The price of everything

What colour are your spectacles ?

“Bank failures are caused by depositors who don’t deposit enough money to cover losses due to mismanagement.”

 

-       Dan Quayle.

 

What a mess. Still only part way through one of the biggest banking crises in history, yet having suffered grievous losses across multiple asset classes, we don’t appear to have learned very much. Relations between the UK’s tripartite oversight authorities seem to be deteriorating into acrimony and turf warfare even as the regulatory pendulum gains in weight and momentum. The banking and financial services sector is fast becoming a political football. Taxpayers deserve better. Maybe they will get mildly less incompetent treatment from the next government. Meanwhile, Wall Street firms that are only in existence due to the unconsulted largesse of US taxpayers are planning to boost executive pay. Citigroup (current share price: circa $3, which makes it the equivalent of a penny stock), having received $45 billion in “government” bail-out funds, now wants to increase some of its banking salaries by up to 50%. Did the events of 2008, during which the taxpayer rescued Wall Street and the City, never actually happen ?

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The geeks shall not inherit the earth

“I am indeed rich, since my income is superior to my expense, and my expense is equal to my wishes.”

 

-       Edward Gibbon.

 

The brief of Eric Beinhocker’s outstanding ‘The Origin of Wealth’ (Random House, 2007) is to address the questions: what is wealth ? How is it created ? And how can we create more of it ? But it also, almost incidentally, explains how the current banking crisis happened.

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Of inhuman bondage

“Bush behaved incredibly irresponsibly for eight years. On the one hand, it might seem unfair for people to blame Obama for not fixing it. On the other hand, he’s not fixing it. And not fixing it is, in a sense, making it worse.”

 

-       Alan Auerbach, economist at the University of California in Berkeley.

 

It’s the bond market, stupid. Equity markets may or may not have turned a corner from their recent lows (the signs are improving even if the global economy is not), but government bond markets increasingly look like a grisly road accident in progress. Which is as it should be. 10 year Gilt yields have risen by a third, from 3% to 4%. 10 year US Treasury yields have doubled, from just over 2% to 4% since December. Not even President Obama can oversee a $1.2 trillion annual deficit during years (2009-2012) that were previously forecast to be showing a surplus (of more than $800 billion a year) without Treasury bond investors getting spooked. And it’s bad luck when you’re dependent on the likes of China (foreign exchange reserves: c. $2 trillion) and Russia (over $400 billion) to fund your grotesque efforts to support Wall Street bonuses and the housing market. It’s almost as if George W Bush departed from Washington determined to make the Oval Office uninhabitable for his successor. Having said that, Gordon Brown seems to be going through a similar ‘scorched earth’ policy for the UK’s public finances – and we don’t even have a Wall Street.

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Of our elaborate plans, the end

“Goodbye, Great Britain. It was nice knowing you.”

 

-       Wall Street Journal editorial, 1975.

 

“[Gordon] Brown’s Britain is like an episode of Life on Mars.”

 

-       George Osborne, UK Shadow Chancellor, at the time of the Northern Rock Crisis.

 

 

Does every Labour administration end in economic chaos ? Like Andy Beckett, who has just published ‘When the lights went out: Britain in the Seventies’ (Faber & Faber), this writer was also born in 1969, and it certainly feels like Labour administrations have a greater propensity to disappoint public expectations than even the England football team. Writer and broadcaster Francis Wheen has a nice line in acerbic irony whilst reviewing Beckett’s book for ‘Literary Review’. Politics in the 1970s, claims Beckett, was “rawer, and more honest.”

 

“Thus speaks a man who spent the decade at primary school.”

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