Hester: fast recovery "dangerous"

The UK has been living well beyond its means for at least a decade, in a debt fuelled economy that was unsustainable. After bankers, hedge funds, pension managers and other financial elite-fools had been betting trillions of dollars on ever rising real estate prices and lost spectacularly, a simmering debt crisis turned into a disaster. The average tax payer, pensioner and the next generation will have to pay for a decade for the greed and stupidity of the current financial elite-fools. This fools game of debt, leverage and running away with short term profits cannot be allowed to continue (the UK would be bankrupt if it were to happen again). Strict regulation and a more sensible pay-reward structure has to be imposed in the financial services sector.
You can find more details and arguments explaining the seriousness of the systemic faults in the finacial sector here:
https://globalinsights.wordpress.com/

How sweet, Mr Hester has parents. That's so reassuring, he must be ok then!

A very straight and honest appraisal, the country banks and peoples doomestic finances and financial culture does need to change.

Just a shame that Robert did not take the chance to ask Mr Hester about the policy RBS has agreed with government to transfer UK jobs to India, a policy that even the arch demon Goodwin never advocated! Could it be that the Governemnt are finding it hard to balance being both a major shareholder and the protector of British jobs and interests.
ASK THAT QUESTION ROBERT

Bob, did you bother to ask Stephen Hester what short term sacrifices he was making? Any suggestions, folks?

senior bankers are not qualified to comment on what is "best for the economy" ...

Is Mr Hester an advisor to the government?

Is he too close to his own companies problems rather than allowing him an overall strategic assessment?

Nice comment, but is it credible?

I'm sure every economy would like a long period of relatively slow growth, because that is safe and relatively conservative, but the credit crunch and the worldwide government response has been to put capitalism on hold for the few whilst the majority still have to abide by the newer tougher rules

Does Mr Brown still believe that these bankers might yet fill the great hole in public finances through taxation?

#5 is spot on - senior bankers are the last people to tell us how to fix the economy.
And if Mr Hester really thinks "the priority for the UK is to reduce the indebtedness of the public sector, households and businesses", he and his banking colleagues might make a significant contribution to that process by stopping charging everyone rip-off arrangement fees and greedy, profiteering levels of interest, way above base rate. Caledonian Comment

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

Social unrest is often, as in 1930s Germany, a catalyst to massive change. Hester's analysis is, possibly, too little too late to arrest the impact this year will have in the coming months.

As a recipient of perhaps the biggest benefit hand-out ever seen, Mr Hester should be re-paying the UK tax payer in gratitude for his continued employment. He is out of order in lecturing the rest of us on prudent use of our wages, salaries, pensions and savings ! The true irony of the current situation is that, as StrongholdBarricades wrote, all of us are having to contribute to the cost of putting capitalism on hold - whether we like it or not.

"Robert Peston | 11:15 UK time, Thursday, 10 September 2009

Now I don't expect Stephen Hester to crack open the bubbly when I see him later this morning, to interview him for the last in the current series of Leading Questions (which you can see on the News Channel this weekend)".

" Robert Peston | 08:41 UK time, Saturday, 12 September 2009

The chief executive of Royal Bank of Scotland has said that a slow recovery from recession would be far better for the UK in the long term than a rapid bounce".

Very good Robert. When did you say the interview was recorded? :-)

Arrogance... These bankers still haven't learnt have they. Confirms my long held view that we desparately need some new banks that believe in what JF Kennedy said: "think not what your country can do for you but what you can do for your country."

On the basis of the reports, I don't interpret Hester's comments on reducing debt as implicit support for the Tories. Darling has made it clear that Labour will, if they remain in power, have to make cuts when the recovery can stand it. (By the way, he is my tip for the next Labour leader. According to some columnists, there might even be a coup against Brown before the next election. If so Darling might, like Major before him, have the crown thrust upon him and might even go on to a surprising election victory.)

It is hard to disagree with the opinion that there should not be a swift return-to-the-bad-old-ways recovery, and that both the state and individuals need to save more. In the latter case, I think that it is crucial for the government to bring in tough legislation in order to prevent the banks offering easy mortgages and starting another house-price boom. Legislation is necessary because the banks have proved that they cannot be trusted restraint themselves.

Someone talking (kind of) sense at last. The situation in the UK is surreal. After deliberately indebting themselves up to the point where people have amassed collective negative net savings close to 1 trillion pounds, everybody is in complete denial that this is THE PROBLEM. From the ordinary people to the government everybody insists that more debt would be great and solve the problem. More than two years after the long-predicted disaster started to unfold, hardly anyone has learned anything. It is heartbreaking!

#13
Sorry but talk of "tough legislation in order to prevent the banks offering easy mortgages and starting another house-price boom" is simplistic nonsense. It also falls into the trap that those who really caused the credit crunch have set - they try to persude everyone that somehow a small percentage of dodgy mortgage holders brought the entire economic edifice crashing down.
The "sub-prime" scapegoats can't explain what happened. Greedy, irresponsible speculation by senior bankers and City spivs caused this lot - not George and Edna defaulting on their £125 grand mortgage for a 2-bedroomed flat in Newcastle. Caledonian Comment

Comments against Hester are misplaced. He is not the man who got RBS INTO the mess. He is the man appointed to get them OUT of it. So far he is acting sensibly and - as he is paid to - is acting in the interests of RBS shareholders. Would that his predecessor had been similarly so motivated!

As to paying down debt, this is so obvious that I am amazed that there is argument over it. We are in this mess because of financial misgovernment (running a fiscal deficit when we should have been in balance) and a failure to correctly regulate the banks. The FSA totally failed to see the importance of adequate capital ratios, let alone enforce them. This is not rocket science and having highly leveraged banks has always been a recipe for disaster and still is.

We NEED debt paid down to reasonable levels. Corporately, privately and in government. Failure to do so will lead to catastrophe.

Thank goodness. At last you've found someone with some common sense. May all like minded people feel they can speak up too.

Hester may well be right that peorsonl, big corporation and public debt must be reduced.

But hundreds of thousands of small and medium size businesses are struggling to keep afloat or support their planned expansion because banks have tightened the screws. OK. The banks sloshed money over everybody at low cost becasue they chose to take high risks. Now, with base rate at 0.5 percent, they are ratcheting up the costs and tightening conditions of loans.

This is strangling the very companies who can easily take on more people but daren't risk it. Meantime, big companies - and even government - can be very slow settling bills which increases the pressure on the smaller.

It does come hard to accept lectures from any banker - however good - about trying to manage personal or company affairs more sensibly...

And I'd like to have heard whether he believes the Boards of banks that failed truly big-time should be banned from becoming directors of other companies.

After all, MGRover was a bit of a basket case when it was taken over by Phoenix. I don't think that was true of Northern Rock, Dunferlime, RBS, HBoS, etc. But bank boards all seem to say they had no idea what was actually happening inside their companies.

Just goes to show that 'he'/ 'they' do not really know any more than the rest of us!

#15
I wasn't suggesting that the house-price bubble was the sole cause of the crash, but it was certainly a significant contributing cause. Moreover I think that the government could, and should, bring in legislation which "encourages" British people to take a more continental attitude towards home ownership; i.e. one where most people rent, only those who are at the middle-aged putting-down-roots stage think of buying, a house is primarily a home not a speculative investment.

I saw the interview last night. It was of particular interest to me as a RBS employee (Information Technology). Some key questions that weren't addressed - (1) The company is busy sending large numbers of jobs offshore as well as deploying Indian staff in the UK and this has accelerated since the government bail-out. UK staff are kept very much in the dark about what is happening but are being expected to keep things going despite the issues with offshore of inexperience, poor levels of initiative, poor attitude to QC and high attrition rates due to the buoyant jobs market. There has already been one swathe of redundancies this year and we are expecting at least a couple more. Morale is rock-bottom, most people I know openly admit they will leave when the UK jobs market recovers, that's if we haven't already received the P45! (2) Changes to the Final Salary pension scheme. No complaint that change is inevitable due to affordability issues, however the plan is that annual increases in pensionable salary will be pinned to inflation or 2%, whichever is lower (bear in mind we don't get inflation-based pay rises so your salary can be frozen from year-to-year). As a result, there will be little incentive for people to seek promotion in the future since the pensionable salary will be virtually unchanged and you'll lose 41% of your rise in tax & NI. Going to an average lifetime earnings scheme would surely have been fairer. (3) Stephen Hester has a very modest target of getting the share price back to 70p to trigger the large bonus payments in his package. Quite why UKFI agreed to such a target is a mystery to me. Robert did touch on bonuses in the interview and therefore had ample opportunity to raise this question.

