Final Salary Pensions? Only in Parliament

In a truly awful weekend for the UK; Government paralysed, celebrities like Suralan given jobs in Government, the Prince of Darkness promoted to be the real Prime Minister. There is another longer running story that is very bad news.

This is that many companies are using the recession to end their final salary pension schemes, even to current members. I know, pensions is not the most exciting subject, but this is sad news for all the generations of this country.

I am saving for a private pension, by my own reckoning I will end on about one fifth of my final salary is I save 10% a month of my salary. Final Salary schemes on average are 4x as generous as this. It is a huge pay-cut too all staff who are taken out of such schemes or whose companies close them.

Even worse, the reason they are closing is because companies cannot afford them at the moment and the Government has robbed with taxes the other types of pensions savings.

Only the Public sector and MP's will soon be left with such generous pensions provision. And this is payed for by the put-upon private sector who will have to find new ways of reducing employee wages in order to pay taxes and try to make profits.

The situation is untenable and will come to a head one day in a political crisis that will make today's events look like a mild disagreement at a dinner party.

Northern Wreck update: Government unfit to run whelk stall

This story is covered in detail elsewhere. However, it is worth noting that £80 million in fees to clever consultants did not stop the Government signing up to a fantasy business plan - house prices to drop 5% over 3 years - really sticks out. As does allowing another £800 million of 125% mortgages after March 2008.

Whatever the case for nationalisation due to financial collapse in banks, this just shows yet again that the UK Government cannot run private companies. It may well be that due to losses Lloyds, RBS and Barclay's do end up fully naitionalised, but it will not end well if they do.

The Treasury is not full of highly intelligent super-humans who can run everything, as Gordon Brown wold like to believe. it seems the opposite is nearer the truth.

We said close NR when it went bust, it was the wisest strategy at the time and remains so to this day. saving Northern Wreck has been a total waste of money

Northern Wreck rides again

Covered in depth elsewhere I know, but the sums mentioned just do not add up and I have not seen too much coverage of that. Wreck received a loan of £27 billion upon nationalisation, then it has received a further payment of £3 billion as I understand, plus another of £2 billion which has been hidden as an equity loan.

In return the Wreck has repaid £18 billion of the loan; benefit to the taxpayer but not the mortgage market the Government has now realised (screw the market I say, it needs to fall, but that is for another post)

It has also made a loss of £1.4 billion this year.

So, Wreck still has just under £9 billion of our money, £3 billion of which I understand is really accounted for as good will impairment and so gone forever. Wreck may have lost £1.4 billion, but the taxpayer has really lost £3 billion.

Now we are going to pump another £5 billion in for mortgages of up to 90% - given even the average consensus is for house prices to decline 12% this year, then any money lent at 90% will have to be accounted as a loss in the short-term. More capital will then have to be put in to balance the books.

Hence Northern Wreck is still on course to cost us up to another £15 billion in losses, having already accounted for £3 billion. Plus more money put into it in the future is guaranteed by this 'business plan.'

It is a disaster, the nationalisation of it was a disaster as I said at the time, the new policy of subsidising a falling house market is utterly without merit.
Why are the people doing this not being held to account? Why are the mainstream media not seeing the insanity and wanton wasting of billion in these ill-thought out measures?

'Bad Country' needed, not 'Bad Bank'

Our great leader, Gordon Brown, has admitted yesterday to thinking about creating a 'Bad bank.' Along the lines of the original US TARP model, this would buy the worthless assets (can you spot the problem with this idea yet?) from UK Banks, which would relieve their balance sheets and so enable them to lend and end the credit crisis.

Genius, ain't it?

However, this is such a good idea that we should think much bigger instead. What the world needs is a bad country that 'buys' all the bad debt from across the globe and so sacrifices itself in order that the rest of the world can emerge quickly from its economic malaise. We should immediately ask the UN to vote on this, as we could do this and end the global recession in a few weeks.

I suggest some countries below, please add more in the comments; You only get 2 sentences to make your case.

