Recession

The compliments are coming thick and fast at the moment. Our man in China asked for a picture of me and this was his reply:

"You look as a handsome,robust,kindness man I think."

Of course, I am his customer, so there just may be a touch of sycophancy there...

Anyway, today is a day when Mrs. Lear goes to Yoga.

There are two distinct classes, the Blingers, and what she calls the Norms & Nicies.

The Blingers mostly drive black 4x4s, and get very upset if the perfect line up outside the class is broken by eg a Ford.

They arrive late and chatter.

They've all had breast enhancement. How can you tell? When they lie on their backs, their boobs stick straight up.

The Norms & Nicies on the other hand, turn up on time, concentrate on their Yoga, their boobs meld into their chests when they lie on their backs, and generally drive ordinary cars.

And they don't care where or how they are parked.

The point of this story is that the Blingers are slowly but surely diminishing in number.

This is the direct result of the present economic conditions. Some of the 4 x 4s have gone. The husbands are either having to put more money into their businesses, have lost their jobs, or, if partners in law firms,have no net salary this year.

These are the people who would normally keep the economy growing by their spending habits, but these are the very people who have been hardest hit.

The Banks, of course, have been waiting for the little glimmer of hope so they can start liquidating any problem loans ( they don't do it at the bottom, only when it starts to improve). They've also been hugely encouraged by the Basel III bank ratios, as to all intents and purposes all UK banks are well within the parameters.

Which would make you think they would start lending again.

But of course not. As someone recently told his bank manager:

" Listen, if you hadn't caused the problem in the first place, you wouldn't be causing us ALL problems now!"

PS In case you are unsure, this is NOT a picture of me. I am far more handsome... and incredibly modest.

Plus ca Change

I apologise for being away for so long, but I have had a great many problems to contend with - not least having to change my email which rendered this account inoperative for some time.
Romania finished off well apart from the weather that was poor for the time of year.
The wedding went well and instead of the bride being ransomed it ended up as the bridegroom ( Nicou) who was more than bemused with the whole thing. I managed to get candle wax and honey all down my jacket, so it is presently residing in the specialist cleaners.
In the meantime, I see we now have a coalition government. It remains to be seen whether it will be strong enough to force the banks to stop lending to it, and start lending to the poor benighted punters. I had a discussion with the regional director of RBS today, whose brief is:
1) Do not lend money on property
2) Where you have lent money in the past, claw it back
3) If you can't get it back, up the charges, margin and fees.
4) Er, that's it.
In effect, whereas bankers used to get bonusses for lending money,they are now getting bonuses for getting it back in. It will all end in tears, as all things with the banks do in time.
I am gearing up for Gurkha Highlander 2010, which is actually named "The Seven Sisters", the idea being to do 7 Munroes in 7 days. Fortunately, I am only driving again.
In the meantime, I was on the Somme again for a boy's outing, which was great fun, even if a bit chilly. It culminated in an excellent lunch on Sunday in Arras at a restaurant that had just opened two days earlier. The food was excellent as was the ambience - but we were somewhat surprised to discover that the Chef was from Swindon.
I sort of think the level of his food was a bit beyond the good people of Swindon...
As an aside, the spell check suggests " Swindlers" for Swindon...
The most extraordinary thing about the battlefields is that when the war ended there where literally thousands of square miles with nothing in them - just mud, holes,metal and bodies. These bodies keep appearing - we saw several new graves in some of the cemeteries with addenda in the registers. The thought at the time was that no one would ever live in the area again, but good land ( especially owned by a Frenchman) is precious, and the villages all grew up again quite quickly.
One of the more interesting things to do is visit a German Cemetery. There are very few as most bodies were taken back to Germany, but there are a few here and there.
Complete with Jewish headstones.
The thing is, the non-Jewish corpses have a simple black metal cross with the name, rank and job of the interee.
The Jewish ones were removed during WW2 and melted down to make bullets - so at least the Jews could be useful. The bodies were removed from their Aryan colleagues.
Now, the headstones have replaced the gaps and the bodies have been returned.
In Schlaflige Ruhe

Jawohl Mein Hauptbannfuhrer!

