfermline BS and Scottish BS for building up small, dispersed pots of savings. Spread the risk.
Incidentally, I consider it a disgrace that the UK government is using/abusing anti-terrorist legislation to target a NATO ally. Does the UK now consider Iceland to be a terrorist state?
5 I am sure many people have money in ICICI who offer huge rates ….. do any councils have money in this Indian bank?
5 I am sure many people have money in ICICI who offer huge rates ….. do any councils have money in this Indian bank?
Actually Mike there is yet another scandal emerging here.
Local authorities are often legally obliged to deposit at the highest rate available on the market, and therefore a large ammount of local authority money is tied up on deposit in Icesave.
The fact that Kaupthing had over 4 billion in UK deposits has rather fallen trhough the cracks- not covered by iceland or the Uk- and anyway the smallest local authority deposit is 5 million.
Is there a list of which local authorities have invested what in the Icelandic Banks?
“Those who handed over their cash to these banks were … gamblers who were getting odds of up to 2/7 that their money would be safe.”
How do you conjure up those odds? Have I missed something? My mind always boggles at anything financial, so perhaps I have misunderstood something.
Why should Kaupthing be excused from honouring their side of a contract?
The banks aren’t going to excuse us from paying off our mortgages, are they?
Contracts have to be enforced, otherwise the whole system really does fall apart.
The bookmaker analogy is a poor one, IMO - whether Obama or McCain wins, you expect the bookies to pay out, don’t you, Mike?
As I understand it, the situation with Kaupthing Edge is actually very different from that with Landsbanki/Heritable.
Kaupthing Edge is UK-incorporated, guaranteed by the UK’s Financial Services Compensation Scheme, and so retail depositors are covered by the FSA up to £50,000. This is not the case with Landsbanki’s Icesave, where the first EUR 20,000 is protected only by the Icelandic Government.
Non-retail investors and organizations like councils are not protected.
That’s my understanding, but I may be out of date or indeed totally wrong. Anyone know otherwise?
10. Just found one.
http://www.thesun.co.uk/sol/homepage/news/money/article1791374.ece
I think this is too simplistic - it’s so easy with the benefit of hindsight to criticise. An waful lot of afe bets have gone belly up. I also find GB’s bullying tone with the Iceland govt. totally unedifying and only serves to hihlight British weakness. Is hr gonna make the same noises to protect investors in Lehman’s, etc, etc.
Plain fact is we’re all in the sh** now & one way of another we’re all gonna pay.
11. John, I think the 2/7 comes from comparing the 7% offered by Kaupthing against the 5% offered by others.
I work in Oslo, and a workmate was complaining how he couldn’t get his money, savings for his wedding, out of an Icelandic bank yesterday.
Twenty-twenty hindsight.
These banks were respected and recognised by independent financial advisers, senior CIPFA professionals, CLG…
I can and do reproach myself for buying a house in 2006. But for following the best advice I could get on where to invest my ISA? No.
Interestingly enough, ALL my clients have also lost money. It provides some reassurance that I’m working with these authorities to show them how to spend significantly less on service delivery. But I’m definitely exposed to Icelandic bank losses in more ways than I could have expected, even last Thursday.
re 11. John - The 2/7 is based on the extra interest that the Icelandic banks were paying in order to get deposits. HSBC = 5%: Icelandic banks = 7%.
It is just my gamblers mind trying to express this in betting terms.
Any reply from YouGov yet Mike?
‘Gordon Brown never blinked as fists flew and tables smashed
- … World Cup qualifier is the biggest Scotland game since last year’s climactic Euro 2008 visit by Italy, which attracted both the Prime Minister and the First Minister’
At the VIP reception afterwards, a tabloid hack got into an argument with a Scottish comic actor. One let the other have it over the skull with a champagne bottle and was treated to a Glasgow kiss in return, while the table between the pair collapsed amidst splintering wine glasses.
Only a few feet from the scene, the Chancellor [Gordon Brown], corralled against a wall by admiring females, blinked not an eye as the brawling pair were hustled away. It was a performance fully worthy of that heartfelt cry of approbation commonly heard in the PM’s Fife constituency.
“Yahoorsir!”
http://www.telegraph.co.uk/sport/football/international/scotland/3168497/Gordon-Brown-never-blinked-as-fists-flew-and-tables-smashed-Football.html
Am I alone in thinking that the words “Gordon Brown” and “admiring females” do not belong together in the same sentence?
9. Cicero, I think this is wrong. Locally authorities are required to maximise yields as their third priority. Security and liquidity are first and second responsibilities.
Fuller list of banks which have lost money can be found here: http://news.bbc.co.uk/1/hi/uk/7660741.stm
17
the BCCI scandal proved: If it looks to good to be true.
Well done Mike.
As for professional advice, see the FSA…
Sums it up.
When has the FSA said : run away : too risky.
