Monday 19 January 2009

RBS share price down 70%: We said this would happen..what now?


Ending the short-selling ban has not worked, as predicted. Bailing-out the banks without suspending the shares has not worked, again.


The government has repeated the same mistakes it made in October.


Ideas to move forward are desperately needed, feel free to discuss in the comments...

27 comments:

  1. Anonymous4:05 pm

    Yes tell Brown to ***** and then take a ****** ** and ****** it.
    That at least would ****** the useless ******

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  2. Total nationalisation of the banks for £1. Accountants and actuaries to take a good look at the books to determine how much bad debt there is, total transparency with the public and Treasury.

    Bad debt written into a specific government bond issue to be paid off at a sensible interest rate over 30 years.

    Bank capitalisation rules to be toughened so this never happens again.

    Revitalised banks floated once again.

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  3. BE - RBS balance sheet is £1.6 trillion. If we take this on and there is say a 20% loss - £320 billion. Then add Barc, LBG, not to mention HSBC.

    There are assets as well as losses; but if we put these on the government sheet today the UK then I see a sovereign default within a few days in the current febrile atmosphere.


    We need some space, why oh why did they not suspend bank shares this morning...

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  4. Anonymous4:30 pm

    Every nulabour voter in 3 last elections sent a bill for 15k per vote

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  5. Anonymous4:33 pm

    They didn't suspend shares because they didn't want to be seen to panicking.

    It's like watching Frank Spencer defuse a bomb, there's a method to the madness, but it doesn't stop it from being madness nonetheless.

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  6. passer by - worse if you never voted for them....

    Anon - maybe. maybe gordon just thought he had saved the world again and expected the market to push on to 6000

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  7. So either banks default or the state defaults, either way we all lose. I don't think the state has to default, it just has to slash spending on non-front-line services. Not popular, but possibly necessary. That or the Argentine solution: default now, pay later.

    Reykjavik-on-Thames suddenly sounds apt.

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  8. if short selling was so inevitable after the 16th (i thought it was bound to happen too), who on earth is lending their stocks out?

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  9. the government roy. All part of the grand socialist plan....

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  10. Get your handcart out and your summer clothes (if you know what I mean).

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  11. "Reykjavik-on-Thames suddenly sounds apt." (blue eyes)

    I'm seriously thinking we might do an Iceland now. In fact tomorrow I'm opening an account where I can buy warrants and am going to hedge myself against a devastating collapse in sterling by buying December 09 puts against the USD and EURO.

    I get the impression that Brown and Vaderia have gone 'all in', if things continue to deteriorate the only move they have left is to crank up the presses.

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  12. Anonymous10:19 pm

    "What now"

    Let them go bust. All the bad debt, gone, Pfffft!

    Then instead of the endless bleeding dry of the tax payer, a one off capitalization of a brand spanking new bank, with perhaps 30bn initial capital.

    With fractional reserve banking and a ration of 10:1 that would be 300bn avaliable to loan into the economy.

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  13. Anonymous10:21 pm

    Blue Eyes: "That or the Argentine solution:"

    Which is to look at the pension schemes and confiscate them.

    Right up Browns strada really.

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  14. Anonymous11:10 am

    Mr Brown said: “I came into politics because of the scourge of unemployment in my own home area and I will not sit idly by and let people go to the wall because of the irresponsible mistakes of a few bankers.”

    True.
    They'll go to the wall because of irresponsible mistakes of a c*nt in Downing Street

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  15. Anonymous11:13 am

    What happens if they go bust?

    Shareholders get wiped out - well arguably they deserve it, and the State's share is effectively worth nothing anyway.

    Retail deposits are guaranteed. Yes it's a lot of dosh but it can't be worse than where we are now.

    Then the actual real performing assets can be picked up by someone (PLEASE not the government) and set working again.

    Is there something wrong with this picture?

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  16. Anonymous11:13 am

    Perhaps this is a naive question, but is it really worse to allow RBS go bust?