Word on the Street is that Germany will not lend Greece one cent - so says the German finance minister.
A snippet has reached me, however, that a " cash for asset" deal might be done.
You may recall that one of the other times the Banks got it completely wrong about sovereign debt, the only way to solve it was for the Banks to take over part of the infrastructure of the defaulting country. This was known as a menu, and would include eg the electric company for a $billion or so - things were much cheaper then.
Of course, this suited the defaulting countries perfectly. A year or two down the line the government would change, usually non-democratically,and the new government would re-nationalise whatever it had previously swapped. In the meantime, the taxpayers in the western banks had effectively paid the sovereign debt off, because it was written off by the banks on day 1, hence a fall in profits, hence no tax payable. Very neat whirligig.
So we are probably fast approaching a similar situation. A little bird tells me that Germany and Greece may be discussion the sale and leaseback of Corfu. In fact, this won't raise that much cash because Germans own most of Corfu ( along with Majorca, Crete etc etc) already.
What it does do, I think, is point out how far Germany's desire for " Lebensraum" has moved in the last 70 years or so.


After all, the last time they wanted a bit of space they didn't sign a cheque - they launched Barbarossa.
I have to say, I can't think that all the stunning blond girl's hearts will beat as fast for a chap signing an enormous cheque as for a Panzer Kommandant.
Mind you, you never know....

Why being a Banker is now a euphemism...

We, dear reader, are the owners of something like 80-odd% of RBS and 45 % of Llloyds, quite apart from the about £2 trillion that the BofE is supporting them with in loans and guarantees, so you would expect that they might just be a tiny bit interested in keeping us "on side".
Not a bit of it. Their service continues to deteriorate faster than their balance sheets are slumping.
A friend has a couple of properties that are VAT rateable, so he has to add VAT to the rents. You will be aware that the rate has changed twice over the last year or so, first down to 15% then up again to 17.5%.
So when the rate went down, he carefully filled in the standing orders for his tenants, and made sure they signed and gave them to their respective banks ( aww you've guessed already, one was HBOS, part of Lloyds, the other RBS).
And he waited for the money to arrive in his account.
Well, it did -sort of. One of the banks paid two standing orders, one with the correct 15% VAT, the other with 17.5%. The other bank paid neither. Discretion impels me not to reveal which was which.
It took a couple of months to sort it out, and eventually he managed to get both banks to pay the correct amount. The little hiccup at the beginning they could not sort out - there was an exchange of cheques...
Move on a year and the VAT rate has just gone back up.
Same scenario, properly filled in standing orders, acknowledged by both banks...
And the same bank paid two lots and the other paid none.
Except the bank that had paid two then paid a third one.
As my friend says, " And they want to abolish cheques? It's the only way there is of making sure they do it right."
I'm not so sure about that. Twice I have paid a cheque to cover a credit card bill over the counter, and the bank has managed to give the card company the wrong amount ( despite giving me an electronic receipt for the right amount).
More recently, I upped my personal overdraft over Christmas and New Year for two weeks. On the due date for the increase to expire, the account was below its original limit - except the bank had not only removed the increase, they removed the overdraft completely - and charged me two lots of £25 for being over limit.
When I remonstrated, I was told ( admittedly by a minion and not the relationship manager I have) that there was no agreement for an overdraft ( can't find anything about it she said) and the £25 was for being over limit on the expiry date.
" So what's the other £25 for?, " I innocently asked.
" Oh, that's the charge for having the "privilege" account you hold." Silly question obviously.
When my relationship manager got back 5 days later, I taxed him with the problem.
" Ah yes, " he said." Don't worry, I will reinstate the overdraft "( which had had another 9 months to run)
" And what about the ( by now) £75 of charges your bank's mistake has so far cost me?"
" Ah yes. Well, I'll see what I can do..."
By return of post came a facility letter for the overdraft. Except it only had 6 months to run, not 9.
And there was a fee which exactly covered the charges - along with his chatty letter saying he had waived the charges for the over limits.
Nice work if you can get it.

If only...

I don't know if the Royal Bank of Scotland is advertising as heavily down south as it is up here in Scotland, but everywhere you look there are billboards, newspaper ads, TV ads, the lot, telling us how good RBS is at looking after its customers.
The ad I particularly like ( which comes in various sizes) is of a vet " who has been an RBS customer since age 6" with a tag line that says " we are open on Saturdays because your hands are full during the week"
Now being a vet, his hand could be up the backside of a cow, but no - just fitting in the palm of his hand is the sweetest little cocker spaniel puppy you have ever seen.
I'm sure you get lots of questionnaires to fill in, all trying to get your " feelings" towards various companies, but this is the first ad I've ever seen for a bank that made me a) smile b) go "awwww" and c) not want to shoot the lot of them.
So I suppose that's progress of a sort.
Their other ad, which had the directly opposite effect - i.e. a) I growled b) ground my teeth and c) wanted to shoot the lot of them - is the one with the school children all in white shirts looking happy.
The words are " RBS has taught over 400,000 children how to manage their finances through their xyz programme."
If only RBS had taught it's top 4 how to manage their finances we might not all be up a certain creek.
Without the proverbial.

