CRASH 2: Give credit where it’s due…..

…..and take charge of the aftermath.

In this, the final crunch match between the Eggheads and the Crash, team spirit among the Eggheads is not all it might be. Ben Bernanke looked almost truculent following Christine Lagarde’s man-the-lifeboats speech at Jackson Hole last Saturday, and the boss of the EU’s piggy bank Jean-Claude Trichet said she was “quite wrong” to call his little piglets wobbly. Although she is of course quite right about their fragility, in one mighty leap she has gone from driving the French nation into debt, to complaining about the amount of cash in European banks not being enough to cough up for disgracefully accumulated sovereign debt in the EU. Quietly seething in the Elysees Palace is Nicolas Sarkozy, a man already behind in the polls, and thus not exactly crying out for a collapse in the public finances on his watch.

Trichet doesn’t like Lagarde, and he doesn’t like Frau Merkel much either. But Merkel herself is in a deal of trouble, because a head of steam has been building up in Germany that, as I’ve long suspected, is going to call the next round of bailouts offside – including the one being lined up for Greece – and very probably defeat Merkel in the Bundestag. The Greek people in turn aren’t getting on too well with their ‘government’, which has effectively been neutered by events; and after requesting emergency aid for its banks last week, the Athens Government facilitated the fastest merger in banking history by allowing its second and third biggest institutions to join forces – the better to pile up the sandbags against the coming waves of foreclosure.

So apart from US and French Presidents distracted by re-election, a revolution on the boil in Greece, a constitutional crisis about to sweep Merkel away in Germany, the Italian leader Berlusconi beset by charges of under-age sex and corruption, and at least one major bank already on a drip feed from US FX emergency dollar funding, the Eggheads team is focused and ready to face the challenge ahead.

Yes, well – not really: the Eggheads are Arsenal in this encounter, and Crash 2 a rampant Manchester United. I feel sure that in the various White Houses, Downing Streets, Elysees Palaces and Beijing mausoleums around the globe, only the truly dense people at the top are in the slightest doubt as to the eight-goal rout that is coming. The main task ahead now, for the politicians who facilitated this mess, is one of finding the best things to blame – via which, they hope, any responsibility attaching to them might usefully be shrouded in heavy mists of alleged serendipity.

Last time around, Bush blamed the ease of access to alcohol on Wall Street. Eric Daniels of Lloyds Bank blamed Greenspan, and Gordon Brown blamed Esper & Marlene Hillbilly of The Tree-House Branch, Tennessee, for their unwisely successful $2.3M mortgage application of September 2004. Adam Applegarth of Northern Rock blamed the rates for going up, Hank Paulson blamed Congress for not giving him absolutely all the money in America when he asked for it, and Goldman Sachs blamed Clinton for forcing banks to give black folks mortgages they didn’t deserve.

This time, the Chinese were first out of the blocks, naming and shaming the US as the prime culprit. Washington didn’t have to look very hard before alighting upon S&P, the ratings agency that had downgraded its debt; although some time before this, Obama had fingered the GOP for its audaciously irresponsible attempt to stop him launching a free National Wealth Service during election year. The Tea Party blames Washington because it’s there, but at the moment Greece is in the lead by apportioning equal blame to Goldman Sachs, the ECB, the previous government, the IMF, Moody’s, Fitch, and anyone who was nuts enough in the first place to ever expect them to pay the money back.

Last Saturday was Christine Lagarde’s bid for freedom, and it’s clear she has two targets in mind: the banks for not recapitalising, and the taxpayer for being too mean. Both are incredible as objects of blame, but its never stopped her before, and it certainly won’t now. So it only remains for me to size up what the late starters will do….once even they have spotted the inevitability of le deluge.

The Labour Party will blame the UK Government’s programme of cuts – except for Harriet Harman, who proposes to lump all the guilt onto the EMA scandal, as she’s taken to calling it, and gender inequality. The Guardian will probably blame everything done since May 2010, and toss in a conspiracy theory involving James Murdoch for good measure. George Osborne will blame the EU for not getting a grip, and – if things turn really tough – David Cameron for giving in too much on expenditure cuts. Cameron himself will naturally blame Brown, but single the banks out for special praise and complete absolution.

