Thursday, 3 May 2012

Gordon Brown triggered global recession, says King

I had to re-read Mervyn King's words in the Telegraph this morning to believe them. Yep, couldn't be clearer.
"From the start of the crisis, central banks provided emergency loans but these amounted to little more than holding a sheet in front of the emperor to conceal the nakedness of the banks. They didn’t solve the underlying problem – banks needed not loans but injections of shareholders’ capital in order to be able to absorb losses from the risky investments they had made. From the beginning of 2008, we at the Bank of England began to argue that UK banks needed extra capital – a lot of extra capital, possibly £100 billion or more. It wasn’t a popular message. .........That bold action (to nationalise RBS and Lloyds) in October 2008 could have happened sooner; bailing out the banks came too late to prevent the financial crisis from spilling over into the world economy. The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession. Over 25 million jobs disappeared worldwide. And unemployment in Britain rose by over a million."
One can actually hear the dripping sarcasm in the words 'That bold action..' in describing Brown's dithering, panic and confusion, and the accusation is clear - if Brown had acted quickly, and boldly, then the global recession may have been averted.

Two things. Up until now we've been told it was the Septics wot triggered it - Fannie Mae and Freddie Mac lending to junk people for junk real estate. Now it seems it was our dear banks, mired in greed, rapacity, obfuscation, fraud and balance sheet distortions. 

Secondly, Brown didn't cause recession. His stupidity may have triggered it, but it was the same greedy, rapacious etc. bankers as above that caused it. 

As Bob Diamond contemplates his £17m bonus this morning, I hope he thinks that 25m jobless around the world is good value.


TheFatBigot said...

I have long believed the problem has always been a very simple one to identify. All economic woes of the last few years are a consequence of money being lent to people who could not afford to repay it. Just that.

Had it not been lent, national GDP would be much lower now than it is today but it would have represented the true state of the national economy.

When unaffordable credit is lent for house purchase it leads to a property price bubble. Those who benefit from the bubble vote to retain it.

When it is lent for equity release it leads to an artificial boost in GDP. Those whose jobs depends on current levels of business being retained vote to retain it.

Once GDP goes up a fall is condemned as a disaster, regardless of the previous rise being, essentially, fictional.

The problem is not what Gordon Brown did once the "ahem" hit the fan, it is what caused so much "ahem" in the first place.

Particularly in the USA banks had no option but to lend to the impecunious because not just government policy but Statute required it.

Our government followed that pattern through regulation rather than law. Of course it led to pitiful Gordon Brown's claims of having ended boom and bust because unsustainable credit led to ever-increasing GDP.

The banks were in error to lend as they did, but they knew they would always be bailed out by the very governments that benefited from the political largesse that accrued from foolish lending.

Gordon Brown was significantly responsible for the current mess but not, in my opinion, in the way you suggest. He was responsible for creating the situation in which the banks came to be bailed out. The bail out made things even worse but the substantive problem comes from what caused the losses in the first place.

DeeDee99 said...

The accusation may be clear to you and readers of this blog, but the tribal numpties who vote Labour, will not even hear it let alone understand it.

And the cabal currently leading the UK Regional Government of the EU seem to find it impossible to pin the tail on a donkey, let alone pin the blame for the banking crisis and recession where it lies.

Barnacle Bill said...

Mr. FB Good morning to you, nice to read one of your well opinionated comments again.

I feel that the Buffty frae Kirkcaldy was at the root of our banking crisis but it goes back to the very begining of nuLabor's rule.

The relaxation of the rules on financial institutions by nuLabor, particularly on fractional reserve banking, led to the financial crisis.

It was just that the Bottler then lived up to his nickname making things ten times worse for us.

Weekend Yachtsman said...

FatBigot has it nailed.

One certain way to stop that happening would have been to have no limited liability in the banking business.

Let the fat cats understand that their whole existence is on the line if their bank fails: the Porsche disappears, the Italian villa is sold, they move into a council house and their kids end up at the local comp.

Then there'll be no more bad loans, you can depend on it.

Of course we are where we are, and this isn't going to happen.

But as a next best thing, I don't think Diamond will be getting his £17m: for once, the owners of his company (ie the shareholders) are flexing their muscles. More of that please.

Anonymous said...

