The Granite Hits the Fan

The FTs Alphaville blog draws our attention to bad news on the wires this morning, as the Dow closes below 8,000 and the FTSE trades below 4,000, we get the news that Granite Master Issue PLC, the trust that is 28% of the UK mortgage securitisation market, is reporting a “non-asset trigger event”. It is telling lenders that Northern Rock‘s collaterallisation, and hence credit worthiness, has declined significantly.Granite is the single biggest funder of the UK mortgage market. If it goes tits up, £38 billion of Northern Rock mortgage assets could be liquidated…

Government Has Already Lost £8 Billion in the Banks

If you thought your pension portfolio was doing badly you should see the government’s share portfolio. When it decided to nationalise banks HM Treasury said:
The Government’s investments will be managed on a commercial basis by a new arm’s-length company, ‘UK Financial Investments Limited’ (UKFI), which is wholly owned by the Government. Its overarching objectives will be to protect and create value for the taxpayer as shareholder…

UKFI of course differs from other funds “managed on a commercial basis” in one important respect, it is unable to sell underperforming assets, and underperform they have, destroying value for the taxpayers as shareholders.

Barclays took petro-dollars to recapitalise, so could and should have these banks. Northern Rock should have been put into receivership and whatever was of value sold to other banks. Instead, somewhat pointlessly, taxpayers have been lumbered with an £8 billion loss to date. The government is no better at investing in banks than it was at investing in British Leyland.

Instead of being lost in the stock market, £8 billion could have been used to raise tax thresholds by £1000 per income taxpayer for a year with plenty leftover. Helping those on lower incomes the most.

Pound Trading Higher

Must be really disappointing for Mandy, Brown and Darling that the pound is up this morning. They were all ready to enjoy themselves blaming Osborne breaking some unheard of convention and trashing the economy.

Ahh well, back to painting Gordon as the Saviour of the World.

Brown’s Empty Claim to Economic Leadership of the World

Only Nick Robinson would give Brown’s ludicrous claim a serious hearing:
“BBC political editor Nick Robinson said the fact that a series of countries now look likely to implement packages of tax cuts and spending increases would allow Mr Brown to claim the UK is in the lead when it came to dealing with the economic crisis.”

Well it will allow the Prime Mentalist to make that claim to “leadership” only if Nick fails to ask the right questions. Here are a selection of packages already announced from around the world:
  • The U.S. fiscal stimulus plan worth $150 billion went into play in February with bi-partisan support.
  • The Chinese stimulus package is a $586 billion public works acceleration plan announced last week.
  • The German Cabinet approved a stimulus package weeks ago, as did the French.
  • Australia’s second stimulus package was announced last month – though they have the advantage of a massive budget surplus after a decade of Conservative economic policies.
  • Spain’s fiscal stimulus package was announced in April.
  • Conservative run Canada also has for years run a budget surplus and remains determined to balance the budget and cut taxes.
  • Japan has been doing fiscal stimulus for two decades.
In fact of the G7 countries it appears that only Berlusconi and Brown have yet to announce a fiscal stimulus package. Of course Brown is way behind the curve on this, because he was until a few months ago delusionally claiming that our economy was strong and in better shape than the rest of the world including America. Brown’s last budget as chancellor was a fantasy in forecasting. Some leadership…

Gordon’s G20 Plan

Gordon is going to Washington with a few key spin objectives:

  • To present himself as the respected elder statesman of international finance – never mind Sarko’s pretensions.

  • To frame Britain’s problems in an international context. Sterling’s collapse is to be spun as nothing to do with Brown’s bubble.
  • To frame any domestic tax cut U-turn as a co-ordinated international action. This will give him cover for abandoning everything he has told us is important for all his front-bench political life.

Why Gordon thinks it imperative to be portrayed as some kind of respected international finance genius eludes Guido. It won’t save anyone’s job, not even his own.

