Britannia Radio

Not a cheering prospect outlined here.  As far as Britain is 
concerned Brown  appears to be leading us in a totally wrong 
direction and without much decisiveness there as well!

xxxxxxxxxxx  cs
========================
TELEGRAPH   9.2.09
Bond market calls Fed's bluff as global economy falls apart
Global bond markets are calling the bluff of the US Federal Reserve.

By Ambrose Evans-Pritchard

The yield on 10-year US Treasury bonds - the world's benchmark cost 
of capital - has jumped from 2pc to 3pc since Christmas despite 
efforts to talk the rate down.

This level will asphyxiate the US economy if allowed to persist, as 
Fed chair Ben Bernanke must know. The US is already in deflation. 
Core prices - stripping out energy - fell at an annual rate of 2pc in 
the fourth quarter. Wages are following. IBM, Chrysler, General 
Motors, and YRC, have all begun to cut pay.

The "real" cost of capital is rising as the slump deepens. This is 
textbook debt deflation. It was not supposed to happen. The Bernanke 
doctrine assumes that the Fed can bring down the whole structure of 
interest costs, first by slashing the Fed Funds rate to zero, and 
then by making a "credible threat" to buy Treasuries outright with 
printed money.

Mr Bernanke has been repeating this threat since early December. But 
talk is cheap. As the Fed hesitates, real yields climb ever higher. 
Plainly, the markets do not regard Fed rhetoric as "credible" at all.

Who can blame bond vigilantes for going on strike? Nobody wants to be 
left holding the bag if and when the global monetary blitz succeeds 
in stoking inflation. Governments are borrowing frantically to fund 
their bail-outs and cover a collapse in tax revenue. The US Treasury 
alone needs to raise $2 trillion in 2009.

Where is the money to come from? China, the Pacific tigers and the 
commodity powers are no longer amassing foreign reserves ($7.6 
trillion). Their exports have collapsed. Instead of buying a trillion 
dollars of extra bonds each year, they have become net sellers. In 
aggregate, they dumped $190bn over the last fifteen weeks.

The Fed has stepped into the breach, up to a point. It has bought 
$350bn of commercial paper, and begun to buy $600bn of mortgage 
bonds. That helps. But still it recoils from buying Treasuries, 
perhaps fearing that any move to "monetise" Washington's deficit 
starts a slippery slope towards an Argentine fate. Or perhaps 
Bernanke doesn't believe his own assurances that the Fed can extract 
itself easily from emergency policies when the cycle turns.

As they dither, the world is falling apart. Events in Japan have 
turned deeply alarming. Exports fell 35pc in December. Industrial 
output fell 9.6pc. The economy is contracting at an annual rate of 
12pc. "Falling exports are triggering a downward spiral of 
production, incomes and spending. It is important to prepare for 
swift policy steps, including those usually regarded as unusual," 
said the Bank of Japan's Atsushi Mizuno.

The bank is already targeting equities on the Tokyo bourse. That is 
not enough for restive politicians. One bloc led by Senator Koutaro 
Tamura wants to create $330bn in scrip currency for an industrial 
blitz. "We are facing hyper-deflation, so we need a policy to create 
hyper-inflation," he said.

This has echoes of 1932, when the US Congress took charge of monetary 
policy. We are moving to a stage of this crisis where democracies 
start to speak - especially in Europe.

The European Central Bank's refusal to follow the lead of the US, 
Japan, Britain, Canada, Switzerland and Sweden in slashing rates 
shows how destructive Europe's monetary union has become. German 
orders fells 25pc year-on-year in December. French house prices 
collapsed 9.9pc in the fourth quarter, the steepest since data began 
in 1936. "We're dealing with truly appalling data, the likes of which 
have never been seen before in post-War Europe," said Julian Callow, 
Europe economist at Barclays Capital.

Spain's unemployment has jumped to 3.3m - or 14.4pc - and will hit 
19pc next year, on Brussels data. The labour minister said yesterday 
that Spain's economy could not "tolerate" immigrants any longer after 
suffering "hurricane devastation". You can see where this is going.

