Feb 13

A rise in VAT is looming whichever party wins the general election, as Labour and the Conservatives draw up plans to balance Britain’s books.

Alistair Darling and George Osborne, the Shadow Chancellor, are both considering raising VAT to as high as 20 per cent — the European average — from the current rate of 17.5 per cent, The Times has learnt.

Doing so would raise an extra £13 billion a year at a time when financial markets are searching for signs that whoever takes power is serious about tackling Britain’s £178 billion deficit.

Though Labour and the Tories have denied having any current plans to increase VAT, neither will rule it out and The Times understands a rise in the tax is being considered by both parties.

One City source close to the Tory tax team said: “There is a view across the Conservative Party that VAT is going to have to go up.”

The Chancellor is also keenly aware that Britain needs to retain the confidence of the credit-rating agencies. He has privately ruled out either raising income taxes or increasing the scope of VAT, but has deliberately left open the possibility of increasing the sales tax in the next Parliament. Continue reading »

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Jan 27

Highly recommended:

PIMCO’S Bill Gross: ‘Let’s Get Fisical’ (… or why the US will not make it.)

Related articles:

Britain Faces New Souvereign Debt Crisis As PIMCO Pulls Out

Bank of England’s ‘nerves’ to be tested as inflation jumps most on record in December


Bill Gross deals blow to government with warning to his investors that Britain’s debt makes it a ‘must to avoid’

bill-gross-1

The government’s hopes of claiming credit for reviving the British economy suffered a severe blow today when the world’s biggest buyers of bonds warned that the UK was a “must to avoid” for his investors as its debt was “resting on a bed of nitroglycerine”.

The intervention by Bill Gross, co-founder of California-based fund managers Pimco, came on the day official figures confirmed that Britain had emerged from the deepest recession since the 1930s – but only by the narrowest of margins.

The economy grew by 0.1% in the final three months of last year, much weaker than even the most cautious expectations in Westminster and the City. The unexpectedly sluggish performance prompted Alastair Darling to warn that Britain could yet fall back into recession, telling the Guardian “there will be hiccups along the way”. Continue reading »

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Jan 19

The Bank of England and the government have created this mess:

Quantitative easing is creating money out of thin air or “printing money.”

Quantitative easing increases the money supply, creates inflation and devalues the currency.

Inflation is a hidden tax. Quantitative easing is nothing more than stealing from the people.

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.“
– John Maynard Keynes

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
– Alan Greenspan

See also:

Bank of England extends quantitative easing to £200 billion (Guardian)

Bank of England calls unprecedented emergency meeting of economists (Telegraph)

Pound Falls to Five Month Low as Bank of England Says Declines ‘Helpful’ (Bloomberg)

Bank of England: Recession will be the worst in modern history (Telegraph)

Bank of England to print extra 50 billion pounds (Reuters)

Beware Bank of England’s monetary con trick (Financial Times):

Economists have another term to describe the monetization of government debt (=Quantitative easing). The history of “seigniorage” goes back to the debasement of the coinage under the Roman emperors. Seigniorage is really a tax on holders of money and government debt which is paid via inflation. When carried to excess, it leads to hyperinflation.

The dangers of printing money: four lessons from history (Times Business)

Bank of England wants to print more money (Telegraph)

Bank of England sees slowdown deepening, prepares to deploy quantative easing (Financial Times):

Quantitative easing is aimed at increasing the money supply, getting banks to lend more, lowering interest rates and raising the level of inflation. (…and destroying the pound.)

And the UK has Gordon Brown, the savior, also known as debt creator, who will make sure that the UK will default on its debt and/or has to go through a currency crisis:

“A weak currency arises from a weak economy, which in turn is the result of a weak government.” – Gordon Brown

“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” – John Adams

Britain Faces New Souvereign Debt Crisis As PIMCO Pulls Out

Fitch warns: Britain and France risk losing their AAA rating

Moody’s warns of ’social unrest’ as sovereign debt spirals … because of bankster bailouts

UK taxpayers face £2 trillion unfunded pensions liability, more than £80,000 for every household

Moody’s: Top US And UK Debt Ratings May ‘Test The Aaa Boundaries’

Treasury Pre-Budget Report Warning: UK ‘Faces Decades of Debt’

Morgan Stanley: Britain risks sovereign debt crisis in 2010

OECD warning: Britain risks ‘debt spiral’

Prepare for the worst, because it’s coming!

Remember? Jim Rogers: ‘Sell any sterling you might have; It’s finished’

Update:

For sheer gall, Brown posing as saviour of the middle classes takes the mouldy biscuit (Daily Mail):

There’s been nothing like it since the wolf dressed up as grandma in order to turn Little Red Riding Hood into pot-roast.

Gordon Brown now claims to be a champion of the middle classes. Apparently, only he can be trusted to look after their interests.

And there were millions of us thinking that he was, in fact, the unreconstructed arch-enemy of the middle classes and of everything they hold dear.