P.S. I did think Stephen Hester made sensible points about the economy.

Large scale debt reduction for Government, Businesses and individuals might be the best option if we had a sufficiently large marketable productive sector (e.g. such as Germany and to some extent France has). Consuming activities such as Public Services will not get us out of this mess and cutting them increases the problem. Maybe we should follow Japan and have zero interest rates? That way we can borrow for no cost at all and everything will be like it was in the boom years! Seriously this unfortunately also means the pound would probably fall to zero value as well.

Looks like debt reduction for decades with a miserable income to pay for it.

I didn't watch the interview, but the summary doesn't give me a feeling of deep insight. Spending like there is no tomorrow is bad, really? But I think I can reassure Mr Hester: there will be no fast recovery. Perhaps the British and American governments have learned nothing in the past year. But I suspect the Chinese have, and I'm not going to blame them for protecting their interests.

Bob I'm sorry to have to state the bloomin' obvious, but why didn't you use your famous catchphrase 'stating the bloomin' obvious' when Hester's comments are a classic case of stating the bloomin' obvious

Seems like the 'danger' of the UK suffering from an uncontrollably strong recovery anytime soon is rather slight - in fact about as likely as Portsmouth winning the Premier League this year - so I think I'll go back to sleep now; but it's reassuring to know that we now have a prudent banker on the payroll....

"He says that the priority for the UK is to reduce the indebtedness of public sector, households and businesses"

I don't suppose it was in your brief to ask him questions such as:-

1. In total terms, from what to what, in terms of percentage of GDP?

2. The bottom line of this is that the UK needs to become a nett repayer of overseas debt, for a number of years. This is a major turnaround from what we have been for the last 10 - 15 years, and will involve more than a little bit of belt-tightening. How politically achievable is this when we still have the less honourable option of reneging on our sterling denominated debts through deliberate inflation?

3. Is there any benefit to be had from further redistributing nett debt within the UK, such as has been happening between the banks and the public sector? For example, would it be in any way advantageous for the State to assume responsibility for some of the household debt, with the goal of making the forthcoming austerity measures less unpalatable?

4. How much of this debt reduction could be achieved by asset sales rather than saved income? Is there scope for a sort of massive sale-and-leaseback arrangement with some of the UK's owned assets?

Hester is no sage , he is part of the banking sectors problem not the solution. Its likely Hester will pick up £9.6 millions pounds for a few years work with absolutely no risk to his own capital.
There is no doubt we should of let these failed institutions go to the wall and started from scratch, believe me it would be beneficial to the general public in the long term.

Id like to know how it has become accepted now that "we caused this " ?

Could you do a report Robert on who out of the general public caused this, because I dont know many people in debt at all, sure I see signs of people in debt , maybe its more apparent down south ?
I have no debt, I have savings so Id like to know why Im going to be paying for this and being bombarded with its my fault.

this is not to say I dont like to contribute, I do and have no problem with that, but it is me and people like me on modest incomes who live within their means who are going to be paying for this, not the people on benefits, not the mega rich, they have Barclays to help them out avoid tax !

Comment 7 : CaledonianComment

"And if Mr Hester really thinks "the priority for the UK is to reduce the indebtedness of the public sector, households and businesses", he and his banking colleagues might make a significant contribution to that process by stopping charging everyone rip-off arrangement fees and greedy, profiteering levels of interest, way above base rate"

Er ... this wouldn't have any effect. All it would lead to is a transfer of debt between households and businesses, leaving the total the same. What I think Hester means is that the UK in total, the public, household and business sectors added together, with all the inter-sector balances netted off, has too much debt. Which means we owe too much money to foreigners, and one way or another, we need to pay some of it back.

Well, isn't that nice for Mr Hester and his banking chums to sagely weigh up the value of a fast versus slow economic recovery?

I'm sure lots of those who have been made redundant and are living on benefits, or have been unemployed for over 6 months and no longer get JSA, or who have had to take very poorly paid jobs for the sake of having any job at all, who will be really, really, moved by the niceties of that discussion..... not.

Robert, the U.K. is suffering from an increasing chunk of our talented and skilled workers rotting away on the dole, or de-skilling in rubbish jobs. That is happening while bankers and other economic "big guns" play 'safety shots' on the pool table of the financial industries to suit their own needs - and ONLY their own needs, no-one elses - indeed, often not even the needs of their own shareholders!

Perhaps you need to take a longer term view to what makes up business journalism, because by the time that we have economic recovery, we may well be in a skills and talents recession which won't do us any economic good or keep us internationally competitive.

But I'm sure the Stephen Hesters of this world - much like the Fred the Shreds of the world - won't end up going hungry or being homeless.

ExcellenceFirst - you're forgetting this bank is insolvent and only propped up by LIES regarding the value of its assets. Of course they NEED to screw consumers to "rebuild" their balance sheets while the Gov gives them the breathing space to do so.

We'd be better off without these morons, but a succession of British Govs was all for the concentration of the banking industry in this country and a destruction of competition in the name of efficiency which only brought us to the edge of ruin, insanity and an eventual 20% contraction in global GDP.

Wake up.

Comment 31 : MaverickGoose123

I don't dispute that the banks are being fed profits in order to reconstruct their balance sheets. But all this is coming by internal transfer within the UK. What is happening, in effect, is that the banks' historic losses are being transferred to the public sector, because it is only by the public sector taking on these losses that the economy of the country can function. These losses, if recognised and retained in the business sector, are far too great for it to absorb.

But this is just the reallocation of debt within the UK economy, and is a completely separate issue from that to which Hester was referring. His point is that as a country we owe too much money overseas, and that our future prosperity depends on us repaying some of it. There are immense political difficulties in making the changes necessary to achieve this, and these difficulties, in my opinion, are not made any easier by withholding the true nature of the problem from the UK public, nor by allowing idle, uninformed comment to re-establish in the public mind the idea that the problem is much overstated and that we'll muddle through without really having to go through much discomfort.

We need to get real, and get real soon. And while we're at it, wouldn't it be a good idea to dismantle and obliterate Fantasy Island, with all that involves, to help us get used to the thought that the future, as well as the present, requires us to live in reality, not a dream world.

Mr Hester says we need to start saving, but where is the incentive? Interest rates at 0.5 % ensure that savers are losing wealth. And the talk by the cognoscente suggests it'll stay at this rate for some time. Worse some want it reduced to negative rates. Therefore I plan to ditch sterling as soon as possible and think of a more imaginative way to lose money.

Are you going to do a proper reporting job or not?
Yesterday we read just what Mandleson would want you to write... no observations about the role of government in the original decisions regarding MG motor group, nor its timing re. an election, ...and then today we get what the bosses at a large bank want us to read.

Yesterday, basic politics, inquiry promised, delivered 4 years later at massive cost, said nothing, attempts to clear completely the Govt and smear everyone else.

Today, basic economics. The banks have been told to improve the cash ratios of their balance sheets, so they are being a little more picky about where they are investing, and, as usual, if the UK population do not spend on UK goods, we are going down the tubes. Government cannot spend any more, because they will transgress the OECD and IMF key thresholds on public debt and GDP.

For Monday, can we have a proper analysis of something?
Can I suggest...

UK trade deals with Libya?
or
How is the German rescue of Opel likely to affect UK car plants?
or
What Government departments are in marginal seats and therefore are likely to get extra business put their way in the run up to the elections?
or
What is the total cost of all the PFI initiatives entered into by this Government?

Much of what Hester says is actually fairly sensible, if somewhat hypocritical given his own position.

The economy has been fuelled by a credit boom and anyone under 30 has been brought up to believe there is an easy supply of money and therefore no need to put money aside.

However when you consider how the economically responsible people have been treated it is hard to put forward a coherent argument against living for the day.

Many of my era we were programmed to save and only borrow for things that accrued in value and over time that may stand us in good stead.