There is obviously an international angle to the credit crunch, but there are also domestic disasters which happened on his watch.. Sterling’s collapse is not random. Who for instance decided to exclude house prices from the Bank of England’s inflation target which meant we had a ridiculously loose monetary policy?

If the G20 endorses a policy of tax cuts – if – Gordon will have political covering fire to return to Westminster to cut taxes and bugger the deficit. The Pre-Budget Report on Monday week will be his chance to unveil an epic tax-cutting stimulus package U-turn. The Osborne-Letwin* designed response as it stands will be “we shouldn’t be here, you shouldn’t do that”. Preaching fiscal sobriety to the fiscally hungover after the party has finished and the house is already wrecked.

The Tories have boxed themselves into holding to a Brown orthodoxy on tax cuts to which he himself no longer adheres. Time to think outside of the box…

*Letwin’s aversion to tax cuts might have something to do with the 2001 election campaign fiasco when as a junior finance spokesman, he was forced into hiding after disclosing that the Tories had longer-term plans for £20 billion of tax cuts.

Gavyn Davies Advocates Mugabenomics

Some of the more excitable co-conspirators have been warning in the comments on this blog for that Britain is heading the way of Zimbabwe. Guido has until now discounted them as being over the top (yes the comments here do occasionally go ever so over the top).The government’s economic policies do sometimes seem to be a form of voodoo economics involving uncounted debt, faked statistics and ever changing “rules”. Gavyn Davies, a former Goldman Sachs managing director and MPC wise man is close to the Brownies – his wife Sue Nye was Gordon’s diary secretary and is now the Director of Government Relations in Downing Street. So when he advocates, as he does this morning, turning on the printing presses at the Bank of England and just printing more money to solve our woes, you can believe this is being discussed in Downing Street.

Are we now at the dead end of the New Labour era and Mugabenomics is a serious policy option? This is madness.

Gordon Brown Worst PM of All Time for Pension Funds

Alan Layng, a co-conspirator, sent Guido this neat piece of research* :-

I took UK stock market performance since 1902 assuming reinvested income and adjusting down for cost of living to give real terms equity market growth for each of the last 106 years.

I matched this up to the dates of each of the twenty prime ministers who have run this country since 1902 (interpolating to the right dates as required). This gave me a proxy for how much the equity markets had risen (or not) under their stewardship.

From there, it is a small hop to a comparable figure – compound annual growth rates – and, hey presto, we can compare the financial performance of each of prime ministers, and also of the parties, to see if one party has a better long term track record.

It makes interesting reading.

It sure does. It doesn’t even take into account his plundering of pension funds during his Chancellorship. He robbed pensioners by taxing pension funds and he robs children by running up the national debt…

*Historic data taken from 2008 Barclays Equity Gilt study.

+++ BBC Pre-Budget Report Monday November 24 +++

Tax Credit for Breakfast

Dave’s newly announced policy is another welcome help for small businesses, it is not a business subsidy so much as a tax credit, a temporary (only for the duration of the recession) £2,500 tax credit for new created jobs. It

[…]

+ READ MORE +

Tax Cuts are the New Black

Cable and Clegg are already calling for ’em, Brown and Darling are dumping dogma to talk about helping Britain through the recession with tax cuts, Osborne and Cameron are going to announce their tax relief plan tomorrow. Tax cuts are

[…]

+ READ MORE +

European Commission Forecasts UK Economy to Fare Worst

Despite Gordon’s claims to the contrary, nobody seems to believe him that Britain is “best placed to weather the global financial turbulence”, not the currency markets, not foreign investors and nor now the European Commission.

The FT reports that

[…]

+ READ MORE +

Taxpayers Want Politicians to Share the Pain

The Fink had a go at punk tax cuttersyesterday despite always claiming that he is in favour of lower taxes (in the long term) – it is just that those pesky voters don’t believe politicians who promise […]

+ READ MORE +



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