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A few weeks back I found this fantastic January 09 article by Norman Lamont. Despite my delay in commenting on it, this type of material is unfortunately set to have a rather long shelf life, unfortunately for us Britons; Gordon Brown is set to wreak further havoc in the economy before the fat lady sings eventually.

Lord Lamont argues that Brown is “like an arsonist posing as a firefighter”. What does he mean by that?

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If anyone had thought that credit crunch has faded in significance, had been replaced by a deepening – and now acknowledged – global recession, but that basically things were back to some sort of known territory where we’ve been before and know how to get out of it eventually, this morning we were reminded that this was not the case.

Clearly, we are very, very far from being out of the woods, with banks continuing to be on the brink of disaster and still struggling to quantify the extent of their losses.

The new £50bn plan: The new bailout plan, announced in the UK this morning, will allow the Bank of England to buy up to £50bn of risky assets directly from any company (not just financial institutions) that agrees to enter into a voluntary insurance scheme for its expected losses on specified toxic debts. In return, banks have to pay for this insurance – typically with cash, but possibly also their shares. The scheme aims to insure companies against 90% of their losses on specified debts which resulted from the collapse of the sub-prime market and the ensuing global meltdown.

Two bailouts, two stories: This scheme, of course, exists on top of the first bailout in October 2008 where several key financial firms received £37bn as a capital injection to top up their reserves. The second UK bailout, however, has very different features to the first one. Not only the recipients of “aid” are different, but the insurance scheme “twist” is a new one. It is closer, albeit not idential, to the earlier US’s bailout model of buying up bad assets from struggling firms. Read the rest of this entry »

It would have been a bombshell for many, but in good old British tradition details of this annoucement were leaked this weekend, so here we are picking this apart before Alistair Darling has made his speech due later on today.

The jist of it: Labour want to spend their way out of this unprecedented recession. And we are all seriously concerned that the numbers behind the justification of the intention to spend our way out of the recession just does not seem to add up.

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In this morning’s speech, David Cameron laid blame for the current state of the UK economy at Gordon Brown’s feet.

Labour a failure: Cameron stated that the Labour government was responsible for the “complete and utter failure” of economic policy and that it has been an “irresponsible government” presiding over a period of “irresponsible capitalism”.

The implication is that the nation is now reaping the results of this policy as we slide into a recession, our financial sectors in tatters – and that this could have been prevented.

Cease support: In the recent days, Conservatives have been seemingly supporting Labour especially in the latter’s bid to work out a bailout package. So much so that one was wondering if the Conversatives have had any of their own thoughts about the economic policy. And, whilst Cameron is now effectlively making a statement that he is ending Conversatives’ support of the current government’s economic measures, one still wonders what exactly is he going to propose that amounts to a solid economic platform that is actually different from the current course.

General noises are being made about tougher regulations, “new measures to rebalance the economy”, and changes to laws. Whilst this is all good and fine, none of these appear novel measures that have not been mentioned before by someone else.

Are Conservatives still struggling to pull it together? On the evidence I see (or shall I say, do not see) today – yes. But so is Labour, really, although at least they have some sort of action plan for now.

Silly Political games: What seems to be happening on both sides is a lot of posturing. Whilst Gordon Brown is savouring the role of the saviour of the world’s financial system, his opponent David Cameron is the homegrown oracle who had seen it all coming and can see right through the incompetencies of the present government – yeah, right. How easy is it to throw stones about, say “I told you so” and then duck for cover – as really you have nothing new to say, Mr Cameron. Come up with some really smart proposal that will tell you apart from other government policymakers, then maybe we’ll put more trust in the Conservatives.

Until then – the usual charade of ceremonial policital repartee continues. Yawn…  

 

Copyright 2008 by CuriouslyInspired

The euphoria of earlier this week, which followed an announcement of the UK bailout by Gordon Brown, has seemingly finished – as it was feared to. Shares have yet again collapsed. Asia showed probably the worst results today, with the Nikkei dropping 11% on the 16th October. As I am writing this, the FTSE has fallen below 4,000 again. And Dow will be perilously close to its 8,000 mark.

Shifting sands: Investor sentiment, similar to voter sentiment, is a funny thing. Markets are driven by it, same as elections are won on the strength of popular feeling. However stock market sentiment is also fickle and impermanent, and prone to wild swings especially in troubled times such as now. We are nowhere close to being out of the woods yet. In the weeks to come, there will be significant market volatility, and the market will trend downwards. Perhaps my fears of FTSE at 3,000 have yet to be realised.

Credit crunch biting hard: Interbank lending is still pretty frozen, although short term rates have fallen a little – with banks still not keen to do any longer term lending. Despite all government intentions and declarations, banks cannot be forced to start lending against their will if they do not have confidence in their financial partners. Somebody compared this to “asking water to flow upstream” – just is not going to happen. The impact of this has already spilt out into the real economy: businesses are finding it very hard to refinance their existing loans. This will have a negative impact on the whole economy, reducing business activity and forcing some to cease trading altogether.

Recession: What is driving the stock markets plunges at this very moment are investors realising that we are heading full steam into a global recession – and the existing bailout funds will not be enough to prevent it. A lot of government money is being pumped into the banking system – yet as long as investors think we are heading for a recession, they will keep on selling, and the money will keep on burning up and vanishing into the bottomless pit. It’s a vicious circle which under the current financial system, only restored consumer confidence can stop – and we just are not getting any positive economic news for this to happen. Read the rest of this entry »

Gordon Brown decided to bring Peter Mendelson back to join the Government as business secretary. Oh dear. Quoting John McDonnel, a left wing Labour MP:

This is an extraordinary step backwards into the worst elements of the Blair era, to reinstate possibly the most divisive figure in Labour’s recent history 

So an interesting choice from Mr Brown. Apparently the move to bring Mr Mendelson back is expected to unite the Labour party stopping the division into Blairites and Brownites. We can see that this is bound to work, right?!

As the BBC reminds us, Mr Mendelson already left the government twice before in disgrace – “once over a loan from his ministerial colleague Geoffrey Robinson” (failure to disclose a £373K loan from another minister) “and once over allegations of misconduct over a passport application for the Hinduja brothers. An inquiry later cleared him of wrongdoing over the Hinduja affair”.

So Mr Mendelson, the corrupt-but-rehabilitated-by-Blair former spinmaster of Labour, is here again. One only wonders that Mr Brown does not care for public opinion on his newly appointed cabinet figures. Or is he on a self-destruct course?

Tried and tested and squeaky clean politicians, anyone?

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