Angela Merkel will blame lazy latinos outside Germany and electoral agitators inside Germany, prior to finding a Dutch UKIP militant setting fire to the Reichstag, and then declaring a State of Emergency. Sarkozy will blame the Germans for exporting (and exorting) too much, and the British for not stepping up to the negotiating table. President Herman Van Rompuy and President José Manuel Barroso will blame Brussels for wanting two Presidents, and EU citizens for not loving the EU passionately enough. Sarah Palin will blame the Russians, and flouride in the water supply. Putin will just pip Greece at the post by blaming the weather, the Ukraine, the Mafia, South Ossetia, the Chechens, anyone from Georgia, and Boris Nemtsov….assuming he avoids committing suicide by falling off a Moscow tower block before Crash 2 finally gets into its stride.

And finally, what of perhaps the two most influential players on the stage of this third-rate farce – Ben Bernanke and Jean-Claude Trichet? Bizarrely, I’d imagine that Bernanke will blame consumers for deliberately refusing to consume, as they were meant to do in his models….although he will be patronisingly sad, rather than angry, in making this judgement. And Tricky Trichet will blame all 27 EU member States for their insolent disobedience to the dictates of his Central Bank. For they unpardonably sabotaged his one big plan…to retire before any seriously smelly stuff got chucked at the fan.


What we are about to see is the Search for Sanctuary that always accompanies a screw-up. And out of all the blamestormers, perhaps only one will lay the blame squarely at the door of deregulated banks: Mervyn King, the Governor of the Bank of England. He won’t be entirely right (and he certainly must shoulder at least some of the blame for his dilatory attitude in the boom years) but he will be more right than the rest of those miscreants listed above. As with the BBC, King is a curate’s egg who nevertheless gets far more of a whipped backside than he really deserves: just as the Beeb became anodyne after the Iraq unpleasantness involving dead doctors and dire threats from Alistair Campbell, so too King’s opening observation  – that Northern Rock should be left to fail – was greeted with the sort of pernicious vitriol from Brown and Darling that made a mockery of the BoE’s ‘independence’.

But what of the rest of us? I suspect we will remain as clear as we were three years ago about what has caused us to be back in the cess pit, only deeper than ever. On a planetary canvas, it’s terminally obvious that globalist exporting is not the answer – and globally based banking does little except shove paper around while underwriting megamergers. Export mercantilist mania will one day lead to catastrophic war unless it is reined in. Derivatives threaten the fiscal survival of every nation on Earth. And the never-ending shareholder quest for Bigness kills more jobs with every month that passes.

Equally clear is that a globalist business perspective removes all respect for, and loyalty to, national needs. As Homo sapiens is a pack animal, this too is a very bad idea. Further, national politicians are running scared of business, banking, and media power. We can laugh at their silly strutting, but the erosion of sovereignty is an even worse idea.

At a level more local to Sloggers, an administratively strangled EU has failed miserably on the twin bases of creative entrepreneuralism and wealth creation. The growing suspicion of wannabe superstates per se is based on the same old social anthropology so often ignored by politicians: they are too big and prone to being hijacked by unproductive functionaries. But primarily, the EU will eat itself because it has failed to grasp the concept of a varied Europe creating eclectic businesses and products that the rest of the world might want.

Specifically, the European Union’s crazy disregard for focused investment – and an equally mad commitment to cheap, unsecured credit alongside polemic wealth redistribution – is at a tipping point. Put simply, the EU tried to put unaffordable and undisciplined fantasies into reality. This is by far the factor most likely to infect the US, and thence the world economy as a whole.

I doubt if, in the end, there is any point to blamestorming. There is, however, a lot to be gained from a reasoned post mortem. The results of such an investigation ought to mean an end to globalist, neo-fascist conformity in favour of varietal self sufficiency….invention on a global basis, wherein exports are a bonus other markets can enjoy – rather than the be-all and end-all of everything.

