The World Tonight, Monday 14th October, 2008, 10.38pm.

Both the British Chancellor, Alastair Darling and the shadow Chancellor, George Osborne, have been on the radio this morning, resisting the idea that interest rates are political. Instead they have argued, vehemently, that the Bank of England is independent, and that the Bank must decide whether or not to lower interest rates.

Read post »

Tuesday 30th September, 2008.

Anglo-American finance ministers and central bankers, like little Dutch boys, try desperately to plug leaks in the bursting dyke that is the international financial system. In the US, treasury secretary Hank Paulson hoped for $700bn to plug the gaping hole in Wall Street’s banks. In the UK, the government is not just plugging holes, but setting aside competition rules to encourage the monopolisation of finance.

Read more…

The Prime Minister, Gordon Brown, speaking on Radio 4’s flagship current affairs programme this morning, repeated something he says regularly: that ‘interest rates are low’ and that his government, through the Bank of England, kept them low. The question the BBC should have asked is this: if interest rates are low, and have been so, why on earth are people/companies/banks having such a hard time paying debts? Surely the Credit Crunch crunched, because debts – of banks in particular – became both too large, too expensive, and unpayable? Do small businessmen/women pay low rates on  investments? Mortgages? Credit Cards? Car loans? Does the PM live/work on another planet?

Read post »

You have to admire the spin.  The US Treasury Secretary, Comrade Hank Paulson, pictured here, announced  today, Sunday 7th September, 2008  that the US government is natonalising two huge US banks, Fannie Mae and Freddie Mac.  Which means in effect that Comrade Paulson is  socialising the losses of the shareholders and investors in these banks -  $5.4 trillion of guaranteed mortgage-backed securities (MBS) (mortgage backed securities) and debt outstanding. These liabilities are equal to all the publicly held debt of the United States. This in the words of Prof. Roubini is ’socialism for the rich, the well connected and Wall St.” (see below).

Read post »

In this big bad world of the Credit Crunch, powerful central bankers – civil servants all – have bent over backwards to help powerful and rich private bankers.

On one day, ‘debtonation day’, central bankers in Europe and the US pumped an eye-watering $150 billion into the financial system, to keep big banks afloat. According to Bloomberg, the US’s Federal reserve has ‘cycled $2.58 trillion through U.S. money markets since December’. (Bloomberg 8th August, 2008).

Read post »

Fulfilling my duties as a citizen, I am now confined to the Southwark Crown Court as a juror, so have little time to update the blog. However the effective insolvency of two US government sponsored banks or enterprises (GSEs) – Fannie Mae & Freddie Mac – will now impact not just all those US individuals, institutions and local governments that may have invested in these banks; not just on US taxpayers who are expected to bail them out; but also on you and I (our banks may well hold Fannie and Freddie securities); the central banks of the world that have bought their debt – confident that it will always be repaid.

Their insolvency now threatens a global systemic financial crisis, and their taxpayer-funded bailout of shareholders, bondholders and an incompetent management exposes the hypocrisy of much neo-liberal cant.

Read post »

The precedent of the United States’s great depression and Japan’s post-bubble collapse should haunt today’s G8 summiteers, writes Ann Pettifor in Open Democracy.

Japan hosts the G8 summit in the northern island of Hokkaido on 7-9 July 2008 at a time when its prolonged period of deflation and economic failure have rendered its politicians impotent. Philip Stephens notes that – despite Japan’s still considerable role in the global economy – the country’s politicians are the weaklings of global geopolitics. “Where is Japan?”, he asks. “The question is one of psychology rather than geography. Japan is still the world’s second most powerful economy. Politically, it is all but invisible” (see “Japan goes missing: invisible host at the summit“, Financial Times, 4 July 2008).

Read more

My friend the formidable economist, Mark Weisbrot put it most succinctly.

“Since the U.S. economy showed positive growth for the last quarter, some commentators in the business press are saying that we are not necessarily going to have a recession, or that if there is one it will be mild. This is a bit like the proverbial story of the man who jumped out of a window 60 floors up, and then said “so far, so good,” as he passed the 30th floor.”

On a day when Nationwide warned that in the UK “The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market,” his point is a timely warning that while the UK lags the US, nevertheless the levels of household and corporate indebtedness and the scale of our housing bubble means we still have far to fall.

By Ann Pettifor,  Open Democracy, 11th December, 2007

On 9 August 2007, globalisation’s rickety financial levees were broken by a storm-surge of debt, invisible to most punters, but scary enough to frighten bankers. This debt includes highly leveraged corporate debt traded on secondary markets, household mortgages, credit-card debts, car loans and other substantial outlays. But what scares financiers and other experts are the truly big debts racked up by financial institutions, including those that have insured against loan defaults.

One of the least understood, but potentially most lethal financial products they have engineered – away from the regulatory scrutiny of central bankers and finance ministries – is called a credit default swap (CDS). In reality, they are not “swaps”, but a form of insurance (for illumination, read the blog of one “Hellasious”, of Sudden Debt).

Read the rest of this post…