They would rather institutions go bust and let savers lose all than be accused of causing a collapse. So in effect their approval is worth nothing.
Anyone who trusts the FSA or most professional advisers is … misguided.
How many advisers foretold this market crash.. or told their clients to sell last week?
18. So if bookmakers offer different odds, is the difference an expression of the risk of them not paying out?
Watching the talking heads on the business shows this morning - yesterday and today is all about Lehman’s. Institutions on the wrong end of the CDS’s have been selling equities (because it is the only source of liquidity left). Today sees the auction of the Lehman’s CDS’s.
re 12. Bookies go out of business too - which is one reason why I only hand over my cash to the big and well-established firms like Ladbrokes and William Hill.
21
too good to be true.
My wife and I recently put money into Landsbanki and Kaupthing Edge. We calculated that up to £35k each for each bank there was only a limited risk that the British Government would go broke. Do you think that was a bad bet?
21. “How many advisers foretold this market crash.. or told their clients to sell last week?”
Certainly a lot fewer than those who this week are coming out of the woodwork to announce their earlier wisdom.
A big pat on the back to go with your generous dose of self-congratulation.
The continual No more boom and bust mantra from Brown seduced people into believing they didn’t need to be careful anymore.
To answer Mike’s question - why not let these people get hung out to dry:
The banking system is an enormous confidence trick. Banks promise that they’ll give you your money whenever you want it, but they haven’t got enough to do that if more than a small proportion of their customers try to do it at the same time. If savers see other savers losing their deposits they may stop believing in the confidence trick and decide to take out their money. Nearly everybody loses their life savings, nearly everybody’s loans get called in, nearly everybody loses their jobs and millions of people starve to death. This series of events would risk having a negative impact on Labour’s reputation for competence in managing the economy.
If the current mess were being portrayed in Blackadder, we could all have a good laugh.
“You see, Baldrick, the banks were lending money that didn’t exist to other banks who lent it to people who couldn’t afford to pay it back so that they could buy assets at inflated prices. Then it all went wrong.”
“Mr Blackadder, I have a cunning plan. Let’s lend more money that doesn’t exist to the banks so that they can lend it other banks….”
“I think, Baldrick, I can already spot a tiny flaw in your plan..”
Except, of course, it isn’t a comedy. Millions of ordinary people are going to get seriously hurt. It will end in tears. Brown can make jokes about it - but then he’s protected by taxpayers’ money.
How depressing.
re 22. If a bookie is consistently getting the pricing wrong then the chances of it failing are that much greater.
Quite often Ladbrokes and William Hill will not be offering the best odds but I prefer to stick with them - particularly for long-term political bets.
I think your premise is more than a little wrong. Whilst the interest rates may have been at the very top end of the range, they were not all that out of line with other financial institutions the government are now offering to provide support. For example we have money in a well known local UK brand at 7.11% aer.
And these banks are supposedly regulate by the FSA. Either the FSA should have the role of regulator and then be held to account for its failings. Or we should drop the pretence that such banks are being regulated and get rid of large chunks of the FSA.
Whilst not quite a widows and orphans fund, I am involved in the management of funds for a members organisation. The position is actually much, much more complicated than you simplisticly suggest. And the consequences of failure to reimburse regulated aacounts will be far wider than local authorities.
FTSE will hit sub-4000 today.
re 19. Yes - Peter Kellner tells me that the YouGov polls were carried out in exactly the same way with the SNP option presented in the same form as the other main parties in Scotland.
31. Russia has suspended one of its markets this morning. Maybe we could do the same to the FTSE and open it again in 12 months time!
32. Thanks Mike.
I wonder why YouGov did not publish an SNP figure in that case? They simply gave Con, Lab, LD, Other - which is ridiculous for Scotland where the SNP voting intention figures are currently approximately three times the size of the Lib Dem figures. They have never done that before.
#23 Mike - on that point:
Small/mid-caps with potential refinancing risk are Cattles,
Independent News & Media, JD Wetherspoon, Ladbrokes, Punch Taverns, Rank, Taylor Wimpey, Yell, and William Hill.
See http://ftalphaville.ft.com/blog/2008/10/07/16749/markets-live/
16. 18. Can you explain the explanation?
Odds of 2/7 actually means a fraction of 77.8% (or 128.6% if you put it the other way round); 5% compared with 7% is 71.4% (or 140%). Did you mean 2/5 rather than 2/7?
Absolutely right, Mike.
They should no more be reimbursed their losses than I should for the loser I backed at Wincanton yesterday.
Betfair is significantly safer than Ladbrokes and William Hill, because both sides are required to put their money up front.
Once the Lehmann issue shakes out over the next couple of days the stock markets will almost certainly rebound significantly
Heaven’s above! OK, it is through gritted teeth, but Alan Cochrane agrees with Alex Salmond about something. Wonders will never cease.
