Solid… Solid as Northern Rock

What the run on Northern Rock shows is that the great British public has learned that valuable lesson Bush famously could not remember: shame me once… After Equitable Life, after Fairpak, people have learned not to trust reassurances that everything will be alright, have learned that when things inevitably go bellyup they are the ones left holding the ba and have learned not to trust the government to bail them out. So instead they all decide to withdraw their funds while they still can. In the process it seems they have forced the government to provide a proper bailout if Northern Rock does go bellyup, since it’s now guaranteeing a hundred percent compensation scheme.

I love it when a plan comes together.

“Don’t Panic Mr Mainwaring!!”

Is Northern Rock the new Credit Anstalt? .

It’s a spreading meme and I’m probably one of many thousands of bloggers making this comparison this morning.The British media is ramping up for a full blown panic – could the impending collapse of this overextendxed and undercapitalised bank be just the first of many dominoes to topple in our precariously-balanced economy?

Grimly satisfying as it is to see baby-boomers desperately trying to get their comfy pensions and the profits from their hiousing speculations out of a crumbling bank, unfortunately this won’t just affect the comfortable middle classes.

The knock-on effect will be broad and deep: so many are employed in the financial services and derivative industries that if the panic continues and more banks get into trouble, even if there is bailout and the situation stabilises there will be a massive retrenching and many, many people will be out of a job, from call-centrre operators to cleaners to copier technicians to consultants to sysadmins. If doesn’t stabilise… well, then all bets are off, so to speak.

The UK government’s spokesdroids and our laughable chancellor Alistair Darling are desperately trying to convince us in increasingly shaky voices that it’s not a bank crash – as the public sees right through their feeble protestations and continues to queue for its cash. Reportedly 6.1 billion 1 ibillion 2 billion pounds has been withdrawn over the last couple of days. It’s Financial Contagion in action

What is financial contagion

“When the thunderclap comes, there is no time to cover the ears” –
– Sun Tzu

A large number of bank failures occurred in the 1930s, accompanied by declines in asset markets, mostly triggered by common adverse business conditions. This seriously weakened the US financial system, and left it unable to support economic activity effectively through financing. Consequently, there was a continuing vicious circle of economic decline and financial weakness.

When asset bubbles burst, or economies suffer a severe downturn, weak banks can become insolvent, and their failure then further weakens other banks causing the problem to spread.

In testimony before the U.S. Senate Committee on the Budget on September 23, 1998 Alan Greenspan said:
“Developed countries’ banks are highly leveraged, but subject to sufficiently effective supervision both by counterparties and regulatory authorities, so that, in most countries, banking problems do not escalate into international financial crises. Most banks in emerging market economies are also highly leveraged, but their supervision often has not proved adequate to forestall failures and a general financial crisis. The failure of some banks is highly contagious to other banks and businesses that deal with them, as the Asian crisis has so effectively demonstrated.”

But regulation and supervision of individual financial institutions, however much they may be effective, may not necessarily guarantee the stability of the financial system as a whole. Problems in one bank may spread to other parts of the financial system by the common involvement of other banks in one particular risky business area that turns bad, through counterparty exposure to events such as the Baring Brothers crisis of 1995 or the Long Term Capital Management (LTCM) crisis of 1998, or loss of confidence in one institution may result in funding problems for other institutions if they are perceived to have something in common.

Banks are interconnected through interbank deposits, loans, payment systems, and common markets. An adverse event that drives one bank into insolvency may then cascade to other interconnected banks by generating losses for them. If the losses generated for the next bank in the chain exceed their availability of capital to absorb the losses, then a domino effect of contagion can occur that threatens the whole financial system.

In May 1931, the Austrian Credit-Anstalt bank failed after customers withdrew funds on worries over the soundness of the bank’s loans. A cascade of financial problems ensued, which contributed a great deal to the economic problems of the 1930s.