US Treasury Profits...

Little snippet on the wires - the USTreasury's TARP programme is already getting back the cash it lent various banks ( in full) and they have embarked on selling the warrants they received from the likes of JPMorgan, Capital One, CITI and so on. They have so far made a profit of about $3 billion from this, and, of course, earned 11% or so on the moeny they lent.
And they aren't stuck with any of the toxic loans - they remain firmly with the US Banks.
Compare this to our own situation, where the Treasury has had no money back, hasn't made a profit ( in theory there might be SOME but those dang prices keep going up and down), and has had to shoulder about £850MILLION of toxis debt and dodgey loans.
Don't quite see that as saving the world....

Mine and Thine

The re-emergence of trainspotters is to be applauded. I have noticed many hanging about on several stations, notably Carlisle and Preston. Perhaps it is a preferred North pastime - along with ferrets and pigeons. Stations are, I'm assured, one of the good places for bats.
Mrs. Lear has really taken to bats, and appropriately enough went to a bat conference on 31st October. This, I may say, had 119 delegate branches attending from all over Scotland, so I won't hear any scoffing, if you don't mind. I can't help but think of Jeremy Lloyd's Captain Beaky who had a friend, amongst others, who was known as Batty Bat ( "The bravest animals in the land Are Captain Beaky and his band.That's Timid Toad. Reckless Rat. Artful Owl and Batty Bat.March through the woodland Singing songs That tell how they have righted wrongs." Love it). We need stuff like that to cheer us up in these dark days.
I noted the other day that some august body had worked out that the banks were lending £215 billion a year less than the sum required to finance the economy. So it's no surprise it is still contracting. That £215 billion deficit will have to be eliminated before we return to stability and a stuttering growth. Mind you, if the Government had simply handed all the money they have given to the banks to the likes of us there would be no problem.As Keynes once remarked ( I think) the best way to restore an economy is to pay people to dig holes, fill them with bank notes, then get people to dig them up. In a sense, this is what Quantitative Easing is all about.
Although this time round the mistake was made to give the resulting money to the banks who promptly bought Government debt ( as they were pretty much forced to do by the stupid new rules which brought about this debacle in the first place.)
The Romanian's have what I would describe as a robust attitude to the present problems. They've never had a period of what I would call " You've never had it so good" so things are just a bit worse, rather than a LOT worse, and they were only a bit better so the difference is quite small.
They also have a different morality to things - if it's not nailed down, I can take it. And even if it is nailed down, maybe I can take it anyway.
When I was last there we drove along a road that a year ago had been a dirt track, but which now was tarmacked. As we got further from the main road, the surface was more and more broken up, until eventually there were only a few scattered complete patches.
On our way back we passed a horse drawn cart loaded with slabs of "reclaimed" tarmac. Clearly this valuable resource was being recycled, as everything is in Romania....

A load of Merchant Bankers....

I was taken with the statements from the various parties to do with bonuses at the Banks:
George Osborne: Banks should not misuse taxpayer support.
Vince Cable: The FSA needs to show real teeth.
Harriet Harm any man around:WE NEED MORE WOMEN BANKERS!
Not entirely sure what that would achieve, but as you know a Merchant Banker is a pejorative term for someone who is an idiot.
The other one I like is a LOMBARD: lots of money but a right Dick....

In the Bank...