This is what the UK government and the BoE are doing:

“When a country embarks on deficit financing and inflationism you wipe out the middle class and wealth is transferred from the middle class and the poor to the rich.”
– Ron Paul

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.”
– Ron Paul


UK inflation jumped the most on record in December, fuelling fears that interest rates will have to rise sooner rather than later to keep prices in check.

quantitative-easing
Steve Bell, The Guardian

The sharp rise in the annual rate of consumer price inflation from 1.9pc to 2.9pc was driven by exceptional events in December 2008, as the VAT cut and high street discounting at that point were not repeated last month.

An increase in the price of petrol and new cars also drove the Consumer Prices Index (CPI) up last month, the Office for National Statistics said. Economists had expected a smaller rise in CPI to 2.6pc.

Howard Archer, chief UK economist at IHS Global Insight described the data as “a very nasty shock”.

It was the first time since May that inflation has risen above the Bank of England’s 2pc target, and economists predict inflation will rise above 3pc this month, reflecting the reversal of the VAT cut on January 1.

At that point Mervyn King, the Bank’s Governor, would be required to write a letter to the Chancellor, explaining why inflation was more than a percentage point above the target.

It comes at a difficult time for Britain’s consumers, who face the prospect of rising taxes, rising interest rates, and spending cuts as a fragile economic gets underway following the worst post-war recession.

The retail prices index (RPI) – which includes housing costs – rose even more sharply, to 2.4pc from 0.3pc in November.

Inflation in Britain has remained consistently higher than other countries during the recession, which economists partly attribute to the pound’s weakness, which has driven up the cost of foreign goods. Continue reading »

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Jan 06

See also:

Pimco move to sell gilts raises spectre of a UK sovereign debt crisis (Telegraph)

Gordon Brown accused of “fantasy” over public debt as changes tack (Times)


britain-faces-new-souvereign-debt-crisis
Pimco’s decision to sell UK gilts this year will be seen as a financial vote of no-confidence in the Government’s handling of the economy.

FEARS that Gordon Brown has left Britain on the brink of ­bankruptcy intensified last night as investors withdrew from backing the Treasury’s soaring debt.

US-based investment group Pimco, one of the world’s leading bond houses, said it will sell its UK government gilts this year.

It will be a hammer blow to the Treasury’s attempt to raise up to £200billion of government borrowing amid the deficit crisis.

The embarrassment is all the more acute because the younger brother of Cabinet minister Ed Balls is overseeing the gilt sale.

andrew-balls
Labour’s Ed Balls’ younger brother Andrew is overseeing the Pimco pullout

As head of Pimco’s European investment team, Andrew Balls is spearheading the exit from investment in the Government.

The Tories seized on the announcement as evidence that Mr Brown’s soaring borrowing is threatening the UK with the worst debt crisis since the 1970s.

Shadow Chief Secretary Philip Hammond said: “This announcement by the world’s biggest bond house is a damning verdict on Gordon Brown’s handling of the economy and raises yet more questions about where the ­Government is going to borrow the £178billion it needs over the next 12 months.

“To restore confidence to the bond markets, keep mortgages down and get the economy growing, Britain needs a credible plan to get the deficit down.

“Instead we have a Prime ­Minister and Chancellor at loggerheads over tax and spending. We can’t go on like this.” Concern has been growing in the City and on international money markets at the unprecedented scale of the British ­government’s debt crisis. The Treasury is on course to ­borrow £178billion this year and the national debt is tipped to reach a colossal £1.5trillion for the first time in our history.

Continue reading »

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Dec 10

You better release those figures quietly!

Prepare yourself for the worst.

See also: Darling’s Pre-Budget Report: Middle Class Hit With £7 Billion Tax Bill


Taxpayers are facing a £2 trillion unfunded pensions liability, equivalent to more than £80,000 for every household in Britain, according to figures quietly released by the Government yesterday.

uk-taxpayers-face-2-trillion-unfunded-pensions-liability
The National Institute of Economic and Social Research has said that in order to fight the rising pesnion deficit, the Government ought to raise the retirement age for both men and women to 70 Photo: Ian Jones

In a document released on its website only a few hours before the Chancellor’s pre-Budget report (PBR) statement, the Office for National Statistics (ONS) laid out the definitive cost taxpayers will have to bear for both the state old age pension and public sector pensions.

The document reveals:

  • The total public sector pensions bill is now £810bn, a figure confirmed later in the day in the pre-Budget report. The majority of the state employees are on generous final salary schemes unattainable elsewhere in the UK.
  • This bill for key public sector workers’ pensions has rocketed by 20pc between 2006 and 2008.
  • The Government Actuary’s Department’s estimate of the cost of the state pension due to all workers is £1,350bn as of 2005 – equivalent to almost 100pc of Britain’s annual economic output.

The entire bill of around £2.2 trillion would more than triple the size of the national debt overnight. It is entirely unfunded, so will have to be paid directly by future generations of taxpayers, rather than out of a pot contributed to by the pensioners themselves.