It started when the bank’s depositors grew concerned about the Austrian economy and the state of the bank’s non-performing loans. After it failed, general confidence in banks was damaged and there were runs on banks in Czechoslovakia, Germany, Hungary, and Poland. The top four banks in Germany declared themselves bankrupt and the Berlin Stock Exchange closed for two months. British investors in Europe and exporters lost money, the UK suffered a rapidly growing deficit, and foreign investors withdrew, deserting the Pound Sterling for gold and other currencies. The British government raised taxes to try to restore confidence, but investor confidence collapsed, and the pound was allowed to float, declining by over 20% against gold.
Comparisons have been made between the Credit-Anstalt crisis and potential risks in China’s banking system:”

More…

Even if the Bank of England does manage to maintain confidence in the short-term, this is a globalised economy and the US debt situation is so precarious that it could still tip us all into a worldwide depression.

Recession, resource wars and climate change, what a prospect.

I’m going out into my garden to sit in the last of the summer sun and to try not to think about it any more for today but perhaps I will think about investing in a wheelbarrow.

A Hollow Man In A Hollow World

Damn, I wish we had Channel 4 on our digital package so I could’ve seen this expose of Sebastian Coe (sorry, that’s Lord Sebastian Coe, Baron Coe, KBE; do forgive me, your bloody lordship) the social-climbing former athlete.

A while back I wrote about the way the mismanagement of the 2012 Olympic bid by Sebastian Coe and then Minister Tessa Jowell was symptomatic of New Labour’s lower-middle-class idolisation of titles, money and the rich and that the spiralling costs of their grandiose plans were (and still are) draining money from the taxpaying community and into the pockets of parasitical accountants, lawyers and international consultants.

What I didn’t know then was that Lord Coe – who never actually had a proper job that didn’t come from athletics and who’s managed to parlay the accidental ability to run fast when he was younger into a career that’s most lately seen him ennobled as one of the ‘great and the good’ and the profit from which he’s used to start a chain of health clubs – wasn’t just idolising the superrich, but angling to join them, using the Olympics as his springboard.

Coe accused of ‘profiting’ from Olympic bid as arts and community groups lose out
By Andrew Johnson
Published: 09 September 2007

The 2012 London Olympics – already under fire for draining lottery money from the arts – are likely to be plunged into further controversy tomorrow amid allegations that Lord Coe has profited personally from his position as chairman of the committee organising the games.

In a Dispatches programme to be screened on Channel 4 tomorrow, the former Olympic 1,500m gold medallist is accused of using his success in winning the Olympics for London to make personal profit. In contrast, the Olympics are draining resources from arts groups after costs spiralled to £9bn.

Not just arts groups: community groups too. Thanks to Jowell and Coe’s mismanagement the shortfall is being taken from Lottery Fund monies assigned to vital community groups. Llet’s not forget that this money is the public’s money, not government money, not tax revenue, but the public’s money. Taking it for the Olympics without so much as a by-your-leave is essentially licensed theft.

Coe and his advisers are all atwitter about the documentary:

Lawyers acting for the Tory peer were trying to make last-minute changes to the programme over the weekend, claiming some of the allegations were libellous. A spokeswoman for Lord Coe said he denied any wrongdoing. She added: “I think the programme may change quite a bit before it is screened.”

Go on Ch4, publish and be damned.

I will admit to a certain animus against Coe, albeit by proxy. When I was at university one of my fellow law students (a middle-aged woman of Hyacinth Bucket tones and proportions) was a Tory big wheel, if that’s not a contradiction in terms, in the Cornish constituency of which Coe was MP – and she never let us forget it.

All you ever got from her was her diinner parties with Coe, her graden parties ith Coe, her lunches with Coe and how witty. celver and charming he was. Blech.

I suspect she had an orgasm on the spot (probably her first ever) the first time he came to dinner after his ennoblement, though there’s a vicious little part of me hopes he turned down her invite on the grounds she wasn’t posh enough for him anymore.