… I do believe that the Nats still occupy, if not the high moral ground, then at least the parliamentary high ground on their plans to restrict the selling of alcohol.
… it is difficult not to sympathise with the First Minister’s frustration that the opposition parties at Holyrood appear to know what they’re against on this matter but don’t know what they’re for.
He got quite het up on the subject, too, railing that it was one thing for Labour, Tories and Liberal Democrats to disagree with “some aspects” of his administration’s programme but adding: “For goodness understand that this country has a real crisis with alcohol. Not just affecting young people , but generally through the population.”
Quite right, too.
http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/10/10/do1006.xml
The point about deposits with Icelandic banks applies just as much to Northern Rock and other depositors.
Depositors should have a liability if their bank fails: it would be a restraint on bank risk-taking. That said, for this crisis, the damage is done (though clearly not yet worked out).
I wonder now if people might become more favourably disposed to a new gold standard?
Like the rest of this crisis, it is about helping people who don’t deserve to be helped, in order to help yourself
Take the West Oxofordshire DistrictCouncil in Witney. It has £9m in Icelandic banks. In all, interest earned is nearly £500k per year. The turnover of the Council is circa £13m. If, as is being said, Councils could receive about 20p in the £ compensation, it is pretty obvious how the gap in funding will have to be be met.
That this particular council has a funding problems of its own making on top, doesn’t help
17. Clearly not twenty-twenty foresight though, in the case of people like Mike and Stuart. The risk was certainly forseeable and I suspect that those who don’t admit it do so in no small part because they want to absolve themselves of any blame.
The same is true of the something-for-nothing buy-to-let market latecomers. I see no moral reason why the government should be propping up the housing market (though obviously there are good political ones, so it probably will). In some ways, I’m very risk averse. I paid my mortgage off a few years ago, way ahead of time, because I did not like carrying the debt. If I’d wanted to, I could have got into buy-to-let quite easily but chose not to because I’d recognised more than two years ago that property was overvalued (which implies prices there still have some way to fall).
To answer Mike’s question though, the answer is the number of swing voters who might be affected (although if that is the line of reasoning, he might be well advised to consider the impact on Council Tax and local services that not at least partly bailing out councils who invested in Icland would have).
A couple of other points. I’d appeal again to our elected representatives to think about the government’s usage of legislation originally passed to counter a terrorist threat. Apart from it being a shameful and cowardly act (would Darling or Brown sanction the same towards Pakistan were a bank there to go bust, never mind one in the USA?), it again demostrates that ministers assurances at the time legislation is being voted upon are as near to meaningless as makes no difference; all that matters is what the Bill contains. Ministers and administrations come and go (and even when they stay the same, they can change their minds). The words in the Act remain - as do the powers that go with them.
Finally, it will be the Lord Mayor’s banquet soon. With the possibility that there is still to be £3bn+ in bonuses paid out in the City, perhaps now is the time for Gordon to don lounge suit and read the riot act. My guess is that the majority of the public will neither accept nor understand that kind of reward for traders in a system that has failed. That they are to some extent innocent in the process - you can’t blame people for taking advantage of a lax regulatory regime, or for accepting generous bonus schemes offered to them - is beside the point.
‘BA should call itself London Airways in wake of job cuts’
http://www.theherald.co.uk/news/other/display.var.2459308.0.BA_should_call_itself_London_Airways_in_wake_of_job_cuts.php
Good question Mike. I don’t know. If someone’s offering 2% more than everyone else there’s usually a risk attached-and that’s as it should be.
I think this financial crisis will damage Brown and Labour in the short term even though the consensus is that he’s doing OK. It’s not the sort of crisis that gets people rallying behind the leader. Infact the contrary.
Though when the history of this greedy malaise comes to be written I’m pretty sure it’s roots will be traced to Thatcher and she’ll go down in history somewhere close to Chamberlain. Deservedly so in my opinion.
On various forums, savers are praising Brown for getting their money back from the evil Icelandic government. The same people who were castigating him for letting the economy fail are now singing his praises. Maybe Brown saw it as an easy vote winner?
36. The calculation is actually a lot more complex than that and ought to take into account all sorts of things, but on a superficial level, yes, it should be 2/5, not 2/7 (although if expressed as two-sevenths, rather than seven-to-two-on, it would be right!).
Apprehension… with the FTSE expected to open sharply down in a few minutes, it feels rather like being winched up the hill at the star of a big rollercoaster, knowing that there’s a fixed point beyond which the only way is down — for a while at least…
45. Conclusion leading the argument, perhaps?
The failure in the system has been one of inadequate regulation. Once again, Conservatives - including Thatcher - do not support the absolutely free market, not least because it tends to monopoly if left entirely alone. Conservatives believe in a lightly, but adequately, regulated market. I would anticipate Cameron and Osborne making this point fairly forcefully throughout 2009 and 2010, and asking the public who was in charge of the regulation throughout the Labour term of office.