The revelations, contained in the ONS’s Pensions Trends document, underline the scale of the long-term fiscal crisis facing this and future governments – even before the added costs of the economic and financial crisis are taken into account.

The Treasury itself has never published its own comprehensive calculation of the size of Britain’s unfunded pensions liabilities.

Continue reading »

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Dec 10

Aren’t you glad your government bailed out the banksters?

“When a country embarks on deficit financing (incl. bankster bailouts) and inflationism (The BoE is still printing money like mad.) you wipe out the middle class and wealth is transferred from the middle class and the poor to the rich.”
– Ron Paul

Now the taxpayer will have to pay the bill and this is just the beginning.

Welcome to Gordon Brown’s ‘New World Order’, where you will not have to worry about the middle class anymore, because there will be only the elite and slaves.

See also:
UK taxpayers face £2 trillion unfunded pensions liability, more than £80,000 for every household


The middle classes and the better-off are to be hit with £7 billion a year in new taxes, Alistair Darling has disclosed in his pre-Budget report.

alistair-darling
Alistair Darling delivers his pre-Budget report

The Chancellor announced increases in national insurance contributions for workers, while freezing a key income tax threshold to push more income into the 40 per cent tax band.

The Treasury will also take more money in inheritance tax and levy a new tax on financial workers’ bonuses. Pension relief will be cut for some high earners and taxes will rise on company cars and workplace canteens.

Continue reading »

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Dec 06

See also:

Morgan Stanley: Britain risks sovereign debt crisis in 2010

OECD warning: Britain risks ‘debt spiral’


Britain faces decades of rising public sector debt, increasing taxes and, potentially, falling living standards unless it tackles the growing costs of its pensions and health bill, the Treasury will warn this week.

hm-treasury

In a paper to be printed alongside the pre-Budget report (PBR), the Treasury will warn that the costs of paying for state pensions and the National Health Service are set to rocket between now and 2059 unless action is taken to reduce the bill.

The paper on long-term fiscal challenges, which will accompany the shorter-term forecasts in the PBR, is intended to focus politicians from both parties on the risks faced by Britain unless they contemplate radical actions such as increasing the retirement age or cutting back on free healthcare provision.

Although the paper is likely to be over-shadowed by the PBR, in which the Chancellor is expected to accompany broadly unchanged spending plans with new taxes on the wealthy, it will sketch out a worrying picture for Britain’s fiscal future.

Continue reading »

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Nov 20

Britain’s banksters and their bonuses have been momentarily saved, but the taxpayer has been looted like there will be no tomorrow.

The UK is broke and the pound sterling will soon go through a real currency crisis, thanks to the spend the UK into oblivion team Brown/Darling and to the printing press King of the Bank of England.

Mission accomplished!


Britain is at growing risk of a “public debt spiral” unless the Government takes “drastic” action to cut the deficit, according to the OECD, world’s leading economic institution.

hm-treasury Britain faces having the biggest deficit in the developed world until 2017.

The Organisation for Economic Co-operation and Development said that even if Britain reduces its deficit in line with other leading nations, it will still have the rich world’s biggest deficit from now until 2017 and potentially beyond, casting serious doubt on its economic credibility.

The warning coincided with shock public finance statistics showing that public borrowing in October was 88 times what it was in the same month last year, making it likely that the Chancellor will miss his £175bn borrowing forecast this year.

The double blow is acutely embarrassing for Downing Street, coming ahead of next month’s pre-Budget report and only 24 hours after it pledged to create a Bill to halve the deficit within four years and to reduce debt every year for the coming decade.

In fact, the OECD predicted in its annual Economic Outlook, Britain’s deficit was likely to be even higher next year than this year, at 13.3pc, raising the prospect that the Government could break its own law in its very first year.

Britain’s deficit will remain higher than any other major country, including even Iceland and Ireland, unless the Government takes far more drastic action to repair it, said the OECD’s acting chief economist Jørgen Elmeskov.

“Halving the deficit would be a start, but since the UK is starting out from a deficit which is in double figures, one should go further still,” he said. “The concern is that there could be a cost spiral – where debt increases, hitting confidence in the market, which pushes up interest rates, and this leads to even higher deficits.”

The prospect of interest payments on Britain’s rapidly growing debt rising to 12pc of tax revenues has already prompted Standard & Poor’s to issue a warning about the security of the UK’s credit rating.

Continue reading »

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Nov 07

Quantitative easing is creating money out of thin air or “printing money.”
Quantitative easing increases the money supply, creates inflation and devalues the currency.
Inflation is a hidden tax. Quantitative easing is absolute stealing from the people.

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
– John Maynard Keynes

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
– Alan Greenspan


BoE warned that UK banks are still failing to provide enough credit to businesses and households as it held interest rates at 0.5%

quantitative-easing
Steve Bell, The Guardian, Friday 6 November 2009

The Bank of England will expand its programme of money creation by £25bn over the next three months to boost Britain’s recession-hit economy, Threadneedle Street announced today as it left interest rates unchanged again.

