2009 is payback year

Oh dear, more bad news!

Though I think I agree with Robert - now that we're in such a widespread mess we need to help the better businesses through it, rather than leaving them to hang and finding our own necks are unwittingly in the same noose.

From Mr Peston:

"Though in punishing imprudence we would be foolish to punish ourselves."

There`s that royal "we" again Robert.
It`s the lumpen proletariat who are being punished.The Brown dictatorship is punishing us for being poor at the behest of the international banking dynasties who control the governments and media of the world.

Financial investments its abit like being in the bookies only in the bookies you know the odds.

Corporate debt will be backed by taxpayers next year. It should not be, but it will be. Many undeserving companies will be propped up for political reasons. The normal and valuable process of streamlining that recessions provide will be discarded as our leaders try to save the fat. Too much damage for a constituency to handle, etc. Everyone is a special case these days.

There is no dilemma about what to do with the management under such circumstances. If a government rolls their debt, the directors must be removed and their posts advertised at substantially reduced renumeration. This is the LEAST we should demand as a concession to an otherwise flawed policy which will result in a legacy of waste characteristic of the planned economies of old.

I like the idea of of "leaving feckless management to swing in the wind" but fear Governments obsession with an arms lenth approach to the companies it bails out will mean a retention of bad managment, leading companies that can only survive by suckling on the government teat.

RP wrote:

"The trick for government, therefore, would be to rescue fundamentally viable businesses, while somehow leaving feckless management to swing in the wind."

I think we all know that "viable" in political terms is measured in the number of marginal seats saved, not anything of a financial nature.

There is a lot of debt to refinance, and a number of things will happen. Primarily the cost of debt will rise. Corporates then have a choice: pay the higher interest rate and probably see margins decline (they will have no pricing power until at least 2011 so no price rises to compensate). Or they can tap shareholders for extra equity finance. The impact there is lower share prices, as earnings per share declines.

Some companies will not get debt finance or be supported by shareholders. Why? Because returns (either profits adequate to cover the higher interest burden, otherwise known as interest cover, or return on equity) will look unattractive. Such companies, of which Woolies is perhaps the first of note, will go under.

And why shouldn't they? Such companies are probably marginal, based on the cheap and easy availability of credit over the last 4-5 years. We know credit was excessive then, which means it ought to decline and, unfortunately that means some companies will fail. Some of them may be big companies. It's doubtful, for instance, whether we really need all the shopping centres and shops we now have, given that consumption is unlikely to rise quickly as households save more to repais their savaged balance sheets (house values, pension plans etc).

That doesn't mean a major retail player will necessarily go under, but it does mean it's likely that some of the big High Street names will start reducing floorspace. Depending on how they're financed, that will reduce the debt they need to refinance. It probably means some of the property companies will be in financing difficulties in 2009/2010. But so what? If we don't need the premises, then we don't need them. What's the point of propping something like that up if it's of no economic benefit?

That brings me back to the start: it isn't an economic benefit the government is seeking, it's a political one. They don't want big redundancy numbers coming out between mid-2009 and mid-2010 when they hold an election.

Yes, still awake, thanks.

But thank you for another very clear and relevant point made.

This is indeed where it gets very worrying indeed.

As far as the financial co's are concerned with the $800bn needing refinancing, the government absolutely should not help them in any way at all (beyond the existing set of banks recapitalised etc that take retail deposits, in order to guarantee these).

As for the non-financial businesses with the $200bn needing refinancing, it really should stay clear too. Surely these guys can do their refinancing via extra equity? OK, it will mean huge dilution and massive declines in share prices, but then that is the price of their executive managements incompetence in running the businesses (and it'll persuade a few of us to get back into the market too.....).

And if that won't work then they should go bust, but if a company goes bust simply because it has a huge debt load around its neck, its business wont be "wiped out" as you say. It'll simply be purchased by someone else who, if they have any wits about them, will probably go out and make a good amount of money.

Lastly, if the government does dare help a non-financial business, I certainly hope it asks for convertible preference shares in those businesses. Us tax payers will be being sold an enormous pup otherwise.

There is a lot of talent amongst small and medium sized businesses in the UK who as a group, as you have pointed out yourself, are not indebted at all. One huge step forward in getting the UK out of this whole mess would be for a major transfer of the management of productive assets to take place from the big companies - who have been neglecting their customers and markets, while concentrating on increasing gearing, returning money to shareholders, spurious wheezes and restructuring at the same time as paying themselves ridiculous amounts of money - over to the medium sized and smaller businesses.

I can't stress enough that the future for the UK over the next five years is going to be dependent on creating conditions that enable small and medium sized businesses to grow rapidly. Artificially supporting their larger dud cousins is not going to do this.

Tim Harford of the FT wrote a great article about Robert Peston at the weekend: asking "Did Robert Peston cause the credit crunch?"

My answer is slightly different to Tim's: https://www.knowingandmaking.com/2008/12/tim-harford-on-perceptions-and-economic.html

This article is a good example. On this issue Robert has made some of the subtleties clear, but it's easy to misread it due to both the tone of the article and the mood we are all in. This makes it all seem worse than it is.

For example, note that $800 billion of repayments are by financial companies. Many of these will be to other financial companies and could well cancel each other out. Others are already guaranteed by governments and won't require any additional action.

The remaining $200 billion is spread across the whole of Europe. Britain's share (if the government were to guarantee the issuance of debt fully) is around £12 billion, and even if these ended up losing 35% of their face value as Robert suggests, we would lose only £4 billion. Based on the structure of the bank rescue, the taxpayer will be well protected with equity stakes if any repayments are not made.

However, there are definitely interesting questions here. It's very interesting to try to work out which businesses the government should support. It almost seems as if lending less money is more risky than lending more... if the government only picks a few companies to support, and leaves the others to collapse, the ones it has chosen will probably suffer too and the taxpayer won't get its money back.

On the other hand if it lends enough to all of them, as well as creating a big fiscal stimulus, maybe more of them will survive and more of the money will be repaid. Of course, that strategy increases the stakes enormously. Are we willing to let the government do that?

I think the basic message is that companies may need to adjust to living in a low-capital environment. Here are some ideas on that:
https://www.knowingandmaking.com/2008/12/reducing-capital-needs-of-european.html

Debt for shares sounds and a fixed return of interest for each share like the only viable option.
That way at least taxpayers get a good return from the investment.
Shares should be brought at a discount to the market value taking into account how much business the company has lost because the borrow to spend consumerism boom has ended.

With companies having to roll over debt many will struggle to do so. The government will have to open up the books of those that approach it and see if they are viable to save in the long run. Those businesses that grew partly on the back of people borrowing and spending more are going to have to look at down sizing, not only to cope with the loss of custom but to pay money for borrowing too much as well.

You're probably right that 2009 will go down in history as the payback-year (or the first of these). But it will depend on the political handling whether this will be perceived as the beginning of the healing or the beginning of the real nightmare. It just needs to be made sure that it will be those who borrowed who pay back, companies and private consumers alike. The rest needs to get through quickly and continue with what they have done before: Being productive and consuming within their means.

