Spelling It Out

I have been asked by one of my blog readers, what do I mean when I say 'There is a shortage of houses to be sold at £10m+. Go figure.'

It's a good point. What I mean is that the top earning and most wealthy individuals of this country and those who work here but are classed as non-domiciled for tax reasons have been the least affected by the financial crisis over the last period - in fact, they have mostly benefited from it. There is a good reason for that and why Britain is still in recession despite the fact that super-wealthy people cannot find enough £10m+ homes to use their money on. It's because our bank bailouts ensured that the way these people earn their money was not just preserved but actually the whole system has been 'reset' at taxpayer cost so that they can earn far, far more from the kinds of products that mean nothing to us and society in general.

Our Government, very different to Governments of France, Germany and Japan, poured almost all of their 'stimulus' money into saving the banking system. Germany, for instance, put €10bn into directly subsidising wages so that workers were not laid off and into major education rejuvenation projects and technology plus stimulating directly, and substantially, the car industry. In contrast, we have really provided little stimulus and what we have provided mostly went down the throats of banks in the form of Quantitative Easing who used it for their high risk casino banking.

That is the reason why we have remained in recession and why the only way out to service our long term debt will be to make the low earners disproportionately less well off as tax increases will be aimed at those first.

It's hard to spell it out any clearer - but there is a tiny percentage of very wealthy people who helped cause the crash who are far better off because of our Government's policies on economic rescue. Sarkozy and Merkel told Brown he was wrong in trying to bail banks out too readily, they have been proved right.

This year over 100 banks have failed in the US and not a single saver has lost their money - nearly every one of those banks were small regional players that did not participate in the activities of the greedy banks - yet they took the brunt of the economic catastrophe. Meanwhile the newly revitalised investment banks like Goldman Sachs and JP Morgan Chase are talking in terms of record profits and bonuses.

The solution to our problems are actually making the problems worse.

It's Payback Time

If Silvio Berlusconi 'fingered' you for a particular role, I should think most of us would feel distinctly uncomfortable and start looking over their shoulder.

As David Mills has found out, there can be a high price for helping him out even if the initial rewards are good. So I wonder how Tony Blair must be feeling now, having just been endorsed by the Italian PM as the 'ideal' candidate for the new role enshrined in the Lisbon Treaty of EU Presidency. Currently, Mr. Blair is busy squeezing being a Middle East Envoy in between earning an estimated £12m since leaving office in 2007 in various other roles as writer, public speaker, non-executive director and adviser on globalisation to people willing to pay £2m a year for his wisdom.


Only the ratification of the Czech Republic stands in the way of the appointment which Berlusconi wants confirmed as soon as is 'legally' possible. The word 'legal' must send a shiver down his spine for the man who describes himself as, 'The most persecuted man in the world'. There are no suggestions of favours being called in although those with good memories will remember that the Blairs have enjoyed multiple free holidays at various Berlusconi properties in Tuscany and Sardinia. But as Tony's good friend, Peter Mandelson, knows there are always such things as free lunches and holidays on £80m yachts and the like. Just tell the public that you discussed the weather and they will believe you.


My memories are of Berlusconi smiling and greeting with a bandanna as his hair was busy being transplanted and dyed while dreaming of nubile young girls. It is as good as endorsement as Blair will get as Sarkozy and Merkel are rumoured to have not endorsed him while he is unlikely to get it from Chairman Brown.

Where's George W Bush when you need him?

Different Strokes

China will spend around 2% of GDP on Fiscally Stimulating its economy this year and the same next - USA exactly the same this year, dropping to 1.8% next while Germany will spend 1.5% this year and 2% next. Britain will spend 1.4% this year and zero next.

Germany's biggest issue is that the money it has pledged to stimulate the economy is not being used fast enough, as much of it is for driving renewable energy into public buildings, building more, refitting old buildings and other projects. Such projects are big public spends and their laws mean that tenders have to be written and due process observed. This has bottlenecked public spending and so they have introduced ranges of laws that say spend of less than €100,000 does not have to go to public tender, just a few quotes while some projects up to €1m can avoid the old tender process. In just 14 months, they need to spend €10bn in education alone and the rumour now is they will spend that money on anything that disperses the cash quickly meaning that German schools could become showcases for interactive learning for all Europe. The main thrust is that instead of just a few large construction or IT companies benefiting from the spend, literally thousands of small firms will benefit from the spend.

Along with direct Government subsidies to firms to pay wages in the recession, Germany has deadened the impact and unemployment has not risen appreciably despite spectacular insolvencies like Arkandor. Britain, meanwhile, has seen unemployment rise to over 2.4m and it continues to rise with predicted peaks at over 3m. In the same breath, we have seen tax receipts drop 20% in the last quarter, 3 times the level of drop predicted by the Chancellor, meaning higher borrowing again - rumours abound about Britain's ability to pay for all this debt which could see our credit rating moved down.

For Britain, it was all about saving the banks and stimulus has come only from the VAT decrease which is temporary. Credit was seen as the major issue and so it had to get flowing again. Instead of seeing more Fiscal Stimulus going directly to save jobs, we have seen new money pumped into the banking system via Quantitative Easing to the tune of £175bn and precious little has got down the line. In fact, credit has never been so expensive and hard to get with banks missing their lending targets consistently, loans at multiples of base rate not points above, fixed rate mortgages at a huge premium and loan criteria at their most stringent in years. Yet banks are awash with new cash from taxpayers and money markets again at the cheapest price in years.

What has happened? Why isn't the money getting into the economy at the points where it is needed? The answer is simple - banks are at their high risk games again, with cheap money and an unlimited guarantee against losses underpinned by the taxpayer - they cannot fail to make money, so why give it to us where they would earn comparatively less?

While even Adair Turner is now mooting a windfall tax to prevent excessive bonuses, and bonus schemes are getting a bit tighter but no one is regulating new salaries and inter-bank headhunting of new 'talent' with lavish guarantees and other perks. The fact is that while bonus schemes may look more difficult to attain the old heights on what is certain is that clauses defining that traders MUST get paid even if the banks are making losses are being set in stone. We actually will come out worse, not better thanks to the lack of thought being into the process by non-bankers.

The end result is that technically France, Germany and Japan have all exited the recession while we suffered a further 0.8% shrink in the same quarter. It seems Britain is more focused on fining and locking up music downloaders than tackling unemployment or real crime - it seems we are more keen on bank rolling the real criminals in banks who robbed us of billions to support their high risk gambles and we have allowed them to do it all again with impunity. Meanwhile, the money getting to the parts of the economy where it is needed is minimal, expensive and late.

We have paid the best part of £100m in fees to numb skull bankers and lawyers to plot a way out of trouble that has put money right back into the hands of those who broke us, and they are keeping it to spend on their lavish high risk derivative gambles to earn mega-bucks to lose again later.

It is anticipated that Angela Merkel will breeze the forthcoming election in Germany and she has around 83% of the anticipated votes in polls. Gordon Brown may take real note as she fought him hard on Fiscal Stimulus and bank bail outs at the G20 as did Sarkozy of France. They have been proved to be right, Brown wrong despite his belief he 'saved the world'. They thought about specific programs and directed spend to stimulate the economy and get money into all businesses while we focused billions on banks and the financial system which are failing us yet again as we did not set rules and regulate properly.

Despite the smug, self-congratulations, Brown has been proved to be lacking in real skill in economics and Britain will pay a very high price as a result.