In such a business context, domino-falling investment banks would be a bad dream from the distant past, and the business of financing entrepreneurs or mezzanine concerns would be a far more diverse process. The aim of most nations would be self-sufficiency in everything from food and natural resources to energy. We will never achieve that of course, but in a way, that’s the point: without an ideal to aim at, humanity will always be tempted to languish in a ditch.

Aspiration is the main thing we have lost after 35 years of Friedmanism. Protection of what we have, obsession with the material, and short-termism have replaced the great quest….until we are indeed in a ditch of our own making. We have rewarded lazy shareholders, as opposed to investing in the future. The tiny minority has sought to profit from monopolies, rather than a majority hell-bent on their ideas and labour offering reward for them, and fulfilment for others.

The mutual, varied community will one day replace the Big one-size-fits-all society. When it does, we will all be the better for it. But it won’t just happen: we have to make it happen. Once the Judgement Day has passed, and the blame has been apportioned, it’s up to us to take charge in the community that replaces the society.

The UK bank holiday is over, as are most of Europe’s August vacations. From tomorrow, the debt pantechnicon rolls ever nearer. There will be no place for negative blame in this new future. Instead, a positive learning process must take over. Actually – whether the elite like it or not – cultures usually learn far more from mistakes than from success. If they can no longer do that, then every sensible citizen should desert that culture in search of a better one.

33 thoughts on “CRASH 2: Give credit where it’s due…..

  1. Who knows? 7 September in Germany looks like an important day, and SocGen’s days may be numbered(renationalisation).Beenwanking has spluttered,and put off giving his Delphic wisdom until sometime in September,and MarK is as usual leading from the rear,anticipating his next summons to the Commons.The hot air season (party conferences)may be rudely interrupted by market events,and my guess is beginning September is the time to buy big pharma.


  2. You can almost hear the mutterings from the politico-banking elite “Shit, this wasn’t supposed to happen on my watch, give that f*****g can one last big kick.”

    Apres nous le deluge indeed!


  3. “Eric Daniels of Lloyds Bank blamed Greenspan”
    And Daniels was right to. Greenspin fired the starting pistol on the unprecendented credit boom based upon cheap money.
    … …
    “Goldman Sachs blamed Clinton for forcing banks to give black folks mortgages they didn’t deserve.”
    They were right to. It was Clinton who started the US housing boom.
    … …
    “The Labour Party will blame the UK Government’s programme of cuts”
    Naturally, they’re in denial.
    … …
    “Cameron himself will naturally blame Brown,”
    With good reason. Brown was on the bridge at the time.
    … …
    You make some excellent points, John. The only thing I have serious concerns about is the idea that we can call time on globalisation and go back to self-sufficiency. Neither Britain nor any other country can do it and any attempt at it will cause a lot f very severe pain…enough to cause serious civil unrest.
    IMO the very best we can do is 1) take a serious look at the globalisation of big money, product dumping et al and eliminate the pointless, and 2) introduce genuine incentives to re-start manufacturing/agriculture in Britain. One way to do that is by abolishing volumes of rules/regulations invented by successive governments (Labour in particular) and the socialist EU-crats which have choked our home industries to the point they just gave up. Lots of other things to do, but not abandon it.

    The world cannot afford socialism any longer. We have to face that.


  4. The worst aspects of globalism are to be seen in the energy markets. We must strive towards self sufficiency in this area. The carbon tax / target politics of this debate are dangerous red herrings in our national well being.


  5. We can do it with electricity by building more nukes, but how to achieve self sufficiency in oil, gas? which are major inputs…


  6. You make some good points BT, and of course John is right. 
     You should, however, both go down to your local Wetherspoons, not sure about The French equivalent. 
      Do you really believe the masses give a dam! They are scraping together seven quid for there next pouch of baccy. Get out and you will see the size of the problem!
     John has hinted for some time about the disorder that could be created – be prepared.   


