Wednesday 4 July 2012

We Are Teetering On The Very Brink

... and all the Boy Osborne seems able to think of is using the LIBOR outrage to score petty student-politics points against Balls.  Grow up, you infantile git, and look around you at what is about to befall.

We have written here before of the significance of defending the UK's AAA.  Now we see a challenge of even greater magnitude:  powerful forces full of revanchist malevolence see their opportunity to destroy the City utterly and forever.  The French, the Germans, the multifarious ex-communist euro-federasts seated in Brussels, yes and even the Americans with their atavistic anti-colonial instincts, they all want the pre-eminence of London ended for good.  The Chinese will be only too pleased to pick up some of the pieces for themselves.

Addicted to their own centralising bureaucratic ways, none of these envious nations have ever truly succeeded in emulating (or even understanding) the deep OTC markets fostered here. Instead, heavy-handedly they always fall back to corralling commerce into exchange-trading uniformity, thereby crushing the financial creativity and innovation which are the hallmarks of flourishing capitalism, and vehicles of economic advance. By contrast, the City together with our precious common law legal system sustains not just the deepest and most liquid markets in financial and physical traded products, but the vast industry of legal and other professional services that Raedwald discusses here.  And, yes, the envious euro-wallahs would dearly love to overthrow our pre-eminence in commercial law, too, and win the world over to the Code Napoleon.

In the modern age, the imperative of defending these freedoms and ways of doing business should rank alongside the physical defence of the realm.  Do our schoolboy politicians have the faintest idea of what needs to be done ?  The integrity of the City's mysterious processes needs to be as secure as the hallmarks on our silver and gold - always accepted as totally trustworthy the world over, just as French hallmarks are taken with a pinch of salt.

Osborne, lay down your catapult and ink-pellets, and listen to Old Drew.  No hiding behind protracted inquiries, we know what we need to know. Consider yourself responsible for a fabled and most valuable brand that has suffered the most appalling and potentially fatal blow to its reputation, like Mercedes when its A-Class started flipping over at bends in the road, or Perrier when its pure waters became contaminated.  Stop at nothing to restore the actual integrity of the brand, as energetically and transparently as you know how.  Make examples.  Stage public floggings.  Work night and day. Take such measures as will shock, awe and fundamentally impress hardened bankers the world over.

Or else, the City will be left as the nasty, spivvy little offshore tax haven it is portrayed in unfriendly quarters: isolated, friendless, legislated against in foreign capitals, reduced to raising the odd million for bent commodity traders, unsavoury Central Asian biznismen, and Mr Unscrupulopoulos the dodgy shipping magnate.

Get on with it. Right now. You little git.



Anonymous said...

They're just sound-bites for the dumbed-down BBC etc. to feed to the masses.

It seems Bob was handed the revolver by Mervyn, so behind the scenes maybe that shock and awe policy is under-way.

The one thing needed is to split casino banking and retail banking starting ASAP, not on the vague 2016/17 timeline the banksters managed to get away with

andrew said...

I fear the bankers look at the common law and apply a napoleoninc view to it already.
If you do something dangerous on the road you can get done for dangerous driving. What you are actually doing does not need to be specified in the law.
The bankers seem to take the view that if what is being done is not against the regs - it must be ok.

There is 30 years of this culture to unwind.
So, how do you short the city?

Timbo614 said...

Yes, Nick, indeed I had this very conversation Monday. We are losing the brand, the respect, the trust, hundreds of years worth of it! Not so long ago you could spend "sterling" or use a draft/note from any major UK institution and its value would be unquestioned...

"Our word is our bond" seems not any more, and we will pay dearly for that loss.

Anonymous said...

The biggest threat to the City will be from Barry and has Chicago cronies.

As with BP. they'll all be short when Obama grand-stands on US TV about Barclays etc. No doubt they're still all riled-up about Bob buying Lehman's for a song.

TBH, we should fall in line with Europe and introduce the Tobin tax, which'll oblige the US to do the same. Then the banks get be recapitalised from transaction taxes rather than printing money.

We need to keep things on an even keel for 5 years or so to allow the debts to be paid down or else we'll have another cascade of bank failures as bad debt on commercial loads, CDOs etc get crystallised.

Electro-Kevin said...

The Tories annihilated the unions in the '70s for far less a crime than this.

We voted for them in the belief that working class job losses were the correct price to pay in order to modernise to compete in global markets - we, the working class Tory voters, took the pain and the grown-up decisions.

We were never credited with this.

How were we rewarded ?

They gave us a subsidised underclass instead of a subsidised mining class - they opened the door for energy insecurity and the greenist lobbies.

Then mass immigration. We resisted all temptation to vote BNP.

We were never credited with this but the message was that we were dispensable.

What's new under the Sun in Britain ?

They displaced the union shyster-class and replaced it with the corrupt City shyster-class and then Britain PLC went under the hammer to line the pockets of a privileged few with no view to the futre.

And now we are truly fucked.