But that’s by the by, except to explain why I have an extra personal frisson in seeing him exposed – if these Ch4 allegations are to be believed.

Coe certainly makes great play of his position as Chair of London 2012 when touting himself as a public speaker.This is from his page at CMM UK Celebrity and Endorsement Booking Agents’ Keynote Speaker Bureau

In May 2004 Seb was appointed Chairman of London 2012, the company bidding to bring the Olympic Games and Paralympic Games to London. Seb is responsible for overseeing all aspects of London’s bid to develop an exciting and winning package.

London’s bid has been short listed as one of five venues for the Games and Seb will help promote London’s bid internationally to the sports community in an attempt to steer London to becoming the first city to host the event 3 times.

It’s certainly being presented as a unique selling point in marketing him as a speaker, but is that enough for Dispatches to allege corruption?

To my mind Coe is a walking exemplar of a whole riotten system of patronage which promotes know-nothingness and banality (since when has the ability to run fast denoted wisdom or political talent? ) to influential positions on the basis of no experience or talent whatssoever bar the ability to charm the gullible and do very nicely out of it, thank you.

Lord Coe, 50, who is paid £285,000 a year as chairman of the Organising Committee, is in demand as a speaker at small-business forums where he uses the successful campaign to win the games as a platform for advice.

As far as I’m aware, being a greedy, greasy, political climber isn’t actually a crime, as yet. If it were half the government would be banged up. If the speakers bureau is all Ch4 have it’s hard to see it justifying a whole expose and they’d’ve done better to have examined the whole bid. That was bad enough.

TThe Olympic infrastructure will take one-sixth of the lottery pot during the years between London winning the bid and the Games, according to Hansard.

“The irony that local community sports teams and training facilities are losing out [while] organisers are making personal profits is profound,” says Sian Berry, the Green Party’s principal spokeswoman.

:

Today’s Must Read

Many left bloggers in America and in the UK wrote about the blatant theft of billions of dollars in cash and antiquities by US contractors and others in Iraq while it was happeniing; we also wrote about the fact that the looting was only made possible by the incompetence and collusion of the fundy-staffed, Paul Bremer-led Coalition Provincial Authority (aka ‘What Liberty U students did on their gap year“).

But, as has become usual in Bush’s America, it’s taken years for big media to actually notice ( or to be more accurate, to have the guts to write about it) and to get the story to Mrs and Mrs Average Glossy Mag Buyer.

Vanity Fair’s account of the mercenary free-for-all following the illegal invasion of a sovereign nation (however odious its regime), Billions Over Baghdad, although it’s a day late and a dollar short will, I hope, deeply shock those American voters who still have residual faith in the probity of their politicians and government officials and in the good intentions and morals of the senior ranks of their military. These are not the Good Guys.

[…]

Over the next year, a compliant Congress gave $1.6 billion to Bremer to administer the C.P.A. This was over and above the $12 billion in cash that the C.P.A. had been given to disburse from Iraqi oil revenues and unfrozen Iraqi funds. Few in Congress actually had any idea about the true nature of the C.P.A. as an institution. Lawmakers had never discussed the establishment of the C.P.A., much less authorized it—odd, given that the agency would be receiving taxpayer dollars. Confused members of Congress believed that the C.P.A. was a U.S. government agency, which it was not, or that at the very least it had been authorized by the United Nations, which it had not. One congressional funding measure makes reference to the C.P.A. as “an entity of the United States Government”—highly inaccurate. The same congressional measure states that the C.P.A. was “established pursuant to United Nations Security Council resolutions”—just as inaccurate. The bizarre truth, as a U.S. District Court judge would point out in an opinion, is that “no formal document … plainly establishes the C.P.A. or provides for its formation.”

This isn’t just about the criminality and greed of the Bush administration but also about the incompetence of Congress and the corruption of the civil service and the military.

Not only did the institutions of government fail to stop the criminality, they allowed it to happen.