Warning that UK banks are still failing to provide enough credit to businesses and households, the Bank said it would increase the size of quantitative easing (QE) to £200bn.

The Bank’s nine-strong monetary policy committee also pegged bank rate at its record low level of 0.5%, where it has been since March. It said cheap borrowing and QE were needed to prevent inflation falling below its 2% target.

In a statement, the Bank said: “On balance, the committee believes that the prospect is for slow recovery in the level of economic activity, so that a substantial margin of under-utilised resources persists.”

Although the Bank said there were signs of recovery in the world economy, it added that output in the UK had dropped by 6% since the start of a recession that has now lasted for six quarters, the longest period of decline since records began in 1955. “Households have reduced their spending substantially and businesses investment has fallen especially sharply,” the statement said.

Offiicial data released today showed that manufacturing output improved in September, and the MPC said that there were signs a “a pick-up in economic activity may soon be evident”.

Under the QE programme, the Bank of England buys bonds from the commercial banks, thereby providing lenders with extra cash to lend. It received permission from the chancellor, Alistair Darling, to extend the scheme.

Continue reading »

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Nov 04

Darling warns RBS could still need more money after £33.5bn bailout

Royal Bank of Scotland may need more taxpayer funds to nurse the state-controlled lender back to health, Alistair Darling said yesterday hours after announcing a £33.5 billion bailout package for the bank — the biggest of its kind in the world.

Unveiling details of increased bailout funds for RBS and Lloyds Banking Group, the Chancellor told MPs that RBS “may need more capital” in order to help the bank to return to stability.

The Treasury said that it would inject a further £25.5 billion of taxpayers’ funds into RBS to prop up the lender, along with a new £8 billion pot of reserves intended for emergencies only. Mr Darling also announced a new capital injection of £5.7 billion for Lloyds, in which the Government holds a 43 per cent stake. The total bailout for the two banks now stands at £76 billion, the equivalent of almost 17p in the pound for every taxpayer.

George Osborne, the Shadow Chancellor, said: “They [the Government] went around boasting that they had saved the world, and they are still trying to save the British banks and they haven’t got on to saving the British economy.” He added that the extra financial help for RBS represented a “new world record” as the single biggest bailout.

Continue reading »

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Nov 04

Every family in the country is now facing a tax liability of £4,350 to prop up Britain’s banking system after Alistair Darling announced the biggest bail-out in history.

rbs-lloyds-banksters
The Government is injecting a further £30bn into Lloyds and RBS.

The Chancellor confirmed that the Government would pump an extra £25.5 billion into Royal Bank of Scotland, and declared that it was the only way to keep the business alive.

Taxpayers have poured a total of £53.5 billion into RBS, including the £20 billion part-nationalisation last year and another £8 billion that was set aside as insurance against further trouble in the future.

In total, the Government has put £74 billion of taxpayers’ money into the banks, including RBS, Lloyds and HBOS, since the start of the financial crisis last year.

The Conservatives claimed the latest bail-out equated to an extra tax liability of £2,000 for every one of the 17 million families in the country. This comes on top of the £2,350 to which every household is already exposed as a result of previous attempts to prop up the financial system.

Continue reading »

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Aug 22

‘Peace of mind. Piece of happiness.’ That’s the promise the Japanese government is making to its citizens if they’re prepared to open their wallets and buy some of the country’s ballooning debt.

darling
Alistair Darling has a lot of debt to sell. What slogan should a UK campaign use?

The suits at Japan’s Finance Ministry have called in the advertising gurus to help drum up some interest in the country’s bonds. With the recession forcing national debt up to 684.4 trillion yen (£4.41 trillion), there’s no shortage of supply.

The Japanese will soon find the adverts in taxis and on their television screens. Who knows whether the Japanese will pay any attention but there’s a department in Whitehall that may be paying close interest.

After all, the Chancellor of the Exchqeuer, Alistair Darling, has a record £220bn worth of British government debt to find a home for this year. Fast forward 12 months and it may be George Osborne, the shadow chancellor, with the same headache.

Continue reading »

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Apr 24

The prospect of the UK losing its AAA sovereign credit rating, resulting in higher interest rates for companies and households, moved a step closer after ratings agencies voiced fears about the UK’s vast public debt burden.


The Chancellor revealed in the Budget that the national debt will reach £1.4 trillion over the next five years Photo: EPA

Moody’s and Standard & Poor’s are reviewing the UK’s rating in light of the Chancellor’s revelation in the Budget that national debt will reach £1.4 trillion over the next five years. Spain, Ireland, Greece and Portugal have already been downgraded.

Related articles:
Taxes ‘must rise’ by £45bn a year to meet Budget 2009 target (Telegraph)
Time to bail out of Britain? (Telegraph)

Arnaud Mares, lead analyst at Moody’s for the UK, said: “Treasury projections that public sector net borrowing will remain above 5pc of GDP five years from now… are a cause for concern. This suggests that fiscal policy will have to be tightened much further than currently envisaged. The alternative would be that the Government chooses to live with a permanently higher debt burden which would likely have rating implications over time.”

