The crisis began in America and it continues to worsen there, with yet another banking shock last night as State Street shares halved after the banking and investment firm reported a 71 per cent decline in 4th quarter profit and a $US10 billion write-down.
But right now the world’s money wants to be nowhere but US dollars. Specifically, there is now a run on the pound that is threatening to get out of control and sink us all.
The UK is a bigger, more dangerous version of Iceland. The $US4.4 trillion in foreign debts built up by British banks is twice the size of the economy, and 73 times UK’s foreign reserves.
Commentators in Britain are calling for Royal Bank of Scotland, Lloyds and perhaps Barclays to be fully nationalised to overcome the fact that the taxpayers are effectively wearing all the downside, but the banks are still being managed by the same idiots who caused the problem in the first place.
Those idiots have swung 180 degrees, from profligate lending to no lending at all; from frittering capital to hoarding it.
Similar calls for full nationalisation are being made in the US, with the example of Sweden in 1992 most often cited.
Barratts (Includes PriceLess stores) the UK shoe retailer called in the administrators yesterday. They have over 400 stores and other outfits with 5,450 jobs at risk.This is just part of his article in Business Spectator - doesn't look too good, is a huge understatement.
Barratts (Includes PriceLess stores) the UK shoe retailer called in the administrators yesterday. They have over 400 stores and other outfits with 5,450 jobs at risk.
Barratts and PriceLess are owned by Stylo. Stylo shares have been suspended.
So many companies announced job cuts yesterday it is not possible to list them. This recession is proving very sharp indeed as the UK follows Germany and Spain into sharp decline.
Is this because sales are down or because they cant get finance to operate ?
I'm in the UK and there is a don't buy attitude everywhere now, unless the price is low. Supermarkets sell shoes as well and appear to have dropped prices deliberately to gain greater share. ( a supermarket near me knocked 70% off the prices in a sale).
Other stores with big ticket items are crashing as people go more for repairing than buying new. Some spares retailers are booming now.
Stores selling items that people can do without seem to be closing - boom to bust in six months.
Problems that will hit Australia, is that companies are not paying such high dividends or any at all now, and that combined with complete loss of asset value, has just made less money available.
They’ve gone up so much because they’re basically trading as options. They’ll either be nationalised (and hence worth nothing) or they’ll survive and be worth a quid or two. You’ll see this come through in the way the GBK (Great British Krona for those unfamiliar) trades on the cable and against the euro. Banks up, GBK up and vice versa.Barclays Bank up 73%, Lloyds Bank up 32% & Royal Bank of Scotland up 20% in overnight trade. Darlings of the finance sector once more?
Brit nightmare suddenly over?
Bring out yer dead?
Got a bit fired up there, didn't I?Why dont you challenge him directly. be interested to see if you get a response.
Got a bit fired up there, didn't I?
He’s completely full of crap isn’t he! Keeps the viewers tuned in though.Alan Kohler really isn’t worth the column inches he’s given. His sensationalist articles read like cobbled together headlines and punchy one liners that don’t stand up to even the lightest of examinations.
For starters, foreign debts of banks, assuming they have been reasonably managed, are approximately matched in currency and maturity to foreign assets. In fact, last I looked foreign assets of UK banks amounted to something in the region of A$8-9 trillion. Sure, many of these assets may be impaired, but we’re talking FURTHER writedowns of in excess of 50% before the line starts to look tight. Then factor in that these writedowns are being driven largely by distressed sellers forced to sell to defend their stat capital ratios and that they are probably worth considerably more on a held to maturity basis. .
Furthermore, I don’t understand how tax payers are wearing ‘all the downside’. Much of the positions have been taken as pref share or normal shares, giving the tax payer a share in the upside. Even in the case some, or all the banks are nationalised, there is precedent for that going well too. In Spain not all that long ago, a number of banks were nationalised and then sold at a profit 3 years later.
As for his comment about ‘those idiots swinging 180 degrees’ is hypocritical to say the least. On the one hand, he’s claiming that the banks were irresponsible with their lending and that caused the crisis and therefore they deserve the boot. Now he says they are being more responsible with their lending and they deserve the boot. Time for Alan Kohler to decide what side of the fence he’s on rather than rehashing populist, dimwitted rhetoric.
Roubini is an interesting chap. Many point out he's been calling for this for a long time now. I don't really want to criticise him though, but I do disagree with your representation of his thoughts on the UK banking system.Sorry doctorj, I have to agree with Al on most of his points.
$8-9trillion of assets? - most of which are OTC derivs. Lehmans are the only CDSs that have gone to settlement and at the auction they fetched between 8c and 20c in the dollar. That puts US and UK banks as all insolvent, as NYU economist Noriel Roubini recently stated. (He predicted the crisis in 07)
According to the IMF, sterling is still the third most popular global currency reserve. The UK is the world's 5th largest exporter of manufactured goods. The majority of its foreign debts are in GBP.Kohler said:The UK is a bigger, more dangerous version of Iceland
Roubini said:In many ways the UK looks more like the US than Iceland: a housing and mortgage boom that got out of control; excessive borrowing (mortgage debt, credit cards, auto loans, etc.) and low savings by households; a large and rising current account deficit driven by the consumption boom (and private savings fall) and the real estate investment boom; an overvalued exchange rate; an over-bloated financial system that took excessive risks; a light-touch regulation and supervision system that failed to control the financial excesses; and now an ugly financial and economic crisis as the housing and credit boom turns into a bust.
If you look at http://news.bbc.co.uk/today/hi/today/newsid_7846000/7846412.stm he says many banks in the UK are insolvent, but not the entire system. Coming from Dr Doom himself, that's almost bullish.
But in terms of hard numbers, Goldman's economist put out a note on Jan 21 putting total 'troubled assets' in the 3 largest UK banks (ex HSBC) at £350bn (book).
Per the BOE November data (the latest available, I can send the data if you'd like), UK banks had £4.02 trillion in foreign debts and £4.07 trillion in foreign assets at current market prices.
According to the IMF, sterling is still the third most popular global currency reserve. The UK is the world's 5th largest exporter of manufactured goods. The majority of its foreign debts are in GBP.
So in the sense the UK is an island in the similar part of the world to Iceland and it has a much larger economy, it is a bigger more dangerous version of Iceland. It does however have more weapons at its disposal and isn't on the cusp as Kohler might have you believe.
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