[Archived] The End Of Global Capitalism?

[Al]

with interest rates and inflation pretty low i think that this isn't anyway near as bad as peston would have us believe

The man is a pain. He's probably happily selling shares short as we type.

[American]

Isn't the point of the capitalist system that businesses that are unsound shouldn't survive? GM should go bust because they haven't been able to compete properly for years. They've been getting killed by Toyota and Honda, but haven't put a product forward worth buying and their approach has been awful.

As for banks, I really don't need 7 different banks on two blocks in my neighborhood.

[grizfoot]

UK local authorities investing money in Icelandic banks came as a shock to me. They didn't tell anyone about that did they? surely they should be supporting the UK economy by having their cash reserves in UK banks, surely that would make more sense and would have meant that taxpayer money was more secure. Council tax is suppose to be spent on improving the local community and not spent playing investor by investing in foreign banks.

I can understand the reasons why people were drawn to invest in Iceland it was a growing economy and has one of the highest GDP per capita in the world. But at the end of the day Iceland is a small country with a population of just over 300,000 and now they left to try and cover bank debts that are many times its annual GDP. I can understand the UK's frustration in the fact that Iceland have confirmed that Icelandic money in their banks has been guranteed but for foriegn investors in Icelandic banks. But at the end of the day thoose UK local authorties took the risk by investing in overseas banks.

Right now we are seeing historic economic moments of all time one which we might never see again. The idea of globalisation was one of which as always filled me with concern. The saying if 'Amercia sneezes the world gets a cold' couldn't have been more true. Unfornately it's a little bit more than just man flu that the economy is suffering from at the moment. If countries were a little more independant and less reliable on other countries this wouldn't happen but I suppose that's risk in adopting a capitialist system, there's always going to be the boom and bust cycle.

[Flopsy]

the councils by all accounts asked the treasury whether they should invest in iceland. Of course its triple A secure came the reply.

This is the thing that might bring the govt down. The lib dems are claiming that they told the treasury and fsa there were issues with icelandic banks months ago. Can't see brown wriggling out of that if it is true

[thenodrog]

Right now we are seeing historic economic moments of all time one which we might never see again. The idea of globalisation was one of which as always filled me with concern. The saying if 'Amercia sneezes the world gets a cold' couldn't have been more true. Unfornately it's a little bit more than just man flu that the economy is suffering from at the moment. If countries were a little more independant and less reliable on other countries this wouldn't happen but I suppose that's risk in adopting a capitialist system, there's always going to be the boom and bust cycle.

Isn't it simply a (harsh) return to sanity that we are seeing?

[philipl]

the councils by all accounts asked the treasury whether they should invest in iceland. Of course its triple A secure came the reply.

This is the thing that might bring the govt down. The lib dems are claiming that they told the treasury and fsa there were issues with icelandic banks months ago. Can't see brown wriggling out of that if it is true

I think there are a lot of things that have happened behind the scenes here.

My guess is that the Treasury officials were monitoring the Icelandic situation and were aware that the UK Local Autho0rities and public bodies which had Icelandic deposits could have crashed those banks had they withdrawn earlier.

The anger of Brown struck me as that of a man who had struck a deal with the Icelanders about protecting British interests in return for maintaining confidence in Iceland only to have the Icelanders cut British deposits adrift and protect their own when the proverbial hit the fan.

[grizfoot]

Isn't it simply a (harsh) return to sanity that we are seeing?

True we were never going to have economic growth and have everything ticking over nicely forever. But it does make you question the current economic system when something like this happens. We've never seen anything on this scale of global economic gloom before, we are in uncharted territory and nobody really knows the best way to fix it. We'll just have to wait and see what happens. But the $700bn US rescue package hasn't done anything to help at the moment. Probably not helped by a certain Mr.Paulson's words which won't have exactly filled people with confidence.

[philipl]

True we were never going to have economic growth and have everything ticking over nicely forever. But it does make you question the current economic system when something like this happens. We've never seen anything on this scale of global economic gloom before, we are in uncharted territory and nobody really knows the best way to fix it. We'll just have to wait and see what happens. But the $700bn US rescue package hasn't done anything to help at the moment. Probably not helped by a certain Mr.Paulson's words which won't have exactly filled people with confidence.

Two fundamental problems with the Paulson Plan:

1) They won't have worked out how it works and published the details until 5 November (appropriate date for UK readers).

2) At the auction of $400bn of Lehmann CDS's yesterday, they realised 8 cents in the dollar. That leaves about $368bn of insurance costs to be paid out two weeks from now.

oh 'eck. Paulson will have burnt all the $350bn he's allowed to spend before going back to Congress for permission to release the next $100bn three weeks before he has worked out how to spend it....

