Friday, 16 October 2009

The new asset bubble

Simon Jenkins' polemic against the government's mismanagement and inaction as the bankers are creating a new asset bubble is well worth reading.

What did we expect? Bankers are not Mother Theresa. Over the past year taxpayers have given them half a trillion pounds in cash, loans, shares, lucre, dosh, quantitative easing, whatever, with not a string or condition attached. We knew, or at least some of us did, what they would do next.

They would not give the money back. They would certainly not lend it to collapsing manufacturers or high street retailers, whom the government had refused to help. Instead they would pay off the gambling debts they had run up from money previously entrusted to them by the public as depositors. They would spend the rest on bonuses, houses, Porsches, yachts, brothels (says the Guardian), Cotswolds farms, commodity shares, bonuses, bonuses and yet more bonuses. After a while, you just cannot get rid of the bloody stuff.

I've said we should have let Northern Crock go bust. I've said we should have separated retail banking and the transfer network from buccaneer banking and be prepared to let the gamblers go bust without a penny of State aid. This could have been done over the Summer. Now, as those gilded fools are building yet another unsustainable asset bubble that will burst in due course, there is no recourse, nothing left, with which to bail them out again. And this time they risk taking the whole of the retail banking system with them. Jenkins says;

The answer must lie in their personal circumstance. Those advising Brown and Darling in Downing Street, such as Lord Myners, Lady Vadera, Lord Turner and John Kingman, were all past or present bankers, or friends of bankers. When they leave public life they are likely to work for a bank.
You. damned.bloody.fools. It will be lamp posts and piano wire next time around.


Guthrum said...

Agree with every word.

The flotsam that pass for the political elite see Banking as an industry in itself, but immune from insolvency because they deal in money.

The failed banks should have been broken up to produce more competition, not merged to create less.

Blue Eyes said...

Is there anything that individuals can do to hedge against the inevitable?

Letters From A Tory said...

I read in the FT recently that since quantitative easing began to pump more money into the economy to the tune of well over £100 billion, the money supply has increased by 0.2%.

Yes, 0.2%.

Basically, the banks kept the money for themselves to recapitalise and businesses have seen precious little of taxpayers' cash.

Elby the Beserk said...


I'm no economist, but I gather that what QE has loosened is mortgage lending. Hence the recent rise in house prices. Given that rising house prices constitute the Prime Moron's only economic policy, I have no doubt that QE will continue,so that the "economy" will appear to be in good shape come the election.

We're doubly fucked now, for as Raedwald points out, we can't bail them out again, as there is nothing to bail them out with.


We're thinking off heading off to Ireland. May be heading for 3rd world status, but at least the government there aren't all over you like a rash.

Krauser said...

Total myth that credit = prosperity. Don't confuse increased supply of the trading unit (money/credit) with an increased supply of the value traded (goods/resources). Wealth can only be created by increases in productivity.

Budgie said...

I must be having a 'turn' - I agree with the post and the comments, so far.

What can the little man do but stock up on food? I cannot see any salvation in our odious, sordid, rotten, thieving, incompetent government and parliament.

Bill Quango MP said...

Banker profits are the fastest way for the government to get its money back.
Banker's create money from nothing, from thin air.
Far better for tax receipts to let bankers run riot selling money and insurance to each other than trying to flog Leyland cars to the masses.

Shocking that this continues. But then it has, unchecked, since a few weeks after the crisis.
The government has had its chance. It can't control the money. It can't even control the bonuses.

Anonymous said...

The way I see this may be a tad controversial. I don't really mind the bonuses, its the risk strategies that deliver the bonuses that I object to - its the risky inter-bank "product portfolios" that screwed us up.

If (and only if) bankers can make money from a range of products thay the man in the street can understand, then, when the profits come (if indeed they do) they can have their bonuses.

Two things are for sure though. Firstly, the best way to get our money back is to sell the governments (our!) share purchases at a profit. That could make us tens of billions that will come back into the coffers and hopefully (if managed by the Conservatives!) pay down a chunk of the burgeoning public sector debt. Secondly, it was always and forever this governments intention to let the banks run riot with risky, and largely unregulated, derivative products. Why? Because it was the huge "profits" that created the huge tax revenues that funded NuLabour's bloated political class - all the additional 618,000 of them that we see today in "non-jobs". We need these banks to come back into profit on the international stage, and at the same time we need a change of administration to ensure that the sale of shares and revenue receipts are spent wisely alongside a massive reduction in the size of the state.

Coney Island.

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