Luxembourg - they can't invade us back and are a bunch of tax evading accountants and lawyers.

Israel - if this is a UN vote, then the outcome is a forgone conclusion; as they are brilliant business people and would soon be out of trouble in any event....

Zimbabwe - With hyperinflation at over 2 million percent, the debt would all be reduced to a manageable amount within in a few minutes...

Iceland - They got is into this mess....

Taiwan - St Helena, well it worked for Napoleon.

So who else, did I miss any obvious ones?

Brown to be bonded for eternity

The Excellent Neil Hume has this over at FT Alphaville. Basically, as we go through this 'rally' (still likely to be bear market, but we'll see) in shares, Bonds become less of a good thing.

Last year, when share prices crashed, people bought bonds. Mainly US ones, but all bonds. Despite them having no yield (i.e. effectively cash) at all. This was very handy for high spending governments that had lost control of their public finances. This includes most of the Western World.

However, it has become obvious that this move in and of itself has been a bubble. All the hot money in the world moves very quickly these days. First half of last year was oil and commodities, then bonds..what next? Previously it was US mortgages and Private Equity. Maybe Shares will get a rally one the back of this move this year.

Anyway, back to the main point. Bonds are not going to be so attractive in 2009. Even Guido is shorting gilts. How Brown and darling must have quivered when even Germany, fiscally responsible Germany, could not get 32% of its latest bond issuance away.

Brown and Darling will have to borrow up to £180 billion this year. Adding a couple of percentage points of interest as a sweetener will decimate UK public finances for a decade.

I don't see anyway out of this trap. He had better call an election before everyone figures out we have a national 'together' mortgage.

Giant Ponzi scheme uncovered at the heart of the UK

Shocked to the bone is all I can say, what a sad story to break over the Christmas period;

There has been a dark conspiracy at work in the UK for over 10 years that has finally succeeded into putting millions of our fellow citizens into penury. Worse still, this terrible crime has many facets, so even those who thought themselves clever enough to avoid the obvious deception have now been caught by the more refined versions. The basics of the scam go like this;

1. A mysterious body known only as 'The Treasury' started many years ago collecting monies from all her majesty's subjects, promising in return fantastic rewards like free world class schools, free world class health care, green power stations, magnetic trains and rocket cars. As these promises came to naught, they expanded them into the realms of complete fantasy.

2. To continue this con, the leader, known only as 'Mr Brown' decided to get some of the subjects onside. He invited them into a special club, known as the 'public sector' where pensions would be gold plated and they would be rewarded simply for encouraging membership the Scheme. Tomorrow's children would pay for today's rewards, an exact copy of the great original Ponzi ideology. To keep all in order, Mr Brown exponentially added to the numbers of these 'public servants.'

3. Despite the above, many subjects continued to prosper and were not considered by Brown to be contributing enough to his scheme; the scheme was running short of money and was predicted by many outsiders to be bankrupted within a few years.

4. To gain more control of the 'Private Sector', Brown ordered his front organisation, comically called 'The Bank of England' (in a copycat of Nigerian 419 scams), to keep interest rates low and artificially boost revenues to the scheme.

5. This then enabled a whole new part of the criminal genius of the plan to begin. The low interest rates caused a boom, private sector workers were encouraged to invest in 'shares'. These consisted of pieces of paper of no intrinsic value; The shares then 'crashed' in 2008 causing huge losses to the private sector.

6. Mr Brown was now able to step in, declare he had 'saved the world' and take over the remaining private UK banks. These were then forced to buy 'treasuries' from the Government and pay extra funds into the scheme in the forms of preference shares.

...but this is not over. Mr Brown is still at large and it is feared the last part of his scheme may still be to come. Allegedly, Brown is unhappy that some money still remains outside of the scheme. He plans a final assault on the Pound Sterling. This paper currency has been in circulation for hundreds of years and is an unsuspecting victim of the Scheme. Interest rates will again be dropped, a 'run on the pound' will lead to hyper-inflation and the remaining money outside of The Scheme will have become worthless. Everything and everyone will be subservient to Mr Brown.

