Reply: foreign investors, individual UK savers, pension and insurance funds etc

This was the fourth big bubble since 1945. It always ends with a property price slump, credit crunch, recession etc. You can see why people get drawn into property speculation – it’s little effort, apparently low risk and taxed at very low rates.

So why not go back to the root cause of recessions – the property price bubble – and shift some of the burden of taxation away from incomes and production and investing, and towards property ownership, to dampen the bubbles while lifting the burden on the productive economy? (within the overall confines of reducing the overall tax burden significantly, of course!)

Just to put them in perspective… the ’stimulus’ amounts to: “Buy a nice digital camera for £100, and get a free cup of cappucino”.

Hardly compelling.

From the Bloomberg site:

“Nov. 24 (Bloomberg) — The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.”

The link is as follows:

http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home

I don’t care how much people want to cite the fear of deflation, increases in the money supply on this scale can only lead to scary levels of inflation. I wonder how long before we find ourselves flexing our money supply to the same degree (as a proportion of our GDP that is, although Gord and Alistair may want to go the full nine yards and match Bernanke in absolute terms).

On a related note, the prospect of devaluation is in Latvia now affecting freedom of speech. The secret police have been arresting and briefly (day or two) detaining people for publically speaking out about the risk of devaluation – on the basis that spreading false rumours about the financial system is a crime.

It’s disturbing, to say the least, that the Government is deciding what people can or cannot talk about in public.

It has of course paralyised public debate and the exchange of information on the matter. Latvians are being decieved, by the State, into holding lats. Of course, from the POV of the State, they’re doing it “for the good of the people”, since if the truth was known, the lat *would* devalue, so trying to keep it hidden is their best bet.

They are however in that position in the first place because the Government spent like there was no tomorrow. There is a zero percent chance of devaluation being avoided; but since the Government has made the decision to hang on and is suppressing discussion, this issue is not open to debate.

The people owning lats are going to see all their assets and debts go to zero. Those who saved are destroyed, those who borrowed do very well, just like Iceland, and they have no chance to take any steps now to try to rescue themselves in any way, because the Government is not permitting – by the use of the secret police – them to know about this problem.

The logic of withholding information from people “for their own good” is awfully seductive to Governments.

The recent news about ID cards, large fines for not informing the Government when your name or address changes, are propertly tantamount to you being required to explain your private life to the Government “for your own good” (to prevent terrorism).

I’m not old enough to remember the fallout last time the UK went to the IMF to bail us out.

If the country goes bankrupt where do we stand? What are the key things we need to know or be aware of?

I see today that UK gilts cost three times more than those of Germany or the US to insure. The omens don’t look good.

If we are made bankrupt – surely this changes the whole debate about joining the Euro? We’d need to dive into the Euro for protection wouldn’t we? I’m loathe to join the Euro until we have democratically and accountable politicians in Europe, but I’m wondering if the UK can go it alone any more.

Reply: We would have to seek international loans from IMF etc and accept their terms which would include spending cuts.

(Did I mention that it would be a good idea to separate the “executive” – ministers – from the “legislature” – parliament.)

As it now appears that the world’s monetary system is moving on to the balance sheets of the world’s central banks; it may be time to have a “world” central bank to design a new set of rules to keep governments honest. Like doing away with off balance sheet accounting by central banks and government treasuries. Perhaps, a limited number of derivatives with a standard, global specification – options; futures and swaps – that are openly traded through a price transparent market maker.

FSU is saying that UK government debt will hit £2,140 billion by 2013; 160% of GDP. I haven’t got a clue if that is right or wrong. That would put us similar to Japan; but, Japan has a large current account surplus, the UK is the opposite.

http://www.financialsense.com/fsu/editorials/walayat/2008/1124.html

For those who may want an IE forms spell checker:-
http://www.iespell.com/download.php

What I note though is that the Government is doing everything to avoid *permanent tax cuts*. I think this is because doing so requires *permanent reductions in Government spending*.

Even now, in the face of catastrophe, Government priority appears to be protecting Government spending.

Those growth forecasts look a little optimistic, given that growth forecasts have already been slashed since the Budget in March 2008 but will magically stabilise by next year.

http://www.lettersfromatory.com

Does the 157 billion figure roughly equate to the old PSBR? Sorry for the questions, it’s a long time since I studied any of this in detail. Based on the evidence of the past decade I’m assuming there’s a lot of smoke and mirrors going on.

reply: the BBC parrot Darling’s wrong figures. His numbers leave out all the bank share buying which is revealed later in his document and is part of the borrowing.