As you will know if you have been paying attention, I am now a fully-fledged member of the Car-less-bus-riding-walking-underclass. To be a health-fanatic member you must own a pedometer, and I duly bought one today.
According to the Doc, who claims to be the same age as me, everyone should walk 10,000 paces a day. At a rough calculation this is just under 5 miles a day.To and from the office is about 60% of this, so a couple of excursions daily are required to make up the balance. To and from the Bank just about does it. I don't need to go to the Bank every day, but hey, they are always very nice, so I may just drop in for a chat.
Today as I was waiting for something, a somewhat scruffy lady came in and approached a teller.
" Ahve got a charge on my credit card of twelve quid - wit's it fur?"
Turned out to be an over limit charge.
" But why? Ahve no' bin goin' mental nor nothing."
Yes but it's over the limit.
" Whit d'ye mean? Whit limit?"
The limit on your credit card.
" Naw naw, I alus piy the right amount ivry month"
To cut a long story short, she had been looking at the card statement, which shows the minimum payment requirement each month and paying that. Eventually, of course, she had run out of road, and was incensed by it.
And now she owed some £2500. Which drove her into a frenzy of self-justification that she had been paying what was asked every month, and how come she owed all this.
Eventually, the local manager took her into a meeting room and went through her account with her. I don't know what the eventual outcome was as I got what I wanted and left, but it did occur to me that if the banks and credit card companies are giving people credit limits of thousands of pounds who have no actual idea of what they are doing, then hell mend 'em.
In the old days, people didn't get credit, and in general didn't get into financial bother. I remember my mother buying a Hoover on the never-never in the late '50s and my father being enraged. People were taught debt was bad and ate into your soul - but none of that applies any more. They want it, and they want it now.
And the banks have obliged - up to the point where they themselves are over indebted and then we all have to pay - and suffer.

How to get an increased overdraft.

Now here's a thing.
One of our tenants who banks with RBS, who is permanently at the top of his overdraft of £20,000 and really needs some leeway, got a call from his (lady) bank manager, to say can you come in and discuss your account.
In my day, that spelled doom.
Not a bit of it.
She played around with the computer for a bit and said that's fine have another £10,000.
Bear in mind he hadn't actually asked for it, and, despite desperately needing it, he felt he could squeeze through.
Bear in mind too that RBS is government owned and has been told to lend money to small businesses. OK he had to pay an ( enhanced) fee and about 5% over base, but that's nothing when your profit margins are IRO 80%. He can now afford to take on the £40,000 of work that he has been asked to do.
So perhaps - just perhaps - the banks are loosening up a tiny bit.

Going Down

I'm trying to keep off the economic stuff as it is too depressing, but all the present indicators point to not a "V" shaped recession, a "W" shaped recession or an "L" shaped recession, but an "L" followed by another "L".
We are presently on the plateau between the two "L"s, which is why people are talking about stability and the like, and it's true, things have levelled off.
But I fear the next step will be heading down again. This is pretty much what happened in the US, and they are about a year ahead of us. There, they are now talking of a real plateau from which economic activity can grow. Their economy, of course, is infinitely more flexible than ours, which is why I am not holding my breath for things to get better. The real bank squeeze is just beginning, and it is a certainty that interest rates will have to start climbing soon - long before any real upturn takes place.
I remain convinced things will fall further until at least the spring of next year before we encounter the real plateau.

Don't hold your breath...

I'm glad someone has finally said it isn't as good as you think. Perhaps around the bars in Westminster things are looking better as the Summer Season gets going, but here in the real world things are anything BUT rosey. I can't get the graphs to come across, but if you have a look at the article, they are all there to be seen.
In essence, things are just as bad, if not worse, than in 1929. The only difference is the interest rate regime and the monetary response ( although one of the graphs worryingly points out that monetary growth continued for some considerable time after 1929)
More importantly, what's happening on the ground?
We landlords are always the first to feel the pinch and last to come out of recession. If you are a manufacturer, you give what little money you have to your suppliers - landlords come last. A landlord will always do a deal to keep you in the property as otherwise he has to pay the rates and the upkeep, so even NO rent is better than NO tenant.
A stark example is one of our tenants who until November was talking of taking extra space. Admittedly his business relies on entertainment, both corporate and private, but his business has literally died. He's fired everyone apart from one YT, and is back where he started 5 years ago -but in worse shape as the bank won't even give him the overdraft it gave him then.
Another is finding that every time he makes a sale, when he delivers, the client wants "£150 off" or some such figure, and his margins are already squeezed to nothing to get the sale. And then arbitrarily an extra 30 days credit is being taken, not least by government departments.
So it ain't over yet by any means.
I stick to my forecast of some time ago that things will continue to get worse until some time around Easter 2010 - and we'll then have 18 months or so of levelling off, before ANY talk of green shoots is appropriate.