As an aside, and to anticipate a point from Coldstone, Conservatism is at its very deepest level a social, not an economic ideology, with its core objective being the minimising of the risk of social unrest. In that, it differs fundamentally from socialism, which is at its core an economic ideology. As such, it’s entirely consistent with Conservatism to oppose free markets as and when necessary, if failing to do so materially increases the chances of unrest or social breakdown - although that would usually be a short-term policy.
Before we get into the daily updates of the stock markets from around Europe and the States, could I point out that of at least as much significance is the decline in the value of the pound, which seems to have gone almost unnoticed.
FTSE off nearly 400 btw.
45. Roger - “I think this financial crisis will damage Brown and Labour in the short term even though the consensus is that he’s doing OK.”
Agreed.
I simply do not understand why on earth Brown is grinning like a Cheshire cat. I am beginning to think that the man really is a loony.
50. I should say, that figure was from a verbal report on Sky. It seems that not all the stocks are open for trading yet, so it might not be wholly accurate.
Dax down 10%
17
The FSA ’s remit is to protect the stability of Financial markets.
It is NOT to prevent individuals losing money.
So for anyone to quote FSA approval as a means of vetting investments is : wrong.
I recently had an opportunity to put a pile of spare cash in a Far Eastern bank which was offering 18% interest rates. I wouldnt normally touch it but I knew a lot of people who had money with these people and for many years - It all sounded too good to be true. I put in 5k for 1 year - so good so far, then my wife persuaded me to increase it to 10k - she actually wanted to put in 20k but I didnt like the sound of it. Sure enough 6 months later the scheme has gone bust and we are fighting to get our cash back - we will probably get most of our original capital back but have lost opportunities to gain more modest returns elsewhere.
There are three morals here for any investor/gambler (same thing)
1. If it looks to good to be true it probably is.
2. Dont invest money you cant afford to lose
3. Dont put all of your eggs in one basket
45. Change the record. You can’t blame everything on Thatcher. If Michael Foot had got in we wouldn’t be here now.
54 - To be fair, if FSA approval doesn’t mean anything then they shouldn’t be offering it. Most ordinary people looking to put their money somewhere really can’t be expected to appreciate the nuances of who is to be trusted and who isn’t.
55 - I’m really not sure you can compare a 7% rate to an 18% one!
Despite GBs posturing that the world should follow his lead - where to? £ is tanking FTSe is tanking and he is squealing about Iceland!!
McBean is only interested in how secure he is as leader of the Zanus. He’s had a great boost on that score in the last week or so. That’s why he’s grinning like a mong.
50. I should say, that figure was from a verbal report on Sky. It seems that not all the stocks are open for trading yet, so it might not be wholly accurate.
IG Index’s front page shows it down 400 or so - still around 100 points above 3817.9, a closing value below which would mean the index had had its worst five-day fall in percentage terms ever.
FTSE down 10%.
49. David. The public see what’s happening as a chronic lack of regulation by the authorities (see Mirtios’s uncharacteristically excellent post at 28). An international crisis but not one we didn’t have a hand in.
Unfortunately for the Tories-in particular Osborne and Cameron-there is abundant footage of bankers institutes and party conferences where these two implore the Chancellor (Brown) to free business of the shackles of red-tape.
Quite right Roger. Thatcher saved the UK economy and McIdiot has destroyed it. Vote Labour!
ftse below 4000, this is huge!
Hmmm,its that weasel word “guaranteed”. I have always adopted the maxim in private life of avoiding financial products where the returns are “guaranteed”.
With a day to reflect, the present fiduciary rules for public authorities were designed to avoid another BCCI. And they have done that by dividing risk. If they were not in place there would be just about the same amount of public revenue at risk but it would be concentrated in perhaps half a dozen councils, some of whom would be up sh** creek with no-one but the Treasury and the Daily Mail there saying, “I told you so”. Well, actually they didn’t, either of them.
Infinitely more seriously, with a couple of days to reflect, I am becoming increasingly concerned that many of the clunking fist measures put in place on Monday can only be futile attempts to pi** in the wind. I am concerned that they add to our national debt and will make it more difficult to crawl out of the debris when the hurricane has passed in perhaps six months.
If we had massive gold stocks then a proportion could have been sold on Monday to increase liquidity. Oh, shome mishtake surely …
How do you avoid the perils of boom-and-bust, maintain an average growth rate of 8% p.a. over 55 years, and avoid the disaster of the current financial crisis? By planning your country’s economy and building infrastructure, instead of gambling with trillions of dollars of non-existent money.
http://www.youtube.com/watch?v=PqUNd82pYCI
65. Someone asked (on Monday?) if the FTSe would hit below 4000 by Christmas - I thought it would happen by the end of the week but considered it too pessimistic to say so. It’s outrageous!