  7. I’m certain the masses don’t give a damn about globalisation per se. I doubt if many even understand what it entails.
    But they soon would be interested if the things they spend money on (imported foods/gadgets/cars) were either not available because globalisation were ended to force us to be self sufficient or prices were hiked up by tariffs to discourage imports. Add to that if currency controls were reintroduced or a tax introduced on foreign spending (tax of 6.83% is levied on foreign use of debit/credit cards abroad by Brazilians). All that really would create disorder and more allegations of rip-off Britain.


  8. what nobody wants to admit — is that we (& the rest of Europe & the western democracies) can hobble along indefinitely on expediencies applied. (the sticking-plaster remedy) whatever pending disaster is looming — we’ve never been better-off in our existence — I’d bet not many contributors to this & similar sites are on the bread-line! I holiday regularly in West Wales (my spiritual home) & for the last 20 yrs we’ve been anticipating the demise of the cod — in effect the chip-shops are groaning with the fish — in hugh portions & reasonably priced. the trouble is everybody presents themselves as experts — how often have the ‘experts’ gotten it wrong?


  9. It has to be said that your concerns about the destuction of Globalisation is one which we ‘debated’ a few articles back.
    However (having just come back from my local so excuse the dixlecsha) it is Globalisation which is the problem for consumers and the economy. The people can do without the good which are imported based on cheap labour vs. locally produced goods. They used to do so – they can do again and they will have to until it can be produces locally. It is all very well for those who are ‘OK’ wanting these goods – but they lead to social disruption when those who cannot afford then – see them !
    We have an economy whereby too many people are ‘have nots’ and they are growing. A bit of hardship for those who can afford a bit more will not produce the sort of uprising (that a lack of kiwi fruit or 50″ 3D tv) will produce.
    What you are concerned about is ‘nice to have’ products. What I am concerned about are ‘must have’ (food and energy) products.
    A Global cartel can make these things unavailble to the masses. Thus local production and supply are the obvious requirements. Since deregulation of the power companies we have seen them over time reduced to a cartel all of whom variously increase prices (by buying cheap and holding until the supply is more expencive) then demanding increased payments from the consumer. That they all ‘slide’ the increases is no excuse. The Power companies should be telling Government that they will not sell expensive power as this limits competition but they do not (one could undercut all others and gain market coverage) thus a cartel is formed and worse – it is encouraged by government demanding the price so the happy cartel continues.

    Anyway – nice to know (John) that my thoughts and yours coincide fairly well. I just wish I was as able as you to put things into words. I also lack the contacts you appear to have, which adds additional pleasure to your posts.


  10. I have been reading your comments here for a few months now having been pointed in this direction by a few BBC bloggers. I will always try to get my news information from as many quality sources as possible to hopefully try and work out what the hell is actually going on. You have made it compulsive reading – keep up the good work and good luck to all in the turbulant times ahead, Tim


  11. I have a rule ! when the term expert is applied in a presented (especially BEEB) article – think vested interest.

    It works well and a bit of research can give much more balance.


  12. Glad to read that the Intelligence Corps Activities at Sandhurst are state of the art up to the minute..arf..
    Posh Holiday camp.


  13. ….” The aim of most nations would be self-sufficiency in everything from food and natural resources to energy. We will never achieve that of course, but in a way, that’s the point: without an ideal to aim at, humanity will always be tempted to languish in a ditch….”

    UK has tidal energy, climate and soil emminently suitable for all of these….but lacks the intelligent breeding at local and national level to recognise and then manage any of these challenges.


  14. …..”The mutual, varied community will one day replace the Big one-size-fits-all society…..”

    The Mutual, varied community can only be Family Groups – given the ‘every man for himself attitude of self’ that prevails today.
    The Italian model of Mafia looks a unit that could have enough weight to progress in today’s world.


  15. The elite will assume they will be the leaders whilst the tsunami of hate washes them away a new elite emerges even more loathesome.


  16. Somebody cleverer than myself put it nicely in that experts are wrong as often as the ‘man in the street’ the only difference being that the experts expound their opinions more elegantly.