Brown [his claim to fame was a PHD in History] was supposed to be the 'man on the ball'.
An economic genius - well all that was put about by his PR team made up of Ed and Mrs Balls, who were his enforcers and number one fans. Lured in, the British media - even the Daily Mail praised his supposed expertise but as usual with Labour politicians it was a great smoke and mirrors lie and of course all this was encouraged while Bliar was allowed carte blanche to royally ***k up - in tandem with Brown - was allowed to do his own thing.
Balls' PR job was imbibed and the corporate banking sector decided it was all true and the great affair between Gordo and the big banks was consumated in 2001. Though, actually Clinton probably kicked it all off by rescinding the Glass-Steagal ACT a single act of lunacy and who encouraged that.......could it be those same corporate banks and led by Goldman Sachs??
MacBruin's profligacy was central to the implosion in 2008, IMHO, his reflationary budget in 2001 and afterwards the barmy public spending spree MacBruin embarked upon, was one of the main factors in Britain's economic catastrophe of 2007/8.

Exacerbating the problem, what made it far worse was that 'end to boom and bust' man - did encourage a consumer credit bubble, a spending spree which caused the great property bubble, of mad bank lending to anyone who walked in off the street and the buy to let market explosion has kept prices rising [along with whizz kids buying property as investments esp in London] meant unaffordable housing for many new starters, all MacBruin's doings.

All of this was purposefully done, the extended credit - and much of this money is still outstanding, many are in negative equity and still up to their eyeballs in debt - which is still a ticking timebomb for the British economy and the banks. NEXT, Brown's 'off the books' accountancy [PFI etc] and misdirection is still being quantified. His dithering over Northern Crock and the lunatic merger of Lloyds/TSB with HBOS was a political marriage to save thousands of jobs in Labour heartlands and not least in Scotland, But, lamentably with Lloyds, he saddled a good bank with a leg iron, nice one: the Kirkcaldy Steak of Driech.

We are still in the proverbial and one man was largely responsible, he knows it too, hence his retreat from public life and sackcloth and ashes apologia - touring the world to save the poor.

Where is our financial genius these days?
Macavity, was always nowhere to be found.

Peter Whale said...

"BANKRUPTCY" The clue is in the term. If this applied to banks we would not be in the state we are in now. Brown is the greatest bottle job this country has ever seen.

Sean said...

If you die of cancer, you will probably die of multi organ failure, pneumonia ect. The doctor will write on your death cert. Cancer.

First came the trade imbalances with the emergence of Asia, then the capital flows east to west.
The weak points of fiat money and fractional reserve banking were exposed. The bankers and their mad models and other idiotic ideas resulting from these two things are a symptom, not the cause.

We spend an awful lot of taxpayers cash on civil servants from oxbridge and the like to look out for these changes and they utterly failed.

Not one banker, politician or civil servant has been jailed for the biggest cock up in economic history.

Johnm said...

But the cock-up continues. Even under the stewardship of The Great Osbourne. Quite simply; this country is neck deep in debt. The government debt is dwarfed by private debt in a ratio of more than 1:5.
While The Mad Scot may have been asleep at the job people should remember that he has an army of well paid public servants to advise him, doubtless the same ones advising the new George. The same ones paying themselves through their own limited companies to avoid tax. The same ones who will end their employment days working for those same banks.
Fractional reserve banking isn't going away, and its regulation may improve slightly, but they will still be able to lend far more than they have as long as they are allowed to generate their money from thin air.

Scrobs... said...

Oh, nice one JohnM!

I needed the impulse to write, but you said what I feel...!

Meanwhile, real people are doing what they can to get deals done in property - no mean feat while we have this burden.

Far Eastern money is a clue - forget the wasted ones here.

Go for the throat.

TrT said...

I've said it before, people think I'm joking, I'm not.

Certasn high placed staff in the brown bunker and the FSA took their phones off the hook, loced their doors, and hid undertheir desks

Anonymous said...

Certain high-placed staff in the chancellor bunker, employed by us as public servants took their phones off the hook.
Doubtless they will keep them on the hook when their ex-government employment starts, even if only to talk to their still in-gov contacts.
I'm sorry, but the stench of corrupt dealing, in both government departments and politics, is becoming so intense that soon it may be necessary to bury those from who it is being emitted.

Anonymous said...

There would have been no banking crisis. If Northern Rocks directors had all been arrested and charged under the fraud Act (up to 10 years in jail and or an unlimited fine).