Paulson and Bush have set the hurdle so low they are making Darling and Brown look like global colossus.

[Billy Castell]

Sounds like Mr. Paulson asked for too small amount, and then hasn't worked out a plan for what to do with the money. You'd think with $700b you'd sit down and plan things in a lot of detail.

The 'debt clock' in New York has run out of digits, the US debt is so big. China must be laughing, as this must surely bring them one step closer to world domination.

[Damage]

"the most fatal tyranny was that which disguised itself as the protector of its victims"!!!

[Bazzanotsogreat]

Sounds like Mr. Paulson asked for too small amount, and then hasn't worked out a plan for what to do with the money. You'd think with $700b you'd sit down and plan things in a lot of detail.

The 'debt clock' in New York has run out of digits, the US debt is so big. China must be laughing, as this must surely bring them one step closer to world domination.

Wow that is big statement- The US still blows China out of the water in all indicators. Econmic, technological, scientific and especially its military.

India has as much chance of becoming a hegemon as China- simply because it has already has a democrtic system already in place, where China still has to make the choice between authortarian control & democracy.

[philipl]

Yes but when the US Government puts its $2bn of new Treasury Bonds in the market (as it does so every day in order to fund its borrowings), if the Chinese Government says no thanks, we are not buying today, the US Government is totally screwed.

[philipl]

Encouraging signs:

There is a Euro zone agreement that means no bank in the 15 countries can go bust before 31 December 2009. The "Brown Plan" looks like it will be implemented across the Euro zone with each country to announce the size of intervention necessary to support the pan-European pledge.

All major German Bank share prices in off-ex markets have risen by at least 20% in the last hour.

Sky has egg all over its face after announcing the Lloyds/HBoS merger was off and then having to reverse that announcement 7 minutes later.

[philipl]

OK, maybe Sky called it right first time! The banks semi-nationalisation seems to be happening and with the raison d'etre for saving HBOS disappearing the need to merge Lloyds and HBoS is receeding.

Asian markets were mixed- commodity dominated exchanges rose slightly, manufacturing dominated exchanges fell slightly.

The SEC has relaxed mark-to-market "where a market is seen to have ceased to exist". This should halt the de-leveraging effect of market falls accelerating the squeeze on the banks but I would still have preferred a return to fair value accounting.

[jim mk2]

Having overseen the destruction of his bank through over-expansion, irresponsible lending, greed, arrogance and downright stupidity, RBS chief Sir Fred the Shred Goodwin is to be sacked and will walk away with a £580,000 pa pension.

In a nutshell why the western economies are in this current turmoil.

[philipl]

I have a lot of sympathy with that view jim. Putting it in a nutshell, the world has been mugged by its own bankers.

Something I hadn't realised but could become a significant scandal, the CDS market has a central clearing house and banks' bank so the volume and value is known. It was $44tn last year but had wound down to $34tn when everything went pop.

BUT, those numbers are double counted- the bank selling the CDS records it and the buying institution records it as well so both sides count it into their bonus calculation! (At one time there were more takers than CDS available so acquiring those things was a trading coup).

That means that if all CDS are rubbish (which they are not- probably 5% at present are total garbage), the $17tn damage looks a huge amount more manageable than the $600tn which was the highest number I have seen.

Shares in Europe, especially banking shares looking healthier already. FTSE up 5% at the moment.

The bank rescue by the Government of Lloyds and HBoS is predicated on them merging so egg back on Sky faces! Government is taking 60% of RBS, 40% of Lloyds/HBoS, Barclays is raising £6.5bn of new capital privately starting by cancelling its £2bn dividend payment.

Finally, the good news coming out of the USA is that the Paulson rescue is starting at the simple bottom end with troubled construction contract financing being bought. That at least will mean construction employment in the USA will not be wiped out and new build can get going again.

[thenodrog]

Having overseen the destruction of his bank through over-expansion, irresponsible lending, greed, arrogance and downright stupidity, RBS chief Sir Fred the Shred Goodwin is to be sacked and will walk away with a £580,000 pa pension.

In a nutshell why the western economies are in this current turmoil.

Good eh? Heads I win ... tails you lot lose, with no personal risk involved. Nice. He's hardly going to be throwing himself off some parapet in the City is he?

[Billy Castell]

Having overseen the destruction of his bank through over-expansion, irresponsible lending, greed, arrogance and downright stupidity, RBS chief Sir Fred the Shred Goodwin is to be sacked and will walk away with a £580,000 pa pension.

In a nutshell why the western economies are in this current turmoil.

