If it wasn't such a wet day, I might have been out for a walk. As it is the promised dry spell inthe middle of the day has turned out to be very short.When I took the ash into the garden the rain came on again as if a tap had been turned on.
It's been pretty dismal all week in this part of the world but for the last two days I've been working on a freelance project, so I would have been indoors anyway. The work has been news analysis and I've analysed the news story about Eric Daniels' choice of directors for the new Lloyds megabank several times over. As a result, and notwithstanding my own reservations about the Lloyds/HBOS merger, expressed here a couple of weeks ago, I'll take it as personal affront if any of these attempts to save the Bank of Scotland actually come to anything. My forecast remains that this is unlikely. The simple reason is that HBOS's solvency problems could be so severe that only the government's offer to not submit the merger with Lloyds to a competition inquiry, and thereby permit the formation of what would normally be considered to be an uncompetitively large bank, is sufficient inducement for anyone to take the risk of being dragged down by HBOS.
That said, I still think that the Lloyds megabank solution is going to come under more fire a few years down the road. Maybe Lloyds will be able to sell of some of its parts before that happens.
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The attitude to the banks after the surprise interest rate cut by the bank of England was a surprise in itself. It's already been pointed out that the government's wishes for the banks to lend more and lend more cheaply may not be comptatible with the banks being able to repay the money the government has provided to them. However, there are a lot of other questions to be answered about the supposed advantages of lower interest rates. First of all, we may still see a bigger run on sterling caused by these low rates. How easy would it be for the government to stop UK nationals buying foreign currency? The government will lose billions in tax receipts on the interest paid on bank deposits but they may be more interested in being able to borrow more cheaply themselves. Unless the rate of inflation falls very rapidly, savers will be receiving negative rates of interest.
In fact it looks as if the Bank of England's Monetary Policy Committee are reckoning on just such a steep fall in inflation and that they've some truly awful forecasts. This week's 1.5 percentage point cut is another of those 'no one realised how bad things were until...' moments like the reference that Alistair Darling made to the worst economic conditions for 60 years, back in September.
As we've been told the right first question is not what effect the interest rate cut will have but whether it will feed through into actual interest rates paid and charged by the high street banks. Commentators keep saying that the real trigger for drops in real interest rates is a drop in LIBOR, and that that depends on the banks being able to trust one another. Granted that LIBOR has been dropping gradually for two or three weeks now, but it does seem strange that it dropped so much yesterday afternoon - after the MPC cut.
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I'm glad about Barack Obama becoming the next US President - and curious about how he's going to handle the crisis. I was taken by surprise at the significance that was attached to his colour as up until Wednesday everyone seemed to be saying that he transcended race, which I took to mean that voters were able to see the man, not the skin.
The new film 'W@ has been advertised a lot on the radio this week. Although I believe that a lot of President Bush's policies were wrong-headed, I'm amazed at public opinion turning on him like this. Have millions of people simply forgotten that they voted for him - twice. I guess it's just a scape-goating process but it seems ugly and counter-productive. After all, it's the voters who need to learn from their mistakes, not the ex-presidents.
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In the last two weeks, I've had two good books to read; 'The Hour of the Cat' by peter Quinn, and 'Zoo Station' by David Downing. Co-incidentally, the plots of both of them take place in 1939 and both deal with eugenics programmes, illicitly in New York and legally in Berlin. 'Zoo Station' had the edge as a thriller. 'The Hour of the Cat' takes place in New York and Berlin and while the depiction of the private eye, Fintan Dunne, is excellent, the chapters about the real-life Admiral Canaris and Colonel Oster are much less interesting. I'm still not sure if turning Hitler history into this kind of fiction is a good idea.