I'd prefer to see each company in trouble being treated to the same types of restrictions and language as a someone in this country who is claiming benefits. Give them £60 a week.

Why should those who complain about benefit claimants, including the government, be any less tough on companies and their rich directors?

I'd also like to see each responsible director being barred from future directorships. They are clearly incompetent to have created the mess in the first place.

Aren't they supposed to be intelligent adults able to make clear decisions rather than following trends like a teenager subjected to peer-pressure in the playground?

No one made these companies agree to so much debt. We've already been subsidising them with tax credits to under-paid employees for years.

If the companies fall, well, we will create new industries and companies.

It will be tough, but I am we could retrieve assets and monies from rich companies just as we do from many other criminals. The government hasn't be afraid to produce retrospective laws in the past and they can do so again.

Or would that upset their friends in the playground?

Just how can the UK government bail out these companies when it is technically bankrupt itself?

I would classify bankrupcy as when one has to borrow more money in order to pay just the interest on his loans. Well, the UK interest payments on its public debts has risen to £36 billion pounds per year (greater than the defence budget), yet Gordon Brown is planning to borrow over £100 billion pounds next year which is 3x more than the interest on the public sector debts.

See: https://www.marketoracle.co.uk/Article7526.html

Thanks Gordon for bankrupting us, just because you wanted to buy votes with public jobs and state benefits by you consistently spending above your tax income.

So you can bet the car companies get help Robert, But the problem there is, there still going to have to down size by atleast 50% . there just wont be the same demand for the new car in 2010. let alone 2009.

the goverment really need start to get a grip, we import coal at a much bigger cost than mining our own coal, We need to open up the pits on a short term basis untill we can start to provide ourselves with enough renewables. This would also create jobs which will be very much needed.

To carry on with a globle ecomony is a joke, the globle ecomony as collasped,

Thank you #7 for making a point I forgot to make.

When a company fails to pay its debts, it does not necessarily get shut down; that does not serve the creditors' interests any more than it does anyone else's. If the company does something fundamentally useful and productive, someone will buy it at a discount and ensure it continues as a going concern. This benefits the economy, as servicing an unpayable debt is not productive; it is a waste of productivity. If the company has no utility, its liquidation might give a smaller company its big break, by giving it the deal of a lifetime on tools, for example. This is no bad thing either. Maybe the government simply wishes to avoid a transfer of wealth from the merely indebted to real holders of capital?

Let the market sort the wheat from the chaff. The process underway is not abnormal and current conditions in the credit markets should be within the pain threshold of any well-run company.

Sadly next year's business plan sales pitches for taxpayer bailout money will amount to nothing more sophisticated than "I employ lots of people in your constituency, give me money."

On a more personal note Robert, I am sure like all other bloggers, you do not despatch your copy into a vacuum but skim the comments. Every time you may come away with the impression that we are a tough crowd in the peanut gallery determined to voice displeasure come what may.

What you must realise is that this has become a sounding board for fundamentally unpopular policies. Whether this is an editorial direction of your choosing I do not know, but the criticism you see comes not from the breaking of news, but the breaking of future policy - and seldom is there anything to like.

2009 Will be pay back year?

Robert Should that read 2009 to 2019 will be the pay back years..............

The problem is that for the last ten years, at least, cheap money has meant that companies have found it more attractive to borrow than to raise equity.

It is madness as well as impossible for the government to support everything with taxpayers money.

The companies that cannot raise loan capital will have to go back to shareholders for equity capital and they will have to give whatever deal the equity suppliers ask.

The money is there it is just that those people holding it want a much better deal than anyone has so far been prepared to offer.

Company management does not like this scenario because it increases shareholder power and that is likely to curb the remuneration of the management. It reduces the value of the share options for a start.

If a car company, or anything else for that matter, goes bust; another supplier will get the business or a "capitalist" will pick up the assets cheaply and start again.The same number of cars will be made and sold.

The weak must go to the wall. That is the way business and everything else evolves and improves.

Goverment should concern itself with encouraging investment in areas that will be essential to us in the future such as energy procuction.Note encouraging not investing.

Government should not throw money around like confetti in the hope that some will stick in the right place which is what is going on at present.

We need to lay out a coherent plan and stop ranting.

People seem very preoccupied with how we now have parity with the Euro.

In 6 months time we will have parity with the dollar !!!!

We are bankrupt and yet lending more ???

With all countries lending more can you tell me where this money comes from ??? We are obviously perceived as a bad bet as our currency is in free fall will this mean even higher interest rates for us compared to other countries when we borrow ????

The is a lot of comment about how this will help exporters ?? do we still have any ?? how much revenue is there from exports ???

I cannot see how we will be out of this in 10 years and in 12 months time will still be going downwards and i am an optimist.

How can we the general public force the lunatics out of office ??? and at least get new faces to look at !!!

Insomnia has now taken over as my worries grow at the magnitude of the situation.
though whether this coming thought is born from deep depression, having studied so many column inches or some inspirational vision I don’t know but I am drawn to two dads army catch phrases [we’re all doomed] and [don’t panic don’t panic] why should we not panic well simply because we are all doomed.

Normally when a person a business or a country gets into debt they are humiliated by the creditor taking the moral high ground. You irresponsible unworthy debtor owe me highly respectable generous and legally backed creditor x amount of money which you have no doubt squandered and wasted in personal pleasure or ill managed venture.

Now from recent reports and exposures we find out that those who have previously taken this moral high ground have been far more reckless than the rest. Having discovered this fact through free trade most governments of the world under the leadership of world saviour ‘Prudent Scottish Gordon’ [after all where in the world could you find any other three words that conjure up so strong an image of safe with money] have followed his leadership and thrown the rest of their citizens money from down the side of the national settee into the pot.

The creditors of the world are now as broke as the debtors and the smirk of fiscal righteousness belongs to no one. So when any country calls at any other county’s door for the money they will find that all the debts gone toxic and the cupboard is bare.

Now one may argue that at the moment there is some non toxic debt about but it won’t take a long recession and a few million unemployed in every country of the world many moons to turn the rest toxic.

The governments of the world will then have to get round the table and properly discuss a solution that is global and is not nationalistic. A solution based on the facts that as we all live on one planet with one set of finite resources from which we create whatever we feel we need to enhance our time here and as we are now all in the same boat it has to be time to start cooperating with each other.

After all we all share the same air, the same land and the same sea. Now we all share the same debt and toxic assets lets see if there are some ways to share a solution, a different order of living by employing a new way of harmonising our lives through cooperation not conflict.

We have the means to travel anywhere on our planet in less than a day and a network that allows us to communicate any where on the planet with anyone, on a one to one basis.

Surly we need a new system of fiscal and social management to live with the powerful opportunities of that technology. Our tribal tendencies that grew up from the hunter gatherer’s needs to protect their community while out gathering or hunting are no longer relevant but we should value that everyone of us is different every one unique not look for a system that ties us in but frees us to cooperate and prevents us via incentive and law from conflict at every level.