Even if individual congresspersons, civil servants or army officers didn’t personally benefit from the smash and grab they didn’t speak out, except in very rare cases: Bunnatine Greenhouse, for example, should be a national hero but instead she’s demoted and vilified.

Those who knew what was happening and failed to speak out failed in their duty and are therefore in it up to their necks, as much as any apparatchik or noncom with a handy cash sum stashed in the Cayman Islands.

Accountable really to no one, its finances “off the books” for U.S. government purposes, the C.P.A. provided an unprecedented opportunity for fraud, waste, and corruption involving American government officials, American contractors, renegade Iraqis, and many others. In its short life more than $23 billion would pass through its hands. And that didn’t include potentially billions more in oil shipments the C.P.A. neglected to meter. At stake was an ocean of cash that would evaporate whenever the C.P.A. did. All parties understood that there was a sell-by date, and that it was everyone for himself. An Iraqi hospital administrator told The Guardian of England that, when he arrived to sign a contract, the army officer representing the C.P.A. had crossed out the original price and doubled it. “The American officer explained that the increase (more than $1 million) was his retirement package.” Alan Grayson, a Washington, D.C., lawyer for whistle-blowers who have worked for American contractors in Iraq, says simply that during that first year under the C.P.A. the country was turned into “a free-fraud zone.”

Iraq has been the biggest home invasion of all time. Murder, rape, torture, looting; Genghis Khan would be proud. But it’s not just Iraqi money that these slime are stealing, though, it’s yours too, if yoiu’re a US or UK taxpayer – Bush has just asked Congress for another 50 billion dollars more and the UK has spent 6.6 billionpounds so far. Who knows into whose pockets it goes?

America may not be the Good Guys their self-image tells them they are, but then neither are we British and there is another, untold story here.

What was the role of the British military and diplomats in the CPA? They were as deeply involved as the Americans in the invasion – what were they doing while this as happening, sitting on their hands and going ‘Oh, dear”?

Take Basra: who handled the money for Basra province? Where’s it gone and to whom and for what? Has there even been an accounting?

I note that British diplomats, in concert with the US, pressured the UN for the CPA to be accepted as a valid interim government. They worked hand in hand with the Pentagon: do we really think our diplomatic staff and senior military had no inkling of the wholesale theft that was going on? Can we believe that if they did know, that they were so morally spotless as not to have been tempted to have a dip themselves? Of course it may not have been necessary to be quite as crude as that: there are other ways to benefit from criminality. Turning a blind eye can be quite rewarding, as our country’s record on rendition has shown.

But surely, if there are any malefactors, heaven forbid, in the ranks of our government, diplomatic corps or military, good old British justice will sort it out. Won’t it?

I mean, just look at the way George Galloway has been hounded by New Labour for being a bit equivocal reporting a donor in his paperwork for the Mariam Fund (total value 1.4 million) – that’s how punctilious New Labour is. They’d never do something sio venal as to take cash for honours or anything like that, oh no.

Shorter Uk government – criminals and war profiteers? What criminals and war profiteers? We’re British! We’re honourable!

Hardly. Some of our recently retired generals and diplomats are now issuing their own revisionist versions of recent history – what they say, in short, is that they were against the invasion all long, really, and it was all the fault of those naughty Americans. They didn’t want to do it – a big boy made them do it and ran away, wasn’t us, guv, we said it was a bad idea.

Unfortunately for untold thousands of dead Iraqis they weren’t so honourable as to say so at the time. Only now, when there’s autobiographies to be sold and the information is of no earthly use do they come forward. There’s the honour of our glorious military.

Meanwhile the Iraq war continues to be highly profitable – for some.