A Standard & Poor’s spokesman said: “We are looking at the details of the Budget and have no comment to make at this stage.”

Sources in the bond trading market claimed credit agencies were already stress-testing the UK again for a possible downgrade. “You have to assume the risk of a ratings downgrade has increased after this Budget. It is certainly much more likely than we thought a few months ago,” said John Wraith, head of rates strategy at RBC.

Last November, Frank Gill, S&P’s director of European sovereign ratings, said public debt above 60pc of GDP could undermine an AAA rating. At its peak in 2013, the Government is forecasting debt at 79pc of GDP.

Continue reading »

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Apr 24

Alistair Darling’s calamitous Budget not only consigned the nation to decades of debt, but also planted a poisonous legacy that will blight generations to come.


Alistair Darling and Gordon Brown have landed the voters in it Photo: PA

“To preserve [the people’s] independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty, or profusion and servitude.”
Thomas Jefferson, President of the United States of America,1801-1809.

This week, Alistair Darling made a selection for us. His Budget for Bankruptcy banished economy and liberty. In their place, he delivered a profusion of unaffordable spending and a contract of servitude, not just for this generation, but for the next and the one after that. This is how independence is murdered. A ball-and-chain of spirit-sapping debt has been clamped to the nation’s future. We are all serfs now.

In a speech of stunning torpidity (how does he manage it?), the Chancellor claimed: “You can grow your way out of recession, you can’t cut your way out of it.” Growth sounds attractive, an aspiration for solid citizens. Except the growth that Mr Darling had in mind was government borrowing, which is shooting up like bindweed on steroids, choking the economy.

His red numbers are so immense that most pocket calculators cannot accommodate them. Over the next five years – if all goes according to plan – Mr Darling will borrow £703,000,000,000. As the late Roy Castle used to say: “It’s a record breaker!”

Related articles:
Taxes ‘must rise’ by £45bn a year to meet Budget 2009 target (Telegraph)
Time to bail out of Britain? (Telegraph)

The United Kingdom is mired in debt, and the Chancellor’s fiendishly clever escape route is, er, to borrow his way out of it. He’s in a hole and digging furiously. Yet Gordon Brown, whose face is beginning to resemble a smacked bottom, was delighted by his cipher’s performance. This style of presentation – straight from the Ceausescu handbook of statistics management – appeals to the Prime Minister’s control-freakery.

Continue reading »

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Feb 14

Last night on BBC’s Newsnight Alistair Darling, the Chancellor, defended both the Government’s role in pushing through the Lloyds takeover of HBOS last October without due diligence and the subsequent £17 billion taxpayer-funded bailout of the merged entity.

“The problem was that last October the banking system was facing imminent collapse,” he said. “We had no alternative but to intervene quickly.We had a matter of days and then hours to stop the entire banking system collapsing. Since then many other countries have done the same thing. The alternative was to let HBOS go down and last October [at such a critical point] the damage would not have stopped there.”



Peter Cummings, left, at a dinner with the Top Shop owner Sir Philip Green in 2007. Mr Cummings was the head of corporate lending at HBOS and the bank’s highest-paid director (Jeremy Young)

HBOS’s aggressive corporate banking division was revealed to have been at the heart of the £10 billion shock loss announced by Lloyds Banking Group yesterday.

Lloyds Banking Group issued a warning that HBOS, the ailing bank it has taken over, made a whopping £7 billion of corporate losses last year after making bad bets on business lending.

Lloyds admitted that HBOS’s corporate division, which was run by Peter Cummings – the highest-paid executive at the bank – has had to write off £7 billion of bad loans, far more than HBOS’s management ever admitted. Mr Cummings is understood to have left in early January with a payoff thought to be about £660,000 and £6 million of pension entitlements.

The announcement leaves taxpayers facing billions of pounds of extra losses on their rescue of Lloyds and HBOS, while politicians are now warning that it is inevitable that the Lloyds Banking Group will need more government money to keep it afloat.

Continue reading »

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Jan 19

Bank shares plunged and Government bonds tumbled after Gordon Brown announced plans to insure lenders for losses on bad loans which could amount to billions of pounds.

The Prime Minister announced a scheme to allow banks to exchange cash or shares for a Government guarantee on their “toxic” debts, transferring any losses they suffer from the banks to the taxpayer.

But the Government has conceded that it can’t estimate how much taxpayers’ money will be on the line in the latest bank assistance package.

UK bond prices fell sharply as the financial markets digested the prospect of further Government borrowing. Bank stocks also tumbled with shares of Royal Bank of Scotland losing more than half their value. Lloyds, Barclays and HSBC also fell.

Ministers say the new package, which comes only three months after another £500 billion bailout, is vital to restore bank lending and help companies get credit and stay in business.