That is use the systems we have to find a way to re-structure our lives after all by the end of 2009 there are few in the world that will not be in the same boat.

And whether that makes me a [stupid boy] for thinking such cooperation could ever exist I don’t know but I do know one thing there an awful lot of people who are going to feel by the end of 2009 that Jones has fiscally - stuck his cold steel up’em.


PS. there is just one horrible thought I have had if we are brought by our leaders through world bankruptcy to sit and discuss a new order for the future of society will Robert Mugabe claim he lead the way.

No problem at all keeping awake, actually perked me right up!!

#7 post is spot on, and I urge everyone to back up and read it.

There is a lot of hope out there, and there are solutions to the conundrum, IF and ONLY IF, innovators in small business are allowed to operate in a free environment.

What Mr. Peston describes is much like what GM faces here--some $100 billion in debt stacked upon $2 billion in equity, and not many customers interested in buying their cars!

It can be worked out, with everyone, and I mean everyone, willing to take a major haircut. The corporate debt holders will have to settle for equity stakes, the common shareholders will have to suffer dilution, the union will have to settle for a lot less, and the taxpayer(who is forced to kick cash in) will have to settle for preferred share warrants, and hope to heaven it works.

It would all resolve so much more quickly if the Congress stayed out of it!

I can't describe (and get past the moderators) the sensation of watching Barney Frank and Maxine Waters, whose blind support of anything Freddie and Fannie undertook, browbeating auto execs about how they run manufacturing firms.

It's breathtaking, to say the least, in polite language!

The more the government gets involved, the more it will be picking winners and losers based upon political considerations, not economic realities.

Imagine Barney and Maxine designing a car that the entire country will be required to drive...not a pretty thought, is it?

Well done Robert ,nothing like humour doom and gloom to start each new week in our winterr of disco intent with the fantasy that things couldn't get any worse when we know they will .


I have been waiting for the final musical chairs to be removed so that we can see the last man de s itting himself and finding nothing on a roll


Cheap loans provided by the fractional reserve banking goon show in the hay day of banking to stave off the day of wreckowning are now un reamortisable millstones for those that thought them the fasion statement trophy of their day.

And to think that we had the audacity to laugh at the polynesian cargo cults which sank their canoes with their granite credit default swaps now beggars belief .


As part of the fiscal stimulouse package Great Gordon should commission giant figurinals of the labour cabbynet [ similar to those on Easterr Island] to be placed on top of the white cliffs of Dover to keep our creditours at bay[particularly doodle bugger types that wish to invade Inkland and interfere with our bottom line in the sand Canutes before the tide does ]


Its time for those who saved the world [but could not save money ]to compete with Mount Rushmore and join the mportals of history.

And, Mr. Peston, since I am about to be doing business in the UK--can you discuss the future of the pound vs the dollar? I keep expecting the dollar to crash vs the pound, because we are in the hands of idiots here, and all the UK posters expect the pound to crash vs the dollar.

What do you think?

It's a right fine mess, is it not?

The taxpayer... interesting!

In order to get tax revenue, there need to be jobs. There will be a great number of job losses over the coming 12 months - far greater than anticipated.

A substantial number of "high end" tax payers will be leaving the UK - those who pay more in taxes than what the majority earn in a year.

And so on.....

The gist is... there is little (if any) faith with regards to the UK tax payer (both individual and corporate). You can see this so well illustrated in the declining GBP, etc.

I watched an advert last night for a large high street bank , giving advice to customers about managing there money.
If this advice was given and taken by the banks then we would not be insuch a mess.

One area that realy concerns me is the giving of incentives or commision on what you sell not good, as this breeds greed, the person selling is going to do all he or she can to close that sale weather you can pay or not.

Financial institutions must look at there operation and tighten the process of lending.

It is clear that companies particularly the larger ones have financed unsustainable expansion (and rewarded their directors and shareholders) using borrowed capital. It is equally clear that payback time is approaching fast. However the fat cats at the top of the corporate hierarchy are unlikely to see their 7-figure salaries affected – there seems to be no penalty for failure although I suppose their bonuses may suffer for perhaps as much as two years?

The pension companies which 'own' a considerable share of the equities market are also in trouble but mainly because for years they really didn't use their muscle to attempt to control the companies they invested in, and tacitly supported the culture of corporate greed. The people whose money they managed of course had zero say in the matter.

Brown will be focusing his lending (via the nationalised banks) not on those most viable but on those that yield the greatest political capital. So the risk to the banks (and taxpayers) is not minimised and we have less chance of seeing our money back.

What I cannot understand is, in the days where money is in such demand, why the cost of such money is falling. As a saver the return on thrift seems beggarly. Where have the market forces of supply and demand gone?

So get the printing press working, because sooner or later the govenment won't be able to borrow the money either.

Then the money will not be worth borrowing.

if government's will be underwriting bank and corporate debt by next year, who will be underwriting governments? God?

Bankruptcy is the most effective way of clearing debt ,without some bankruptcy all go bankrupt [fractional reserve banking ,you can only have your cake if you eat someone else[s]].

Think of it as a canibaaal convension where some of the guests become a la carte that others might live to blight another day .

Lloyds ate HBOS

Santander ate Ali b&b A after being told to open sesama [the other forty will go down thw hatch later]

Aren't Gordon Brown's intentions for the UK economy beginning to look rather like the mother of all ponzi schemes?

And we all know what happens to ponzi schemes in the end, don't we?

Re the last sentence, would you put money on NuLabour pulling off this "trick"? That lot are not fit to run a whelk stall, never mind decide discriminate between winning and losing propositions. And who is going to replace feckless management - Whitehall's finest?

Dear Robert
YOU bet your life it will be payback time, and its going to hurt, especially the low paid, the poor and Pensioners.
Council tax will rise modestly, but councils will bring in stealth tax's by adding costs for views, and additional Buildings, (window tax) ie,
they have got the sums all wrong, this public liablity is out of order, and Gordon Brown, should resign.
Britain will be in recession long after the rest of Europe, tax will be huge, National insurance will increase, and interest rates will prevent savers obtaining reasonable pensions on their savings,and expats abroad will see at least 30% written off their pensions
2009---------------------
House prices will have fallen at least 40% or more, and the jobless will be in the Millions, this is pure unadulterated fact, the Governemnt and its advisors know this, and the Unions and the Opposition are correct in stating this.
Indeed, there is going to be severe hhardship under socialist doctrine, amd New Labour.

I'm not at all sure it can work that simply Robert. If as this re-finance unfolds I decide I see a company worth investing in but the government choose a different competing company to bail out, I and others like me are likely to call foul.

I suspect we will not only call foul, we will lobby the relevent EU bodies to declare the government loan illegal.

Re- organise, re-structure and move on.....

Its quite simple and we've seen it all before, although on a smaller scale to what is coming to us next year.

