The cause are salespeople who sell mortgages to people who can’t afford them, and estate agents to pump irresponsible journalists to enthuse the public to buy houses they cannot afford.

The only difference between this crash and the early 1990s crash is that Lehmans (amongst other banks) was brought down by portfolios of liar loans, high risk etc – which they believed were low risk. Investment banks were nailed this time because they were caught holding the bad loans. In the early 1990s the public and the retail banks shared the pain.

It’s the same bunch of salespeople who over sold endowment mortgages etc, back in the 1980s who over sold mortgages today. US politicians encouraged it because they wanted poor people to become home owners. The sales people were more than happy to sell an expensive product to people who couldn’t really afford it.

Think of the people you went to school with – went to the sixth form and ended up with 3 bad A-levels. Used to play on the slot machines down the pub. They wanted a respectable job because Mum and Dad expected it. So they went to work for a retail bank or life assurance or pension company. The salary wasn’t high enough to feed their aspirations – so they got into sales. Then they sold and sold. Commission driven sales meant that they over sold. Their company masters turned a blind eye because of the competition and that the sales arm of these companies often holds power because they are the revenue drivers. It is this group of people who are responsible for our economic woes. Investment bankers trade FX, fixed income, equities etc – very differently and take calculated risks. They invest heavily in this area. I work in one of the respected investment banks and manage risk. Down at the branch level in retail banks risky mortages pour in and nobody ever manages them.

On the Radio 4 this morning (about 6.15) a question was asked – “Why do banks sell mortgages they know are high risk ” – The answer is simple banks do not sell mortgages – salespeople sell mortgages. Banks take on the risk. Regulators allow it.

What has the FSA done about this – very little. They ask for more forensic accounting, which does very little. They do not set an upper limit on loans. Unless transparent and solid limits are placed on bank loans tt will happen again and again – and I will be digging this post up in 10 years to say told you so.

(1) Implement a UK version of the American Glass-Steagall Act that Bill Clinton repealed in 1999. This placed a firewall between normal commercial banking and high risk activities linked with derivatives etc. These must be undertaken in separate companies; Chinese walls are not enough. This has been consistently advocated by Liam Halligan in Telegraph newspapers.

(2) Allow banks to mix normal commercial banking and high risk activities but insist on high liquid assets to deposits ratios, and a high level of disclosure about the risky activities.

I think I prefer (1), but I would not have been in this position. Had it been my decision, I would have let RBS crash and burn. It was very clearly under reckless management ever since it used borrowed money to outbid the then BOS to take over Natwest, in about 2001. Caveat emptor, caveat investor, caveat depositor.

I don’t vote Labour plus I’m very definitely on the political right rather than the political left (BNP member actually). But Labour politicians have been right to point out that the Tories have made all the wrong calls on the credit crunch. Johann Hari had an article in the Independent some time ago in which he described Cameron’s ideas on economics as “Voodoo economics”. I didn’t agree with every detail of Hari’s article, but the phrase “Voodoo economics” is a good description of Cameron’s ideas on economics and Redwood’s ideas on QE.

Reply: You need to offer us your best shot at a couple of alleged errors to make this worth reading. My analysis makes a clear assessment of QE which no-one else has picked holes in.

QE will not cause inflation itself unless it is allowed to continue beyond the point where it is needed (quite possible of course). The inflation was already caused by the relase of so much debt in the first place (house prices rising to mop up all available income of the people). QE just bakes this previous inflation into the cake.

The big danger of QE is that just at the time when we are trying to raise debt on international markets the BoE is demonstrating that they will repay this debt by simply printing more cash. Once the international markets click on to the realities of this the £ will be about as popular as the Zimbabwean $. Then we will need the IMF, and quick.

Better maybe to pass a bill giving immunity from prosecution to anyone forging banknotes between certain dates. Think of the boost it would give to the business of the makers of printing machines, simply as a spin off.

I agree = I would echo your most apposite observation in Winnie the Pooh :

I don’t care who you blame,
as long as you don’t blame me

How many little people are going to be hurt by all this shambles

I remain your obedient servant & sympathizer etc

G Eagle

Well………………

Long story

First of all, only a central banker could contrive a phrase like quantatitive easing to describe THEFT, because that’s what it is.

It’s second only to ECONOMIC DOWNTURN, the Orwellian Nulabour doublespeak for RECESSION…(or the approaching DEPRESSION)

Your savings, your pension and your asset wealth denominated in our joke currency Sterling will be rendered worthless by QE and by decades of mismanagment and fraud on an epic scale. Brown is a sociopath, a madman, but the blame for our nations predicament is much deeper than just NuLabour.

More fundamentally, the entire monetary system has been usurped by the (banker -ed) controlled central banking system. In 1950, about 50% of the UK money supply was debt free cash. Today virtually all money, certainly over 95% of everything in circulation is interest bearing debt.

Our entire monetary system has been hijacked.

