Davewmart's  Instablog

In a conference this morning the new Chancellor, George Osbourne, said that a new forecasting organization is being set up, headed by Sir Alan Budd, which will make determine likely future growth independently, so that politicians can't juice them by assuming unrealistic growth rates and squeeze in more spending.

In addition, we are to have the first proper balance sheet showing all the currently off-budget items, including public pensions, which in the UK are due to rise to an additional liability of around 80% of GDP on top on the on-budget ones.

This hopefully is the start of a political process to rein in a lot of the more extravagant expenditure, as the costs are made more clear to the public.
80% of people here pay in far more than they receive to pad the pensions of Civil Servants, whilst getting a fraction as much themselves.

On the downside, there is a splash of paddles as the new Government rows back on plans to cut the banks down to size and they are shifting from a promise to take independent action to saying that they have to wait for what the US does, and can't go far outside that envelope.
With Geithner in charge, that means the banks carrying on business as usual.
Action in Europe though may force their hand.
For the moment European ire is being focused on the hedge funds rather than the banks, as no-one wants to think about their huge problems.
The $1 trillion bail out is to patch some holes in European banks balance sheets.

That mythical beast, 'growth' is supposed to eventually complete the bail out after the trillion runs out.
I am expecting a European program to finally locate the unicorn sometime soon, and it appears to have as much chance of success as getting any money back from the PIIGS, or of getting growth whilst savagely cutting budget deficits at the same time.

news.bbc.co.uk/1/hi/uk_politics/8685989.stm



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The excelent Edmund Conway, writing in the Telegraph, has published the comments of Mervyn King, Head of the BOE, on the crisis in Europe and what went on in the meetings about it - and he has been startlingly frank.
Here he is comparing the present crisis with the previous banking crisis:

'After all, dealing with a banking crisis was difficult enough, but at least there were public sector balance sheets onto which the problems could be moved.

Once you move into the sphere of concerns about sovereign debt, there is no answer; there’s no backstop. And it is very important therefore that we hit these problems on the head now, put in place credible solutions to prevent the problems becoming worse.'

blogs.telegraph.co.uk/finance/edmundconw.../

I owuld question whether there are any measures short of the break up of the Euro and default which are credible, but the some of the gravity of the situation is illustrted here.

There is more in the link about UK cutbacks, and other issues.


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On the BBC the first news of the investigation have been translated into English.
We should be so lucky in the UK and US to see those responsible held to account:

Leading Icelandic figures, including ex-Prime Minister Geir Haarde, are guilty of "negligence", a report into the Icelandic banking crisis has said.

More should have been done to limit the damage to Iceland of the collapse of its biggest banks in 2008, it said.

Authorities should also have made sure UK Icesave depositors were insured by the UK, saving Iceland nearly £5bn.

The scathing 2000-page report also cited evidence of possible insider trading by key Icelandic investors. .....

If the Icelandic authorities had intervened in the summer of 2008 to ensure that Icesave was turned into a subsidiary, it would have meant that Iceland was no longer liable for its nearly £5 billion in deposits, the report said. ......
 

"It seems like the authorities sat back [during the summer of 2008] while Landsbanki and the FSA went back and forth and back and forth, without anything coming from it."

Negligence

The report goes onto accuse leading Icelandic figures of negligence in failing to appreciate the systemic risk posed by Icesave to the Icelandic banking system.

Among those specifically criticised are the former Prime Minister Geir Haarde, the former finance and business ministers, as well as the head of the Icelandic central bank and the head of the financial services regulator.

The commission chair, Pall Hreinsson, said that a parliamentary committee would now decide whether legal action ought to be brought against those named in the report.



 

 

 

 

Disclosure: No positions

Disclosure: No position