The big job providers will be protected, if they are worth protecting, the smaller ones and of course any retailers will be left to sort themselves out .......and they will.

The big retailer chains will reduce their floor space and the smaller independent retailers will either go bust or get purchased by the larger companies who (may) have a bit of cash lying around and everyone else will either go bust or survive to fight another day/recession.

Of course the knock on effect to our retailers shrinking in size is the amount of people that depend on our retail trade to do well.
Advertising, marketing, manufacturers to name but a few.

Their lies the biggest question, how large will our unemployment register be and the larger it is the longer the pay back period.......

We have run the Boom on borrowings and as with all borrowings that needs repaying when the music stops. Much of our present position is due to allowing new, blue sky thinking and shameless spin to take place of wise old heads and a good bit of caution.
The old saying goes, Spend a penny less than you earn and you are a happy man, spend a penny more than you earn, unhappy man. Times havnt changed, the numbers just got bigger.

Should we help out the car companies and steel magnets ? The car Companies boast of being the leaders in just in time principles and screw their suppliers to comply, why have they built up such massive and unwanted stocks of cars ! Bad, and starry eyed spin. Steel companies bought assets out of borrowed funds and took delight in Lording it as the future business champions, those borrowings have to be repaid, and why should the taxpayer now pay again to rescue failure which was all to obviously coming.
Reckless banking and reckless Government made it all possible and perhaps now the roundabout has stopped we can fix the problems properly, if abeit slowly.
More good money after bad wont help anyone in the long term.

Robert,

The demographic time bomb is about to go nuclear. All the pension funds depend on getting their income to pay pensions, soon they are going to have to start liquidating their assets to pay because the income is no longer there.

The investment banks will lose the income they receive through their portfolio management fees.

As for the Post Office which you refer to this morning, the government taking control of the pension scheme will be a dsiaster. They will suddenly have voting rights because they will be major shareholders in a substantial number of companies.

I think that you want to remind yourself of the Guiness Affair. Look and learn Robert and other viewers of your blog. There are lessons still to be learnt.

The whole game is up, look at how and why Arthur Andersen collapsed.

There are serious problems, you know that, I know that, soon the whole world will know that. Soon people will start talking as the big pay-offs to buy silence disappear. There has been a massive confidence trick.

What some people want to look at is the Robert Maxwell connections to the current labour government.

IMF here we come AGAIN!

Robert, Unlike previous articles you fail to mention any big company names that have these huge European debts. Are they US or UK linked or just companies that few of us know about or their funding banks? Barclays? HSBC? ING?

And just who allowed their debts (bonds) to increase to levels that couldn't be repaid? Bank managers? There's a coincidence........Loved just a tad less than Estate Agents....

Is it coincidence this morning then that the 'skulking' John Varley, Head of Barclays, so afraid of interviews in the British media and the BBC, is hiding over at Sky news and now encouraging a bigger run on UK property and equity assets, in addition to the UK pound whilst hiding behind Gulf state 'skirts' financing?

What does the man himself have to gain?

More dollar hedge fund profit taking, as Ms Horlick revealed on the Today programme this morning?

Or has Barclays significant exposure to 'hedge fund bets' on property?

Is this similar to the multi billion black hole found in its books last year, that it tried to keep secret? Or is Barclays Capital in trouble yet again?

I would hope that City analysts (lemmings?) ignore his whimsical comments about UK property falls and instead look at where Barclays is and has been investing. After all Zimbabwe is really not the sort of credible place for Barclays to be is it? Apart from the issues around Mr Mugabe, the country has rampant inflation. Or is Barlcays profiting from that sorry state of affairs, much like the years when it propped up the apartheid regime in South Africa and the numerous other African governments that held funds in, when waging wars agains their own people. Sadly Barclays has a chequered and
somewhat bloodied history.

John Varley should do the honourable thing, that his more credible Japanese counterparts do, 'fall on his sword'.

Barclays and the whole Banking sector could do with someone more in touch with the global economics of today.

Perhaps Robert should run for either Treasury Minister, head of the FSA or maybe (and better still) Governor of the BOE?

I think for some of us 2009 will be "pay again" year.

It's not companies that make decisions it is people who in the not so long run are able to look after their own comfortable retirement.

Clearly there has been massive short termism with company executives or gigantic collective stupidity.

If what Robert says is the true measure of things there clearly needs to be draconian regulation of credit in future and the government's obsession with base rate and inflation is little more than urinating into a gale!

Never mind it's christmas and we can all take heart in GB's (Blair's trans-alantic soul mate) reassuring assertion that we live in the best possible economic system.

I'm beginning to beleive that we're going to have a recession a nasty one but only a recession no collapse of the whole economy, no depression - If that was truly happening the FTSE would of carried on down instead of trading in a range like it has over the last month.

Perhaps a somewhat naive and oversimplified comment (and of course, easier said than done), but here goes ...

Would it not make sense to use the taxpayer bailout of the banks to initially ease the debt burden of those who now find themselves so financially overstretched in the short term, reducing their likelyhood of default (and thus the toxicity of assets linked in some way to these parties), before providing some form of financial compensation to those more prudent savers at some point in the future, from the release of equity in said banks once the situation has begun to recover and a certain value has been reached?

Having said this, I suspect without tighter regulation or greater prudence exercised on behalf of banks (in some ways evident as we see them tightening their belts ever more so as we speak) that things are likely to return (albeit briefly) to the way they were, before we find ourselves in a similar situation once more ...

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
(Thomas Jefferson (1743 - 1826), Letter to the Secretary of the Treasury Albert Gallatin (1802))

I can't help but think that one of the Founding Fathers of the good old US of A saw this coming 200 years ago ...

There is only one possible solution to this mess and this is inflation. The interest-rate lever has been broken for some time and just as the previous high interest rates ruined the UK's industrial competitiveness, the present low interest rates will accelerate the steep decline of its currency. The manufacturing industry in the UK has of course nowhere near enough volume to make up the gap left by the demise of the financial services industry.
So inflation, which taxes money and reduces debts, is perhaps the only way out.
The government needs to take back control of the money supply (which was franchised out to the financial sector with the disastrous results we see today) and start printing money again.
The results will be mixed, of course. Inflation is never pretty. But the alternatives are surely worse.

Comrade Robert, you old socialist you!

Your report on the riviting Bank of England quarterly bulletin was "spun" into a plea for the nationalisation of the whole of British industry.

A highly controversial conclusion and not one that the BofE intended or that the Brown government has even contemplated.
Have you asked Gordon, Robert?

"The Government will succumb and will lend taxpayers' money to non-financial companies". REALLY?

"In a way, there's no choice. because we'll be hobbled for years as an economy if our few remaining manufacturers and exporters are wiped out". NO CHOICE?

"The trick for government, therefore, would be to rescue fundamentally viable businesses, while somehow leaving feckless management to swing in the wind".

And install commisars, and apparatchiks and be run by the central committee in Moscow, sorry Whitehall, I suppose?

