Gordon thinks that banks have been wicked and they need to confess:
Gordon Brown told banks to come clean over the extent of their bad assets on Friday, admitting the scale of the banking crisis could threaten the global economy with a new phenomenon: “financial isolationism”.
“Tell me how bad it really is,” is at best irrelevant, and, given we have a crisis of confidence, most likely damaging. But the quintessential moralitarian is not concerned about that. Nor about isolationism, merely because it means poverty and depression. The self-criticism of others must not stop, engagement with the global system must not stop, because otherwise there will be no one else left to blame. There is no chance of him confessing his faults. Our Great Helmsman will stand as a colossus of rectitude and the transparency he demands in others is not necessary for him, lest we be blinded by the light.
And yet mighty Oz, aware of his own illusion, thinks banking is a magic that will survive removal of the smoke and mirrors (he almost certainly believes in ‘fair’ prices too). The opposite is the truth. The obsession with stripping the mystery in case someone might be making money, has the predictable effect that making money is harder. Compliance and confession will crash the banks, not stabilise them. They are already doing so, as The Economist points out:
The Basel 2 international bank-capital regime and the global accounting standards known as IFRS—to say nothing of security analysts and rating agencies—are forcing banks to hoard more capital, anticipating that deepening recession will slash asset values further.
This is the modern equivalent of Keynes’s “cross of gold”. We are being wrecked by the rectitude of mark-to-market. But the governmentalist says the problem is not enough sinners have been whipped, and “orders” that they are.
It was William Jennings Brian’s “Cross of Gold” Amazing to think that back then(1890’s?) somebody could run for president on the issue of opposing the Gold Standard.Ron Paul started off his campaign raising the Gold Standard this time round,but he was,whenever you could pin him down,for it!
Indeed it was Bryan’s phrase, my apologies. I was certainly not endorsing bimetallism.
I was thinking of Keynes’ plausible assertion that the gold standard helped choke demand and set off the great depression. The analogy is that governments in the 20s and 30s clung to an artificial framework that reflected their common assumptions about how the world ought to work, then tried to fix the world in accordance with that framework — intervening in trade and production of goods in that case rather than in the accounting for them.
Put PFI liabilities on the public books, Gordon, and then come back and lecture people on openness and probity.
Rob beat me to it: i Brown is prepared to come clean about the off-balance sheet debts of PFI, and put them on to the books for all to see, I would take him seriously. I would also take him seriously if he did not lie about the parlous state of UK public finances, or claim we are in a better position that most of our major industrial peers when we are not. Being compared with Italy is hardly a great achievement.
I would also take this man seriously if he had not:
raided private sector pensions;
produced a regulatory mess at the FSA;
introduced a hideously complex tax code;
persecuted non-domiciled residents and proposed a new higher tax band, thereby deterring entrepreneurship;
weakened the Bank of England’s inflation target;
massively increased public spending after 2001.
rant over.
I once heard a prominent financial commentator refer to Gordon Brown as “the world’s greatest user of Enron-style accounting.” This was back when he was chancellor and busily hiding all sorts of costs and liabilities in his SPVs – I mean PFIs.
Why the feck didn’t he make them “come clean” before dishing out the money he already gave them?
Does this not know you are supposed to pull your pants down before you sit on the lavvy?
You missed flogging our gold at the bottom of the Market, Johnathan.
A MP being a hypocrite. Whoda thunk it.
His most recent and blatant fiddling of the figures is to exclude more than a hundred billion pounds of borrowings from the public sector debt statistics merely because there is a (very slim) chance we’ll get it back.
This was in order to push a message that public sector debt was only 37% (based on a calculation devised by Brown himself apparently) when it is more like 45%.
Laughably, in the PBR statement from last November they did actually publish a fairer figure for the years ahead. While Brown and Co expect it to reach nearly 60% by 2012 I think, the more honest figure is nearly 70%. That doesn’t include PFI debt.
Not sure if it includes local authority managed pension funds on the other side of the balance sheet. I bet these add up to a pretty penny. If they want to nationalise something, nationalise those.
Check out the Financial Crimes blog http://www.alexmasterley.blogspot.com for a great video on this
Don’t forget the £5 trillion plus for unfunded state pensions and £1 trillion plus for public sector pensions. Local govt pension deficits would be on top of course.
In reality the UK national debt could easily be 500% plus.
Never understood the point of Basel 2. It’s like self-insuring against house fire by putting aside money to cover the expected cost, but then when your kitchen burns down Gordon Brown appears and tells you you’re not allowed to spend it.