17 No, Mike has got this one right. The evidence was out there that the Icelandic investments carried a surprisingly high risk from the time they became available in this country.
What is very disturbing about this situation is that financial ‘experts’ were giving these investments high ratings until very recently. I’m sure it would be incorrect to say that these folk are corrupt, but they were either insufficiently skilled or seduced by the hype from such banks. Just shows how deep-seated the problems of the credit crunch are.
66, hey did you forget what the Supreme Leader said when asked by Boulton about this?
Under the Evil Tories we had too much gold, and needed to diversify so we had some assets that were worth less money. It’s obvious really.
I hesitate to ask…. but what’s the current level of the FTSE?
Where are Barclays shares Roger? Any other good tips……
68 - One wonders what more the authorities can do to stabilise the market.
70. I hesitate to ask…. but what’s the current level of the FTSE?
About 3970.
66 - The critical thing to look at is what is guaranteed.
About 40 years ago, a family friend who owns a shop, and who is notoriously careful with his money, saw an advert in a magazine which ran as follows: “Fly killer: 100% guaranteed effectiveness or your money back, £5″ (older PB contributors can reminisce at this point about the time when £5 was really worth something). So he sent off his money.
A couple of weeks later, he got a big parcel in the post. He opened it up to find two bricks, one with a painted A and one with a painted B, and a set of instructions, which ran as follows:
“Place brick A on the ground. Place fly on top of brick A. Bring brick B down on brick A. Your fly is now 100% guaranteed to be dead.”
70 - Last I saw it was 3986.65….
One thing that nobody seems to be saying about the Icelandic saving bank situation is that those who invested with the banks were either stupid or greedy or both.
Or they were trying to spread out their investments among lots of different bank accounts - on the advice of the… er… government, and er… (continued on page 94)
Madasafish - “we’re all Doooooomed” - is the new Ave It!
Top tipster….sadly.
Extraordinary stuff on the stock market. The whizz kids who have been running away with themselves with fancy investment vehicles are now strangling themselves with the same vehicles like credit default contracts which have become so ubiquitious its like some old geezer going into a bookies and backing nags all day because he just likes their names.
The problem is that they will take the economy much further down with them. Forget the fears of recession talk, this just doesnt account for such massive falls. What does contribute just as much is that theres an awful lot of people who deal in computer money who have now realised that its real and are in trouble.
Time to take the markets, suspend trading and tell a slice of the financial ibstitutions that from here on there is nothong new being added beyond measures in place. Any other solutions required is up to them.
73, bugger.
Brown will strain his face his grin will be so wide.
Right, well I’m going to bed.
Try not to let the world end whilst I’m sleeping
72 Stabilise markets? Could follow Russia’s example - and close them….. Get them to put a brown papepr bag on their head and get their breathing under control.
When markets fall 10% financial journalists are allowed by their employers to use the word “crash”
Sorry Mike disagree with your article. For a start its not a direct analogy with betting at all. This was a well recognised regulated bank incorporated in the UK. Of course there is a level of risk in choosing an account but very few people in the UK would see their relationship with their banks as akin to a day at the races.
71. Yes Kas. Keep buying Barclays. They’ll come good. You might have to show uncharacteristic patience though for a Thatcher disciple where ‘get rich quick’ is all that matters.
69 - who was the evidence available to, and was it widely published? Remember that the average punter is not an economist, or a financial whizz - they just look at the best buy tables and follow their nose (and in any case Icesave and others were not always top of these tables). Average Punter didn’t expect that just around the corner was a cataclysmic chain reaction set off by the failing of a significant number of banks.
Average Punter had a lot of trust that banking really was safe as houses. But then it turned out that houses weren’t safe, and so neither were banks. They were wrong in the end, but it was an error in good faith. Of course there are no risk-free investments, but, let’s face it, savings bonds and deposit accounts are widely thought of as the closest we can get to it.
Now that confidence has been shaken. It will take a very long time for banking to be seen as trustworthy again.
IMF: global situation “dangerous”.
Cheers, guys….
84. hahaha
As Camilla Cavendish points out in the Times , the “Financial Services Compensation Scheme which, until last week, stated prominently on its website that Icelandic banks were regulated by the Financial Services Authority (FSA) and that all British money in Iceland was “protected”.
That applies to private investors rather than corporate/local authorities but this is a wider failure than just the investor, the FSA failed again to properly regulate, the credit rating agencies to highlight risk and the British and Icelandic Governments to have proper regulation. The were plenty of signs but even after Northern Rock failed what did the FSA do as regards Icelandic Bank operations in the UK?
63 Roger. Do you really not know the difference between proper regulation and red tape? Is it possible for anybody(even a moron) to be that stupid?
81 - The LIBOR is still spiking no-one is lending anything to anyone. The international authorities need to stem the bleeding somehow.