This is the unravelling of I-got-it-on-the-tick UK. That deregulated credit-fest that we were given as a substitute for real wealth whilst spiv capitalists were stripping the marrow out of our bones.

Electro-Kevin said...

... so add to those woes that it's most definitely going to be a Labour government at the next general election.

'Bankers' and 'Tories' are words that are synonimous.

The Labour spin machine will see that this is reiterated at every opportunity.

The public will never understand the true connection between Blair/Brown and the banks.

Weekend Yachtsman said...

"defending these freedoms and ways of doing business should rank alongside the physical defence of the realm"

Well judging by their record, they don't care much about the physical defence of the realm either, do they?

But despair is a sin.

James Higham said...

The City is strong but forces in Bavaria are just as strong. Bertelsmann springs to mind.

Raedwald said...

Agree. All that's good about the City needs defending, and the best way of doing that is the equivalent of displaying malefactors' heads on pikes on London Bridge

The Mayor and Corporation and the Guilds have a part to play in this; it's time to use some of the City's vast wealth to 'accentuate the positive'

The City made a 2010/2011 tax contribution of £63bn, 12.1% of the UK tax-take, and employs 1.1m. It pays the dole, food and housing for the entire unwaged NE and NW of England and more. For the damage that the Hoon Diamond and his Gordon Gecko ethics have done I could personally disembowel him on Tower Hill. If ever there was a time for a Bill of Attainder it's now.

hatfield girl said...

Do keep commenting on this ND. We need the pills at least twice a day to help with the vertigo experienced every time we look at what is being made clear.

There must be crimes that cover this conduct; we don't need inquiries, we need arrests. And then trials. And retribution, not just for all of us, that's on its way, but for the mandante.

Anonymous said...

To be honest, I'm with Alan Sugar on this one. The whole LIBOR thing is a storm in a teacup and I really think that other nations don't give a monkeys about it. They have much worse things to worry about.

As Alan Sugar pointed out, banks can set their interest rates as they like, it being a purely commercial decision based on competition in the marketplace. LIBOR is only a benchmark. It can be as ill-judged as "The price of ladies panties + 2%". It matters not. What matters is the end price of the interest rate, not how it was arrived at. If that end interest rate was too high or too low then customers could choose to buy or fly.

Now lets consider the fixing itself. Don't think for a minute I am in favour of it. The reputation of the finance sector in the UK can do without it. But this is the outcome of it:-

1] It convinced the world that UK banks like HSBC and Barclays were solvent... which they were.

2] It meant that UK banks like HSBC and Barclays didn't need a bailout from people like me, the British taxpayer.

3] It meant the mortgages of people with LIBOR based variable rate mortgages (mainly in the US) did not find their interest rate going through the roof leaving them unable to pay.

4] It mean that LIBOR reflected the actuality of bank funding rather than the actuality of inter-bank lending. In other words LIBOR reflected what it SHOULD have reflected all along - the ability of the banks to sourfce funds at particular rates rather than the ability of banks to source funds from other banks (Barclays had by this time given up with interbank lending and had sourced funds from Qatar).

5] It meant LIBOR stayed within the realms of reality and didn't of itself cause a mass panic in world financial markets that could have been catastrophic and would not have been based on real funding situations of banks.

From this analysis I would say LIBOR fixing, whilst wrong in principle, had an extremely benign outcome. I think most of those working in finance accept this, wherever they are in the world, and are truly greatful that theh LIBOR fix cured the problems that would have led to [4] and [5]. London and the BofE did a good job via nefarious means. The whole world should be grateful. I'm grateful for what they managed to pull off - HSBC is a big bank and I really don't want to be bailing that one out too!

Anonymous said...

"The integrity of the City's mysterious processes needs to be as secure as the hallmarks on our silver and gold "

Isn't the English hallmark system superseded by the European standards markings?

Jackart said...

Surely the brand-rescuing can wait until AFTER we've laid a bifter on Balls' nose?

All work and no play and all that.

Elby the Beserk said...

Amen to all that. Time, I think, to reintroduce the stocks into the penal code.

Will there be blood? There bloody better had be.

Anonymous said...

Anon at 10:19 AM, yes there's a case to be made that in 2008, manipulating LIBOR was the least worst way of limiting the panic.

On a par with letting the Luftwaffe bomb Coventry so we didn't reveal Enigma had been cracked.

Various forces, notably Preston, seem to focussing on this rather than the LIBOR manipulation in 2005-2007 which, as the emails showed, allowed spivs to profit.

TBH, this corruption shows what has always been a puzzle about the City in what was suppoosed to be a liquid, transparent market.

Everyone seemed to be a winner, and no counter-party ever lost on the deals. That the market was systermicallty false explains so much!

Sebastian Weetabix said...

So far dodgy banksters have given us a housing bubble, so no one under 40 can afford to buy a house, mis-sold us pensions and PPI thereby ripping us off, and given us such wonders as the endowment mortgage. Yet more people ripped off. Of course one must not forget the trillions in labilities and shitty debt they have unloaded on to us poor saps the taxpayers.

I can't help wondering if we might have a healthier society if they did all piss off to some nasty little tax haven.