Really, this complex, long-term plan makes Madoff look like a rank amateur.

Bad News, Darling

The Pre-Budget Report seems a long time ago even now. The UK Government promised to spend our way out of recession, pushing annual government debt to 8% next year (EU guidelines are for 3%, crazy says EU's Trichet).

This huge spending boom and a set of interest rate cuts would see of the worst of the recession (and set the stage for a 2009 election?).

Here we are, not quite a month later and the latest economic forecasts have the economy shrinking at 1% or more in Q4 2009. Why is this so bad; well Darling, my beloved badger of a Chancellor, had said growth for the UK would be .75% for 2009. Well, so far it looks like this:

Q1 at .3%

Q2 at 0%

Q3 at -.3%

Q4 at likely -1%.

Add those up (there are some technical issues that mean this does not quite work, but the gist is near enough) and you get to -1.3%.

That is a huge variance to .75%. It is over 200 basis points out. Each of those is a fall in tax revenue and means more borrowing for the Government.

And so, we will see whether the fiscal stimulus works by mid-2009. The issue is that even if it does, the Government's borrowing forecasts are already shot and we will be even more in debt next year that they planned for. Despite this Brown and Darling criticise the Tories for suggesting we live vaguely within our means. Appalling.

Gordon's Economic Rally

Gordon and Alistair have been in this race for sometime. The end destination is a massive pension pay-off and autobiography sales. All they have to do is drive the UK Plc car for a 3 year stage, but they seem to be struggling on the way....

"Gordon we have to stop going left all the time."

"Darling its the only choice, right takes us down the dark path, it can't be the correct choice, you are reading your map wrong"

"Don't talk to me about map reading, when you gave me the map it was upside down and the route had to be crossed out and re-marked"

"That is not true Darling, the route was clear and there had been only minor historical revisions to re-order the effects poor statistical analysis"

"Mind that bump there or we will hit another credit crunch"

The car wheels left and nearly off the road.

"Make your mind up Darling, are we going to deal with that crunch or just keep avoiding it"

"I don't think the car can handle it Gordon, there is a long-route around, let's try that today"

"But we nationalised the Banks, lectured the world on fiscal prudence. We will go over that crunch without a bump. I am a genius driver, but just in case I am not what is the alternative?"

"Gordon, your the Boss the, next alternative turn is a hard right into the forest of fiscal stimulus"

"Hard right it is then, don't think I have ever done one before, but if we are going to get our rewards then we had better take some risks. After all tax cuts are what Socialism in the 21st Century is built upon."

"You have the knack now Gordon, you seem to have Tony's victorious twinkle in your eye now.It's OK Gordon, once we have done the first turn there are a myriad of small left's to tale in the future, higher taxes, government subsidies - a miasma of Big Government tinkering. It looks like a right now, but actually the end point is considerably Left of where we are as the crow flies"

"Let's get on with the job then"

"One Hard right to beat the opposition then Left all the way"

"Gordon"

"Yes Darling"

"I love you. You arte taking me back to my dreamy university days of the 70's - oh the joy of my misspent youth in the library with mr Marx. We are going to go so far left and back in time that Michael J Fox won't be able to find us"

The wheels screetch as the car braces against the turn, but can the turn be made of does the car go off a cliff? To be continued at 3.30pm today...or not.

US Bail out bill fails; Dow down 750

Now what?

I can't face looking at my portfolio in the morning....

Friday Joke; It's a belter

Gordon Brown at the UN on World, and therefore by association, UK Government financing:

"The age of irresponsibility must be ended. We must now become that new global order founded on transparency, not opacity."

So, glad he has seen the light as regards PFI off-balance sheet financing and failing to account for Public Sector pension provisions. Also will he demand the EU get its accounts actually signed off this year?

Ho Ho Ho