Aegis turnover soared from £554,000 in 2003 to £62m last year – three quarters through work in Iraq, including its role coordinating all private military and security firms operating in the country. Aegis is led by Lieutenant-Colonel Tim Spicer, who broke a UN arms embargo on Sierra Leone with his former company Sandline International, and was jailed in Papua New Guinea for earlier activities. The firm DSC, now part of British company ArmorGroup, was implicated in providing intelligence that helped Colombian death squads identify groups opposed to a BP oil pipeline project. ArmorGroup, which trebled its turnover from $71m in 2001 to $233.2m last year, typifies the private military sector in hiring former government officials and officers to wield political influence. Sir Malcolm Rifkind, the former UK defence and foreign secretary, is a non-executive director of ArmorGroup. In 2005 the Foreign Office and the Department for International Development awarded the firm armed security contracts in the Afghan capital Kabul, as well as in the Iraqi cities Baghdad and Basra, together with control of the Iraqi police monitoring programme.

Aegis’s non-executive directors include ex-UK defence minister Nicholas Soames, as well as Lord Inge, former chief of defence staff, and Roger Wheeler, earlier professional head of the British army as chief of the general staff.

That’s the kind of moneymaking from war that goes on all the time, but no-one complains and if they do well, they’re just whiny peacenik hippies who want to curb free trade.

The difference in Iraq is that war profiteering, instead of being a covert operation, has been carried out in the open with actual cash money and a blatancy that takes the breath away.

The big question, to my mind, is if, when those alleged to be the ‘good guys’ commit crimes of such magnitude, who, if anyone, is to step in and enforce the law? The Democrats don’t seem to have the bottle for it and neither do either of the British opposition parties.

This is a question that no-one seems to want to answer, because it would mean questioning the fundamental bases of our entire political systems, on both sides of the Atlantic. That way lies revolution – and that would never do.

Respect wins in council by-election

Last Thursday the Shadwell Ward of Tower Hamlets (in London), with a margin of almost a hundred votes over Labour (1512 vs 1415 votes respectively). That’s good news, as it shows that at least in Tower Hamlets Respect is more than just a protest party and can win succesive elections. The by-election was brought on by the resignation of one of the Respect councillors, amidst rumours that this was organised by Labour, whom certainyl seemed to do their best to win this election, to no avail.

Respect was set up to build an alternative to the Labour Party, one that embodies the social democratic ideals Labour has left behind in its quest for power. It’s nowhere near a true socialist, let alone revolutionary party, but then it’s not meant to be. In the current political climate it’s a great leap forward to even have a proper social democrat party again. Politics have moved to the right and the old social democrat parties have moved with it; having a proper alternative therefore is a must, one that doesn’t scare away people, yet doesn’t abandon its own ideals either.

Here in the Netherlands we’ve seen the same process at work. For most of a century the PvdA and its predecessor, the SDAP, were the main social democratic party, while there was a variety of more leftwing, socialist and communist parties operating in their shadow. In the Eighties however the PvdA was largely sidelined from government, while the smaller parties lost votes and membership, which ultimately led them to fuse into GroenLinks, less doctrinate, less socialist and more of a challenge to the PvdA, or so the hope was.

In reality, what happened was that as the PvdA moved towards the right in the eighties and nineties, GroenLinks moved along with them, until there was little difference between them apart from a vague sense of smugness… In the process hardcore social democrat –let alone socialist– values had been thrown overboard.

Enter the SP, or Socialistische Partij. Founded in 1970 as a Maoist party, the SP had never managed to get even one seat in parliament, until 1994. Since then the party’s share of the vote steadily increased election on election, until today when they’re the third biggest party, with 25 seats.

How did they do that? By starting small, in local neighbourhouds and unions, by relentlessly campaigning, not for some distant socialist utopia, but on practical issues of direct importance: “sewer socialism” at its best. Through their evolution the SP shed a lot of baggage, became less socialist perhaps, but the end result is that there’s still a party in Dutch politics that talks about realising a socialist world and it’s a party that cannot be ignored.

That should be the future of Respect. It did well in the 2005 general elections, getting Galloway elected and they hope to get him elected again, but for the moment they should concentrate on building up their strength locally, around issues that directly influences the lives of the people they hope to be their voters.