Those are not words we often use in the same sentence on this blog but fear not: this posting is not about British journalists but about an extremely brave Russian (well, half Chechnyan) lady who spoke this evening at thePushkin House. According to Bloomberg, the Group of Seven major nations is unlikely to adopt Britain's proposal to guarantee lending between banks when it meets today, a G-7 official told reporters in Washington. A useful overview on the current status of deposit guarantee schemes in EU member states. Interestingly, the schemes are posted under the heading "state aid". In The Financial Times today, Alistair Darling, our beloved and revered chancellor, has penned his thoughts. As he toddles off to Washington, he tells us: Via Reuters:Saturday, October 11, 2008
The blind will not see
You really have to give it to Charles Moore in his column today. He has really excelled himself – in his blind, vapid, malign stupidity. It transcends all his previous effortsand stands as a towering monument to the blindness of our political classes (of which he is a fully paid-up member).
Compare and contrast – first Charles Moore:…the fact that the British authorities are able to put together a huge rescue package with the banks is a sign that our political condition is not as weak as we think. The same can be said of the Paulson plan in America. It has become commonplace to say how appalling it was that Congress argued over it for a week. Not at all. The elected legislators were duty-bound to ask difficult questions about what looked like the biggest transfer of wealth from relatively poor taxpayers to rich bankers ever undertaken.
Now read this, extracted from our earlier piece, contrasting events in the US with what happened over here. "Over here, what do we see?" I write:
The debate happened. Compromises were made. The Bill passed. The system worked. I hope Parliament will submit the Brown/Darling plan to the same level of scrutiny and correction, and then agree it.
In both cases, the countries involved are sovereign democracies. They have electoral legitimacy, proper institutions, the rule of law, and the capacity to act.As the crisis develops, the complaint arises of government "dithering" – reacting to events rather than taking the initiative with a pro-active strategy. The main action we see is a series of meetings with the European "colleagues" behind closed doors, poorly reported and completely misunderstood.
This indeed is the politics of denial and this is what is blighting our attempts to bring any rationality to the debate about the European Union. It is not that the evidence is not there – simply we are doomed by this wilful determination of our political classes to shut their eyes to reality and pretend everything is normal … nothing has changed.
Then, after the final, key meeting of Ecofin on Tuesday, we see action taken. Parliament is not consulted. There is no debate. Parliament is simply told what is going to happen. It is then allowed to discuss the issues. But there is no vote, no approval. None is needed. Your government has spoken – the government of Europe.
Therein lies the difference – on the one hand in the United States we see, with all its imperfections, a functioning democracy in action. Here, we see a cabal of rulers working behind closed doors, coming out into the daylight only to inform us what they have done and how much it is going to cost us.
Repeat after me, they say: "we are a sovereign democracy … we are a sovereign democracy … we are a sovereign democracy …". "Now, off you toddle, little man," they say in that infuriating, patronising way they have got down to such a fine art: "nothing has changed."
COMMENT THREADSmoking gun II
This blog has discovered incontrovertible evidence that the EU commission has known for at least a year that there have been disastrous "shortcomings" in its system of financial regulations. These include the measures for the application of the "mark to market" rules which lie at the heart of the current banking crisis.
The commission has also known that changes to the system were urgently needed to prevent a repeat of the "market turmoil" of the summer of 2007. Yet, despite a massive effort to produce new rules, it has only just been able to deliver drafts of the vitally needed changes.
In a carefully orchestrated deception plan devised to avoid having to take responsibility for the flawed rules that have done so much damage, it has slipped changes, unnoticed, into the regulatory system. The commission hopes to have new laws approved by April 2009, too late to affect the current crisis and perhaps too late to save much of the financial industry.
We are putting the final pieces of this complex story together and hope to publish in full by mid-late morning.
COMMENT THREADFriday, October 10, 2008
Courageous journalism
Read more on EU Referendum 2.Market value
At the end of the day's trading, in accordance with mark to market rules, the Group was re-named G-2.73, reflecting its current market value.
COMMENT THREADThat bad!
From The Times website. See the first line under "related links" - I only read that line. I should, of course, have read the whole thing, but you know how it is!
I know things are bad, but are they that bad?
COMMENT THREADThe driver quits the train
The real experts in the business seem to be saying that the thing to watch as this crisis unfolds is the inter-bank lending. It is, after all, the seizure of the credit market that is at the heart of the problem.
In this context, an index that, if we were honest, very few of us knew much about even a few days ago, suddenly assumes crucial importance – that is the Libor (London interbank offered rate).
If Brown's EU-approved bank rescue package starts to work, it is here that the first signs will be seen. Even before the package is fully up and running (which it is not yet) one would expect it to have a "halo effect" on that magical mystical creature "sentiment".
But bankers, when it comes down to it are an unsentimental lot – brutal, in fact. We saw yesterday that the immediate response was to mark up slightly the crucial three-month rate. And so it is again today.
In a headline that is horribly understated, Bloomberg reports: "Libor for three-month dollars rises as cash injections misfire."
That one word "misfire" is a deadly shorthand for saying that Mr Brown's (EU-approved) rescue package definitely isn't working. The rate climbed again today, this time by seven basis points to 4.82 percent.
"Central banks are trying to supply liquidity, and in many cases it just comes back to them," says Robin Marshall, director of international fixed income in London at NCL Smith & Williamson – cited by Bloomberg. "There's a real problem in getting people to put their money to work. The fear of counterparty risk is so intense that the only bank prepared to lend at the moment is the central bank," he adds.
"You just don't know whether the person you're lending to is going to be the guy that has the weak balance sheet and is going to fall over," says Sally Auld, an interest-rate strategist at JPMorgan Securities Australia Ltd in Sydney. "What markets are telling you is that it doesn't matter what central banks and governments do."
That last comment says it all. To a very great extent, governments seem to be bystanders in this unfolding crisis, the adverse sentiment being driven by the increasing realisation that they have lost control.
For those of us who are rank amateurs in the technicalities of this field, that itself is the most worrying thing. You don't have to be an expert to realise that, when the train driver leaps from the cab of the runaway train, we're all in trouble.
COMMENT THREADState aid
When, then, is state aid – which is illegal unless authorised by the commission – not illegal?
COMMENT THREADMr Darling writes
We need to shift the IMF's focus towards surveillance of the links between the financial sector and the real economy. It will identify risks in advance, co-operate with the Financial Stability Forum to design policy and regulatory responses and strengthen links between ministers, in the Group of Seven and beyond, to ensure effective follow-up. The world economy is changing. Sticking with the solutions of the past is not an option. Now, more than ever, we need new ideas.
"…It will identify risks in advance"?
Bit late for that isn't it? Or is Darling thinking in terms of "better luck next time"?
What's the market in soup kitchen futures like?
COMMENT THREADQuotes of the day
"This is panic... There's nothing left for us to trust," said Takashi Ushio, head of investment strategy at Marusan Securities. "Investors are scurrying to convert to cash. A lack of confidence is coupling with panic."
And, from Warren Buffett in 2002: "In fact, the reinsurance and derivatives businesses are similar: Like Hell, both are easy to enter and almost impossible to exit."
COMMENT THREAD
Saturday, 11 October 2008
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