However it is hard to stomach a lecture from a banker whose irresponsibility put our savings and pensions in jeopardy.

Pity our banks were not like those in Canada, avoiding risky lending, with Tier 1 capital ratios at more reasonable levels. Oh and by the way the BNP was one of the few parties to forsee the meltdown. Check out their website sometime.

'Obscene' is the only way to describe the remuneration of Stephen Hester.
1.2 million salary plus bonus.
Big house in Holland Park and 350 acre estate in Oxfordshire and he has the gall to say that we are responsible for the economic mess.
This is the guy who whilst at British Land said 'I don't believe we are about to see a market decline, but the period of sharp growth is over.' just before the property slump.
'We' will certainly have to tighten our collective belts but only because of people like him who have been in the thick of it all of his career.

So here we go again.

Robbery in your face. We are shown here again that you can steal in the open, in full media glare and get away with it, just like the MPs.

I dispair for this country and her people.

Any fool could have reasoned that if you are selling 110K cars a year and making 180K cars, that you cut production and workforce accordingly. I would have been difficult but a core workforce of 3500 could have survived, with truths being told to the union and getting their agreement.

The result was a lesson for us all on how to run a company down, make tons of money from it by proxy and selling off the assets with absolutey no risk to their own assets

Legal crime ?

#33, thatmcgrath wrote:
Mr Hester says we need to start saving, but where is the incentive? Interest rates at 0.5 % ensure that savers are losing wealth. And the talk by the cognoscente suggests it'll stay at this rate for some time.

TMcG

I heard a message to pay down debt. That seems to be happening amongst sensible people with big mortgages or credit card obligations. (Like keeping mortgage payments at or close to previous levels, rather han pocketing the reduced amount to splash on retail therapy...)

Can't see too much new in that - seems to have been what my grandparents told my parents, who told me.

But if banks were allowed to splosh money around with no central financial intervention to stop them, people were obviously tempted to take advantage. Blame the banks? Yes. Blame the government? Yes. If the FSA, BoE or Treasury had said "Hey guys, if you want to retain your licences, just stop the rediculous salary/income multiples or loan to asset value ratios".

Why not?

Because it was nice to have easy targets to tax. Nobody wanted to believe that the fairy tale could end. (Because boom and bust would not be allowed!!!!) Brown moved from fiscal prudence to fiscal incontinence within 3 years of taking the reins.

It's going to take our children a while to wipe up the consequences. But in the meantime, suckers who were dragged in are being told "It's all of our fault". Yes, you poor struggling masses, it's up to you to share the guilt because governments couldn't be bothered to properly oversee finance organisations, who traded made-up assets... Yes, you should have disregarded governnment comments about a built in stability... Yes, you should have understood that, when everything falls apart, your tax money will be expensively re-cycled so you get a bit back.

But don't fret. The bankers who made a fortune will have to invest it somewhere. Maybe they'll buy things, so you'll get a trickle down benefit. Just give it time, hey?

But saving is a whole different ball game. It's what people do when they have a bit left over from essential spend. And it's only worthwhile if the return outstrips general inflationary trends. That's dead in a way.
May have been true for a period, but forget it for a while.

If Mr Hester is stating the blindingly obvious why isn't the Government? Could it be they got us into this mess, as RBS got itself into a mess, but can't state the blindingly obvious as well. Hester is spot on but it needs the Government to act and rein in spending. Will they do it ahead of an election.....no! So we need an election now to stop the rot today not next May. Blindingly obvious, isn't it?

Apologies folks post 38 should be in the rover blog, maybe BBC admin will move it for me ;o)

Question: why is the banker in Monopoly not allowed to practice fractional reserve banking and lend out the other players money at interest?

Answer: because it would completely waste the game: either the banker would win or the bank would crash and everybody would lose their money. Once you played two or three times you would see what was happening and refuse to play again unless you were the banker.

The difference with real life is that because the game runs for decades its a lot harder to see what is going on and even if you do see you don't have a choice about playing.

So why should we be surprised that when the government look for people to run the nationalised banks they choose a guy from British Land and a guy from Citybank i.e. people closely associated with the property and fractional reserve banking system that caused the problem. They chose them because they want to put things back the way they were, they don't want any embarrassing enquiries into who did what and they don't want any serious reform. All well and good except that with the amount of debt we have taken on to fix things up this time we won't be able to do anything when it all goes wrong again.

Comment 39 : fairlyopenmind

I think you might bear in mind that neither the bankers nor the politicians were operating with a free rein to make decisions as they saw fit. By the 1990s the acknowledged political orthodoxy had moved a long way along the democratic spectrum, away from the representative towards the direct. No longer was the bulk of the population prepared to accept that its opinion should be so uninfluential in national decision-making. After all, wasn't that great man of the people Tony Blair handing out the message that the popular will is paramount, and that he would be guided by it in all matters of policy-making when he became Prime Minister. Hadn't we left the dark, dark days when an intellectual elite made obscure decisions purporting to be in the public interest, but in reality all about preservation of power within this elite? Surely, 130 years after Gettysburg, we'd finally cleared away all the institutional obstacles put in the way of government of the people, by the people, for the people?

Except ......... maybe the intellectual elite's wish to retain a veto over decision-making wasn't quite as self-serving as it has been painted. Could it be that bulk humanity, at its current level of development, just doesn't have the capacity to make good collective decisions? Might it be that the parliamentarians we ejected for refusing to fettered to public opinion are the very ones we needed to make the sort of detailed, unintuitive decisions that make a complicated society sustainable? And could it be that popular sentiment is still heading in completely the wrong direction; that greater popular influence will lead to even worse government; and that what we really need is a distancing of government away from the populus and restoration of a talented decision-making aristocracy trusted to make precise and rational decisions in the national interest?

I find it incredible in this modern era that we have people arguing for protectionism. What is so sacrosanct about saving British jobs? Why stop at British, why not preserve Scottish jobs at the expense of English jobs? Indeed, why not make sure the jobs are located in Edinburgh rather than Glasgow?

The argument about out-sourcing to India should not be one of protectionism but one of whether it makes sense strategically for RBS. Clearly, they think it does. However, out-sourcing has its dangers; inability to forecast the future and being locked-into rigid contracts are a few.

If Indians can do a job cheaper to the same quality, then why not let them do it? Or do we think the world owes us a living. There are historical precedents to this. In the 16th Century, China led the world economically, scientifically and in terms of standard of living. They ignored the outside world and by the 18th Century, the found they were following behind. By the 19th Century, China became a backwards country. That is what protectionism does to a society in the long run!

#43 ExcellenceFirst wrote

'what we really need is a distancing of government away from the populus'

South Georgia sounds distant enough for me.

'and restoration of a talented decision-making aristocracy'

They were never talented, they are only self-interested. It was only through the blood, sweat and tears of the common man/woman that some small vestiges of power have been wrestled away from the incompetant elite and economic growth was allowed to flower.

That this process is not complete is shown by the inordinate power of the bankers/accountants/politicians (offspring of the landed gentry mostly) to manipulate the poor, befuddled and defrauded masses into paying for their collective mistakes whilst laying the blame at the door of the same.

South Georgia is perhaps not far enough.

# 44 mustrumdavid wrote

'If Indians can do a job cheaper to the same quality, then why not let them do it?'

If they can do the same job to a better quality for the same wages then thats fine, exploiting wage differentials between continents by global corporations is a hangover from Dickens' London and should be abolished. (along with sending children up chimneys, another thing our 'Talented Decision-Making Aristocracy used to allow)

I think Stephen Hester's remuneration package disqualifies him from commenting or offering suggestions...he and the other 'Back to business as usual' people in the Banking Ivory towers are the problem...not the solution.

WE all know that the 'patient' isn't recovering simply because the fever has abated.... the next crisis will hit a weakened patient... so why are the government reapplying the same conditions that caused the collapse in the first place.

That question is asked over and over on blogs like this but gets no answer... it's horrible waiting for the thing to play itself out now.

#44. mustrumdavid wrote:

" The argument about out-sourcing to India should not be one of protectionism but one of whether it makes sense strategically for RBS."