Robert, I haven't laughed so much in ages. I am ranking you alongside Rory Bremner as one of my favourite comedians.

Tovarisch Chelyabinsk

Speaking as a member of the younger generation, who owes no debt (not even a mortgage) and has worked hard to save and pay taxes, I cannot object strongly enough to this mendacious plan to bail out one failing company after another.

There is no economic doctrine in the world that could possibly suggest that increasing the UK's already colossal debt is a good thing. The value of the pound is falling day after day and the UK is now seen as a credit risk.

If the UK goes bankrupt, everything we own will be lost. We must let these companies go to the wall. We urgently need some monetarist policy and a cut in the public sector spending.

It is always tempting to blame the messenger, but our dear and unique Robert cannot be blamed for 'causing' the credit crunch any more than the person who treads on a land-mine 'causes' the explosion. One has to distinguish between the causes of instability and the trigger that tips the system from one state to another (the butterfly effect, if you wish).

The fundamental reason that things have to get a lot worse before they can get better, as Robert so accurately points out, is that everythign is interconnected in the economy. There are a whole series of dominos waiting to fall, and each takes time to gather momentum. You don't need me to point out what they are, but they will fall one after another unless appropriate, timely, and substantial corrective action is taken.
Unfortunately I don't see any indication that the government or BOE really appreciate the scale of the problem, yet, let alone have a solution. I think they are still trapped in the confines of their broken mental model of the way the economy is supposed to work (but doesn't).

One of the major problems that many retail companies will face is the consequence of their own management's actions some years ago.
Many were persuaded by the financial community to sell off their (previously 100% owned) premises and lease them back, as a way of generating finance that could be used for expansion (plus bonuses for themselves and dividends for the shareholders, naturally). Many of us said this was short-sighted at the time, and they will now pay the price as Woolies has done.

Taxpayers money?? There is not much left anyway. Where does AD/GB this going to come from?

Stamp duty down
Income tax down with record job losses
Corporation tax well down, esp. in financial services
VAT down 2.5% for a year, maybe longer

Probably more worrying for smaller companies is how the larger businesses will behave when squeezed.

Expect to see dramatically increased payment terms as the large companies push their cash flow problems down the supply chain.

The inverse of the situation is that the funds repaid must be reinvested somewhere. HMG's answer should be to force lenders to extend the life of their deposits according to the existing terms, or drain them from the economy to fund the umbrella. Either way, end of problem.
As this is a mere continuation of the banks' refusal to function as credit houses, despite HMG's instructions to the contrary, I'd prefer the second solution, if only at first "to encourage the others", as the French nearly said about the execution of Admiral Bing.

Dear Robert,
"lets do a George Orwell."
2038, the BBC has been given asasurances by Tessa Jowell That it will be funded by the taxpayer to the tune of £800,000,000 as the liscence fee.
"Do you see Britain free and democratic then,"? I do not ,
there is a definate threat to Constitutional Aspects of British ways of life, and we are moving towards a Federal State of Europe as can be seen by numeruos idedtifiers of such an organisationTHAT HAVE ALREADY BEEN IMPLIMENTED.
What is Interesting is that during this peruiod, how will this State Fund the issue we now find our selfs in The major issue that conpounds ever other one is the future of the Individual, an according to Governments they do not comment on the individual.
Now that raises the question on OUR FUTURE, because at the moment, everyones future is seriously indoubt, as Pensioners loose their pension rights substantiously, especially if you do not live in the UK.
and even that is now very doubtful to, due the Gordon Browns Tax on Pensions.
Governments ARE attacking the individual, because it is they who are suffering regards the failure of Governments to Regulate the Banks, and Financiers it is definately Governemnts fault that what is Happening is and was instigated by Governemnt Policy
That Policy is the Domestic Policy, of the UK Government, it is their policy that has put us into this situation, IT IS NOT THE WORLD GLOBAL ISSUE, at all, but serious faults in Ministers failing to control economic indicators and allow a free for all that has driven Uk Fianacial and Economic Policies to the brink of Armegedan.

How can we rescue viable businesses with more taxpayers money/government borrowing and stay within the European Union's pact rules regarding these same levels?

Joining the Euro would quite probably destroy the Euro as well. Remember that the Eurozone base interest rate is higher than the B of E base rate, which would only cause more domestic economic grief for personal and corporate debt.

I am also not sure about propping up the UK car industry as it stands. Most of the sales over the last few years have been on the back of company car sales (I thought that the Government wanted to tax this?) and personal credit loans. Also fairly unique to the UK market there is also the "kudos" of owning a car with the latest year's registration - in the current financial climate, is this sustainable?

I would suggest that spending habits are due for a big shake up and government policy should reflect this rather than hankering back to yesteryear.

I was aware that this would happen but

it seems i was 30% out on my estimate.

We will no doubt see a torrent of

insolvencies next year turn into a tidal

wave.

END TO BOOM & BUST!!!

HEADS MUST ROLL FOR THIS FECKLESS

STUPIDITY.

3000 jobs for Electrolux 600 in the UK

good start to the week.

TRUE UNEMPLOYMENT LOOKS LIKE HITTING

8 MILLION.

Robert,
What makes a business 'fundamentally viable' now? In a low/no growth credit crunch world it would presumably be one which has little or no debt, and guaranteed positive cash inflows. Well those kind don't have a credit problem. How should we taxpayers choose which industries to support which don't meet those criteria?

#37 Spot on analysis - though to "skulking" I would add a number of other expletives.

Unfortunately most of the population are blissfully unaware of the John Varley and Barclays that you accurately describe and believe him to be a fine, upstanding citizen.
As a consequence, when the head of Barclays says there will be a further fall in UK property, this is almost guaranteed to produce a further drop in the number of transactions and therefore a prolonging of the recession and all the adverse effects that follow.

Clearly Barclays have taken the view that they will make more money, by whatever means, by making this announcement and care little for the human consequences that will inevitably follow.

Further evidence, after the Madoff revelations this weekend, that the Banking system is rotten to the core...unfortunately it was ever thus...

In a general sense, two things strike me about this crisis in the context of previous recessions (or, dare I say, The Great Depression).

First, the general global financial and economic conditions today seem to be much more complex, inter-connected and operating in real-time than at any other time in human history. Is this a good thing or a bad thing? My instinct is to assume that when the economic escalator was going up, it was a good thing (Gordon had us believe that this was all of his making, of course; it wasn't; he knew it, but it suited him and his Party to deceive us; such are politicians).

Now that we find ourselves on the way down, I fear there is potential for the moving staircase to run away with itself and plummet faster and further than anyone would care to imagine.

Second (related directly to my first observation), I wonder if the sum of this economic train crash will be significantly greater than the effects of its specific parts (catastrophes) being announced on a daily basis by Peston and others?

Taken my two points together, I find the various comparisons between our current woes and recessions of the 70s, 80s and 90s somewhat unbelievable. Surely, we're seeing such unprecedented ructions in the global financial and economic environment, against a backdrop of equally unprecedented scale and complexity that it's hard to avoid thinking that we're careering towards depression, rather than recession?