There are no gainers on the FTSE 100 or FTSE250… eep
88. Nothing, of course. Brown’s FSA is probably the most useless organisation ever created in the financial world.
90 So you’re telling me we just invested £500 billion - and the patient got worse?
79 - I’m not so sure. If this financial crisis, as looks very possible, gets still more protracted, then any ‘bounce’ from Wednesday’s package could turn sour quickly. I’m not predicting that: I haven’t a clue what the immediate political consequences will be - the next few polls will make fascinating reading.
Iagree with Roger for once. I have consistently been astonished that Labourites are spinning this crisis as being a boost for Brown.
Yes he has solidified his position with Labour (which DC will be delighted about) and energised the core but he is still a landslide behind Cameron and it is all downhill for him from here as the recession bites in the “real” world.
Roger - So when should I stop buying? 1.00?
92 FSA = f**king say anything…..(as it was affectionately known in the City)
93 - Pretty much.
63. Not all red tape is the same, and while some areas have been underregulated (those which the government / authorities didn’t really understand?), others have been subject to an excess of paperwork and rules. The distinction is particularly acute between small businesses and large city institutions.
Even so, I take your point that it won’t be difficult for the Labour Party to find some choice quotes that could be taken out of their full context and which Cameron and Osborne could find difficult to explain away. That’s if anyone is prepared to listen to what Labour has to say, and indeed, if it has any money with which to say it.
Morning all
Should be an interesting day once again. I imagine we will mark time until Wall Street opens and let’s see how the session runs from there. The pundits are still frantically saying what a good time it is to buy but no one seems to be listening….
The ideological struggle on the Right goes on as well. On Fox News last night, I watched some GOP congressman in Florida claiming America was now a socialist state and the general tone was that the Government interventions had only made things worse.
You can see the pragmatists lining up against the fundamentalists on the economic right on this one. It’s much less vocal on here but there is an undercurrent that the Government intervention here is somehow “wrong” and that the markets should have been allowed to sort this out via their own more Darwinian mechanisms.
As for the Councils and the Icelandic banks, I commend Kent County Council’s Budget Book to you - Kent spends approximately £2 BILLION per year so £ 50 million isn’t as bad as that. The level of County Council spend is quite diverse - Surrey is around £1 billion while Cornwall is about £350 million. A lot depends on whether larger towns and cities are unitary authorities or not.
Counties like Kent and Surrey have very large education and social service portfolios which bump up the spend. It’s also instructive to see just how little some of these southern shire counties get from the Government nowadays.
It may well be the smaller district councils who will be worst affected.
It’s a sad world when so many people know what “unwinding credit default swaps” means.
The banks and other institutions are not playing their part here. The short term loans are simply being used to circulate money back and forth, not around the system.
“Gordon: not Flash. Just Crash.”
Coming to a poster site near you.
Interesting that even the pink and fluffy creatures of BBC Breakfast were playing the huge losses story together with the clip of Brown’s failing bank “quip”. Utterly toxic…
Total panic, chaos and capitulation today. Lehman’s debt insurance falls due ($450bn) — will anyone have the cash to pay?http://www.ft.com/cms/s/0/fb0866d2-9693-11dd-94fa-000077b07658.html
Capitalists have become capitulists! Perhaps full nationalisation of most banks will be the only way to get money moving in the real economy again. Is this why Gordon is smiling so much?
Look at the end, John Cleese is standing in front of the Kaupthing logo.
Wanna know why? John Cleese did their adverts!
http://uk.youtube.com/watch?v=RKOnYjwNUKg
http://uk.youtube.com/watch?v=sCvIsZ6fHaY
http://uk.youtube.com/watch?v=nc1eRmk7ijc
10% fall in a day is considered a crash, is that right?
I take it that’s only monitored at the close of play?
Unless the US has large falls on opening, I think the FTSE will end up somewhere between 5% & 7% down today.
As might have been expected, the FYSE has bounced back from the opening lows. I may be way off but I seem to remember the FTSE at or around 3500 in the days after Sept 11th 2001 but apart from that I can’t remember it being below 4000 until this morning.
Currently just back over 4000…
At 92, Runnymede said “Brown’s FSA is probably the most useless organisation ever created in the financial world.”
He was wrong to use the word “financial” in that sentence.
95. JH - “I have consistently been astonished that Labourites are spinning this crisis as being a boost for Brown.
Yes he has solidified his position with Labour (which DC will be delighted about) and energised the core but he is still a landslide behind Cameron and it is all downhill for him from here… “
Agreed. This is the beginning of the end of the Brown Tragedy.
109. Yes - I flattered them, I fear.
105 - I doubt it, I think what is needed is co-ordinated efforts from the G7. It may even need another co-ordinated interest rate cut.
105 You are onto something for a title there: “The Unstoppable Rise of Capitualism”
Deep rumbling belly-laughs heard emanating from Highgate Cemetery…
99. David - “That’s if anyone is prepared to listen to what Labour has to say, and indeed, if it has any money with which to say it.”