How to steal a few Billion

I had coffee today with my friend from Hungary who says things there are not good. The problem revolves around how banks have drawn people into their debt net.
He likens it to drug dealers. Give them something cheap, just a taster, then when they are hooked, up the ante, charge them more, move them from hash to cocaine, then up the stakes again to crack or heroin.
This is basically what the banks have done to their clients.
When you first get a loan, its not usually very big, its easy repayments, because you haven't got any debt it's cheap and so you think hey, I'd really like that new whatever, and away you go. Various Ms.Lears assure me their friends all live from one credit card statement to the next with absolutely nothing to show for it.
And do you suppose all this is all in Florints in Hungary? Not a bit of it. It's in Euros and Swiss Francs, because that's how the banks can make extra money ( on the exchange rate) and in fact it would appear for the past few years they haven't even offered car loans in anything else. Can I have a Florint loan please? - no,non,nada, nul points.
The other thing he says ( quite rightly) is that nothing is going to change. Because the Banks have been bailed out ( and you can forget any pathetic strings attached) in another year or so things will be just as bad if not worse.
Compare this which what happened in the East in 1998. Korea, for example, let every dodgy bank go bust. Yes it was painful, but new banks appeared as if by magic overnight, and now Korean banks are amongst the soundest in the world. The economy picked up rapidly too. Contrast that with Japan which, 15 years on from its own bust, is still struggling with limping banks, and no improvement really in their economy over all that time.
The other thing that's scarey in the West is the propensity of banks to start pulling the plug just when things start to get better. The reasoning is they will be better able to get their money back. The reason the American banks are now talking tough ( we are gonna pay the TARP back) is so they can foreclose on some assets that they now see as being cheap, and allow their newly created distressed asset funds pick them up for a song. It's already happening in real estate - some commercial properties are being sold in the Sattes for 40cts on the $ on the cost to build them.
I did hear one quite nice thing. If you are a private client of UBS, they are offering you loans to 90% of value at 1.5% over Euro LIBOR. This means about 3.5%.
And the security?
Cash.
So they will take your money and give you 90% of it back - and charge you 3.5% pa.
Nice work if you can get it.

Credit Agricole.

Well, BB has prompted me to put the Credit Agricole story first.
If you follow the charming and second best card player Winchester Whisperer, you will have spotted we were in Albert over the last few days.
I had stayed there before in the Hotel de la Basilique, where Didier and Sandrine looked after us excellently again.
As you do, I got chatting with Didier, telling him how nicely I thought they had done up the hotel since last we were there. Whereupon he told me his story.
The Credit Agricole, with which his family have banked for more than 100 years, lent him about Eur 20,000 to do up the hotel last year. Admittedly they took no security, but the hotel and its business must be worth , ooh, say about Eur 400,000
Things were quiet running up to Christmas, but no payments were missed, but money was tight.
Before the January payment, due 24th of the month, and in fact on 10th January, his bank manger walked into the hotel and without any discussion said two things.
1) We will not honour any of your cheques which are presented as from today.
2) We want our remaining loan ( about Eur 16,000) repaid immediately.
Taken aback, Didier asked why.
" Because you have only paid Eur 500 into the account in the last 10 days"
" So what? " said Didier. " I have 14 more days to make the payment, and if necessary I can borrow money from my father"
" Nevertheless, as from now your account is effectively closed. And we have taken your credit balance into the loan account."
Bouncing a cheque in France is a criminal offence.
Absolutely shattered, Didier spoke to his father who wrote a cheque on the spot for Eur 20,000, but on his way to pay it in, he passed another bank, CIC.
He walked in and asked to see the manager, who he knew ( Albert is a small town), and told him the story.
The manager smiled.
" Well, I think I know why. Here are account opening forms so that you can at least trade. We will honour your cheques meantime. Once we have this open we will see about the rest. They have to give you 6 weeks notice to repay anyway."
Still shattered, but mightily relieved, Didier filled in the forms, then paid the Eur 20,000 from his father into the account, and proceeded to contact his suppliers to sort out the mess of CA's making.
A few days later, Didier spotted in the paper that CA had made a loss of Eur 5 BILLION. He went along to see his new, friendly bank manager.
" Ah yes," he said ," This is the reason, as I thought."
As Didier said, " It's not me nor people like me who have lost CA Eur 5Billion. In fact they have made it from us. It is they themselves who have gambled and lost, something we would be punished for. But, of course, not them."
As a postscript, the CA manager was furious with Didier's father for giving him money - it was a CA cheque and was Eur 20,000 less that they had to weather their own storm.

There are people in Britain starving....