If you throw in the fact that we're reaching (if not at) the end of mankind's era of cheap energy (on which infinite economic growth is predicated) then one wonders if the next few years/decades are going to be more about armageddon than depression, let alone recession.

Anyone else thinking this way?

Robert,

during the Great Depression, or Global Downturn I, the Stock Markets did not fall dramatically every day. There was no index to measure the stocks against. As for the Dow Jones it has to be the most ridiculous index ever invented, and only 30 stocks, unbelievable.

We should not look at stock markets in any other way than gambling dens. There is no investment. It is no different to putting your money on a horse and hoping that it comes in.

If you think that investing in pensions is any different to the 'Ponzi' scheme now exposed in America then dream on.

The demographic nuclear explosion will start to really kick-in over the next five years as the children born in 1944 now reach retirement. I am a 49er so will reach formal retirement age in 2014, by which time I expect the money all to be gone. There will be no jobs for the younger generation to pay taxes to pay for my pension, so where will my pension come from. Higher taxes, this will be a disaster. I am soon to be a serf, we have been on the road to serfdom for years.

Everything Robert says is so true, but the entire world seems to be overlooking a global resource of $17.4tn of private wealth, accumulated mostly by successful entrepreneurs, most of whom would invest in wealth-creating SME's. We must never forget that this is where most of the leading innovations of the future come from. In the UK, there are 250,000 of these seasoned, wealthy entrepreneurs who have an estimated 5bn+ to invest, mostly in deal values £10,000 to £500,000 in start-up and growing SME's.

I don't know if pointing to URL's is allowed on these comments, but more on this in a press release (13-11-2008) that can be downloaded from the media zone at growthwire.com.

Feckless management to swing in the wind?

I am struggling to think of any feckless management that's swinging, or has swung, in the wind. Even the bosses at Northern Wreck walked away with plenty of pocket money.

Unfortunately, when the banking industry and CBI call the shots, our great government simply jumps - no questions asked.

A disgraceful state of affairs, truly disgraceful.

Welcome back to the Seventies!

Just as happened then we will get into a programme of sustaining companies with taxpayer bail-outs. Nothing will be done to restructure those companies for fear the prevailing debt will get worse. Productivity will go out the window and we end up owning an economy comprising sub-Soviet tractor factories.

Then someone will have to come along and turn off the life-support system as the taxpayer would have run out of funds and millions will end up on the dole as happened in the early Eighties. They will of course be damned forever in the eyes of many; just like the way Ma Thatcher is hated. So what politician is going to do that?

This is clearly a time of change and we need to change with it.

We need to identify the industries we can go forward with and use taxpayer funds to invest in the future, not to prop up failing and incompetent management.

The more time we spend contemplating the present and maintaining the current structures for fear of the consequences, the less we attend to the future.

We need a new political consensus, a new economy and a better future.

Get rid of Brown, get rid of New Labour and all the stooges!

Lets have a national government capable of dealing with the real issues facing this country: a failed economy, a ruined constitution, an incompetent political class and a generation of egotists pretending to be managers.

Post 45, I commend you for two reasons.

Firstly for cutting to the chase. Why should those of us who have lived within our means bail out the wasters and fools bith individual and corporate that have got themselves in this mess?

Secondly for the use of the word mendacious in a blog. It is nice to see such clarity and force of views expressed so succintly and effectively and form one so young. I can only assume you didn't attend one of Comrade Brown's nationalised sink estate schools.

Oh and whilst I'm on rant . Post 43, A little inflation is the best way out of this. Wake up and smell the coffee!

Robert Peston the Sage.

As a mortgage valuer, watching first hand the debt mania unfolding before my eyes, I've spent the last 4/5 years tearing my hair out at the sight of Robert Peston twittering on about how "We've never had it so good" and talking up the achievements of his friends in the Labour Party - as they conned us about economic "growth".

Let's see some re-runs of his comments about rising personal wealth based on house price inflation. How stupid they seem now.

Surely the "doom mongers" like myself were the true sages.

post 55 moraymint

Very much my mindset this could trigger

anything.

So, what you and your sources at the treasury are saying ,is that nationalisation is on the cards for our bigger companies, the smaller ones can fade away and the taxpayer can foot the bill. This is supposed to be a world wide problem , but it seems that Britain which "is best prepared of all the developed nations to face the recession " is in fact in a very much worse position than the dynamic incompetents Brown and Darling are telling the world. "We have European agreement " Brown trumpeted again at the weekend, but this I'm afraid was more wishful thinking. Europe is looking after itself and what happens to Britain is of no concern to them.

You do relish your bad news, don't you?

It is unfortunate that we have such a political dimension to all we do
Ordinarily banks would attract funds by high interest rates and lend at higher rates so the market is allowed to function.
Dodgy business goes to the wall and good ones thrive .
The craven desire to keep Labour powerbase secure endangers all of us

This is illustrated by the measures taken to assist poor families and those on benifits whilst not doing anything for savers and those who have stood on their own feet.
Tax credits for the rich who pass it on to their grandchildren would be effective.
Floods of capital become available to the wider economy.

One day soon the penny will drop that with such low interest rates there is only one place left to earn money --Shares !
A dividend at least secures some income and provides capital.

One thing you have not mentioned Robert is the 25% inflation Tsunami on the way .The Sterling collapse means goods being sold off at half price now will have to be replaced at the new cost in the New Year which is hardly a bank manager dream for small business.Why would a scared functionary in the bank risk it ?
It is the political distortion that will keep us in a hole for a long time .

...."feckless management swinging in the wind...." oh you mean like the management of HBOS , NR, etc, etc..........All still drawing vast salaries, some even "advising" the government.

Looks like Madoff is going to get the GOLD

Medal for his enterprise.

I guess he has TROUNCED the lot.



Horlick will be spitting Feathers in her

Office today.

Would love to hear her VENOM.

This comment was removed because the moderators found it broke the house rules. Explain.

If we lived in a JUST state we would need

to see i guess a 40000 plus increase in

Prison places to deal with the culprits.

But there will be no justice?

AS ITS POWER AT ANY COST FOR BROWN.

# 54 and others

Varley hasn't said anything that hasn't already been said by about a thousand other analysts. He's forecasting an overall 30% fall in UK house prices and for the downward trend to this total fall to take much of 2009 to work through.

Most analysts also see no strengthening of GBP until end-2009, though Barclays' own research then sees the possibility of significant EUR weakness towards the end of next year, as Eurozone takes longer to come out of recession.

So I'm not sure why you're picking on Varley. If you want to criticise him, failing to say anything new might be his biggest weakness.

Actually the UK is not bust, our national debt is quite low compared to many other countries. We can afford to run a large budget deficit for a few years and this is the right strategy to pursue at this time. The exchange rate is not a problem either. Of course it has declined, because the BoE has violently changed tack from a high interest rate policy to a low interest rate policy. The lower exchange rate is good for the UK and will counter the deflationary tendency of the impending recession, encourage exports and discourage imports. Just the medicine we need. The flexibility of having our own currency is vital at this stage and I predict we will emerge from this recession sooner than many parts of the inflexible eurozone. Cheer up everyone, and happy Christmas.