Instead of money being backed by something tangible, we are trapped in a system of ‘pledging.’ It’s been tried before and it has always ended in catastrophe because the outcome is ALWAYS ECONOMIC SLAVERY and SERFDOM.

Instead of money being a store of wealth, debt based money is a futures contract. The only thing that gives money value is the presumption that you the reader and everyone else will crawl out of their pit tomorrow morning, go to work and pay taxes to our parasitic, corrupt government and interest to bankers who create money as interest bearing debt out of thin air. But a debt based monetary system is by its nature always inflationary. Debts cannot be repaid without the creation of new debt. So we are trapped in a vicious circle of ever increasing debt and infinite monetary debasement. The conclusion of Keynesian economic will be hyperinflation because the only way the debts can be serviced (not repaid) is to constantly devalue our money. This is an absolute certainty.

To give you an example, the US dollar is worth about 4% of its value In 1913, when the Federal Reserve Act was signed into law by Woodrow Wilson

£1 Sterling used to be redeemable for 1 pound of Sterling silver. Today, £1 wouldn’t buy you more than a little speck of silver.

Banking is the ultimate criminal cartel. The central bankers are masters of the universe. Politicians are servants of the bankers, not the people. Politcians exist to create the illusion of choice where none exists. This is why David Cameron will not stop the approaching destruction of our country.

Thomas Jefferson famously said that if the American people ever allowed private banks to monopolize the creation of money as debt, it would eventually reduce the people to serfdom.

Well here we are nearly 200 years after he made that claim and we are rapidly approaching precisely this conclusion.

The problem as I see it, is the system will never be fixed in any meaningful way. The next bust will happen in the early part of 2020’s if not sooner – it will revolve around problems being created today to fix the problems of the last boom.

We need a government with enough brains between them to realise that when you look at past crashes, its not the cause of the crash that is important, but the cause of the boom that preceded it.

Does anyone think that Dave Blair has any ability to actually fix a problem rather than just spin it and blame 12 years of Labour?

Churchill, back when he was a Liberal (people seem to forget he’d go with any party that would give him power) did see the light and was in favour of supporting LLoyd George’s 1909 people’s budget that would have introduced Land Value Taxation.

Sadly, the Conservatives think this is politically unviable (I’ve been in correspondance with their Economic Advisers). Their point was sort of proved by Vince Cable’s basterdisation of LVT with his Mansion tax which is what happens when you let socialists get their hands on a good idea. (New Labour have shown that with their attempt to run a free market economy).

LVT would work, it is 100% fair, it is almost completely un-evadable, encourages production, prevents the huge bubbles we get in the housing market and would control the level or government debt – the problem is that every englishman’s home is his castle. The point is that LVT needs to be introduced with severe cuts to productive taxations (i’d propose a 40% tax on site values with a 5 per cent tax on corporations, 2.5 on SMEs and 5 per cent on incomes above a personal allowance of say £40000).

Don’t forget that MPs are all landowners at the taxpayers expense – that is why the issue never comes up.

Sound money has a cost, too, but its cost is out in the open, not concealed by sleight-of-hand.

As for pharmaceuticals many of them are made abroad under license because labour and costs are cheaper.

That leaves … services.

Not exactly a stunning portfolio of exports is it ?

This is the only economic growth that Brown knows, or can affect. Did he not say, just after the crash, that his intention was to get lending back to April 2007 levels – ille est, repeat the whole “economic boom” sham all over again.

Certainly, he couldn’t give a toss for the country, and will happily leave the most appalling mess for the Tories to deal with in the hope of a quick return to power by his National Socialists.

Treason, to my mind. No wonder they removed capital punishment as the ultimate sentence for treason.

Are they following govt instructions?

Does the Bank know what it is doing? It wants to boost the economy it says – because interest rates are already at ‘zero’, so it prints money. But that money is being hoarded by the banks so
how is it boosting the economy?
All the bank is doing is fulfilling its traditional role of ensuring the govt can pay its debts. The Bank no more wants the IMF in than the govt.

A clear government admission that banks are using QE to invest in the stock market, not to improve the lives of the population

Like Japan, if interest rates are kept too low for too long, banks have no incentive to lend to each other and will just speculate for themselves without taking on credit risk.

As the equity markets are a key indicator of economic strength, the Gordon Brown cannot be too upset with this supportive tactic.

This was always going to be so when the banks had to try to squeeze more profits from a lower turnover to pay back the “loans” from the tax payer

On top of which the banks have had imposed far stricter rules, which on their own would have restricted credit

The best example of this is Northern Rock who’s initial mandate was to reduce the profitable clients…pushing them out onto other lenders, and keeping only those who couldn’t move. What kind of business model is this?

By doing both policies at the same time you effectively have a double whammy

The banks are doing their best, but the government doesn’t want to recognise what they have done

To be fair, however, I don’t think Cameron has any of the answers either, and the BoE is struggling but will have a cast iron pension by the time the rest of the economy has to reap the whirlwind of the end of quantitative easing, because all it has done is put off judgement day.

Double dip is guaranteed then?