Continue reading »

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Jan 16

“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention.” Henry Paulson

Banks Need Second Portion Of Bailout Fund: Paulson (CNNMoney)

Sharpest output fall on way, warns bank chief (Independent)

Dow May Fall to 6,000 Should Low Break, Acampora Says (Bloomberg)

Minneapolis’ ‘Star Tribune’ Newspaper Files Chapter 11 (USA Today)

Darling Said to Prepare Guarantee for UK Lending (Bloomberg)

Anglo Irish Bank nationalised (Independent)

Hertz to cut more than 4000 jobs (Reuters)

Citigroup: Mortgage Losses ‘Rapidly Approaching’ Historic Peak (CNN Money):
NEW YORK -(Dow Jones)- Citigroup Inc. said consumer delinquencies and subsequent loan losses accelerated in many parts of the world. Chief Financial Officer Gary Crittenden said during a conference call with investors, “Loss rates in [credit] cards have now surpassed their historic highs while in first mortgages the rate is rapidly approaching the previous peak.”

Rescue of Banks Hints at Nationalization (New York Times)

Wall Street layoff storm also soaks office landlords (Reuters):
NEW YORK (Reuters) – Wall Street’s employment tsunami, most recently swamping Citibank Inc (C.N), is also undermining the island of Manhattan’s 443 million square foot office market, threatening to drag rents down 35 percent from a second quarter 2008 high.

Oil tankers are going nowhere — slowly (Seattle Times)

Shoppers ‘Sidelined’ In Long Retail Slump (Washington Post)

AMD to Cut 1100 Jobs, Lower Salaries (Wall Street Journal)

Ireland Leads Surge in European Government Bond Risk to Records (Bloomberg)

Treasuries Tumble as Stocks Rise on Government Bailout of Bank of America (Bloomberg)

The more black holes D.C. fills, the more open up (Money And Markets)

China’s US bond appetite to slow: economists (AFP)

China’s Economy Faces 2009 ‘Hard Landing,’ Fitch Says (Bloomberg)

Chinese economy imploding amid global depression: analyst (AFP)

Intel profit sinks 90% (CNN Money)

WellPoint cutting 1500 positions (Reuters)

Circuit City to shut down (CNN Money)

Bear in the beer — you know it’s bad when even suds sales slip (Newsday)

No wind in boat show sales (Chicago Tribune)

Pictures: Growing stocks of unsold cars around the world (Guardian)

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Jan 11


Alistair Darling is expected to back a plan to effectively underwrite the majority of new mortgages in the UK

ALISTAIR Darling is set to back a £100bn gamble with taxpayers’ cash in a desperate bid to kick-start the struggling mortgage market. The Chancellor’s plan involves effectively underwriting the majority of new mortgages in the UK to encourage big investors to give badly needed money to lending banks.

The proposed scheme means the UK Government would guarantee mortgage bonds, where banks parcel up individual home loans and sell them to investment firms. When the system works properly, banks have a source of money to loan to customers and investors get a return.

Related articles:
Darling closes in on plan to kick-start bank lending (Times)
Downturn escalates on both sides of the Atlantic (Telegraph)

But with many investors currently reluctant to risk their money on mortgages, Darling is preparing to guarantee the value of mortgage bonds to get the cash flowing again.

The total value of new mortgages involved has been estimated as up to £100bn, leading to claims last night that the scheme poses too many risks to taxpayers while offering too few rewards. And the new measures, coming on top of a £500bn scheme to guarantee banks’ borrowing and the £12bn cut in VAT announced in October, will raise further fears over the extent of the Government’s spending in the face of the credit crunch.

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Jan 04

GORDON BROWN’S “DECISIVE” strategy to recapitalise Britain’s banks and get them lending again with a £37 billion bail-out, which he claimed has been copied all over the world, has not worked – and the Treasury has no plan B yet.

“The government’s plan A has not worked, and there is, as yet, no firm plan B,” a government source told the Sunday Herald. However, a senior adviser to chancellor Alistair Darling insisted that lending shouldn’t be taken as the sole measure of success: “Plan A has not failed, because the banks are still standing.”

But although UK banks are open for business, Britain is still facing a lending drought with banks and building societies continuing to reduce the amount of credit available to businesses and would-be homebuyers.
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This has left Darling with a dilemma: does he throw more money at the banks, effectively admitting that £37bn of taxpayers’ money wasn’t enough, or does he wait?

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Jan 03

Billions may be needed as lending squeeze tightens

Alistair Darling has been forced to consider a second bailout for banks as the lending drought worsens.

The Chancellor will decide within weeks whether to pump billions more into the economy as evidence mounts that the £37 billion part-nationalisation last year has failed to keep credit flowing. Options include cash injections, offering banks cheaper state guarantees to raise money privately or buying up “toxic assets”, The Times has learnt.

The Bank of England revealed yesterday that, despite intense pressure, the banks curbed lending in the final quarter of last year and plan even tighter restrictions in the coming months. Its findings will alarm the Treasury.

The Bank is expected to take yet more aggressive action this week by cutting the base rate from its current level of 2 per cent. Doing so would reduce the cost of borrowing but have little effect on the availability of loans.