When I was little, my old Nanny used to make me eat my plate clean with the words :
" Eat up your highness, people in Europe are starving."
As this was post war, I'm pretty sure the Brits were doing much worse than the French and Italians, and even the Germans were starting to get there. British Nannies, especially of that era, were quite sure that Europe was never as acceptable as Britain.
I spent part of the morning with an old and dear friend of mine who has retired from the property game.
He still gets stuff offered to him, so it was not a huge surprise when he told me he had bought a "wee shop in Edinburgh" let as a sandwich bar.
Being the cagey Scot he is, he didn't give me much more information - except to say that he had lopped 35% off the asking price and it had immediately been accepted.
There can only be one reason for this - whoever the vendor is, his Bank have told him to get some cash in - any cash at any price. I'd be almost willing to bet it's HBOS. The yield on the deal is more than 10% and makes no sense as even in these times the vendor won't be paying more than 4% maximum.
The word in the market is that there is a gigantic overhang of property on HBOS' books - perhaps as much as £20 billion still, but they can't actively sell it. It would completely destroy the market. They don't want to pay liquidators when they can effectively get it done for free by the existing management.
So for a start all the busted flushes out there are being left to get on with it, but all cash coming in goes straight into the hole, with nothing coming back out. I know at least 3 people who are personally at their wit's end as they have had nothing - nada - into their own hands since October last year. Another friend of mine is busily paying his daughter's children's school fees, and the weekly shopping. God knows what the mortgage company, the car leasing company, the council tax people etc etc are doing for cash from she and her husband - whistling I suspect.
Secondly, through third parties, emails and letters are being sent to potential buyers, so it doesn't look as if it's coming from the Banks. I'm getting on average 20/30 per day. Not particularly attractive, but then I would only need one....
So vent your anger on MPs by all means ( it's all Brown's fault after all), but spare a thought for those ex-property magnates. Even the biggest companies are dying - SEGRO ( ex-Slough Estates) is down from over £6 to below 10p. ie a drop of some 99%.
That's what leverage does to you.
Eat up, for people in Britain are starving....

Not actually improving...

two stories from yesterday's train trip to-and-from London.
On the way down, some poor old chap tried to make of with my briefcase. I naturally prevented him, but it was immediately obvious something was wrong. Fortunately, the guard was just nearby and he took care of the old dear. I later saw paramedics at the next station removing him, so I suspect he had had a stroke or something - he was certainly seriously confused.
On the way back, I was opposite a chap who asked where I was going. I replied Glasgow and it transpired he was going to Penrith.
I've long wondered what on earth people do in Penrith - after all Carlisle is very close by.
It transpires he is a plumber, or more accurately a pipework and heating engineer.
His business is 8 years old and doing extremely well, thank you, with no lack of orders or enquiries - if anything he is up a bit on last year.
He works all over the country, his biggest single contract at the moment being a complete re-working of a jewellers in Bond Street - he didn't say but it could only be Asprey's I suppose. He doesn't do contract work for developers in eg the residential area, so has been saved any losses there.
So that's good news then...not quite, unfortunately.
His problem is quite simply an inability to get people to pay.
They want to pay him ( it's staged payments) but he has now instituted a "no pay no next stage" regime. His receivables are more than double what they were last year.
As he said if he could get the cash in he would be a rich man, but in the meantime his Bank have given him not one penny extra of credit. He's had to finance the debtor increase entirely out of his own resources, which includes taking no salary since January, no Easter holiday, no planned Summer holiday, and only travelling when absolutely critical. His other Directors have done roughly the same.
So that's how Brown's help for companies works...ie none.

Unintended consequences.

The one thing that has become abundantly clear over the last couple of weeks is that not only does this government have no idea what it is doing, it has no idea what effects it is having by what it is doing.
For example, the implication of a three times salary cap on mortgages implies a further huge drop in house prices. This, in turn, will lead to further huge losses at the banks - which means they won't be able to lend to start the economy.
Perhaps this further collapse in house prices is A Good Thing - in some ways it is - but it's also condemning millions to abject poverty.
It really has all got completely out of hand.
I had lunch yesterday with, amongst others, a CA long retired and the Treasurer of the Gurkha Welfare Trust.
He had banked from the days he first had an account with Bank of Scotland - as had his father and his father before him. His practice had banked with BofS. His wife and children banked there too.
Then one morning late last year he woke up and suddenly felt " My money's not safe in that Bank".
He says it was the most shattering day of his life. He had never never contemplated that cash in a bank was at risk.
His view is that the bankers - and the present government - will never ever be forgiven.

