Another Day, Another Scheme To Save The World

So having admitted that he has not quite saved the world the first time around, we now have the latest from The PM and his select band of 'Deep Thinkers' on how to save the economy.

Admission of Failure

First up, the new measures today were the first tacit admissions that the bail out first time around did not have any further effect than saving the livelihoods of Banking Senior Executives with precious few exceptions. However, Brown's intention was that the announced package would at last encourage banks to lend to what he termed 'good businesses' whose only problem at the moment was a 'lack of access to credit'.

I am not sure if he meant Zavvis, Woolies, MFI, Whittard, Wedgewood etc in all that but of course 'good businesses' are not defined.

The Announcements

Included today are some gems:

• Giving Northern Rock more time to pay off its loans. The idiotic thing was that the timetable for repaying the loans were actually forcing The Rock to reduce its mortgage lending and that's what the Government does not want it to do, but it's what Northern Rock needs to do. It's a chicken and egg situation but that's the Government for you.


• Banks will be able to take out insurance from the Government to cover anticipated bad debts - fair enough. Here each bank will tell the Government how much it expects to lose against each debt and then it can get up to 90% of each debt insured against a binding commitment to lend more. It would work fine if any of the banks actually knew which of their debts are toxic or are we going to see a wholesale write down of debts?


• The Bank of England will buy up to £50bn of assets in companies across all sectors of the economy - I have zero idea what that means.


• The Government is increasing its stake in RBS from 58% to 70%. This is great news for us taxpayers as on the same day RBS, our new 'investment' will declare UK record Corporate losses of around £20bn and its share price plummeted in celebration by 67% and are now just 11.6p a share. I'm glad I own that one.
  

Do They Know Something That THEY Don't Know?

Barclays shares have plunged by 40% in the last few days, RBS' shares by 67% today alone, while our other great 'investment' Lloyds TSB fell 34%, and HSBC a feeble 6.5% fall.

Are the markets trying to tell us something that the Government and their heavies don't know?

It's a serious question. I think there are several of us who are now beginning to realise that by parking or insuring these toxic debts, if they could ascertain who owns what and how much they are, actually does not rid us of them. It simply clears them to one side to see if the banking sector can get back to its old self again and start fuelling bonus cheques.

The PM's announcement that he 'Saved the world' was a tad premature and the fact remains that we are still standing at the edge of the precipice that is the result of the 10 years of stupidity. I agree with he assessment of Marc Ostwald at Monument Securities when he said, "It's piecemeal and it's just fighting fires. It still doesn't address how to get rid of toxic assets."

Perhaps that's what has the market spooked. It certainly does not look like a fantastic solution to ailing companies in a recession after all that hard head-scratching. It's time for the caped crusader to think a bit harder, I think.