Living on the edge

Sorry about the sizing - I'll have to get the chap that winds my watch to sort it (joke)
When I was looking up Falstaff for the previous post, I came across this quote of his:
I can get no remedy against this consumption of the
purse;
borrowing only lingers and lingers it out... ( I,2,585)
Do you think Gordon Brown knows this?
Or the Greeks?

How to destroy the middle classes

Chris Dillow on Stumbling and Mumbling has an excellent post today ( not that they aren't always, especially those with pictures of well endowed young ladies with a minimum of clothes).
I did my economics a long time ago, and I had forgotten that borrowing and saving are two halves of the same coin - someone can't borrow unless somebody else has saved.
So the explosion in Government borrowing should not be a shock. We are all saving or paying down debt in one way or the other ( either through thrift or because the banks won't give us any money) so the Government is the only body that can borrow to balance the equation.
PoliticalBetting has a copy of the Mail's headline today, mentioning £2 trillion as what the UK Government now actually owes. This is quite scary as the Yanks, including all their present bailouts, only owe about £7.5trillion - and their economy is considerably more than 4 times bigger than ours. In effect we are over 100% of GDP and the US still only about 75%.
I was speaking with a person who is a real spook recently, and he was saying that he had been astonished at the vitriol that was being poured over this government and Brown in particular. In a narrow sense I suppose the thought was that people tend not to blame in quite the way they have recently.
But on further reflection, and ignoring all the spin ( or lies depending on your point of view), what Brown has done is reduce lots of people to near-penury. Even at the worst point of the last recession, there was quite a large middle-class band that was doing OK. Brown's profligacy, and subsequent taxation policies, has reduced that band considerably, with many falling out of it altogether. As lots of other posts today have pointed out, everything was going along just fine whilst Blair and Brown stuck with the inherited Tory budgets and policies - it was only subsequently that it began to fall apart. I doubt those middle classes will ever vote Labour in the same numbers again. I believe that after the next election the political landscape in the UK may change forever- and I don't mean we will have a permanent Conservative government, but the growth of radical parties across the spectrum.
In my view the critical bit of language/spin was Brown's forever mentioning his "investment" in various areas.
In fact, of course, this was just one more lie. The investment made was largely dead expenditure - whilst real investment was conducted under PFI. It's rather like taking £250 cash out of the hole in the wall, blowing it all on a party, then borrowing £10 to pay the interest on the money spent.
It's Brown wot did it. And because he did it, millions more thought it was OK for them to do it too.
Unfortunately.

A Profound insight... well an Insight anyway.

A profound insight came to me as I was walking the Dog in the lashing rain and howling gale this morning.
As I walked towards the park, umbrella well down in front of me, I kept putting it up to see if anyone was walking towards me. Naturally, given the weather, no one was.
Then on the way back I held the umbrella behind me to stop the driving rain hitting my back. In other words, I could see what was coming towards me without having to raise or lower the umbrella.
It struck me that this is precisely what happens in markets, in crowds and in business. One lot are walking into the wind and rain, the other lot are walking with them. Some are selling, some are buying.
There are all sorts of books about " The Madness of Crowds" and how " The Wisdom of Crowds" is better than a panel of experts - and so it proves with my insight. Those walking with the wind and rain have a responsibility to avoid those walking into them.
At the moment we have two opposing views in this country, the Labour view being to borrow more, spend more, and to this end are berating the banks for not handing out more, never mind the consequences and the potential losses.
The opposite is what I will refer to as the Conservative view which is the direct opposite - save more.
Unfortunately, as this government does not have and never has had the first inkling about economics, markets, profit or anything else, including principles, we are left with a position where the banks are being forced to run into the wind and rain despite the damage this will do to them.
We, as responsible citizens, should be avoiding them.
As I keep saying, yes its painful, yes its going to be some time before things improve, but no we cannot continue to live as we have - and the banks certainly can't afford to lend as they did, with too much and incorrectly priced risk and too little profit. You may say what about all the bonuses and the huge profits the banks have wracked up over the past few years. My reply would be that the declared profits have all been completely false - the first whiff of problems and the entire banking industry has been nearly wiped out, so they not only had the wrong pricing, they didn't even put aside any reserves against future losses. More likely, the tax authorities wanted them not to put money aside as it meant the banks had to pay higher taxes, and Brown for one welcomed this with open arms and promptly did the fiscal equivalent of tearing the notes up and throwing them away.
So my insight today is that it is we the citizens ( perhaps classified in general as " The poor Bloody Infantry) who must get the world out of it's mess. Our instincts are to be frugal, to save, to pass something on to future generations.
Government should encourage these qualities.
PS
I won't go on about Northern Rock and Bradford and Bingley, apart from saying that this clueless government has nationalised them in such a way that 25% of the total UK lending for property that they did in the past year or so has been completely wiped out. Yes they were lending imprudently, but at least they were lending. Now all that's happening is they are getting rid of good borrowers and are left with the bad ones. They may be paying back the Treasury their loans, but in the end the equity the government has put into them will be wiped out - and more.
PPS
See the excellent Tory poster here

I love this image...

Peer Steinbrück, Germany's finance minister, in an interview with Der Spiegel, echoes Angela Merkel's scepticism of Brown-style, debt-funded fiscal stimuli.
"Just because all the lemmings have chosen the same path, it doesn't automatically make that path the right one."
Too true

Loans loans loans

As I'm in Romania I am somewhat insulated from the hurly burly of the present political debate about borrowing all that money ( I ask you, who on earth is going to borrow a falling pound?).
The one thing that did filter through, because it was on Romanian TV news, was that Woolworths had gone bust. That was always going to happen once the original GBP1 takeover failed to work. The Romanians are fascinated by the goings on in UK and US - they find all the esoteric instruments completely incomprehesible. A loan is your brother giving you RON 1000, and getting it back sometime later - with or without interest.
The banks clearly think they can do better than what was on offer. Personally, knowing what administrators and lawyers charge, I would think they will end up worse off, but it may also be a wake up call for other struggling companies - sort yourselves out or you are toast.
That chap Corbett who destroyed Network Rail or whatever it was called was in charge of Woolies for a few years, and appears to have done exactly the same thing ( albeit he left a year or so ago.)
And no, he was nothing to do with Sootie and Sweep.