Millennium’s Credit Crunch Diary… February: Launch the Lifeboats

During the financial crisis, Lib Dem blogger Millennium Dome, Elephant, has agreed to give LDV a glimpse of his Credit Crunch Diary. You can read Part One here.

Rescue packages for everyone* this month: from Mr Lord Mandelbrot’s car loan scheme to Bank Bailout II (this time it’s RBS) to the slightly surprising suggestion in the Grauniad that our beloved Prime Monster, Mr Frown, might be taking to his own little dingy dinghy.

But all these rescue packages have the same message: Mr Frown’s PLAN to save the World economy DOESN’T WORK.

With the Hard Labour Government’s opinion poll ratings on the slide … AGAIN, their “recovery” turned out to be just another “Frown Flounce” – a reverberation of the feline post-mortem variety** – and this triggered another bout of Musical Cabinet Chairs, with everyone*** desperate not to be left sitting in the Prime Monster’s seat when the General Election music stops.

Last month people were SCARED. But this month they are starting to get ANGRY.

Because if January saw people waking up and starting to see, though the blur of the post-Christmas hangovers, that the party was over and it was time to gingerly peel open the credit card bill and peek at the damage, then February was when they spotted all those bottles of Cristal on the statement and said: “Just a COTTON-PICKIN’ minute; WE didn’t order THAT!”

That’s why people are now so cross about Ms Jacqui Spliff, the so-called Second-Home Secretary, apparently feathering her nest. And her OTHER nest. In less straitened times people (or at least journalists) might have been more inclined to overlook this sort of story, but now when a lot, and I mean a LOT, of people are facing up to the possibility of losing their ONE AND ONLY home, this looks like it is taking the Michael. (To rub salt in the wound, can anyone have been happy to hear the news that the Government’s scheme to try to help people in danger of repossession has been delayed until April while who knows how many more people are going to lose their homes in the meanwhile?)

Similarly, “apologies” from obscenely wealthy bankers and the slap-on-the-wrist of a trip to the Select Committee (rather than a trip to the woodshed, which many think warranted) do not cut much mustard. Particularly when within 24 hours the deputy-chief bank regulator (and former head of HBoS) resigns on the grounds that he is “completely innocent” of ignoring and then sacking the man who warned him (when he was head of HBoS) that HBoS was dangerously overexposed in the risky borrowing department. As it turns out, HBoS WAS dangerously overexposed in the risky borrowing department. But that doesn’t, apparently, prove anything.

And only two days after that, the new Super-bank, “Lloyds TSB HBoS Gobble Gobble” announced that they might be heading for the teeniest, tiniest largest second-largest**** loss in British Corporate History, approaching TEN BILLION pounds!

What we are starting to realise is this: big banks are BAD banks – you can’t regulate ’em, you can’t let ’em go bust, you can’t (it would seem) stop ’em paying out bonuses from the taxpayers’ money that you gave them to try and get the credit market going again.

Lloyds Super-bank’s problems come from buying Halifax Bank of Scotland at the very moment it became completely worthless because of all the sub-prime mortgage lending it had exposed itself to.

RBS’s problems come from buying Dutch bank ABM Amrose at the very moment it became completely worthless because of all the sub-prime mortgage lending it had exposed itself to.

And remember, if we DIDN’T pay them their bonuses, this sort of genius-level decision maker might take their skills elsewhere!

We could learn a lot from the rapid defenestration of the JAPANESE Finance Minister who was “completely innocent” of being drunk in charge of a press conference. He put it down to COUGH MIXTURE. I guess he should have read that label more closely:

“Caution: may cause drowsiness. Do not operate heavy machinery or a major world economy after use.”

The Japanese economy has been hit MUCH HARDER than ours, shrinking an enormous 3.3% in just a quarter. Never mind the “R”-word; that is full on “D”-word territory, a depression (as our Prime Monster Freudianly slipped). Which hardly seems FAIR, since all the evidence points to the majority of people there working much harder and saving more thriftily than many people in either Great Britain or America. But unfortunately by investing their economy heavily in high-value, high-tech, high-quality products – mainly consumer electronics and motor plant, or tellies and cars to you and me – they’ve successfully cornered a slice of the market that is VULNERABLE to sudden contractions. Because when the economy looks dodgy, putting off buying a new TV or a new motor is one of the easiest “savings” that can be made in the family budget.

No, don’t think that makes US look CLEVER – we did the same with “finance” products and look where THAT got us!

Back in the UK, news that may come as a relief for some is that the Government are going to use one of the banks that we own, the Northern Rock-and-a-Hard-Place, to increase the amount of mortgage lending and so, we all hope, UN-CRUNCH the credit market.

About time too, I say.

Of course, it would be nice to know what’s CHANGED that has prompted this COMPLETE U-TURN in Government policy, since up to now they’ve been driving the Rock to REDUCE its loans exposure and repay its own borrowing early.

Unfortunately, it may be too late. A swift intervention might have snapped us out of it, but now the recession dominoes have started to topple, and manufacturing is shutting down and laying off.