Nail. Hit. Head.
112. ZIRP all round, please. My bets are on…
Armed Forces details have been lost on a disk… Good grief!
83. Oh I see… is that why I had to have the analogy explained twice?
Brown’s bail out has failed.
I’m still up. How many of you lot are still up, and how many are already up? I’m going up (to bed). It is odd that “getting up” actually means coming down(stairs).
118, I don’t know, maybe it’s too soon to say. I hope so. The alternative is simply unspeakably awful.
not much room for rates to be cut further. its like pushing on a piece of string.
118 - No it hasn’t, but we need co-ordinated effort from everyone else. It is far too early for it to have fully worked.
alex @ 38 Betfair safer because punters post their cash up front?
That might depend on where Betfair deposits these stakes.
121 - UK rates are at 4.5% now so there is plenty of room. US rates are at 1.5% so still wiggle room. Other rates can fall.
119. I suppose it’s about as odd as the odds which say “X/Y” when they actually mean “Y/(X+Y)”.
but everyone’s economies are differently structured. cuts in one place aren’t suitable elsewhere. plus it smacks of panic.
126 - I agree in part but it is one of the few co-oridantable policy tools.
Meanwhile after a brief period of apparently trying to actually tackle the nation’s problems, Labour reverts to type by briefing against the Bank of England…
http://business.timesonline.co.uk/tol/business/economics/article4916708.ece
That’s the way to boost market confidence, eh? What a pathetic bunch of morons.
How long before the Life Insurers become insolvent? That was the worry a few years ago when the markets went sub 4000.
45. Roger - “I think this financial crisis will damage Brown and Labour.. even though the consensus is that he’s doing OK.”
For once I agree with Rogerdamus. I think Brown is getting a very short term boost from Der Kredit Gotterdamerung simply because he looks brooding and pensive and sticks his bottom lip out as if he’s working on a sum.
This affect will wear off. As the recession kicks in (and it’s gonna be a biggie), people will recall what a twat Gordon is, and as they stand in the monsoon of disaster they will remember how he promised an end to rain and drizzle.
Yes, Labour will have a minor poll-boost for a few months. But we are in a phoney war period, like October 1939. Hostilities have been declared, yet life goes on as normal.
But the bombers are on their way, and the incendiaries are being primed. By the depths of winter we will be in the Blitz. That’s when Labour will suffer: because, whatever they say, they ARE partly to blame for the fact that Britain is gonna suffer worse than most other countries.
During the Age of Irresponsibility, Gordon Brown was the Sun King.
101. Its like when every football fan became an expert on the metatarsal, following David Beckhams unfortunate accident.
I broadly agree with Mr Smithson with some reservations
My wife, hardly a finance guru, said to me yesterday something along the lines of “these Icelandic banks were alwyas top of the best rate sleague tables, clear as day there was something dodgy there”
If she can see it, then I would have thought professional advisers could have done as well.
A difficult one though, hard to just see everyone lose everything.
Maybe they could get back their capital with no interest, since it was really the interest which was the gamble, and the capital was reasonably assumed safe?
Off topic (slightly) Where are the tories? Why is Brown getting a free ride?
HEY TORIES - WHY IS YOUR LEADER NOT LAYING INTO BROWN? HE IS THE MAIN CAUSE OF THIS MESS IN THE UK!
The govt’s attempts to bail out the banking sector are doomed to fail, because the potential liabilities of the banks, because of their derivatives exposures, are astronomical.
Barclays’ derivatives liabilities alone are at least £29 trillion.
http://brontecapital.blogspot.com/2008/06/barclays-strange-stranger-and-truly.html
There are huge credit default swap hits coming through following the failure of Lehmans, the Icelandic banks, and others already.
There may be worse to come should the likes of (say) GM or Ford go down.
http://globaleconomicanalysis.blogspot.com/2008/10/you-cannot-patch-busted-dam-with-water.html
Taxpayers cannot be made to underwrite these derivatives: the derivatives’ owners must take the hit and fail. Liquidating the derivatives market must be a first step to stability.
132 - Timing. Not wise until the package was announced. But the gloves should now be off.
134, next PMQs will be very interesting. I hope Cameron hammers Brown.
130. SeanT - “But we are in a phoney war period, like October 1939… By the depths of winter we will be in the Blitz.”
So, the June 2009 Euro/council Elections are going to be Operation Overlord? Then the long march to Berlin begins…
45.”Though when the history of this greedy malaise comes to be written I’m pretty sure it’s roots will be traced to Thatcher and she’ll go down in history somewhere close to Chamberlain. Deservedly so in my opinion.”
Really Roger? She has been out or power for nearly 20 years, and Brown has now been running the economy from No11&No10 for longer than she was ever PM. As others have mentioned up thread, what about the FSA set up by one Gordon Brown, how much does it cost to run it and have we had value for money out of it?
