Britannia Radio

SKY NEWS   1.10.08
Record Dip In UK Manufacturing

Britain's manufacturing sector shrank in September at the fastest 
rate since records began, latest figures show.


Disastrous figures reinforce fears Britain has entered recession

In the fifth consecutive month of contraction, levels of output, new 
orders and employment registered unprecedented declines.

The figures come a day after the Office of National Statistics 
confirmed that the UK economy failed to grow in the second quarter.

They reinforce expectations that Britain has entered its first 
recession since the early 1990s and boost expectations that interest 
rates could be cut as soon as next week.

The latest purchasing managers' index (PMI) for the industry showed a 
reading of 41 - where a score below 50 indicates contraction.

It is the worst result in the 17-year history of the survey.

Investec analyst Philip Shaw expected the Bank of England's Monetary 
Policy Committee to take the possibility of a rate cut even more 
seriously after the disastrous results.
"I'm astonished by the scale of the collapse in the PMI this time 
around," he said.
"Clearly manufacturing surveys have been negative but this takes it 
onto a new level."
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TELEGRAPH   1.10.08
Why propping up banks will not rescue a debauched financial system
Confession time. As 228 Representatives in Congress voted against 
Hank Paulson's bail-out plan on Monday,   I was cheering them on.

By Jeff Randall


At last, there were public figures prepared to reject the political 
and financial blackmail of a debased White House-Wall Street elite.

This is an unfashionable view; it runs counter to The Daily 
Telegraph's editorial line. But the hard-sell of President Bush and 
the US Treasury Secretary felt too much like the pressure patter of a 
door-to-door hawker. Their message was crude: "Trust us. You are in a 
terrible place. Only we can get you out of this mess. No need to 
check the details. Hurry now, or it will be too late. Here's a pen. 
There's the dotted line. Just sign."

But with the President's ratings so low, few would let him leave the 
House with anything more than small change. Congress asked, not 
unreasonably: "If you guys know so much about banking, how come we 
are in such trouble?"

Having spent most of the year telling America, contrary to mounting 
evidence, that the US economy was just dandy, Mr Bush's credibility 
is threadbare. When making statements, he's beginning to look as if 
he doesn't even believe himself. As for Mr Paulson, his long 
association with the jackpot culture of Goldman Sachs is, in the eyes 
of many outsiders, a gilded millstone.

Predictably, the refuseniks have been pilloried as ill-informed 
nihilists. They have been lambasted for failing to understand the 
consequences of their actions. They are, according to the Big Bail-
out Brigade, condemning the rest of us to be buried alive in the 
rubble of a disintegrating banking system.

Try a different take. Yes, the West's financial infrastructure is in 
severe distress. Yes, more banks are going to crumble. Yes, there 
will be a recession. But allocating $700bn (it would almost certainly 
turn out to be more) to a clean-up programme for toxic assets, in 
effect socialising the poison of private greed, has no merit other 
than to delay the inevitable. No amount of federal cash can rewind 
the X-rated horror video.

There is a conspiracy of bankers and politicians whose self-interest 
is masquerading as sophisticated policy. They want us to believe that 
they have the keys to salvation. I have not seen a scrap of evidence 
to confirm this.

There will, of course, be a renewed effort in Washington to push 
through a package of national deliverance. Concessions will be made. 
The US taxpayer will be offered improved terms. And, having made 
their point, having stood up for "traditional American values", some 
of the naysayers in the House of Representatives will cross over, 
enabling a deal to be done. Their consciences will be salved, but the 
crisis will not be solved.

Meanwhile, in Britain, the ban on short-selling bank shares has done 
nothing to make them more attractive to investors. Having blamed 
hedge funds for driving down the price of supposedly healthy 
businesses, officials must be at a loss to explain why bank shares 
keep falling.

Halifax-Bank of Scotland dropped another 14pc yesterday to 122p. 
There is now a yawning gap, about £3bn, between the offer made by 
Lloyds TSB and HBOS's stock market capitalisation. This is the share 
price's way of telling us that it doesn't think the takeover is going 
to happen.  [one commentator, however,  is saying that it is the 
banning of 'short-selling' that is causing HBOS to fall as otherwise 
'arbitrageurs' would even the two bank prices into a coherent whole, 
as has usually occured in the past -cs]

Both boards insist the deal will go ahead, but shareholders may have 
other ideas. Which is a shame, because the creation of Lloyds-TSB-
HBOS would help perform the much-needed service of consolidating a 
bloated industry, clearing out thousands of unwanted bankers, and 
ridding our high streets of too many branches. It baffles me that 
we're closing Post Offices (2,500 out of 14,000 to go) and yet we 
have a multiplicity of banks.

I recently visited Kingston-upon-Thames, where there is a blight of 
banks in the centre. On one street alone, there were five or six. I 
checked online and discovered that in this one wealthy town there are 
three Barclays, two HSBCs, plus branches of Royal Bank of Scotland, 
Halifax, Cheltenham & Gloucester, Alliance & Leicester, Northern 
Rock, Bradford & Bingley, Lloyds TSB, Co-operative Bank, Abbey, 
NatWest, Household Bank, and Beneficial Finance - I may have missed a 
couple.

This, perhaps, will surprise you, but traditional banking - 
collecting retail deposits and making loans to ordinary customers - 
is barely profitable. Compared with the potential gains from a day at 
the currency-swap races, or a night in the derivatives casino, 
current accounts are cold potatoes. That is why bonus-hungry 
executives, at what we used to think of as boring banks, were so keen 
to spin the red-hot wheel of fortune.

In these troubled times, protecting customers, especially depositors, 
is the right thing to do. The Government should extend the guarantee 
it has given to Northern Rock to all bank deposits. Beyond that, 
however, Britain's over-banked economy needs a Malthusian cull.