Ok, so who's going to buy RBS 'products' now 'made' in India (or any kind of product for that matter where production is moved out of the UK) when the people originally making and buying these products in the UK have lost their jobs and can no longer afford buy them?

It's all very well companies moving production to cheaper cost centres in India and China but these same companies still expect the same people back here in the UK to go on buying the product, How can they - when the company had just made them redundant?

A gross over-simplification, of course, but this is what has to happen eventually when all companies have moved production out of the UK and why 'globalisation' WILL fail.

been a while and I've been living on borrowed time since the last time I wrote to Mr Peston..... As an employee (contract) of RBS I agree with a lot of what Mr Hester has said, he's an intelligent man worth an absolute fortune, come on you lottery win !, but can we all please agree on how to move forward saving as many UK jobs as possible. The directive and bonuses of lesser executives (such as Mike Errington) are dependent upon cutting costs ! no matter what ! It really pains me to see how the Government have given the go ahead to release, early retire and make redundant vast amounts of staff who clearly haven't made a fortune in favour of employing staff from overseas who know nothing. I'm in danger of jumping around all over the place quoting all sorts of stuff because I'm getting in a fluster (nearest I could get to swearing). Erringtons directive is "get em out" and "save money" but at what cost ? the 99.8% system availability has been acheived because we all know what we're doing, we've spent years learning our craft, moaning about the procedures and standards while Fred took the profits into the pension fund....though just his part of the pension fund mind ! it's just blood boiling stuff isn't it ! I'll be going cap-in-hand to Social Security in a month or two time while Infosys or IDC take the money. What are RBS really going to save ? £1mil ? £2mil ? I know every little helps but come on ! compared to the billions that we the tax payes have put in ? we've interviewed over the last 6 to 8 weeks numerous Indian staff that don't know what the hell they're talking about, don't mark me down as BNP of anything as I'm in full admiration of the country, culture, work ethic etc etc have several friends bla bla cant the all work on projects related to Indian banks and financial organisations ! I just want people to think about what's going on, do you want to insure your car through Direct Line ? bank at Natwest ? mortgage through RBS ? while your money goes to India and British people claim thousands in social security it just doesn't make sense...... nobody is talking about any of this on the news, nobody is doing anything ! The government just want to come out of the whole RBS thing with "we ploughed billions into RBS but look at the profit we made" without anybody mentioning the cost to the British worker. Why aren't you jounalists giving it some time and space ? I'm tired and the Mrs is getting fed up of me getting on the soap box so I'm signing off.....see you down the Social commrades !

#44
you so missed the point ! RBS are all over the UK and obviously both side of the border. It's not the 'If Indians can do a job cheaper to the same quality, then why not let them do it?' it's that my manager has interviewed dozens who have been put forward and so so so obviously don't have the skills and after turning them all down is now being told to hire them anyway ! even though they know nothing ! by the executives to ensure that they make their bonuses at the end of the year while the working staff receive no bonus and cuts to their pensions and benefits.... if it keeps going like this there will be an ever increaing number of people joining the dole queue, claiming benefits, being a drain ! you've got to look at the bigger picture.....

We go around in circles again trying to blame government for not stopping the bursting bubble; the regulators for not knowing that unsustainable accounting practices were going on. The great British Public deflected by media hype and misinformation - at the root what questions are asked and who is allowed to ask the question.

ExcellenceFirst #43 with the talented elite, very Platonic in believing those involved with the banking collapse; the MGRover asset stripping had any notion of "truth" in their actions beyond "I am in charge so what I say goes" - the British managerial disease. Where do the majority of the "elite" eminate from, 5% of the population provide 90% of these positions. In the 19th century a cousin of Darwin following his theories of evolution discovered that the majority of successful people were the children of successful people, doh? We live in a country where power is held by a very un-meritocric minority, educated in institutions foundering in medieval belief in "right of authority". Again in the 19th century to improve the quality of the Civil Service applicants were asked to sit an examination instead of the existing interview, the result was that an increasing number of the "non-elite" were obtaining positions and the interview was re-introduced. The "elite" is the problem - mainly male, mainly educated in an environment that has no relationship with the realities of the remaining 95% of the population. Our politicians; bankers; corporate leaders; doctors; media pundits have in the main either progressed through this system or had to comply with its influence through acceptance and participation.

Mustrumdavid #44 I would suggest you read Engles' accounts of life in 19th century Manchester, the notion that out-sourcing benifits anybody other than the bonuses of corporate directors is ridiculus. Experience of such systems from the public tend to be negative, assumptions of comparability of service are made by those with a vested interest, working conditions for those employed would be unacceptable in Britain. As for China the so called isolation of centuries was drastically changed by a Communist autocrat laying the foundations for what has become the "sweatshop of the world, and full circle to Engles.

As to the comment on the world owing us a living, probably the answer is no, but those institutions created/residing within our boundaries do have a social responsibilty to their communities. The modern version of the "slave trade" where wealth in one nation is transfered around the globe for the benifit if individuals but at the expense of the majority of participants should have ended in 1807, not been reinvented as global capitalism in the late 20th century.

If you want blame anybody blame the parents of the array of bankers across the globe, the schools attended by the same and their subsequent universities for failing to teach them moral responsibility above the basic self-engrandisment that lies at the base of our current woes.

That the general public within nations around the world, not just Britain but more so due to our medieval social structure, should carry the burden of the profligate financial structures put in place by a self-interested elite seems absurd. As mentioned in other blogs most of the individual unsustainable debt was generated through a hierarchy of commission/bonuses driven greed. A financial structure driven by gambling on share and currency prices degenerating into self-manipulating profit manufacturing, with media advisers making fortunes from upping share values, insider dealing, accounting scams, the list is endless. But where did the engineers of this circus eminate from - to quote Ray Bradbury Something Evil This Way Comes.

Surely we do not wont to hear the obvious from another Banking expert as taxpayers that subsidized the system in its failure to manage its self to prevent failure .I wonder if Mr Hester's academic parents gave him plenty of pocket money when he was young so if he had to cut on his spending and saving he could do it quite comfortably

Maybe we should 'outsource' Mr Hester's job to India. I'm sure there will be someone who would do as good a job for a great deal less money.
And while we're at it, perhaps the serving executives and Board members of all our public-owned banks (by definition 'failed')should be invited to re-apply for their jobs at salaries more in keeping with their demonstrated incompetence.

Robert Peston:

I have to agreed with Mr. Peston idea of a fast recovery is simply "DANGEROUS"....

=Dennis Junior=

I think Mr Hester's comments about reducing debt and living within one's means at all levels to be very sound. Unhappily, I do not see any evidence that he personally, his bank or any other bank, are showing the same restraint. He could do this personally by reducing his salary to less than £1M / annum an no bonuses .. no, not a kings ransom, but neither chicken feed. The huge corporate edifices and corporate art works etc should be sold too. When the banks cut their cloth to reflect the suffering they have caused the nation, then let him profess and be heard - but not before.

To the_fatcat #47

Globalisation won't fail because the money generation will follow the product generation. Just as Britain in the 19th century was the sweatshop of the world, only to be replaced by the assembly line that was America, that was replaced by the dogged efficiency of Japan, to be replaced by the same but cheaper in Korea, now to be swamped by the billions of aspirant sweatshop workers in India and China. The directors of the circus sit in whatever luxury they wish, Monaco, Geneva, the Bahamas, gated and secure from the desolation they leave in their wake. As far as I can recall none have come forward to offer aid and comfort to the billions across Europe and America that they have forced into penary (seen the pictures of Motor City recently?). In Britain the Government is the largest employer, NHS, schools and colleges, civil service, military institutions, etc., if you now include the "nationalised" or debt guaranteed banks there are not many who do not work for the Government. So it matters not a jot whether people are paid to actually work or not as it is all degenerating into a Napoleonic (III) bureaucracy of interdependancy on ficticious wealth creation. Capitalism at it height.

#43, ExcellenceFirst wrote:
"Comment 39 : fairlyopenmind

I think you might bear in mind that neither the bankers nor the politicians were operating with a free rein to make decisions as they saw fit...

Except ......... and that what we really need is a distancing of government away from the populus and restoration of a talented decision-making aristocracy trusted to make precise and rational decisions in the national interest?"


Liked the irony.