Luckily, there are a few people on here who do remember what the country was like pre 79′. As I said on the previous thread, Labour don’t do government accountability after 1997.
59.”Despite GBs posturing that the world should follow his lead”
Someone linked to his article in the Times, and then I saw the front page, frigging unbelievable! No wait, bigging up his own myth has been Gordon’s modus operandi for years.
the fall in the value of sterling is beginning to manifest itself. we can sell “short” with impunity!
63.”Unfortunately for the Tories-in particular Osborne and Cameron-there is abundant footage of bankers institutes and party conferences where these two implore the Chancellor (Brown) to free business of the shackles of red-tape”
Roger, Roger, who took the job away from the BoE and gave it too the FSA? Reading Tom Bower’s book, I was fascinated by what when on behind the scenes between Gordon Brown and Eddie George back in 97′.
Branson on the telly last night arguing that the Government should guarantee all bank deposits. Leaks that Bush is thinking the same. Ireland has done it, Germany may have. What did our lot do. Spoke about raising the limit from £35k to £50k or even £100k some 12 months ago. BUT DID NOTHING until last week. That is part of the reason we are in a mess.
Err where are the Tories. The Tories best friends are bankers you must give them some time to come to terms with fact that their friends have caused this mess. That and they haven’t got aclue what to do.
The answer is forget about banks they are, or should be, only a lubricant for the economy. The real worry is jobs and businesses - we need to cut interest rates, cut taxes, start building council house now.
137
‘The Thatcher Revolution is now eating its own children’
How Gordon must be ruing not going ahead with Operation Sealion last autumn…thwarted by those plucky boys from the Eton Heir Force.
I actually see Gordon more as Dick Dastardly, forever thwarted in his schemes to get over the winning line. Darling is Muttley, thenot-quite-so loyal side-kick, forever muttering “rassen-frassen-sassen-markets”. Their oh-so-clever schemes invariably end up with Gordon wearing an anvil on his head.
140 - Agree but everyone knows that the guarantee would be torn up and extended in the event that it would kick in.
135.Good Morning. We can’t wait untill PMQ’s to arrive Cameron and Co., should be on every TV screen hammering this big puffed-up, grinning effigy of Brown. Now.
132. Because they - the Tories - are seen as the party of capitalism. So they are nervous of attacking what is seen as a failure of capitalism, as well as a failure of governance.
I agree though. In the end the opposition’s job is to oppose, and there is plenty to oppose. Labour have been in power eleven years, during which time they totally re-regulated the City, allowed in millions of migrants which overly boosted property prices, encouraged an obscene culture of corporate greed (Blair loved billionaires much more than Major or Thatcher), and generally let things rip.
The government is, therefore, partly to blame for our present cslamity. The Tories should be kicking them in the goolies. But for that to work they need a smart proletarian bruiser like David Davis to do the thumping. Not a posho trust-funder like Osborne: no matter how clever he is - angry words about bankers sound wrong in a public school accent.
Cameron should bring Davis back and make him Treasury shadow, or something - then set him on Brown and Darling. The chuckling PM is the Neville Chamberlain of this war. He is ripe for a caning.
keep thrashing around in the dirt………. leftie twat
O/T
“John McCain is the hands-down preference for president among chief corporate executives, according to a recent survey by Chief Executive magazine. Democratic hopeful Barack Obama fared miserably in the survey which showed a 4 to 1 preference for the Arizona senator.
In fact, 74 percent of the 751 CEOs surveyed believed Obama would be a disaster for the country.”
Sounds as if it is in the bag for Obama!
141, yawn. No banker ever given cash to Labour then?
Neither the Tories nor the Lib Dems presided over the weakening of the Bank of England’s regulatory role, the sale of gold at the bottom of the market (pre-announced to maximise losses) and ballooning public sector debt during a prolonged period of growth.
Anyone who thinks that the responsibility for this crisis is somehow going to be linked to the current Conservative leadership or any previous Conservative administration is clutching at some very big straws. If the government tried such a tactic it would look very foolish.
Agreed that the derivatives issue has the potential to wipe everyone out.
that was obviously aimed at coldstone. after 11 years of socialist govt we have a country that is broke, where society is crushed and where the poor are screwed. you must be so proud..
146
Hmmm a Libertarian calling for more regulations, well, well, well!
Now that oil has slumped from $147 to $80, I am awaiting the announcement, from the privitized (the Jewel in Mrs T’s crown) energy companies, that they will be immediately reducing all energy prices by 35%: can’t wait!
Footsy coming back a little, only down 5.96%. Yikes!!!! who would have thought we would saying this a couple of week’s ago.
It’s our Great Leaders idioting GRIN that finally did it.
143. Brilliant.
Austrian stockmarket suspended…