Anonymous said...

"Various forces, notably Preston, seem to focussing on this rather than the LIBOR manipulation in 2005-2007 which, as the emails showed, allowed spivs to profit."

Basically no. If you look at how LIBOR is constructed it is basically an average of what major banks think the basic underlying loan rate should be. It's like taking the average variable rate of all the big banks and working out what the average is, then quoting your loan rates on that basis i.e. average variable rate minus 1%. You can manipulate the average rate upwards by making your variable rate higher. In the end of the day it matters not, because customers decide whether to take your loan based on the actual rate you are offering and the conditions attached, how you arrived at the rate is not important. So manipluating LIBOR doesn't have the impact you say it has - if one bank tries to manipulate it on its own it will fail and if all the banks work in concert to push it up then borrowers will simply go elsewhere to secure funding at lower rates.

Far too many people are commenting on this LIBOR issue without checking the facts in detail. I'm seeing mistake after mistake in peoples thinking. Here's a comment from the MSM which points out a lot of the truth underlying LIBOR

Anonymous said...

"So far dodgy banksters have given us a housing bubble"

No they haven't. The BofE sets interest rates underpinning mortgages, not the banks. And the BofE sets its rates depending on government targets.

The housing bubble started as a result of GB goosing the economy by pushing the BofE to go for growth, meaning lower interest rates. Lower interest rates means the banks have to shift more and bigger loans, and people are clamouring for cheap mortageges so they can compete with their neighbours to get into more debt.

It is all Gordon Brown's fault, so Ed Balls has been eager to blame it all on the banks. But the banks were just doing the governments bidding. The MSM have been very keen to back up the Ed Balls narrative, so you know which side they are really on. Labour should never get re-elected after this, but the MSM will ensure that they will come away squeaky clean. Meanwhile Gordon Brown knows full well who is to blame, which is why nobody has seen hide nor hair of him since.

Anonymous said...

I believe we need three macro-level controls to encourage appropriate behaviours, and can then dispense with the value-sapping regulators

1) All "casino" banking and retail banking must be run as totally separate companies by 2015, with the clear understanding that the casinos will be left to fail.

2) The staff bonus pot is limited to 15% of the profits on which UK tax is paid, rewarding shareholders with divis and maximising corporate tax (no bonuses without taxation)

3) A "Tobin tax" is introduced and used to fund savings protection schemes and repay the tax-payer what the banksters owe.

You can still be wealthy as a bankster, but not obscenely so by rigging the game.

Anonymous said...

blimey guvnor Drew. It ain't the end of the World, thankfully no bankers were hurt .

Did you get up on the wrong side ?
Can't really see why 'git' Osbourne is in your cross hairs over this, but maybe Brown, Darling and Balls'up were also in the past ??

@Anonymous 10:19 agree, love the 'benign'. And Yep no one gives a stuff about 2008 and 14 traders. Southern europe is scrapping a living.

Just follow Ed Milliban's (the next PM - ha ha ha ha) view that we gotta look to the future. I guess he knows his crew are knee deep in shite

ND I guess a rant of a blog is better than none, but it is marginal.


Budgie said...

ND, basically I agree with you (shock, horreur!!). Both Cameron and Osborne could do with a smack across their self satisfied mugs with a wet fish. They are truly useless and bad for this country, as we watch our virtues being washed away.

I also agree with the various Anons (sorry I cannot keep track of you - please use a name). Libor is a bit like labour (ie pregnancy - geddit?) - it is the rate it is because the commercial banks own rates make it so. Of far more importance in the BoE bank rate. And doesn't the BoE manipulate that?

Dick the Prick said...

Politicians don't seem to have learned the immeasurable value of shutting the fuck up. Darling has walked out of this unscathed. There is a need for an inquiry and MPs break up in a week; justice has to be quick.Brown was fucking mental enough - notice how Osborne hasn't got a record of Tucker's conversation? Is that why Tyrie doesn't want committee because he's got his eyes on bigger prize? Yup.

Anonymous said...

Never thought you would rebel like this, so it goes to prove that you think something is going disasterously wrong, I agree with you, Gideon and Dave have been office have been in office over 2 years so someone has either not been communicating with them or they knew about it but decided not to act. If something does not happen to change the way the bannks perform everything will go belly up, and as you say outside interests will move elsewhere, those outside interests are in London because they believe they will be delt with honestly and efficiently where they might not in other centres, New York lost its pre-eminence because of certain scandles.

Nick Drew said...

looks as though the same thought is beginning to take hold

Lord Blagger said...

... so add to those woes that it's most definitely going to be a Labour government at the next general election.


There is an easy way to prevent this, but they won't take it. The easy way is to report the true debts of the government, pensions included.

Then give every taxpayer a personal statement with the bill they have to pay. Pro rata.

Then stand back.

Will Labour get in promising more borrowing? I doubt it.

Will the Tories get in? The longer they delay, the less likely.

So In part I agree. Labour will get in, then its all fucked.

Company pensions confiscated etc.