Self-serving, self-appointed business and political "aristocracies" make up stuff they imagine may chime with a "general population's up-perceived desires".

In other words, quite a lot of well educated, but out-of-touch prats (from whatever backgrounds) do silly things because they can.

And other similar prats commentate.

The poor bloody infantry just want to get on with their lives.

The comments about outsourcing jobs to Indians is intersting, as most peoples' experiences (generally poor) come from the call centre exodus a decade ago, which most companies have now reversed. The new trend is to outsource the back offices as this is not visible to the end consumer, which as a rule struggle to identify with 'globalisation' and think of more Nationalistic terms.

The RBS posters on here seem to imply that this outsourcing is bringing in inexperienced staff to replace experienced staff, so in the long term they should suffer yet whilst backed by the government they will not fail so I have sympathy for the staff as again, it seems top layer management are blindly hitting whatever targets set by whatever methods so they can earn their bonuses. No doubt they 'identified' simple processes which must be easy and can therefore be outsourced, which is annoying the staff in the UK who actualy understand the role they do and have the accumulation of years of experience to be able to deal efficiently with the stuff that falls outside of a tick box process. Alas, this is seemingly the norm these days and UK staff are powerless to complain for fear of being labelled racist or fear of identifying themselves to be top of the queue to be chopped.

I suspect this is going on in all major companies, as herd metality prevails and they will all be benchmarked against themselves, meaning if one cuts costs the rest will follow to do the same thinking the other has an advantage.

At some point I guess the Indians will be in trouble too as their wages must be rising in real terms and against the currancy year on year, so Cambodia, Laos and other impoverished African states will be next to gain.

Don't expect any genuine recovery - the amount of capital so far devalued is unlikely to be enough.

Replacing some of the fictitious capital with more fictitious capital (government debt) doesn't resolve the lack of genuine profitability.

Either capital is devalued by banks and businesses going under (unemployment), or inflation devalues money across the board and real wages are reduced.

I suspect we will soon be seeing the latter and the collapse of the US dollar.

The crisis is very far from being over.

#55 "Globalisation won't fail because the money generation will follow the product generation. ....there are not many who do not work for the Government. "

but the government (both UK and US for that matter) can only sustain this by ever-increasing borrowing based, as you say, on imaginary wealth creation. There will come a point when the government will run out of credit lines. At this point the intertwined interdependency will unravel - the government-supported UK economy will implode and all those out-sourced workers in India and china will loose their jobs - as did those in the UK whose jobs they took).

"Capitalism at it height" Not really. True capitalism would have allowed insolvent banks to fail. What we have now in the global economy is not capitalism - although capitalism's supporters cannot but admire how system has developed itself so that it can, with government support, drain the taxpayer - and still reward the elite just as before. That's even better! Perhaps this is 'true' capitalism after all.

Comment 56 : fairlyopenmind

"The poor bloody infantry just want to get on with their lives"

Well then the poor bloody infantry need to get involved, properly involved, in maintaining the social structure that is pivotal in allowing them to get on with their lives. This means politics, real politics, balancing one person's needs and desires against another person's needs and desires, and another's, and another's, until you come up with policy that best fits the interests of the population as a whole. It means recognising that there is a tendency to self-serving bias in everyone, and overriding that bias. Forcing oneself to understand that "which policy is best?" and "which policy is best for me?" are questions that require two competely different thought sequences. And acknowledging that civilised society requires that, in general, people undertake both these thought processes before deciding which particular policies to favour.

In "just wanting to get on with their lives" the behaviour of the infantry is just as self-serving as that which you imply to the political and business establishment.

In response to the_fatcat #59

When the UK economy does collapse then we become the India and China of the new order. The Asian continent will replace the western powerbase and we will again become the sweatshop of the world, or worse the nuclear dumping ground for our new masters.

Anyone for glowing in the dark, as I am sure the bankers are already looking at property deals in the subcontinent, and I believe the BBC is planning a Homes Under the Hammer from Mumbai.

Bankers are No Novices. They invented (CLO's),(DSO's) and all instruments they use. They control the global financial system, claim to know how it operates and demand outrageous salaries and bonuses for their expertise and risk taking. But it’s not their money at risk, it's the Taxpayer and Homeowner who pick up the tab.

The economy, having been run off the road like a car, full off devil-may-care teenage joyriders (The government, FSA, Bankers, Bank of England etc.) is in a ditch. I, for one, find it very difficult to swallow words from those very institutions that have created this mess and the solution they now propose. The talk of pain and belt tightening is never meant for those who are speaking the words.

The recent gesture by Cameron that the subsidy on food and drinks that MPs enjoy in the House of Commons should be removed is an example. Is that the food and drink that the MPs can claim on their expenses or some other food and drink? How out of touch are you Mr Cameron? If your food and drink then cost you so much that you have no more money left over for you to take your family on a holiday or pay your bills - would you be so keen then? That's the world a lot of people live in. Please, by all means pay the full price for your food and drink, but please don't imagine that by doing so you are "feeling pain" like many hundreds of thousands are: you will merely be doing what everyone else has always been doing.

MPs talk about "tough decisions", but I wonder how many of them have had to face tough decisions daily: like "Shall I have the heating on today or shall I eat?"

I really think that if politicians had seen their pension forecasts drop recently to the point where retiring would cause real hardship, they would perhaps think more about how to assist those not on guaranteed government pensions.

I think we have a class of people at the top of society today who have no idea what hardship is and do not care - and it is principally the "teenagers" who have just run our economy off the road.

The "Phoenix four" are the same as far as I can see - they legitimately manufactured their own income and pensions at the cost to thousands of others who were then left to their own devices.

There seem to be few today who try to do the right thing, but more and more who are content to feather their own nest and let the rest go by the wayside.

I did not see the interview, but it sounds like someone is trying to raise a flag for common sense, even if he is a banker,and it is a statement of the bleeding obvious. I wish it was so obvious to our political leaders that they could come clean with the electorate and stop pretending that this recession is something we can get over like the flu and then get back to a growth agenda of unbelievable proportions. Both Alistair Darling and Gordon Brown are continuing to suggest that this country can look forward to a sustained period of 3.5% growth in GDP for the next 20 years.
I have had an e-mail from the Treasury which says that this is quite likely since historically this level of growth has been achieved in the past! Sir Humphrey is still alive and well.
What Heston is saying is probably suggesting is that the time has come to work towards a steady state economy with very low or zero growth rate where we pay our way and live within our means.
Whether we like it or not this has to be the future for mankind, living in a finite planet with dwindling resources, and anybody who says otherwise is either in denial of reality or lying through his teeth.
Mother Nature deals with any attempt at excessive growth with measures like rounning out of food....ask any lemming. We humans have,sadly, disowned Mother Nature, but she will have the last laugh, and it may be sooner rather than later. Nobody is going to fill up our tank when it eventually runs dry.

To ExcellenceFirst #60

The infantry have learnt to keep their heads down, history from Watt Tyler to the Pole Tax rioters has taught them that there is no winning against the organism of class control in Britain. We live in a world of so called "reality media" from Big Brother to the Australian Jungle to the Dance Halls/Ice Rinks of Streatham. Our lords and masters concoct a melange of personality cult; the Iron Lady not for turning (stubborn individual incapable of listening to reasoned arguement); New Labour (Conservative Party but with a small "c" because they keep getting re-elected)); tough on crime and the causes of crime (catch the small villains while the big ones can be classed as entrepreneurs).

We are governed by script writers, from politician sound bites to media hype about themselves. News is created rather than reported, the interviewer becomes more important than the interviewee (Paxman admits that his famous Howard moment was a directional nicety as the production team were not ready for the next item so he had to fill in by repeating the question - 13(?) times). What proportion of the population schedule their lives around TV, from Big Brother/Strictly "anything"/Get Me "on TV again" all impinge on the publics will to think. From materialism being the opiate of the masses it has become "reality" created by individuals in media enclaves throught the country, manipulating public opinion, deciding the questions to be asked, telling people what they should be interested in. Vietnam changed news reporting for ever, from individuals sending back reports that shocked their audiences, slaughter of innocence, drugged-up soldiers, chemical warfare, all blazed across the world media by independent reporters eager to tell it how it is. We now have individuals placed with particular units (part of the group with vested interest in survival/friendships), briefings from military controllers in "1984" style - what we your representatives did for you today - we are winning the war against terror - whoops there goes another bomb.