Ireland lost 36,500 jobs in January - equal to a monthly loss of 2.3m 
in the US [or 547,000 here in Britain -cs] . As the budget deficit 
surges to 12pc of GDP, Dublin is cutting wages, disguised as a 
pension levy. It has announced "Rooseveltian measures" to rescue the 
foundering companies.

The ECB's obduracy has nothing to do with economics. It fears zero 
rates as a vampire fears daylight, because that brings the purchase 
of eurozone bonds ever closer into play. Any such action would usher 
in an EMU "debt union" by the back door, leaving Germany's taxpayers 
on the hook for Club Med liabilties. This is Europe's taboo.

Meanwhile, Eastern Europe is imploding. Industrial output fell 27pc 
in Ukraine and 10pc in Russia in December. Latvia's GDP contracted at 
a 29pc annual rate in the fourth quarter. Polish homeowners have had 
the shock from Hell. Some 60pc of mortgages are in Swiss francs. The 
zloty has halved against the franc since July.

Readers have berated me for a piece last week - "Glimmers of Hope" - 
that hinted at recovery. Let me stress, I was wearing my reporter's 
hat, not expressing an opinion. [He should have made clear the 
distinction!! -cs]  My own view, sadly, is that there is no hope at 
all of stabilizing the world economy on current policies.
========================
  ECONOMIC and other   'Shorts'   9.2.09

TIMES
=CBI calls for easier credit as job cuts grow
'Day by day, constrained credit is damaging our economy,' Richard 
Lambert, Director-General, tells the Government
=We won't abandon savers, says Mervyn King
Mervyn King, the Bank of England Governor, argues radical rate cuts 
will help speed the economy out of recession

TELEGRAPH
=Alistair Darling faces ridicule over City bonuses review
The Chancellor was ridiculed after it emerged that the Treasury's new 
review into City bonuses will not be completed until the end of the year
=Barclays shares jump on £6.1bn profits
High street bank Barclays reports £6.1bn profit in 2008 and is 
reviewing how it pays bonuses in light of the financial crisis.
=Nissan axes 20,000 jobs
Japanese carmaker takes action as first loss in a decade looms


FINANCIAL TIMES
=Bonuses halve at Barclays
Investment bank 'extremely strong
=UK companies fear worst is still to come
CBI calls for urgent government action
=Bank bonus row escalates
Alistair Darling vowed to impose pay restraints across the banking 
industry but he faces political pressure after admitting he would not 
stop Royal Bank of Scotland paying out hundreds of millions of pounds 
in bonuses this year
=BoE to deploy £50bn to get credit flowing
The Bank of England's scheme comes not a moment too soon for hard-
pressed businesses as an employers' survey shows that 59% of 
companies forecast continuing deterioration in access to credit

BBC ONLINE
=Brown talks tough on bank bonuses
The culture of rewarding bankers for failure and short-term gain is 
being "swept away", Gordon Brown says  [Try telling Darling! -cs]
=Job prospects in 2009 'alarming'
Redundancies among UK firms look set to grow as the UK labour market 
picture deteriorates, the CIPD says

=========================
POLITICS HOME    9.2 09
COMMENTS
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
GMTV, ITV at 06:55
Cable: Bankers lucky just to be in work

Vince Cable, Liberal Democrat Treasury spokesman

Mr Cable called for the government to take a very tough line with 
bankers over bonuses arguing they should consider themselves lucky to 
be in work.

"There's an excess of bankers with more bankers around than banking 
jobs - they're lucky to be in work," he said. "The government has got 
to be very tough with these people and put a freeze on this".

He said that the system of bonuses must be changed so that rather thn 
cash payment, bonuses are linked to the performance of a company.

"In the longer term if you have incentives  built into the banking 
then yes they should be paid in deferred shares," he said.

Mr Cable also called for reforms to the banking sector so that 
"normal" lending such as mortgages is separated from the more risk 
based investment banking aspects.