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Dec 21

With such people in top positions around the world … prepare for the worst.
Thanks to their debt and inflation creating policies they have assured that “The whole society is going to suffer.” (IMF boss Dominique Strauss-Kahn).
They are creating the worst depression ever.



‘The whole society is going to suffer,’ warns IMF boss Dominique Strauss-Kahn

Billions more will have to be pumped into the economy to avoid it spiralling into an even ‘darker’ recession, the head of the International Monetary Fund has warned.

Britain and other leading economies will need to double their economic bailout packages during 2009, which is shaping up to be a ‘really bad year’, according to Dominique Strauss-Kahn.

‘I’m specially concerned by the fact that our forecast, already very dark . . . will be even darker if not enough fiscal stimulus is implemented,’ Mr Strauss-Kahn told BBC Radio 4.

The IMF, which oversees the world’s economic system, is urging governments around the world to splurge a staggering £80trillion in a co-ordinated war against recession.

That would represent around 2 per cent of global annual economic output.

But Chancellor Alistair Darling’s stimulus package accounts for just 1 per cent of Britain’s national income.

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Dec 19

Just as Bernard Madoff is alleged to have relied on payments in from new investors to pay out returns and promote a $50 billion (£33 billion) fund that scarcely existed, our Government continues to issue promises which it hopes future generations will honour.


The biggest Ponzi scheme: Bernard Madoff’s or our Government’s? Photo: BLOOMBERG

Christmas came early this week for 95,000 public sector pensioners. After questioning in the House of Commons, Cabinet Office Minister Liam Byrne admitted that they had been overpaid a total of £126m since 1978 but emphasised that they would not be required to pay the money back.

Particularly at this time of year, it makes a pleasant change to see some pensioners actually gaining from the sort of bureaucratic bungling with which we are now so wearily familiar and utterly fed up. All things considered, most people will be willing to set aside any Scrooge-like tendency to ponder upon who is paying for the politician to pose as Father Christmas.

However, a slight chill is placed on this cheery scene when you consider the uncertainty which these pensioners now face over what they will have to live on next year after their incomes are cut to the correct level. Perhaps equally galling, from the point of view of the majority who live in England, is the news from Scotland that the minority who are in receipt of overpayments north of the border will continue to be overpaid for as long as they live.

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Dec 13


The Vauxhall factory at Ellesmere Port, Cheshire, yesterday. The struggling company has offered all 4,500 workers at the plant a sabbatical of up to nine months on 30 per cent pay

A financial rescue package for Britain’s motor industry was being put together last night, mirroring efforts in Washington to save America’s three big carmakers from collapse.

Lord Mandelson, the Business Secretary, and Alistair Darling, the Chancellor, may offer bridging loans on commercial terms to vehicle and component manufacturers and wider guarantees for loans from banks.

The peer is in regular contact with the industry, which has reached a crisis point. Several carmakers plan extended shutdowns over Christmas, leaving them with vastly reduced sales income but with salaries and other bills still to pay.

Suppliers, many of them small companies, are demanding weekly payments to secure their cashflows and stay in business. One firm, Wagon, has gone into administration with the loss of 500 jobs. If the supply chain crumbles, tens of thousands of jobs will be lost. The components industry supports 115,000 workers, while manufacturing employs 190,000 and the whole industry, including retail, 850,000.

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Dec 10

The government and the Bank(sters) of England are intentionally ruining what is left of the economy and what is left of trust in the currency. Britain has become a worse credit risk than McDonald’s. The U.S. will fail and the U.K. is doing everything to follow suit. Who will pay for those billions of pounds? The government has to raise taxes or has to issue more bonds, which are nothing more than a promise to raise taxes in the future, because that money has to be paid back plus interest. Creating billions of pounds out of ‘thin air’ will further weaken the pound and will create massive inflation, which is nothing more than a ‘hidden tax’. The taxpayers will have to pay for all of it until the taxpayers will finally fail.
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The Bank of England

Dec. 10 (Bloomberg) — The U.K. government and central bank are considering plans to pump billions of pounds into the economy as the bank rescue package and the lowest interest rates since 1951 fail to halt a slide into recession.

The Bank of England and the Treasury are weighing a strategy known as “quantitative easing” where authorities increase money supply to boost bank reserves. The initiative was last used by Japan at the start of the decade.

Prime Minister Gordon Brown’s government is frustrated that banks are rationing credit after tapping the Treasury for cash and guarantees to prop up their own balance sheets. Policy makers both in the U.K. and the U.S. Federal Reserve are looking beyond traditional interest-rate tools to revive the economy.

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Nov 09

HOW WOULD YOU FEEL, RUNNING A MODEST business, if the money fairy came along and promised you would never, ever go bust? How much of a spring would it put in your step if the nice imp then said she had cast a spell guaranteeing all your lending, all your borrowing, and 98% of your customers’ cash? “Yes,” you might just say, clapping your sticky little hands, “I do believe in fairies!”