What process allows the "infantry" to make its point, politics is a sausage machine where concerned "infantry" may enter only to be blended/ground into the participation in the agenda of the truely unselected. The "party system" guarantees obedience (a few loose cannons thrown in to hide the blandness of uniformity within the political classes). The same with the media with its nepotism, personality cult, and agenda setting called programming, from the creation of "soaps" to the myth of "reality" the world is manufactured it used to be advertising telling us what we needed it will soon be the "soaps" telling us what products are popular in Manchester. The view of the media classes, pushing notions of what the viewer wants without a care for the message imparted - American style product placement will be in Coronation Street with built in advertising how the only sells Walkers Crisps just to save a collapsing broadcasting organisation from oblivion. It is not enough that the world is sponsored at the increased expense of the items we buy, the future holds manipulation of "reality" to suit the commercial demands of sponsors.

The "infantry" have less freedom to exercise their opinions, CCTV and police monitoring of crowds (apparently missing certain activities), photographing protestors but arresting those photographing them. How do the "infantry" do anything other than keep their heads down in the trenches - they have seen what happens if you go into "no man's land".

#62. FORENSIC-DEBATE wrote:

"Bankers are No Novices..." quite true...

and what is more they also made sure the whole economics profession was thoroughly suborned and subdued by virtue of ensuring that they both financed academic economists and institutions who said that banking was the most important element in the economy, and set the syllabuses to ensure that they were not criticised. One can make a convincing case to say that the banks have neutered economics so successfully that they have destroyed the value of the whole study of economics and also destroyed almost all of its rigour and any claim to a scientific basis.

#60. At 09:30am on 13 Sep 2009, ExcellenceFirst wrote:
Comment 56 : fairlyopenmind

"The poor bloody infantry just want to get on with their lives"

Well then the poor bloody infantry need to get involved, properly involved, in maintaining the social structure that is pivotal in allowing them to get on with their lives. This means politics, real politics, balancing one person's needs and desires against another person's needs and desires, and another's, and another's, until you come up with policy that best fits the interests of the population as a whole...

In "just wanting to get on with their lives" the behaviour of the infantry is just as self-serving as that which you imply to the political and business establishment."

Sorry, Excellence, didn't really need to be told that a bit of awareness of what politicians and businesspeople get up to can help.

The "P. B. Infantry" don't normally spend their working lves trying to devise new laws (at high velocity) to intrude on their own day to day activities - or those of others. In fact, the P.B.I. have little clue about the masses of laws and regulations that flood through Parliament. Quite a lot (most?) have nothing remotely relevant to the pages of party puff paraded at election time.

I've said elsewhere that I doubt - I'd say know - that not a single MP could accurately identify, summarise the intention of and describe the anticipated consequences of all the laws/regulations they pass directly, on the nod or by default because earlier laws allowed government to place follow-ups on the statute books.

For goodness sake, the UK has the biggest business tax regime in the world - 11,500 pages I believe at the last count. It's not requested by business. The PBI doesn't have a clue - actually most people in business don't have a clue - about the impact.

I don't recall the PBI being asked whether they thought it was wrong for their next-door neighbour to drive their children to school, clubs, etc.

It is not a political act to ensure that regulations, once passed, are properly overseen. It's a function of administration. Didn't see too much oversight, when the FSA knew that Northern Rock was getting itself into a tight spot. Did you?

Plc s are owned by shareholders (very often pension funds - private, obviously). Most haven't a clue about the fine detail about a company's operations. But they assume that senior management/Boards do know. But when those people allow wizz-kids to write computer models to "prove" intrinsic value of junk, without understanding it, things go wrong.

I hate to say it, but the Global Warming stuff derives an awful lot from computer models. If we can't even define banking/finance stuff, who (whatever their mind-set - and I believe warming will happen) can believe the stuff that politicians with insignificant scientific background clasp to their hearts?

When people participate in "politics", it's quite often to defend their own interests. If you individually checked every bit of legislation with the population, they just wouldn't believe that so many well paid people waste so much time creating theoretical targets for which they can "develop initiatives".

I'm conscious that Peston's focus was on whether fast or slow recovery would be best for the UK (or even global economy).

Well, here's a policy suggestion. Legislate that at least one board member must understand exactly how his/her company is making money. Legislate that, as of Jan 1 2010, any bank or finance house that fails will be allowed to collapse and board members and senior staff will be jailed for a minimum 10 years and any "performance related payments" will be reclaimed from any member of the close family, or others to whom it may have been channelled.

That should make the bu**&s think.

things will carry on the same , the rich get richer the poor get poorer,brown as a labour pm you are disgrace. brownwatch 260 days (max)

#67 do me a favour please, you can murder 270 people and get less than 10 years,so I dont see people getting 10 years for paltry things like banks going bust!!!!

#60, ExcellenceFirst wrote:
Comment 56 : fairlyopenmind

"The poor bloody infantry just want to get on with their lives"

... In "just wanting to get on with their lives" the behaviour of the infantry is just as self-serving as that which you imply to the political and business establishment."

Sorry, again.

Most of the Poor Bloody Infantry expect that they and others will behave in a fairly rational way and follow (almost all of) the laws that already exist. They expect to tolerate others, in the hope that they will be tolerated.

Most of the P.B.I. don't go out of their way to break the law, but it has become so complex that they simply don't know whether they are breaking it every time they pop to the shop. I take an interest in that sort of stuff, but I'm fairly certain that I offend from time to time.
(At one time, I tried to compare the number of new laws and regulations passed with the number of days that Parliament sat and found there were roughly 18 per day. Of course, MPs say they work really hard, but that would be roughly two laws/regs per hour. Does that seem in anyway reasonable?)

Most of the P.B.I. (hundreds of thousands in the financial sector) just don't/didn't know that some febrile, intelligent idiots were concocting "rock solid assets" from smoke and mirrors.

If they were honest, most P.B.I. in MGRover knew there were problems when the cars they made weren't being sold.

They didn't need vapour-sprayers like Byers and Hewitt to tell them hard facts - which of course they never did!

Economic recovery can be described in many ways, but making it up isn't one I'd recognise. And I'd suggest that letting finance houses shuffle off their extremely smelly assets into a UK publicly owned scheme (so all the P.B.I. get to share the cost and blame when forensic examination discovers what the bankers should have known - that our government is buying on "our - P.B.I." behalf is a load of stinking illusion.

I rather like the idea of moral jeopardy.
You take a risk - hope it goes well, but if it doesn't it's YOUR problem. Don't know why I, or my children, should be made to share the financial pain. Especially when I've already paid (through taxes) for an - evidently useless - government agency to police what was going on.

So what should the P.B.I. type do? Vote for some obscure motion that will be part of a political party's agenda? Why bother? Too many politicians making too many rules but too few practical people saying, "Why should I pay for you people to make my life more difficult, or limited, or subject to laws I don't know about and you politicians don't even know exist?"

Comment 67 : fairlyopenmind

"Sorry, Excellence, didn't really need to be told that a bit of awareness of what politicians and businesspeople get up to can help."

Good, but I don't recall that it was me that told you this.

I think the gist of my post was, at the present level of mass political thought processes, that direct democracy will end up as mob rule. And that therefore there are two developments that would be in society's best interests:-

1. To re-establish the principle that we are a representative democracy.

2. To build trust and respect for the representative elite by increasing awareness of the level of thought and intellect that is needed for capable government of 60 million people. And to open eyes to how useless to this process is the sort of tunnel visioned tub-thumping that some see as the beginning and end of political involvement.

Although the CE of RBS talks much sense he does not run the country. Until those who do start listening to those who are obviously more aware then I cannot see the present government policies on printing and borrowing changing until the pound callapses under the strain.

Inflation will follow as interest rates are hiked and those who are trapped in lower or frozen wage deals will find themselves in a downward spiral of higher mortgage interest and inflation.

Already we see one area of inflation that has come as a complete surprise to economists. That is the increasing prices of used cars. Just another shock caused by trying to manipulate a recession that will have to eventually run its course. There are too many unknowns out there yet for anyone to be cheerful.