Despite Lord Mandelbrot’s intervention, the car industry is looking decidedly wobbly. Honda have closed their Swindon plant for four months; BMW have behaved SHOCKINGLY towards their agency workers at the Mini factory at Cowley; and now the “car plant under threat” has been revealed to be the LDV (you can make your own Lib Dem Voice jokes up) works in Birmingham, leading to a game of CHICKEN between Lord Mandy and Russian Oligarch and Yacht Owner, Mr Oleg Deeplysuspect, over who’s going to bail them out.

Mind you, that’s NOTHING compared to the tottering GIANTS of the American car industry, who were back in Washington this month to beg for another TWENTY-ONE BILLION dollars.

Ah, America. Of course, the biggest, or at least most EXPENSIVE, news of the month was the passage of President Barry O’s STIMULUS PLAN: $787 billion cash, two-thirds to be spent on capital projects and social programmes to save and create jobs, with the rest going on tax cuts mainly of the sort aimed at lower and middle income earners that the Liberal Democrats have proposed in Great Britain.

Barry O addressed a joint session of Congress to lay out the deal for them.

In the absence of water, the President walked across the floor.

(OK, OK, it was said about former SDP leader Dr David Death first, but it seems even more apt applied to our new Neo-Keynesian Messiah)

As part of the compromises to try and achieve a cross-party consensus there are rather more tax cuts in it than originally planned; but the PROTECTIONIST “Buy America” clauses, while not totally blue-pencilled, are at least a bit watered down.

Nevertheless, the Replutocrats have taken the radical (and, frankly, bonkers) stance of going completely PARTISAN on this and refusing to back a cent of it. It appears that they are retreating into oppositionism because it’s the only way to hold their disintegrating party together.

They don’t actually have an alternative to offer, beyond a newly rediscovered (to the sound of much scoffing) interest in FISCAL RECTITUDE. And calling for MORE TAX CUTS. Even though those are mutually exclusive policies.

Essentially, they have NO PLAN AT ALL other than “We wouldn’t start from here”. Which would be funny, what with them getting us “here” in the first place, if “here” wasn’t so tragic a place to be!

So they are betting the farm on Barry O’s plan not working. None of them would DARE to say it, but the Replutocrat policy reduces to, in the bald words of Mr Rush Limbaugh*****: “We hope he fails”.

This is, frankly, a shocking approach, so shocking in fact that the word “un-American” is being used.

The truth is that there ARE risks. Barry O’s stimulus plan MAY not be the right solution. There’s no credit in calls for “national unity” if all that it means is “follow my plan and shut up”. Fortunately, that’s not what the President is saying. National unity, proper democracy even, should be about bringing alternative plans to the table and working out their relative merits and picking the best solution. Although we usually end up with the least worst compromise.

But standing back and yelling “NOT THIS! NOT THIS! NOT THIS!” helps no one. A lesson that the British Conservatories could also stand to learn.

Anyway, don’t think we can’t have any influence. Last month, I said make the banks smaller – now Prime Monster Mr Frown is calling for a return to old-fashioned banking and Conservatory Shadow Chancer Mr Gideon Oboe says that banks too big to save are a bad thing.

So let’s see what we can’t do THIS time!

Recommendations for the month:

(1) in the last recession, companies like Apple were investing in technology like the iPod that has seem them rise and rise with the recovery; investment, and I mean private money as well as the Government, wants to look at NEW GREEN TECHNOLOGIES that will LITERALLY power us into the post-Carbon economy. To be fair to Mr Frown, he’s already talking the talk on this – so let’s see him walk the walk

(2) simplify the tax system. Stop trying to hide income tax rises in the National Insurance Scheme. In fact, just merge income tax and employees’ NI so people can see a single simple rate. Raise personal allowances and ditch the confusing bureaucracy of tax credits and be honest about raising taxes at the top end. And for fluffy’s sake abandon this MADNESS about phasing out the personal allowance for higher earners. It’s complications for complications sake. If you WANT another two grand of tax from them, just SAY SO… and then put the top rate up to 47p!

Meanwhile, announce that you’re going to leave the VAT rate at 15%: it IS expensive, but a shift back to direct taxation improves transparency AND redistribution, and it will save businesses a lot of money not to have to faff around with all their tills and price labels and invoice stationery and accounting computers all over again in December.

Fluffy Footnotes…

* Sorry: NOT YOU

** “even a dead cat-monster will bounce if it hits the ground hard enough”

*** except Ms Harriet Harpic, of course, who, if you read the Grauniad, allowed her ambition to overreach her caution. Or, if you read the Hellograph, who is “delusional”.

**** pipped at the post there by Royal Bank of Scotland’s TWENTY-FOUR BILLION quid down the tubes. (The WORLD’s record corporate loss, though, remains the ONE-HUNDRED BILLION DOLLAR bellyflop of AOL Time Warner in 2002 thanks to the Dot-Com Crash; they always do things BIGGER in America!)

***** Mr Rush Limbaugh is a Big Fat Idiot… according to the book ‘Rush Limbaugh is a Big Fat Idiot’.

* Millennium Dome, Elephant, blogs at his Very Fluffy Diary here.

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This entry was posted in Humour and Op-eds.

One Comment

  • Bruce Wilson 2nd Mar '09 - 4:11pm

    The humour is a bit stretched this time.

    A comment on:
    “…if we DIDN’T pay them their bonuses, this sort of genius-level decision maker might take their skills elsewhere!”

    -I wish they would!

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