  17. Is it not strange that M King, who I believe is a ‘good guy’ (normally the kiss of death for his career), is thought of being ‘at fault’ for keeping interest rates static for too long in a period when he was hitting the agreed inflation targets regularly?

    And today the pundits and those ever so macho free marketeers praise him for keeping interest rates on hold and thus missing his objectives by over 100%

    In my opinion as with many of the problems today it was the objectives the BOE were set that were wrong.


  18. From an article at the Bloomberg site.

    “The U.S. is experiencing a surge in the multigenerational households that were once a common feature of American life, and Hispanic and Asian families are driving the trend, according to U.S. Census Bureau data released this month. The number of such households, defined as those with three or more generations living under one roof, grew to almost 5.1 million in 2010, a 30 percent increase from 3.9 million in 2000, the data show”
     Is this a “mafia style” way forward for the UK?


  19. @Morningstar: yes you’re right, globalisation has been debated recently but it’s an important subject which people have views on.
    IME when people criticise globalisation they are often really criticising consumerism which has expanded beyond belief in recent decades.

    “The people can do without the good[s] which are imported based on cheap labour vs. locally produced goods. They used to do so – they can do again and they will have to until it can be produces locally.”

    Easier said than done. Whilst I am happy to replace imported goods with locally produced products, many items cannot be produced locally for a variety of reasons (climate, cost, onerous regulations etc). And to *impose* such a marketplace looks very much like a command economy to me…you know, the sort of economy that existed in the Soviet Union and its satellites between 1945-90. Those economies produced the Lada and Skoda whilst people in the West were driving VWs/BMWs.
    … …
    “It is all very well for those who are ‘OK’ wanting these goods – but they lead to social disruption when those who cannot afford then – see them !”

    So, none of us should be allowed to buy consumer goods until everybody else can afford them or we risk “social disruption”. Is that right?
    … …
    “We have an economy whereby too many people are ‘have nots’ and they are growing. A bit of hardship for those who can afford a bit more will not produce the sort of uprising (that a lack of kiwi fruit or 50″ 3D tv) will produce.”

    There will always be “have nots” in any society. Not everybody is born with the same level of intel, drive and opportunities.
    ISTM a partial solution to this is find ways of improving the lives of those who cannot afford stuff through education and a more limited welfare system to encourage work. Those who decline to participate cannot expect to enjoy the fruits of hard work because they’re not doing it!
    … …
    “Since deregulation of the power companies we have seen them over time reduced to a cartel … …”

    The privatisation of utility companies was a crock. I have long said that when the UK utility companies were privatised, the government of the day should have first created a new model of Limited company with modified Articles of Association giving equal preference to its customers (instead of the existing model which requires companies to favour shareholders by law).
    Let’s call the new model ABC Public Utility Gas Company Ltd.
    It would still be a private company but one with more focus on its customers instead of the stock markets/inflated divvies. Additional rules could have been introduced to limit % foreign ownership. These companies could have become a grannies and orphans investment instead of what they are today.
    It’s never too late to get it right.
    Add to that hopeless quango regulators who don’t have sufficient powers, often don’t use the ones they have, are hoodwinked by their subjects and do not fully understand the businesses they’re regulating. Gas/Elec/BT are all examples of poorly regulated monopolistic utilities that need reigning in.
    OTOH, at privatisation, the government of the day knew that all of these companies needed massive investments to upgrade their infrastructures to 20th/21st century standards after decades of state-ownership & political manipulation. Similar problems with British Rail.

    But none of the above is an argument to end globalisation. Rather, it’s a case to oversee the process more effectively to prevent abuses and make it work better for customers and consumers.

    I repeat my earlier comments that if globalisation were ended, it would trigger global unrest and a return to Soviet-style command economies with endless 5 year plans for tractor production et al.


  20. More a case for profit for builders building bespoke “one off” extensions to houses rather than whole estates of “Barratt” style rabbit hutches


  21. For sure, when Brown gave the BoE a narrow remit to keep CPI at about 2% that was very wrong. Not least because CPI is a deliberately fake measure of consumer inflation but it’s been adopted around the world by the political elites.