Save save save.

Peter Schiff does it again on Takimag.com
I know if we all start saving money things will get worse - but Schiff makes the important point that it is the leverage on capital that makes possible lending. So £1 saved is - say - £10 lent.
The present problem is that that £1 isn't there. Arguably, all the money thrown at the banks is to replace that £1, because the trillions they used to borrow on the interbank market has gone - and has had to be replaced by their own tier 1 capital and actual deposits. And, of course, all those taxpayer squillions.
So the answer? Save like hell and/or pay down debt as fast as possible.
The quicker you do it, the faster we will get back to a sort of normality.

How not to lose money

I was at a 21st Birthday party on Saturday night with a 20's theme which was great fun if you like that sort of thing.
In view of the present crisis, the talk amongst the older people was all of the crunch, but the younger ones, nicely padded by their parents, didn't seem too bothered.
I was sitting beside an accountant who was fulminating about RBS and HBOS in particular, and the banks in general.
It's a story we have all heard time and again, but he recalled when he was an articled clerk in his early days, earning £65 per annum and damned lucky to get it too. He used to pop into the famous Horseshoe Bar where various other youngsters, including trainee stockbrokers, sometimes gathered. I rather fancy at the time these particular young men had to pay to get trained.
One evening one of the stockbrokers said to the trainee accountant that XYZ Rubber Company was an absolute certainty to go up dramatically, and he should definitely buy shares. Not having any money, he popped into his local Bank of Scotland at 110 St.Vincent Street in Glasgow and asked to speak to the manager. You could still do that in those days. It became a pub,but has now reverted....
Of course, he didn't actually get to THE Manager, but to one of his underling deputies - who were all probably at least 50 and had been with the bank since they were 16.
It was a bit like Oliver asking for more.
" Please sir can I have £50 please?"
I can see the picture - the greying sagacious banker would look over his spectacles with a light frown.
" And what, pray, is this money for?"
" Well sir, one of my friends is a stockbroker and he has given me a tip on XYZ Rubber."
There would be a pause.
" Young man, we are the Bank of Scotland. We have a fiduciary duty to our depositors first and foremost to lend their money to worthwhile and profitable enterprises. It is NOT our job to lend money to worthless young men for inappropriate speculation. Good day,sir!"
Shame they forgot that.

Mad or what?

There has been a property forum happening in Edinburgh which, amongst other things, has opined that commercial property has declined in value by 40% in the past year . Then they say it represents a minus 12% return. Actually, compared to the markets that's quite good, but these two figures are incompatible.
Prime property was yielding about 5%. If it has delivered minus 12% then it has fallen 17%, not 40%.
I suspect, however, that the pundits are referring to the yield having fallen 40%. In the perverse and arcane way that property is valued this means e.g. a 5% yield is now a 7% yield - which actually looks quite tempting.
As my ex-banker advisor says anything yielding above 6% is a steal at the moment. The risk, of course, is of tenants going bust. In that regard, we've had one that is going to leave us. Not exactly gone bust, but as good as. He had a small overdraft of £10,000, pretty much unsecured on his business. It came up for renewal at the end of January, and he somewhat cavalierly rang to say he assumed he could rely on the bank's support for another year.
Not a bit of it. Despite banking with them for over 30 years, and therefore they had all his business transactions for that period, they asked him for a business plan and cash flow. He expressed incredulity, especially as he only ever used a small part of the overdraft and had never over-overdrawn.
Not only did they require the aforementioned, they also needed security, and a £1000 fee, and 7% over base.
Now the latter is hardly relevant, but the fee, as I've said before, means they would be earning a very tasty 18% on their money, if he drew it all down. As he might only draw say £2000, it means the bank would be earning 58% - or much more if he was only overdrawn say half the time. That would be 108%.
The banks "investment/own account" earnings are all gone and are seriously minus. They are going to make that up from people like our tenant.
To cut a long story short, he decided to give up, and I don't blame him.
But I digress.
According to the pundits, in the last wee while RBS and HBOS have accounted for 75% of all property funding in Scotland - and 50% across the whole of the UK.
With that gone, is it any wonder the market's knackered?
PS
A sign of the times. Nationwide will impose charges on overseas card transactions from next month. As Brian Boru has rightly pointed out, not in Europe.