"One of the things that has got to come out of this crisis the 
trading aspects the investment banking aspects have got to be 
separated out," he said. "The gambling principle must not be allowed"
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
GMTV, ITV at 07:14
Cooper: Anyone in favour of sweeping bonuses is "living on another 
planet"

Yvette Cooper, Chief Secretary to the Treasury
[She talks the talk. but as for action ? -cs]

Ms Cooper said that restrictions on bonuses were necessary to restore 
trust in the banking system.
"Anybody who thinks the way to restore that is to have sweeping 
bonuses is just living on another planet," she said, arguing that 
such bonuses were "based on idea that these banks were creating lot 
of value they turned out not to be creating at all".
She also defended the government's position on bonuses, stating that 
the government review will deal with bonuses in a broader way than 
the action taken in the US.
"The Obama position is just for future. We are trying to deal with 
bonuses right now for this year," she said.
She added: "What about the banks that are not getting government 
money but have also been part of the wider system? That's why we we 
need this longer term view"

07:35 Today, Radio 4
Later Ms Cooper said that the government would look at the bonuses 
that banks are legally obligated to pay, but that bankers had a moral 
responsibility to consider whether they merited bonuses.
"There are legal obligations they can't get out of in some cases, and 
that needs to be looked at," she said. "I think there is a moral 
responsibility on these bankers even if they are legally entitled to 
take bonuses
She added: "Senior executives need to take responsibility and 
consider whether they should be taking bonuses".

08:15 Sky News
Later, Ms Cooper added that Treasury officials: "cannot have rewards 
for failure either".  She said there were differences between 
Whitehall and the private sector but that, in all cases, bonuses 
should be reserved for those  who do outstanding work.

She also said that any future deals with banks asking for more funds 
would include agreements on bonuses.

08:35 BBC News

Later Ms Cooper said she agreed with John Prescott's attack on bonus 
culture arguing that the anger felt by many must be taken into 
account when determining the level of bonus payments.
"He's right. Frankly everyone's angry there is a real sense of 
anger," she said. "People are right to be angry, that anger has got 
to be reflected in the decisions that are taken and that's why 
bonuses have to be curtailed"
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
Brown: Moral duty to reform global financial order  [He too,  talks 
the talk. but as for action ? -cs]

Gordon Brown has said he feels there is a "moral duty" to reform 
international economic institutions to tackle the current crisis.
In a speech this morning, the Prime Minister said that while he 
understood the fears of those seeking protectionist measures, 
international co-operation was the only way to secure a "better, 
fairer, more sustainable global financial order".
"We need to avoid the protectionism the new mercantilism, the 
economic nationalism that is bound to be the result of us failing to 
deal with the problems in the countries we are talking about," he said.
"We have got to be able to tell people by policies we pursue that 
protectionism is not the answer [and] show people that international 
institutions can work well. We have got to have national policies co-
ordinated in the international arena to work".
He added: "I believe we have a moral duty to put all of our effort 
into building a better, fairer and more sustainable global financial 
order".
The Prime Minister said that said that this must also include action 
to tackle the bonus culture in financial institutions, adding that 
the government would act aggressively, to tackle "rewards for failure".
"We are leading the way America, France and other countries too in 
sweeping aside the old short-term bonuses culture in the past," he said.
  He added: "The old short-term bonus culture is gone, there are no 
rewards for failure but penalties for failure and in the future there 
must be rewards for sucess but long term sustainable success".
=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
Cameron sets out plan for "Economic Recovery Committee"

David Cameron has announced that he will set up an "Economic Recovery 
Committee" combining both members of shadow cabinet and business 
leaders to look at plans for the future of the economy.

Members will include:

David Cameron (Chairman) George Osborne, Shadow Chancellor Ken 
Clarke, Shadow Business Secretary Theresa May, Shadow Work and 
Pensions Secretary David Willetts, Shadow Universities, Innovations 
and Skills Secretary Phillip Hammond, Shadow Chief Secretary Oliver 
Letwin, Chairman of the Policy Review William Hague, senior member of 
the Shadow Cabinet, will also attend.

External Members, who serve in their personal capacity: Sir 
Christopher Gent Sir Peter Middleton Baroness Sheila Noakes Sir Brian 
Pitman Sir James Sassoon Simon Wolfson Eric Schmidt will be the 
International Business Adviser.