By all means support the companies and keep the people in work, but at the same time the management who have managed to run these firms so low should be removed without compensation and replaced with people who know how to run a business in lean times (NOTE: not a political appointee).

The fact that such things have totally failed to happen during the bank rescue does not make me hopeful.

I have one point of disagreement with this and it is that the definition of weak and strong may have nothing to do with feckless or incompetent management.
The entire private equity business model has been to buy good business and to change their capital structure to improve returns. In English, this often meant debt financing.
The companies that survive will be the ones that escaped this gearing and may or not be the best companies. I am afraid that the timing of debt rollover is now probably more significant than anything else in these businesses. I am also afraid to say that, in many cases, the private equity firm has already made off with the profits by repying their acquisition cost back by making the company borrow to pay for special dividends etc.
I cite as an example (nothing special about this one) that of Esporta, the sports club group. This was a perfectly respectable buisness model, with low gearing etc. It was then bought out, geared up, could not refinance and went into administration. In this case, the equity buyer did lose his shirt, but the point is still the same: a perfectly good company is in administration for no reason other than debt piled on as part of restructuring ownership.

Are we seeing something deeper unwinding here?

For years we have been fighting against two major trends. The first is the march of technology. Remember when we were all promised a life of leisure as all our needs were met by machines? I now have more food than I can eat, more clothes than I can wear, more entertainment than I can enjoy and more transport than I can use, etc. Maybe we just need 25% employment and to attempt more is futile and damaging.

The second is the transfer between generations. My parents generation have been retiring at 55 and living for another 30 years. The holidays and golf that they enjoy are being funded by subsequent generations through inflated asset prices (primarily land) and debt. This has become unsustainable and shows up in the huge debts of young people through from university to middle age, together with grotesque house prices.

Japan has been ahead of us on this and have spent the last 15 years unwinding the position.

i think the world IS GOING TO END. and then i'm going to write something self important here written staright from the pages of my first Chicago School economics textbook.

did i mention it's all gordon browns fault. i'll pobably insult him in some way now too, whilst the most important decision i made today was the colour of my tie to wear.

i might shoehorn in a comment about our impending COMMUNIST POLICE STATE, spell 'New Labour' incorrectly in a tired ironic joke sort of way, and then moan about BBC bias.

i'll proably even use my name to sign off with a pseudo-nationalist comment about being 'English', or anti-european, that most people couldn't care less about.

aand to make it look even more impressive, i'll WRITE BITS IN CAPITALS FOR NO APPARENT REASON.

It's all thanks to the liberals. An immigrants, it mst somehow be all down to the immigrants.

yours,
Angry from England-Not-Britain

Wonderful to be wise after the event (ha-ha I've just heard I'm a grandad again.), however back to finance. For 11 years we have been told there is no sin in borrowing money, and no doubt many of the hyper salaries have been paid with exactly that, BBC and Banks being those with the highest profile, and fiddles galore in Parliament using tax payers cash. How comes none of these high powered individuals foresaw this event, or has their quest for wealth whilst it lasted dulled their knowledge of the truth, because now each to his own proportion of debt, it's going to be the survival of the most prudent, and those who are capable of living within their means. Welcome to the poverty trap. It appears up to 3.5 million could be there. So much for good governance.

This comment was removed because the moderators found it broke the house rules. Explain.

Re no. 74. My father-in-law took early redundancy / enhanced pension from Midland bank at the age of 51. He is now 74 and going strong (which is great). I wonder how much it would cost now to buy an index-linked pension tied to last salary at 51?

I totally agree this is what the government SHOULD do, but there's probably a million reasons what they cant discriminate in ther efforts in saving the worthwhile businesses.

My take through the crisis so far has been to let businesses and people suffer the conesequences of their own financial behaviour. In terms of business growth, organic growth in my vocabolary can NEVER be based on lending to support the growth. On the contrary, growth based on lending is an artificially geared growth not at all aligned to a company's ability to neither do business, nor aligned to the growth potential. But as we all know, credit came at no cost, or so many thought for a long time,and yes the temptation to take advantage of it got too much of a temptation.

I do not think the crisis can be financially manipulated by applying new loans, as it just prolongs the crisis, although I am sure it would help temporarilly. I'd much rather see the government state to the corp businesses that they should NOT expect any help, forcing the corp environments to apply all their skills and experience in operating their companies by the new rules of the world, meaning a world with much less debt. Surely Corp Britain will be able to adopt to new rules and make the most of it.

Brgds
Carsten

Dera Robert
The time has come to have all these Bankers Arrested abd charged with Fraud,
Dozens of them who over saw the

This comment was removed because the moderators found it broke the house rules. Explain.

So what that a few badly run banks and businesses (banks are businesses like all others) Woolies was going to the wall anyway, there is only so much demand for pick-and-mix, I have never seen anyone actually buy anything from MFI for years.

That car manufacturers have huge stocks of unsold cars simply means that they are too expensive, if they halved the price then I'm sure that they could shift a few.

I'm sure I could get credit if I was prepared to pay a high interest rate, the market should be left alone to find the true worth of a product, propping up lame duck manufacturers and service companies only makes it harder for the good (unsubsidised) ones to shine.

Dera Robert
The time has come to have all these Bankers Arrested abd charged with Fraud,
Dozens of them who over saw the Credit Crunch, and the Sub prime scandal are Government Advisors, and STILL sit in the board rooms of these rip off banks.
MAKEOFF????? ENRO, ??? LEHMANS???? HOW MAY MORE WILL RIP OFF THE PUBLIC AND THEIR PENSIONS SAVINGS BEFORE THEY ARE BOUGHT TO ANSWER FOR THEIR FRAUDULANT DEALINGS.""???
Its time the FSA, did its jib along with the serious fraud squad

When will we learn? Bad businesses should fail; if the underlying market/assets are good then they will be taken over by better management.

#75

Are you one of Bremner, Bird & Fortune - you summed up 80% of the posts on here perfectly!

Just one point about the evils of borrowing;

Will the government be advising young people not to take out unsecured loans to fund further education?

What a thing to do; state-sponsored indoctrination that it's great to start your 20's will a mountain of debt.

You couldn't make it up.

Nos 74 and 78
I'd be interested to see what kind of financial sector we would have if one takes the logical step of saying. Give us money for your pension fund - we can only guarantee you can claim it after your death.

Mind you thats better that todays 'Sorry we spent it, theres none left for you!'

#57 - that may be true but they are as greedy, maybe even more so, than the banks have been.

Of course we'll put money into your business but we want a minimum 25% annual return on our investment.

I'm no socialist but it is this greed, allied to the ludicrous short termism of the stock exchanges that have led to the massive increase in corporate debt.