Mister Hester is recommending a slow emergence from recession? This would guarantee the long term business model of banking remains unchanged and return his industry to profitability.

It was the banks that created the situation. The sacrifices of the general population have already been made. What is needed is a slow, long payback of the substantial investment in rescuing the banks from their own incompetences.

If the banking system requires a slow recovery there is an argument about the massive injection of poverty and deprivation that has been created in the last year. With millions being placed into Unemployment by the existing business model of banking, how will bankers be addressing the damage they have done.

There need to be sacrifices: perhaps profits for the next decade could be hypothecated to reconstruction of the economy. The general population and the electorate and the public sector are owed serious, responsible, tractable and implementable responses from the Banking System. The model does not work: why prolong it with a "slow recovery"?

Re 26 - ExcellenceFirst wrote point 2. The bottom line of this is that the UK needs to become a net repayer of overseas debt, for a number of years. This is a major turnaround from what we have been for the last 10 - 15 years, and will involve more than a little bit of belt-tightening.
- Given that this 'solution' is also the 'solution' for Germany, France, America... everyone but China, what you are essentially saying is, unless we find a way to export to Mars, we will all have to become Net Exporters to China. China will then have to become a Net importer and end up with all the problems we have.
Given their policy of being a Net Exporter is a deliberate one and has resulted, not only in the de-industrialisation of the West, but our financial ruin - They say we have lived for the past 20-30 years in the West by buying and selling our houses to each other - who has provided the dosh to fuel the price rises - The Chinese.
The Sterling and Dollars we gave them to buy their 'cheap' goods we not returned to us when they bought our goods, no, they don't do Imports, they used the Sterling and Dollars to finance our mortgage bubble - those cheap imports don't look quite so cheap after all viewed from this light. As an example of the number
flow patterns I talking about :

	                Period 1 Period 2 Period 3 Period 4
Net Imports From China	 10.00	  10.00	   10.00      10.00
Amount Paid to China   	 10.00	  10.00	   10.00      10.00
Mortgages,Bonds,Shares		
Bought by China With
the money received	 10.00	  10.00	   10.00      10.00
Net Det to China  	 10.00	  20.00	   30.00      40.00

So despite having 'paid' the Chinese for their imports, because we have only 'paid' them financially and have not paid for the Imports with Exports, we go deeper and deeper into Debt with China. In a Net import Situation, we do not pay for the goods we only really take them on credit. Uni-trade with China is a huge under stated part of this problem and needs to be addressed and fixed.

What we are all in for is not a "V" shaped recovery nor a "W" shaped recovery! After what we all will consider is the "V" will be short period of stability. Don't be complacent because what we are in for is a "Double V" shaped recovery. The massive government debt, steadily rising unemployment,continued instability of banks and pressure to raise interest rates will send us all down another slippery slope!

There is another slant on 'recovery' while different political parties slang it out with their rhetoric.

If the choice is New Labour 'investment' (in e.g. public sector jobs and services) - v - Tory cuts which of these, if any, is better for 'recovery'.

Over investment in the public sector is futile as it is not self funding as it depends on tax revenues or borrowing as the tax revenues from the public sector itself are not sufficient to fund itself. The public sector is dependent on tax income from the private sector.

The public sector is also less productive than the private sector and so a bloated public sector is insufficiently productive to be economically efficient.

This is all relative to the UK tax base and which is currently too small for current government spending.

A smaller public sector is better providing that the private sector steps up to the plate and reaches efficient levels of productivity - this is not happening at the moment - and the reasons for it are well publicised.

So what does this mean/relevance - I think that this is why other countries are coming out of recession faster than the UK - their public sectors are smaller, their tax bases are relatively more efficient and their private sectors are maintaining good levels of productivity through healthier state finances - this is not just a question of a country's % level of borrowings - v - GDP.

By growing the UK public sector too fast and by not monitoring and maintaining a good level of productivity in that public sector - neglect of the private sector in terms of access to affordable finance - this all adds up to the UK government being over-reliant on borrowing, this hampers timely recovery of the more efficient and productive private sector and leads to higher unemployment.

Paying more money in salaries etc for the public sector also sucks in more imports as the propensity for spending is probably not as beneficial e.g. SME's spending on staff and business investment.

I am amazed at some of the brazen stupidity of the argument that an expanded public sector will lead the UK out of recession - this could only happen if public money is being spent on working capital for job creation schemes that make that public money 'work hard'. This is just not happening.

The Tory line of letting the private sector lead the UK out of recession could I think work but only if they take a much harder line with the UK banking system than they are proposing at the moment.

In other words, neither New Labour or the Tories are going to take the UK out of recession quickly without radical amendments to their policies and so Hester's questionable words of wisdom are probably correct because, giving him the benefit of the doubt - he probably thinks the same as this in private

I think Mr hester is a mite embarrassed that the RBS share price is meandering up to the point where his fabulous bonus package gets triggered.... and he has had bu**er all to do with it.

Easy life if you can get it.

I hope questions will be asked again of those who set the target. (Most of us thought it was a joke at the time.)

#71. At 4:37pm on 13 Sep 2009, ExcellenceFirst wrote:
Comment 67 : fairlyopenmind

"Sorry, Excellence, didn't really need to be told that a bit of awareness of what politicians and businesspeople get up to can help."

Good, but I don't recall that it was me that told you this.

FOM: That's lovely. Not what you intended? Tough, isn't it? But that was exactly the message in your posting. Just read it again.

"I think the gist of my post was, at the present level of mass political thought processes, that direct democracy will end up as mob rule. And that therefore there are two developments that would be in society's best interests:-

1. To re-establish the principle that we are a representative democracy.

FOM: I thought that principle was deeply embedded in everybody's belief system.

Just how many of the "representatives" have any idea what real life is like?

I'd be in your pack if you'd kick out the bright, rather odd, idiots who seem to occupy the role of "representatives". Having a degree, a masters, a doctorate doesn't mean you could change a light bulb...
Just how many "intellectuals" does society need to show the people what they should be doing?

Not sure where you'd like us to be? The fact that we permit some npeople to represent all the others doesn't mean that we have to believe whatever trite nonsense they come up with, does it?


2. To build trust and respect for the representative elite by increasing awareness of the level of thought and intellect that is needed for capable government of 60 million people. And to open eyes to how useless to this process is the sort of tunnel visioned tub-thumping that some see as the beginning and end of political involvement.

FOM: The "representative elite"? Sorry, you lost me. An elite? NOT. Just a bunch of people who should at worst have a bit of an idea about the responsibilties they assume on our behalf. How does that make them an elite?

Sounds as though you'd be talking about a French system, where there are interchangeable politicians/businesspeople who come fron the same mould - and think in the "correct way".

Not for me, mate.


I think you might bear in mind that neither the bankers nor the politicians were operating with a free rein to make decisions as they saw fit.

FOM: What? Just explain why bankers could not make free-choices to screw up. Or which bits of law or social pressure "forced them" to invent imaginary investment assets. Bankers were not constrained to behave sensibly - but you always hope they will. Worked for centuries.

Are you seriously saying that our "free" politicians could not make their own minds up? That has been degraded over recent decades by a rediculous party-conformant bunch of could-have-beens. What makes you claim they could not exercise proper judgement? Fear of the Whips? Tell 'em to get stuffed.
We, the people, never agreed those bullies should be paid to make our representatives were forced into one or another voting booth.

What are you suggesting? A bunch of people hidden in a shroud and constrained by some global conspiracy?

Get real. People can do whatever they want. Nobody forced bankers to get stupid. Or politicians to poke their heads in the sand. Some exercise choice and do stupid things, after being told how to think. Others try to represent their electorates.

So what's your point?

These words are rich coming from a man that is supported by the government with a company that has 130k of debt per person and is currently only lending to its own database, indeed it was anounced last week by the NACFB (National Association of Commercial Finance Brokers) that the RBS had pulled the plug on Lombards and the NACFB mailer said that the RBS was doing this as it wanted to concentrate on lending to its own customers only.Where is the governments agenda of getting banks lending.It is nonsense the banks are doing what they please and the government have given the taxpayers money away with no recoarse against the banks.I have 1st hand knowledge that the RBS/Natwest are not lending.
If the RBS is not lending can the taxpayer have its money back please, why should they keep their jobs where is the democracy is it because they bankroll tesco? The government should take the money back liquidate the bank and give it to a bank that is lending......

