baldysblog.co.uk

I was amused to see a blog in the Independent by one Mr Ben Chu in which he was attacking Boris Johnson for Lobbying the EU concerning proposed legislation on Hedge Funds and all of this is set against the background of upcoming G20 Meetings. http://benchu.independentminds.livejournal.com/19057.html

Hedge Funds are neither here nor there in the story of recent events. Of course the French and Germans want to clobber the City of London any time and in anyway that they can, the EU is and always was run for the benefit of France and Germany and on the basis of “bugger my neighbour”.

The real culprits of the crisis are in order of “Guilt”:

The Politicians – it was an obviously unsustainable boom fuelled by lots of “cheap” but short term money sloshing around the system and they should have been cooling things down from around 2002 but didn’t have the guts. The sure bell-weather were house prices which were clearly ridiculous in the UK, Brown was repeatedly warned by the IMF from 2002 onwards.

The Consumers – If it looks too good to be true, it is too good to be true. Greedy, lazy and total stupid as they tripped around the shops bending their plastic and re-mortgaging to release equity to spend. Naturally, if the “market price” is massively inflated and the property market falls, the debts incurred don’t but of course, who ever accepts the blame for their own stupidity ?

The Banks – Expand or die led to ever decreasing financial underwriting and an insane desire to become the biggest Bank in the World. Barclays was saved by being out bid by guess who ? The lucky winner of a Dutch Bank. Of course we can determine that no one has learned from this when we look at the derelict hulk called Lloyds which was once a profitable business – BB – Before Brown and a word in your ear.

Sorting Out the UK

The trouble with people banging on about Hedge Funds, Bankers Bonuses and the like, is that they are no better than the chap who complained to the Steward about too much ice in his drink, after the Titanic had hit the iceberg. The reality is that in most respects, the behaviour patterns displayed whilst reckless, were rather more symptoms of the disease rather than the disease itself.

Some things require concerted International action but sorting out this Country doesn’t. We may, no we do need to reshape our Financial Institutions, which will mean separating Retail from Wholesale activities which may lead to us paying a monthly fee for having a Bank Account and also a Credit Card rather than those costs being “hidden” but us in effect, still paying them. We may even need to look at the mortgage business, should that return to a “mutually owned model” – backwards to the future ?

The Future

Banks will need to be broken up because the real lesson is that they became too big to be allowed to fail and in the end, that was the real problem both here and in the USA.

But the most important thing is that the UK economy must be rebalanced and directed to genuine wealth creation in agriculture and high quality, low volume manufacturing. Whilst in the 80s it made total sense to see the winding down of the old “Heavy Industries such as Coal, Iron and Steel and that things like mass volume motor car manufacturing would follow the lowest wage and unit cost, it was a mistake to imagine that all manufacturing would or should cease.

It may be as a consequence of this Recession that a “Less is More” culture may evolve and people will have got past wanting to own lots of cheap shit and instead, only buy the things they want plus, expect to pay a higher price in exchange for quality and service. We shall see.