Two more pieces this evening from a bumper crop today with a tail-piece as well
Firstly Darling is distancing himself from Brown. The Ipsos MORI poll in Scotland shows him losing his seat so he no longer stands to benefit by sucking up to Brown!
Then A.E-P looks outside Britain and sees that we’ve not seen the half of it yet. (not to speak of the German bank losses which the Germans are so anxious to keep hidden till after their election on 27/9/09 )
Finally the Diary wraps it up amd tells us to put the bubbly away for another day!
Christina
SUNDAY TELEGRAPH 13.9.09
1. Daring Darling finally puts Brown in his place
Liam Halligan
Having often berated Alistair Darling, this column would like to say, "Hats off". Our erstwhile "glove puppet" Chancellor is now biting – or at least nipping – the hand that controlled him.
Gordon Brown drones on about "Labour investment versus Tory cuts". No matter that the UK budget deficit will equal 12pc of GDP. So what if we're set to borrow a staggering £200bn each year for the next three years.
The Prime Minister's solution is to keep spending willy-nilly and paint anyone who asks questions as immoral. Yet it is Brown that is immoral. Our so-called leader is at risk of wrecking the UK's credit rating – a cataclysmic outcome that would result in genuine austerity budgets and annual debt service costs approaching what we spend on the NHS.
By racking up enormous debts, on top of those he created as Chancellor, Brown is not only hindering UK recovery, he's also trying to scare us into stealing off our children and grandchildren, so he can use the proceeds on counter-productive policies designed to cover-up his previous mistakes.
The British public isn't fooled. The vast majority of us – even public sector workers – know we've been living beyond our means. Having taken his cue off Brown for much of his adult life, Darling is now speaking up. "We have to focus on the limits of what government can do and areas where we can step back," the Chancellor said last week.
As Darling broke new ground, George Osborne followed – pledging for the first time to provide "specific numbers" on spending cuts before the next election. The Shadow Chancellor also confirmed that lower spending, rather than higher taxes, would be the "focus" of Tory efforts to get our public finances under control.
It's all so incredibly timid, though. We desperately need a no-holds-barred debate on fiscal constraint – and fast, before our creditors rebel. Yet Darling is still speaking in code and the Tories seem to think they can solve the biggest fiscal crisis in our peace-time history by culling a few civil servants and raising the price of a salad in the MPs' canteen. [That’s not fair and somewhat ‘cheap’ . Osborne says he’ll give detailed figures for cuts when the election is called -cs]
We can't spin our way out of this one. The UK needs to take very substantial steps to cut spending – and the general public knows it. If our top politicians got out more, and hadn't spent their entire lives in politics, they'd have grasped that already.
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•Liam Halligan is chief economist at Prosperity Capital Management
2. Lehman is a footnote in the great East-West globalisation crisis
You can see why markets and governments both like to blame Lehman Brothers for the "Great Contraction". Such wishful thinking shields investors from the nasty reality that deeper forces are at work: it absolves officialdom from its own destructive role in fixing the price of credit too low for 20 years, luring us into debt.
By Ambrose Evans-Pritchard
As my colleague Jeremy Warner puts it, Lehman no more caused the economic convulsions of the last year than the assassination of an Austrian prince caused the First World War. There was the little matter of a rising Germany then, and a rising China now. Both scrambled the international system, albeit in different ways.
The 48 hours that killed Lehman and AIG – and would have killed Merrill, Morgan Stanley, and Goldman Sachs within a week if Washington had not stepped in – merely brought to a head the inevitable exhaustion of a global order in which the West chokes debt, and the East chokes on export capacity.
As of last week, the ABX index of sub-prime mortgage debt showed that AAA-rated securities from early 2007 were trading at 28 cents on the dollar – AA was at 4 cents, near all-time lows. No one can say that $2 trillion (£1.2 trillion) of sub-prime and Alt-A debt is still trading at panic levels, exaggerating losses. The dust has settled. What we can see is that creditors will never recoup their money.
The housing crash has tipped 15m US home owners into negative equity. A third of sub-prime mortgages are in default. Some 7.8pc of all loans backed by the Federal Housing Administration are in foreclosure or 90 days in arrears. This is why the US Treasury had to seize Fannie Mae and Freddie Mac, the $5.3 trillion pillars of US housing. It is not a liquidity crisis. It is a bankruptcy crisis.
Foreclosures reached 358,000 in August alone. More Americans are being evicted each month than during the entire Depression year of 1932. This is not to pick on America. Variants of the bubble occurred across the Anglosphere, Scandinavia, Holland, Club Med, and east Europe. Defaults will hit with a lag in Europe, but hit they will. The IMF expects global banks to lose $2.5 trillion by next year. So far they have confessed to $1 trillion.
We know why the bubble occurred. Call its Greenspanism. Central banks rescued assets each time there was a hiccup, but let booms run unchecked. They pulled "real" rates ever lower, creating addiction to monetary stimulus. Larger doses were required with each cycle, until we hit zero, and it is still not enough. Debt burdens rose to records across the OECD.
