Obama can split the banks; Osborne can try

The loss of Edward Kennedy's Senate seat to the Republicans has compelled the Obama Administration hastily to demonstrate its populist intentions. 'Main Street versus Wall Street' has been a battle-cry resonating through the USA for eighteen months, and it has become a mass clamour as the bonus season has proved just how insensate and arrogant - and downright stupid - the giants of financial services have become.
The huge US economy is still based on the broad acres and natural resources of the continential USA, and [above all] on the immense accumulation of scientific and technical intellectual property that the country possesses. America can afford to make the banks become once more the servants of real business; and cease to be autonomous cyberspace empires that can threaten the functionality [though not the substance] of the US economy.

Britain is in a very different place. Industry has all but been destroyed. The country is carrying some four million state employees, more than ten million pensioners, and more than eight million adults who are 'not economically active' below pensionable age. Another twenty-five million adults and children benefit from tax credits, and the parents of all children are recipients of child alowances and other benefits. The tax income that is needed to support that number of individuals is massive.
The industrial base is narrow, though it contains world leaders in aerospace, pharmaceuticals and biotechnology. The biggest-spending area of the private sector and the prime source of taxation has been finance, which has gone heavily into gambling. To shut down the casino or even to ban some of the high-rolliing games, would make any survival strategy for the economy much more precarious. Separating the gambling from retail banking is basic common sense - which is no guarantee that a government of any complexion would actually do it - but it would be ruinous to drive the gambling hive overseas. This means that the country must bear the risk of harbouring an increasingly-adventurous casino City as the major source of tax for the period until research, technology and industry can be reconstructed. These are not nice thoughts, but they are reality.

They still have not 'got it'!

Politicians and the press are becoming tired of repeating the mantra that the bankers have not yet 'got it'; but the point is that the bankers have got the lot!
They have mostly kept their jobs, they had banked their earlier bonuses before the crunch struck the system; and now they can threaten to walk away from London if they don't have their way into the future.

The politicians have not begun to 'get it'.
Their analysis of the events of the past couple of years is superficial: even the better onces, notably Vince Cable, are much stronger on description than on dissecting the causes of the crisis and making policy for the future on that basis.

The inter-party mudslinging is approaching election pitch, and will increasingly alienate voters.

The announcement by NHS auditors that 'international accounting standards' REQUIRED them to aggregate charitable giving to NHS-related causes within NHS accounts was rightly seen as an attempt by government to enable them to pretend that NHS funding by them was much greater than it is.
International accounting standards were a major factor in the exaggeration of the crisis in banking.
International accounting standards are an ego-trip for would-be masters of the universe; who depend on the same, nonsensical Economics that sanctioned the excesses of 'rational markets'.
This may seem a trivial matter, but - like the recent resurgence of the spurious authority of the rating agencies - it shows that the Economics establishment that bears huge responsibility for the global crisis is still wreaking havoc. Keynes wrote that most politicians are in thrall to some dead economist: the tragedy of our day is that the whole system is in thrall to living economists!

Brown & Balls Drop Darling in the Doo-Doo

Alistair Darling has 'had a good recession', in the way that some men have been said to have 'had a good war'.
 He was ridiculed for his prescience in recognising that the then-impending crisis of 2007-9 would be the most serious economic issue for sixty years. He kept his nerve through the collapse of Bear Stearns and Lemans [refusing to take Lemans' obligations onto his balance sheet, which would have been the case if Barclays had been allowed to buy the whole rotten empire]. He calmly took over Northern Rock and Bradford and Bingley, and bailed out the other banks that were essential to the UK economy.
He increased government spending and borrowing to keep trade and industry alive.
Then came his pre-budget report of December 9, 2009. It was crass electioneering, designed in painfully glaring detail to try to get the Labour vote out in the coming contest with the slightly-revived Tories.
National concerns, reducing the deficit and rebuilding international confidence in the UK, were set to the side; to be tackled by whoever will be the government after the election.
It is now revealed that Darling had intended to put the national interest first in his planning, but was overruled by his bully-boss and his sidekick.  What a pity: for Darling's reputation, and for the future of the country.

Brown backs Sarkozy on Bankers

On the morning after the bugetary non-event in London, Gordon Brown has grabbed significant publicity with a joint 'editorial' in Murdoch's WALL STREET JOURNAL,in which he and the French President rail about the unacceptable face of international banking. They note that the bankers have been feathering their own nests in massive speculation that does nothing for the 'real economy'.
Brown spent his decade at the Treasury praising the bankers for precisely what he now condemns.
His entire economic strategy - if it may be described by such an elevated term - was based on taxing the banks at a rate that they found tolerable, encouraging mass consumption through borrowing facilitated by the banks, and allowing industry to fade away under the burdens of heavy taxation and increasingly intrusive regulation.
Now he is imposing a one-off tax on the banks, which they can easily afford; while they pay accountants and lawyers to find ways of substituting other means of remuneration for the bonuses that have been banned. The medium to long term increases in taxation that are needed,  because of the bail-out of those very same bankers, will fall on the broad mass of the population: starting with an increase in the second income tax [known as national insurance]. There's nothing else to be taxed!

The really significant [very bad] news of the week

This week, Her Majesty's Government in the United Kingdom will demonstrate that it has learned nothing of real significance in all the thirteen wasted years since they came to power.
The Thatcherite idiocy of selling-off what used to be the world's greatest concentration of high-grade intellectual property will continue, with the invitation to bid for the Metereorological Office, the Ordnance Survey and other scientific foci in which Britain has been a global leader since the respective sciences were first delineated.
Although these agencies have been denied much of the investment that could have improved them even further over the past three decades, they remain innovative and respected by their few peers. As has happened with other already-sold-off intellectual property, the key assets will quickly pass into alien ownership, so that the earnings from the existing investment - together with all the new output that will come from future investment - will pass away from the United Kingdom. The profits that should come to British taxpayers will go to the new shareholders; while the price for which the agencies are sold will simply be swallowed up in the black hole of the government's deficit.

So now we know: £60 BILLION

The Bank of England announcement that they lent this huge sum off-balance-sheet to RBS and HBOS in the autumn and early winter of 2008 is not really surprising: there were doubtless similar mood-calming moves in other countries.
What is remarkable is that it was replaid by the end of January. So it is no wonder that the banks had no cash to support their customers with, during an after the repayment period.
It shows that the banks have been preferred to their users, because the banks are 'too big to fail': so small businesses have been allowed to fail for the lack of cash.
Banks don't innovate: small businesses develop ideas, and the best of them become big businesses.

Britain Threatened by Discredited Agency

Fitch - one of the less-disreputable Rating Agencies - has indicated that the UK could soon loose its AAA rating, and thus be seen as a worse credit risk than any other leading economy.
There is no surprise in the observation that the British Treasury is creating so much debt that British Government securities may become devalued. But it is very sad that the media can take the comments of any rating agency seriously. The agencies' collective failure adequately to value a huge range of financial 'products' - or the companies that issued them - was a major factor is allowing the credit bubble to develop, which ended in the credit crunch; which in turn created a crisis for the 'real economy' that will take years to work itself out.
Notwithstanding the agencies' disastrous impact ,government and regulators - not least our very own FSA - use agency ratings of businesses and of financial assets because without them they would have no systematic valuation medium at all.
Just as governments have to use the businesses that made the bubble as the means of getting out of the consequential mess, so they have to accept as authoritative agency ratings that can directly harm them.
Truth really is stranger - and even sadder - than fiction.