I’m a day off a deadline for my current work so today I’ve been tidying up the introduction and making a few changes. Tomorrow, I join up all the chapters into the full work. The problems at Bradford & Bingley have been giving me some headaches as I’d used the B&B rights issue as an example. Since mid-summer it’s moved from being an example of a rights issue to being an example of a disaster.
Once Congress agreed to pass a bail-out for the holders of toxic debt it was predictable that there would be a sense of anti-climax. Listening to the news last week was like real-life West Wing and that couldn’t go on. Unfortunately, though, it feels like a nervous, what else can hit us kind of an anti-climax. Today, I’ve been watching UK bank stocks drop again pretty close to the depths they reached just before President Bush and Treasury Secretary Paulson first announced the bail-out. The drop has been so marked that I started to blame the short-sellers until I remembered that that had been banned.
So what else could be causing it? As far as Royal Bank of Scotland is concerned it looks as if investors have concerns that it will prove to be snared up with the part nationalisation of Fortis. Barclays’ purchase of Lehman’s business in the US isn’t looking too clever so far and they and Lloyds could take a hit from coughing up a contribution to the rescue of B&B.
Both in the US and the UK the whole situation seems to have become uglier since the politicians became heavily involved. A blame game has started up and a rather spurious one at that. The politicians are just as blameworthy as nearly everyone else, not more responsible but just as. Too late, they are blaming the bankers for letting things get out of control but they could have made overhaul of financial regulation their number one priority. The fact is that they didn’t look at the matter closely enough and history will judge them to have missed an opportunity – this goes for Democrats and Republicans and Conservative and Labour. One of the consequences of the false position that politicians find themselves in is the artificial distinction between taxpayers (and depositors) and shareholders. The former deserve to protected but the latter must live with the consequences of the risks they took. Never mind that millions of people wear all these hats simultaneously (and that the authorities were pretty keen on investors helping out by taking or increasing stakes in B&B back in July). Obviously, categories like ‘taxpayer’ and ‘shareholder’ are necessary for describing what’s going on but some politicians talk about them as if it was a game of Happy Families (actually, I’m sure I’ve heard that somewhere before).
So the best thing is to ignore about 95% of what the politicians say about the crisis and try to find out what they are doing right now. At least be sceptical about the things that are being said:
For ‘we must have better regulation’ read ‘we missed this problem was growing so big’.
For ‘we’re doing all we can to protect hard-working families from the effects of the credit crisis’ read ‘some people are going to lose out’.
For ‘we must have an answer to the questions of when Mr X knew the scale of the problem and why he didn’t do something earlier’ read ‘holding the other man to account has just come back into fashion’.
As far as the state of the banking industry is concerned, it looks as if the private individual with cash deposits is king. There’s all this money which is supposed to be earning (relatively) high interest rates but the banks are too scared to lend to home-buyers or to one another. So, one wonders where the money to pay the interest is going to come from, and the obvious answer seems to be from new cash deposits. Obviously, people paying interest on existing mortgages and debt and British business pay some of it but it does look as if bank deposits are beginning to become a bit like a national pyramid selling scheme.
Presumably, the Treasury and the Bank of England are (secretly) on top of this problem and at some point interest rates are going to fall quite far and quite fast.
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After the nail-biting bail-out negotiations the televised presidential debate in Oxford, Mississippi sounded a very tame affair. At the moment I’m expecting Obama to win and for America’s internal problems to take centre stage as far as his presidency is concerned. That Obama supports US intervention in Pakistan in pursuit of Taliban and al Qaeda suggests that he’s tuning into most Americans’ current little patience for overseas entanglements and that this will translate into reduced commitment in places like Afghanistan, Iraq and Georgia, which could be a worry for the rest of us. Either this policy will start to unravel and the US will be dragged back into conflicts but at a greater disadvantage than before or – they won’t allow themselves to be dragged back in and the rest of the West will be at an even greater disadvantage.
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A week ago they Sunday Telegraph had an article by Christina Lamb about Frank Leeson who served in the Indian Army in Waziristan after World War Two. The article emphasised the similarities between then and now although making the point that the Waziris were fierce but also tolerant from a religious point of view. The contrast between the intolerance of the Taliban and tolerance of most ordinary Afghans today came out in Lamb’s article from yesterday.
September’s ‘Atlantic’ had an article entitled ‘All Counterinsurgency is Local’ arguing that the allies in Afghanistan needed a bottom up policy of providing help to Woleswali, areas smaller than a province that are under the control of a single tribe. Certainly, it seems that provincial governors may be using their positions to favour some tribes (their own tribe) against others.
But no one seems able to explain how tribal self-governance fits together with any kind of modern state or modern liberty.
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I went on an excellent walk on Friday. This was the first time that I’d walked more or less right the way around the top of Blackdown. Blackdown and the Devil’s Punchbowl are the two biggest hills in this part of the world. We’ve been to Blackdown many times but I’ve always avoided doing the walk I did on Friday because I thought it would be too familiar. I was quite wrong; I’m often surprised at how surprising supposedly familiar places can be. My favourite part of the hill is the steep eastern flank, under the really big trees that make it like a forest cathedral. The top is now a lot more open because the National Trust is trying to improve habitats for heathland species. Right now it’s looking a bit scarred but I guess it’ll look a lot better in a year or two.
One extra surprise was to come across a burned out car near one of the car parks and the best viewpoint. If it hadn’t been such a wet summer this could have done untold damage. A couple of weeks ago I came across another burned out car in the middle of the woods near Shackleford.
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I’ve been looking at google analytics recently and I notice that a post I wrote about Lou Perac is the most popular topic on my blog. As far as I can tell it is just the name of a (sheep’s) cheese so I’m puzzled. Frustratingly, I’m having problems obtaining the stuff at the moment so if the real Lou Perac is reading….