No recovery will last unless the economy is re-balanced. We have to save more, borrow less, make more of what we buy, secure the retail banking system, restore the integrity of pension and insurance funds by yield based valuations, reduce housing costs,cut the size of government, transfer power from Whitehall back to local governemt, reduce the gap between top and average pay, maintain front line expenditure but eliminate quango type waste and pointless programmes, cut process and enhance responsibility. This is not an exhaustive list and is just the start.
Little,if any of this is happening and without it any recovery whether slow or bouncing will lead straight to another crisis after a short boom. Each time it happens our national debt will grow and our currency shrink.

The banks are lending, but their criteria make the lending phenomenally exclusive. As more and more people are made redundant and more companies go bust, the banks will find their borrowers decreasing and defaults will still occur. Many larger customers take so long to pay that SME's are falling like flies as their suppliers are icreasingly asking for payment at the time of purchase or within 30 days (when 60-90 was previously acceptable) then issuing court proceedings etc if full settlement isn't forthcoming. More redundancies, more strain on the benefits system, and worst of all, more families having their lives ruined.

Noone is safe anymore, which is why everyone is paying down their debts asap.

No way is this 'perfect storm' over. How many bust businesses and unemployed people will it take before the government and banks realise what's going on?

Moving call centres overseas - more unemployment benefits to pay and loss of tax revenue to pay it with. A great idea if you are a company-phenomenally less wage and tax bill, after all, who can survive on a wage of £1.50 a week? As a customer they're a nightmare. Certain companies now advertise 'UK call centres' as a selling point-they know this is what people want.

Cutting your workforce is the easy way to reduce costs initially, but long term savings need a fundamental shift in thinking -big employers find the easiest and quickest ways so the net profit looks good on paper. This is what their bonuses are calculated on, and what caused this whole mess in the first place.

The knock on effect is gathering pace, and I can't see a way out of it. Living costs are up, our survival needs (food, energy, fuel, clothing) are already through the roof and still rising-how our the people in this country supposed to live with no income, no job prospects and no future?

I see no sign of humility in the banks. They should have been broken into retail and risky, and the government have missed the chance to stem the knock on effect of the credit crunch.

We're broken, and now we're getting smashed to pieces. Soon it will be back to a handful of very rich companies and individuals owning what's left. SME's need support now, not just from the banks, but government too.

Why is it always the smaller companies who suffer?

Sorry - arrived a bit late to this one, just one comment:

Did Stephen Hester really say this?
"the government gets its own deficit under control"

...now would that be the defecit YOU ASSISTED IN CREATING under his previous employment at Credit Suisse?

I wonder if Mr Hester will be showing restraint over the coming years...

"The Hesters, live in Holland Park, West London but also maintain a 350 acre estate in Oxfordshire, Broughton Grange.[6] One of Hester's passions is said to be the garden of Broughton Grange and development of its arboretum, which was designed by landscape architect Tom Stuart-Smith and includes pleached limes, formal beds and five of the first batch of Australian Wollemi pines ever to be brought into the UK"


....or do the rules of decency, fairness, honesty and openness only apply to the poor then Mr Hester?

He's no better than a politician.

This just makes me so angry - so I should be saving - with what!!!

RBS have refused to lend us money under the EFG scheme even through we are a viable small business so I have been reduced to using all my personal savings to pay my staff and taken no salary myself.

Everyday I wake up thinking would it be easier just to give up, let my staff go, watch as RBS - who I have a mortgage with - take my house off me, leaving me with nothing to show for 20 years of working and now I beig told by a man who is worth millions that "all of us to make short term sacrifices for longer term rewards"

Just what long term reward I am going to get Mr. Hester and what sacrifices are you making?

Thank you Mr Peston for getting Mr Hester's views into the public and asking poignant questions.

Mr Hester says the crisis "has been averted" at RBS.

RBS in H12009 reported "run-offs" of their less reliable assets of 25bn and only forecast 14bn for h22009 (i.e. early loan repayments, yet clearly indicates in the interview that these run-offs are occuring -people are "paying back debt, not taking more" This means RBS may well only have 130-150bn to take into the asset protection scheme. Again Mr Hester confirmed that they are looking at "all options". They expect write downs going forward - but he did slip in "these may be lower or higher than H12009" and are elevated above normal levels

so with H1 core operating profit of 6.9bn - or even more - look set to be repeated for H2, and reduced assets and losses on non-core business, the govt investment in RBS looks set to rise. Mr Hester's words were - "I am extremely optimistic that the Govt will exit at a profit".

Im glad I bought RBS shares.

> Stephen Hester says "arguably what we need as an economy is a rather gradual emergence from recession where the economy can complete the rebalancing that has not in any way been completed, where people can save more, borrow less, the balance of payments deficit closes, the government gets its own deficit under control".

"Not in any way completed"? I haven't seen it even "beginning"!

Comment 74 : GlenisDevereaux

I appreciate that the world economic imbalance can just as easily be represented as a problem with the nett exporters as one with the nett importers. But representation is one thing, causal responsibility is another. Who had control of the Western credit expansion without which the massive imbalances could not have occurred? Did the Chinese insist on their deposits being used to fund the spending of sub-prime inadequates? Were the Chinese responsible for the increased leverage of Western financial institutions. Were the Western politicians and media bamboozled by the Chinese into silence about the growing trade imbalances?

I accept that the international financial system has a major flaw in the asymmetric way it deals with the two sides of mercantilism, but I should have thought that the culpability for major imbalances must lie principally with the negligence of the leadership of importing nations for failing to anticipate and deal with the problem before it became too large.

Comment 78 : fairlyopenmind

"So what's your point"

That if we'd had direct democracy for the last 5,000 years we'd still be living in caves, and if we insist on persevering with it now, then, at best, we'll be back living in them within a generation.

I am glad that someone has finally mentioned the balance of payments. It is clear evidence that Government borrowing and money printing mean that the country is still living beyond its means. We are consuming more than we are producing. It has to stop. Reduced Government borrowing and an end to QE would help but only when this country starts to pay its way can we be confident that we are on a sustainable path. Then we can start to think about how we start paying it all back...

What a bunch of pessimists you all are. I mean I lost my job due to redundancy in the UK so I moved to Plan B, I could live off the interest on my savings, we aren't rich but we could survive for a while, oh but then the erm... interest rates hit the crapper so I had to move to plan C as I couldn't get a job in the UK. I moved to Hong Kong and at least the family would be OK but oh ...... wait a minute, my wife is from Taiwan and the Government will change immigration policy so we have decided to split up our family, she will stay in the UK until she gets citizenship otherwise she looses her PR status and I will live in HK. To summarise, thanks to the talentless Brown and Co, I lost my job, my money lost it's value and I have temporarily lost my family till my wife gets her citizenship, thanks Mr. Brown.
Oh and one more thing, I will pay my taxes to Hong Kong and my wife and kids will utilise the UK schools and medical services - this Goverment is an 'economic basketcase'

As someone who has the misfortune of being employed by RBS, allow me to share my experiences.

First of all the offshoring to India. Initially RBS were against the proposition - mainly because they didn't understand the work already done by ABN AMRO. Once understood, they have embraced and pursued that strategy with vigour - with the resultant loss of jobs in the UK. I wrote to my MP to question the Labout Party / Governments endorsement of this policy given that the Government are the majority shareholder in RBS. The response I received agreed that the situation was unacceptable to my MP and that my letter was being forwarded to the appropriate Minister for comment. After 4 months of hearing nothing, I received a reply which stated that although they are the majority shareholder etc., the Government is NOT interfering with the daily running of the Bank. Curious, because when sensitive issues such as bonus payments are discussed within RBS, the line is that policy is dictated by the Government ! Hence thousands of ' ordinary ', average wage earning employees are suffering financial hardship as a result.

I'm not writing this wanting or expecting any sympathy for those of us in the Banking Industry. The point I want to make is that RBS remains a duplicitous organisation which will only tell you what it thinks you want to hear. Together with the shambles that is the current Government, they make quite a distasteful double act.