Couldn't they see that this was cheating: stealing from the future? No, they were seduced by "inflation targeting" – watch goods, ignore assets – just as cheap imports from China rendered the doctrine obsolete. It always takes ideology to consummate massive error.
Asia in turn caused a global bond bubble by accumulating $5 trillion in reserves (a side effect of holding down currencies to gain export share). Long-term rates collapsed too. The global credit bubble was complete.
The Great Game can continue only as long as deficit countries – currently, US (-$628bn), Spain (-$109bn), Italy (-$62bn), France (-$58bn), Britain (-$53bn), Greece (-$42bn), and east Europe – are willing to bankrupt themselves buying Asian goods. Obviously, this is absurd.
America's baby boomers have lost 45pc of their net worth. US pay fell 4.8pc in June year-on-year as hours were slashed. US consumer credit has contracted for six months in a row, falling by record $21.6bn in July. The US savings rate has risen from near zero to around 5pc.
"Who will replace the US consumer to power global growth?" asked IMF chief Dominique Strauss-Kahn in Friday's Le Monde. "We have left the financial crisis, but we are still in the economic crisis. "
There is gaping hole in world demand. It is being filled by governments, all nearing the limit of fiscal stimulus. Some have exceeded it: Spain is to raise taxes by 1.5pc of GDP, and Japan's Democrats are retreating from spending pledges. China is trying to plug the gap, belatedly, by ramping up credit 70pc this year, but it will take a cultural revolution to induce the Chinese to spend. The liquidity is leaking into stocks, metals, and property.
Yes, markets are sizzling, but industrial production is still down 23pc in Japan, 17pc in the eurozone, 13pc in the US and 11pc in Russia. We have a global glut of manufacturing plant. This is why companies will have to slash staff. Don't be deceived: profits can look good at first when firms cut into the bone. It is no strategy for an economy.
We can all agree (except Germany, hiding bank losses) that the G20 in Pittsburgh should tighten ratios for lenders. But will we hear a word about the capital and trade imbalances of late 20th Century globalisation that caused this crisis? Probably not. It is easier to ignore the elephant in the room.
Jonthan Sibun
3. The wrong number
What's the difference between the mortgage market and the mobile phone market? It would seem rather a lot where the Office of Fair Trading is concerned.
I understand the OFT is not planning to look into Orange's planned tie-up with T-Mobile in the UK.
The consumer champion plans to wait until the deal closes until looking at the matter, but even then is likely to leave any investigation to the European Commission.
If the EC were likely to take a long, hard look at the tie-up, that might not necessarily be a problem, but all the signs suggest that will not happen because Europe is already littered with example of mobile phone monopolies.
Neither are you going to hear complaints from rival UK operators such as Vodafone or O2. They will welcome less competition as it should allow them to get more aggressive on prices.
Last year, when Lloyds rode to the Government's rescue by saving HBOS from oblivion, much was made e_SEnD and has been made since e_SEnD about the newly merged bank's share of the mortgage and savings markets.
Concerns were raised that Lloyds Banking Group's 30pc share of the mortgage market would put it in too strong a position for consumers' good.
Competition authorities were rightly told to avert their eyes in that case, but there is no equal imperative in the mobile phone market.
Should Orange and T-Mobile be allowed their British marriage, they will take a 37pc share of the mobile market.
That is plainly unacceptable. The companies and the investment bankers will profit, but the consumer will be the one left carrying the can.
If the OFT cannot or will not look at the tie-up, we need the a change to the system.
Keep the bubbly on ice
So, that's it then, it's time to break open the bubbly.
The recession is over. The housing boom is under way again. The mergers market is back in full swing. It's all plain sailing from here.
Except it doesn't quite work like that.
There is little doubt that the economic situation is improving and that the green shoots appear to be more visible than they have been since the crisis hit, but anyone who thinks their job is now safe and that they can finally stop wearing a tie to work should think again.
History, and insolvency practitioners, tell us that the next six months could be among the most difficult yet where it comes to everyday consumers and small businesses. It is in the wake of a recession that small companies most often run into cash-flow problems as bad debts and cash-flow problems come home to roost.
As the banks get to grips with their loan books, it will also be the time when lenders begin making the tough decision about turning off companies' life-support machines.
The M&A [mergers -cs] market has come back to life, but much of what is going on is opportunistic or market dependent. That means little for the man on the street.
Meanwhile, the housing recovery is being driven by a shortage of supply, likely to be hit when the Government starts to raise interest rates again.
Rates at historic lows are undoubtedly helping homeowners stay put, but those who aren't using the opportunity to put money away for when rates head north will be in for a nasty shock.
Unemployment figures out next week are likely to show joblessness ticking up, which will, in turn, keep consumer spending subdued. The effects will continue to hit small and large business up and down the country.
Better to keep the bubbly on ice for now.
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