Thats a lot of solid gold golf clubs and gardening equipment. Scumbag. He should at least be forced into competing in Big Brother and that jungle show whilst being violated by a cactus. That's where we're going wrong-we haven't fought our way to the top of multi-billion pound companies. If you do well, you get millions in bonuses, if you badly, you get a 'golden boot'. I would have been delighted with £200,000 in a lump sum when I got sacked from Argos when I was 19! Hell, £2000 would have been stupendous.

[dave birch]

Whilst we've had a bit of Stock Market turmoil, and the $ going haywire, things haven't been too bad here.

It's put down to the requirements the Banks have to meet. In fact, my personal banker rang me the other day to ask if he could arrange a reduction in the rate of one of our loans, and this was before the RBA reduced their rate by 1%!

The problems are inter bank and the stock market, no one trust anyone at the moment. It will all calm down and in a few weeks/months things will be on the increase.

[American]

I've gotten an offer from a large bank with a lot of really attractive incentives to get a home loan (including waiving a thing they have over here called PMI, which is insurance you must take out if your down payment is under 20% of your home's value). The loan itself is a straight forward home loan with no resets or anything like that. They are definitely trying to drum up business for their less risky type loans.

[AussieinUk]

Having overseen the destruction of his bank through over-expansion, irresponsible lending, greed, arrogance and downright stupidity, RBS chief Sir Fred the Shred Goodwin is to be sacked and will walk away with a £580,000 pa pension.

In a nutshell why the western economies are in this current turmoil.

Well done, Jim/James/Doris/Victor! For once you have actually got something right*!

* If no-one else can actually pat you on the back (or will not want too by choice).. do it yourself - you deserve it!

I can say from first hand experience, Fred is an absolute tosser and the world will not be lost without him!

.....the CDS market has a central clearing house and banks' bank so the volume and value is known. It was $44tn last year but had wound down to $34tn when everything went pop.

Philip, those CDS's are OTC, so there is no central clearing house! Can you please explain?

[yoda]

Wow that is big statement- The US still blows China out of the water in all indicators. Econmic, technological, scientific and especially its military.

India has as much chance of becoming a hegemon as China- simply because it has already has a democrtic system already in place, where China still has to make the choice between authortarian control & democracy.

The thing about the way China makes it's decisions though is the sublime reason why it will catch up with the USA, If the controlling party decide to do something it gets done, not like in the west when projects, big decision etc can get bogged down in public enquiries, demonstartions etc.

I am not saying it is right or wrong, it is just how they do it in their own country.

[Bazzanotsogreat]

The thing about the way China makes it's decisions though is the sublime reason why it will catch up with the USA, If the controlling party decide to do something it gets done, not like in the west when projects, big decision etc can get bogged down in public enquiries, demonstartions etc.

I am not saying it is right or wrong, it is just how they do it in their own country.

China is catching up, no doubt; however, it has yet come to the point where it truly embraces a democratic system ( not necessarily a western style democracy) , the current authoritarian system will only go so far until either society or big business rebel.

It is simply human nature to want more; I am yet to be convinced that a consumer society and authoritarian rule are ultimately compatible. China still has a long way to go in terms of its evolution and as many predict- the struggle between those few in power and those wishing to have a slice of the ‘one-party cake’ may yet scupper Chinese global plans

[grizfoot]

Despite the UK government bail-out plan bank shares of thoose banks involved still fell today. HBOS alone was down a staggering 27.5%. Probably due to the fact that Brown declared today that there will be no dividends issued to shareholders from thoose banks involved in the nationalsation. This is understandable but doesn't exactly make thoose bank shares attractive for investors (well not just yet anyway).

It also looks like the end of excessive bonuses for bankers, which rewarded people at the top of the banks for taking risks and ultimately putting the financial sector in this state. What I like is how they present these chairmans and CEOs of these failing banks by saying 'they stepped down from their job without severance paid'. That's the bloomin' least they should do, I'm sure they'll survive though with their multi-million pound bonuses still setting nicely in their bank accounts.

What is needed is a total revamp of the current banking model as to make sure this sort of thing doesn't happen again. What worries me though is that these banks now with the backing of government money have been told to return to 'lending at 2007 levels'. Wasn't it the high level of lending that caused the problems in the first place?

[blue phil]

Having overseen the destruction of his bank through over-expansion, irresponsible lending, greed, arrogance and downright stupidity, RBS chief Sir Fred the Shred Goodwin is to be sacked and will walk away with a £580,000 pa pension.

In a nutshell why the western economies are in this current turmoil.

Sir Fred is also a non executive director of the Bank of China Ltd .

He was knighted in the New Years list of 2004 for his services to banking . Whether this was services to Chinese or British banking I'm not too sure ....

Maybe the Queen decided on granting this "honour" on her own ........or maybe the New Labour government advised her on this course of action .

A sad indictment of the whole culture of selfishness and greed fostered and nurtured by this bankrupt government .