This hard-to-swallow tale has more than one happy ending. While your godmother hopes you will become a good little banker one day, she doesn’t want to be too stern. It’s not her place. So if she sprinkles some of her magic dust and shrinks the cost of money, she won’t force you to share your good luck with anyone. She’ll “urge” you instead. But only a very naughty banker would ignore that, surely?

After all, you owe the good fairy something. In fact, you owe her billions of things. They are the reasons why you are still able to frolic as a happy little banker. They also explain why you are still looking forward to big Christmas presents and the chance, some time very soon, to tell fairy godmother where to stick her advice and all those tiresome homilies on the need to be nice to poor folk.

Whatever Alistair Darling was waving at the bankers during a breakfast meeting on Friday morning, it was not a magic wand. He can urge to his heart’s content, but they intend to go on treating the Bank of England, its base rate and its monetary policy committee (MPC) as fictions only children would believe. Most may have buckled, belatedly, under an avalanche of bad publicity, but the chancellor doesn’t frighten them.

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Nov 09

The financial crisis will result in tax revenues from City bonuses alone falling by as much as £4bn next year, according to one of Britain’s most influential economic forecasting firms.


Restrictions on bonuses at the banks which the Government is helping to rescue will also have the unintended consequence of lowering tax revenues Photo: MICHAEL WALTER

As investment banks, hedge funds and private equity firms – three of the principal drivers of the Square Mile’s explosive growth of recent years – cut tens of thousands of jobs, the Centre for Economics and Business Research (CEBR) expects the Treasury to face an overall City-generated taxation “black hole” of more than £10bn.

The CEBR believes the Government will collect around £5bn less than previously-estimated in corporation tax, while tax generated by bonuses, National Insurance contributions and base salaries is likely to fall by around £6bn.

The bleak forecasts underline the many ways in which cutbacks in the City, which has become a crucial engine of national economic growth, will contribute to an expected recession in Britain.

Restrictions on bonuses at the banks which the Government is helping to rescue will also have the unintended consequence of lowering tax revenues from City firms.

The deficit means Alistair Darling, the Chancellor, may need to borrow up to £110bn in the next financial year to plug the hole in the national balance sheet – almost three times the estimate of the £38bn forecast in his Budget statement last March.

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Nov 07

Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.

Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders – including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey – to implement rate cuts immediately.

Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.

Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.

However, the figure remains almost 1.5 per cent higher than the official interest rate.

The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period – a key measure in the wholesale money market – is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.

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Nov 06

Business Secretary Peter Mandelson, is being urged to do more to help small businesses

Hundreds of small firms will go bust by the end of the year if ministers fail to deliver quickly on their pledge to increase bank lending, business leaders have warned.

Despite repeated calls for action from Gordon Brown and Chancellor Alistair Darling, it emerged that companies were still suffering from banks doubling overdraft charges and increasing interest rates.

The squeeze on bank lending puts huge pressure on the Government amid public expectation of a return for its £37 billion bailout with taxpayer cash.

Abbey yesterday increased rates by half a percentage point and Mr Brown was facing further embarrassment today as the nationalised northern Rock was expected to axe its tracker mortgages.

As Business Secretary Lord Mandelson prepared for a grilling by the House Of Lords, it emerged he had been personally warned by business leaders yesterday that firms were facing bankruptcy before Christmas.

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Oct 08

Gordon Brown and Alistair Darling set out a radical £500 billion package today to restore confidence in the UK banking sector and break the crippling logjam in credit markets.

The three-part package includes committing up to £50 billion of taxpayer funds for a partial nationalisation of stricken banks, met from increased public borrowing and with political strings attached that would include reining in executive pay.

In addition, the Bank of England will pump at least £200 billion into the money markets under its existing Special Liquidity Scheme. The Government is also making a further £250 billion available for banks over the next three years to guarantee medium-term debt to help restore confidence and get banks lending to each other again.

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Oct 07

Shares in Britain’s banks plunged again amid panicky trading following emergency talks with the government over a possible injection of billions of pounds of taxpayers’ money into the banking sector.

Royal Bank of Scotland nosedived by almost 40% to 90p in morning trading – its lowest point since the recession of the early 1990s. Barclays, Lloyds TSB and HBOS were also hit, as the lack of a coordinated rescue plan for the banking sector alarmed the City.

By 3pm RBS shares were 32.5% lower at 112p, giving it a market capitalisation of £15.98bn – down from over £75bn a year ago.

HBOS was 23% lower at 124p and Lloyds TSB had lost 13% to 225p. Barclays had recovered most of its early losses following Varley’s comments this morning.

Last night Britain’s bank bosses met with chancellor Alistair Darling, to discuss a possible £50bn injection of equity. They are due to meet again at the Treasury this afternoon.

The talks centre on the idea of a part-nationalisation of the banking system through the injection of capital into the banks via preference shares, which take precedence over ordinary shares during a liquidation, but do not give the holders any voting rights.

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