Many good well managed companies would not invest in their futures because the city expected pay back periods to be farcically short.

If the government is going to invest our money in industry, let them do it by giving 400% capital allowances for investment in manufacturing plant and equipment.

I don't remember which politician it was who said - "never forget - governments have no money. Every penny it has is given to it by the taxpayer".

#27 "if government's will be underwriting bank and corporate debt by next year, who will be underwriting governments? God?"

No way !! God's too busy looking after the poor and the sick to worry about the prodigal son !! This prodigal son blew his patrimony and now expects the fatted calf ??

As for the run-the-printing-presses-and-wipe-out-our-debts-with-inflation brigade, well, you got your wish and the Sterling has gone through the floor !! Any rollover of debts will be at punitive terms !!

The world's markets are punishing Britain for its fiscal imprudence !! Any further bailing out of lame duck industries will see much further falls of the Sterling !!

And to hear a public sector union official insist that the public sector workers need their bloated pensions in order to retire "with dignity" and completely ignoring the fact that millions of private sector workers will not have that option because they are unemployed, brings to mind the pigs in Animal Farm !! All animals are created equal, but some animals are more equal than others !!

You can't just let businesses drop, if you do so then the effect will be catastrophic.

It might be galling but there, whichever companies receive money will have to put up with severe restrictions and with any luck when coming back out of government protection, the governement may even earn money from it all.

In terms of manufacturing base, this is another reason for the UK's difficulties (there is hardly any manufacturing left) so allowing these businesses to go to the wall would make the UK entirely dependent on the 3rd sector and financial services in particular, which would be disasterous.

This is where the govt. can take the moral upper hand, and say that allowing the market to take care of it all doesn't work and that at govt. has to legislate, not just allowing the market to run wild.

I hope for the UK's sake that there aren't too many job losses, otherwise this will have a profound effect for years to come.

#54 houseflogger

Bit rich you talking about 'rotton' banks when you are clearly an estate agent/house flipper/buy to let type.

You are simply a greedy speculator falling rapidly back to earth interested only in your own interests. Tough luck.

My daughter and most young people may well be 'blissfully unaware' about John Varley but not the impossibility of buying a home at a price related to UK earnings. I am not in the least bothered that my house will fall in value by upto 50%; its my home and i did not use it to borrow huge sums of money to fund my lifestyle, or borrow against it to build up a leveraged portfolio. We have robbed our children blind and sit here expecting them to pay our pensions as well as save for their own. Now as Robert says is the time of 'reckoning'

You have moved from denial to panic. Fear and anger are related. You must move on now and accept your errors which like the banks have been driven by greed and hubris.

Pants Robert, total pants.

If firms cannot pay back their debts, the following will happen...

1. A firesale, they will destock rapidly to bolster revenues. Great news for consumers and customers alike.

2. Lay off staff. Not great.

3. Get rid of non contributing assets, another firesale of parts of the business that aren't performing. Great news for shareholders and in the medium term for those parts of the business to be shaped up and made more productive.

4. Go bust. The customers are still there, the business is still there but the balance sheet says they are insolvent. They are bought up, broken up, streamlined, good news in the medium to long term as a more credible and viable business.

To paint it as some kind of nuclear winter apocalypse shows Robert you have absolutely no appreciation of the economic cycle.

Yes, it's uncomfortable and to some, painful. However, it is an inescapable part of the economic cycle, it is all part of economic renewal.

What government should be doing is absolutely NOT intervening, let the market run its course.

I cannot believe that my comment (number 77). I simply asked whether anyone had noticed the last episode of Little Dorrit, put out last Thursday, in which a giant Ponzi scheme collapsed, as it seemed so relevant.

#30 Oi !! Stop casting aspersions on whelk stall owners. I know some fine whelk stall owners purveying excellent whelks !! And nothing Ponzi about their whelks, either, unlike some people who think they saved the world !!

Are we seeing something deeper unwinding here?

For years we have been fighting against two major trends. The first is the march of technology. Remember when we were all promised a life of leisure as all our needs were met by machines? I now have more food than I can eat, more clothes than I can wear, more entertainment than I can enjoy and more transport than I can use, etc., etc. Maybe we just need 25% employment and to attempt more is futile and damaging.

The second is the transfer between generations. My parents generation have been retiring at 55 and living for another 30 years. The holidays and golf that they enjoy are being funded by subsequent generations through inflated asset prices (primarily land) and debt. This has become unsustainable and shows up in the huge debts of young people through from university to middle age, together with grotesque house prices.

Japan has been ahead of us on this and have spent the last 15 years trying to unwind the position.

#32 "I'm not at all sure it can work that simply Robert. If as this re-finance unfolds I decide I see a company worth investing in but the government choose a different competing company to bail out, I and others like me are likely to call foul.

I suspect we will not only call foul, we will lobby the relevent EU bodies to declare the government loan illegal. "

Oh, you mean like the government's treatment of Barclays for getting an Arab bailout instead of kowtowing to the government like Lloyds TSB ??

I am puzzled, again ...

To whom are $1000bn being repaid? Are those lenders just going to sit it instead of lending it out again? Maybe those wholesale credit market lenders are going to leverage the credit crunch, which they may have caused or even engineered, for even greater gains. Perhaps they are considering using the money to buy up firesale assets and companies on the very cheap ???

It seem this may be a time of crisis, losses and recession for most of us but it is a golden time for gains and cherry pickings for a few.

I do wish the media would simply stop writing such rubbish. I run a large company - listed - and are currently increasing our debt facilities. The simple fact is that good business will be able to roll over their debt, characterised by those that have stable revenues linked to good products or services. Indeed my co's borrowing costs will be lower this year than last year as UK Libor has fallen so far. The banks are in fact being very helpful in facilitating our increased borrowing requirements.

On the other hand, those companies that have too much leverage or have revenues or assets that will fall will certainly find they cannot borrow as much as they have done in the past - rightly so - and they will have to sell assets else raise equity. That may have bad consequences for shareholders, a problem that is hardly new!

So it is the same old story as in the last recession which is that the worse it gets the more "doom" financial journalists and commentators unearth. Like it or not we are in a recession, they happen, it is bad, we have to cope and we will. Such panic stricken prose do not help.

Please Robert desist from talking us into depression!

#35 "What some people want to look at is the Robert Maxwell connections to the current labour government."

I thought Captain Bob went for a swim.....

"The trick for government, therefore, would be to rescue fundamentally viable businesses, while somehow leaving feckless management to swing in the wind."

Robert,

You ignore the fact that the government has already set a precedent by bailing out the banks. Thus, surely to stand on legal ground the government must bale out all those who act less recklessly than the banks...must be a very wide scope in my opinion

Bankrupt the banks, pick up the assets without the liabilities, then chase the bankers for the rest.

Then pass the legislation that ensures that once a bank repossesses, the debt is finished. That will ensure wise repossessions and prevent firesales of assets below market value to gain quick cash. Don't back date the laws.

Hoist them on their own petard.