Christopher Booker in today's Sunday Telegraph points out that the " mark to market" rules brought in under Basel 2 for banks have effectively destroyed every banks' assets. When there is no market, the value drops technically to zero.
What you have is solvent banks without any ability to borrow or lend - which is what we have at the moment. According to various sources, the German Government has guaranteed all private savings, and , as the sainted Robert Peston says on the BBC news, " If they really have done this then the UK will have to follow suit."
So much for EU members pulling together.
Maybe now our incredibly naive and stupid government will realise that our EU partners only implement the bits that suit them - unlike ourselves.
Unless there is some clarity before tomorrow morning, the markets will disappear through a hole in the floor. There is already talk of Barclays charging small businesses 15% for money - whether they already have it agreed or not - and just see how long a cheque now takes to clear fully into your account.
UPDATE.
FTSE opened approx 5% down
1 comment:
True but at least mark to market gives a true snapshot of value. If you say all current prices are meaningless, the situation is worse.
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