    But Merv cannot have it both ways:

    – during the Brown credit boom, Merv kept IRs at low levels and sat back to watch the housing boom and personal credit go out of control. The latter reached £1.6 trillion in 2007 and played a major part in the banks lending irresponsibly.

    – when the bubble burst, Merv has gone along with zirp on the grounds that it is needed to support bank lending and the economy. It’s doing neither of these things but it is creating inflation of 5%.
    Since when was his remit to be concerned about “growth”? Under his remit, that’s the goverment’s duty not his. His duty is to control inflation and he’s failing.


  22. I find it ever harder to differeniate fact from fiction but I thought that the BOE has been told they should now have ‘concern about jobs’ whatever that means to the BOE.

    To me there is no ‘joined up government’ they appear always to leave chasms in their decisions so that blame can not be attached to anyone but they can earn their gross salaries and perks by the simple expedient of pronouncing to the public, with a straight face ‘we will learn lessons’

    (my view is that if I want someone to learn lessons I get someone on youth employment secondment, our masters do not believe that they are being paid for their command of the portfolio they are in charge of)



  24. It’s already happening in the UK: 1.8 million ‘households’ ( some 5.4 million people—roughly the entire population of Greater London)) are on social/affordable housing waiting lists—and that’s England, not the whole UK. Clearly, they’re not all sleeping rough on the streets; they’re accounted for by the growing numbers of two or multi-generation households.

    So we are rapidly returning to the overcrowding which inter-war development did so much to reduce—and yielded pre-dominantly suitable family houses with modest but adequate gardens (garden space is not fungible and unless you are BoJo, you can’t build a garden shed on a balcony)

    Meanwhile, new planning consents for housing are down by 25% in the last year over the previous year and set to fall further when the Localism Bill’s provisions take full effect. Rents are increasing faster than inflation. We’re taking far too much relatively scarce green stuff in our towns and cities in the name of ‘protecting’ relatively abundant green land outside them. Green Belts are not working in the way envisaged after the 1947 Town & Country Planning Act and have become a fetish in the name of environmentalism.

    Vested interest in the guise of environmental concern dominates, aided and abetted by MP’s who want the powers but who contrive to abrogate their responsibilites—“it’s nothing to do with me, guv’.”

    The prospects for Generation X (and younger) are bleak. At the moment they’re ‘taking it’ but for how long? I’m sceptical of the notion that the ‘masses’ just don’t and won’t ‘get it’: not yet, perhaps and certainly not all at once, but I suspect they will in time.


  25. @Altergoman: “I find it ever harder to differeniate fact from fiction but I thought that the BOE has been told they should now have ‘concern about jobs’ whatever that means to the BOE.”

    Officially the BoE is still independent of government (unofficially it never has been) and has a simple remit of maintaining CPI at ~2%.
    The MPC is failing to do this and by getting rid of the only moderate inflation-hawk (Andrew Sentance) off the MPC, one assumes it has no intention of doing so in the foreseeable future. There are various unofficial views on the real reasons for Zirp but none of them include increasing bank lending or helping the economy to grow ‘cos neither are happening. In any case, Zirp is outside the BoE’s narrow remit.


  26. Pingback: CRASH 2: Next time, I recommend we keep the bankers in the attic. | The Slog

  27. Well, There are 3 generations living in my house, sometimes 4 :(
    I’m one half of the silly(rich boomer?) generation 2 that stocks the Star Trek transporter room (We put food in, it hums, the food is gone.) the other generations call it a “fridge” for some reason. I’m never informed which members of which generation are staying or for how long. As in the last room switch around where the incoming 2 (members of generations 3 & 4) where within a few months to become 1 x generation 3 + 2 x Generation 4!! What is also worrying is that one member of generation 4 is approaching the age of being able to produce generation 5 :( The other day I heard “just buy a bigger fridge Dad” from one of them! Fridge Trek – the next 4 generations :(


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