    Why should I, as a taxpayer, take ownership & full liability for a £2 trillion black hole?

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  17. Suggestions? Arrest Brown & Darling under Terrorism laws, 42 days detention, whoops - they threw themselves out of the window as we went to interrogate them

    Problem solved.

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  18. anons - many people have deposits over 50k - i.e. companies, investment funds etc.

    A bank going bust screws much of the economy. For example, RBS lost £1 billion when lehmans went bust.

    Also, we can't let it go bust now, it is 70% state owned - we are on the hook for it now for better or for worse...

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  19. Elby - Arrests sound like the best way forward to me too.

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  20. This is a move into the Euro, with the UK as the poor man of Europe. When there's parity, and grand depression across Europe,

    Clarke is on board with the conservatives, so don't expect a fight.

    Indeed, Peston has just posted Jim Rogers comment on selling any Sterling you have. Normally that comment would be ignored by the masses: on Pesto's blog it'll be public knowledge. A7L to offer Euro accounts backed by Santi anyone? :)

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  21. Anonymous12:23 pm

    Couldn't they separate deposits from the loan book. Then leave the banks creditors to fight it out in court over the loan book?
    I'm glad I'm in gold, this is a good time to be outside the system.

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  22. Ror - i expect teh Euro to break up under the stress it is facing. devaluation is saving us from the Irish meltdown and even gordon the moron can see this.

    Anon - as ring-fencing depositors. We did this to landsbanki and Iceland is suing us internationally - you can just renege on the bits of deals you don't like whilst keeping the yummy bits...

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  23. Anonymous2:18 pm

    Print money. It is now clear that this is the only way out in the short term. The banks can't lend to day because they don't have enough cash on their books to lend against. It will be worse as the year goes on because more businesses, starved of working capital, are going to go under. That will make the bank's balance sheets look even worse, making it even more difficult for them to lend. So looking for ways to get the banks to lend or force them to lend will not work - the banks are constrained by international treaty to keep the ratios of loans to cash reserves within limits. Even if they did try to lend they can assume that anyone looking for capital now is a bad risk. So they won't lend, and the governments continued protestations will only delay us moving to a more plausible solution. Even if the government could get them to lend this would only delay the inevitable as the end stops of the debt bubble would just be reached a little later. In the end the debt bubble needs to be dealt with and overcome, or we won't ever make further progress. This was the problem that was faced by Japan.

    So, we now have a situation where clearly the expanding debt bubble can expand no more. The amount of debt in the system starts to contract and therefore the amount of money in the system starts to contract. This causes a deflationary recession. Don't get me wrong - prices of some things will rise but the price of many more will fall in an effort to chase business. Thing is that as prices fall people - even the ones with cash - put off spending until tomorrow because tomorrow they know it will be cheaper - and tomorrow never comes of course. So even the ones with cash don't spend in a deflationary recession. This must be avoided because this will turn a recession into a depression with everyone affected and mass unemployment. The only way to avoid the collapse of money supply when a debt bubble collapses is to print enough money to make up for it. No doubt that QE is a recipe for future serious problems but we have a real danger right here and now and we need to get over that first. If we don't then unemployment will accelerate rapidly as the year goes on forcing the deflationary spiral downwards ever faster.

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  24. If prices fall too far don't sellers stop bothering to sell ?

    As so much of our trade is in imported goods won't most of it be going up ?

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  25. Too many unknowns, too complex, too many *uckwits in charge to make any sort of plan to extricate ourselves from this carnage.

    But a few outcomes seem probable:

    - £ will weaken further
    - Govt will have to print money
    - Govt bond yields will rise

    - inflation will follow
    - cash will lose its value
    - gilts will be a value trap

    - bankruptcies will rise
    - strong companies will take over good performing smaller ones
    - consolidation will lead to cartles
    - companies in the cartles will make big profits and pay rising dividends

    - gold will break through $1000

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  26. Cartels not cartles. Its what this 'global downturn' does to one.

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