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What about those that designed a regulatory structure that failed so miserably?

Also those that refused to provide ready liquidity to the banking system and, when Northern Rock made a request, leaked it causing a bank run?

While Mr. Gieve was high up the ladder, it only lessens the risk.

You are always in danger when those above you cause a shambles and need a scapegoat.

I understood that it was Gordon Brown and his chums who devised the tri-partite system which failed at its first serious test - Northern Rock.

As a sometime systems engineer, I was amazed at Gordon Browns response to this catastrophic failure - "all systems require fine tuning from time to time".

Well, I really must remember that answer but somehow I don't think my customers would be too impressed if a system that I had designed suffered such a serious failure.

In fact, I sure my reputation would be completely trashed and I doubt if I'd get work again as a systems engineer.

Somehow, in politics, people can get away with this complete garbage and come out the other end enriched and endowed with a nice bullet-proof gold plated pension.

You really could'nt make it up.

So the FSA fired a couple of people and now the Bank has let another one go.... Hmm to lose one official is bad luck but to lose two strikes me as very unfortunate.... (to misquote Wilde)

The problem is that the trillions of synthetic money are still sloshing about causing inflationary pressure. Firing people will not stop the rot.

I can see nothing that can be done short of exchange control and the type of Loan/HP controls that existed in the past! (The reintroduction of which is highly improbable and would be devastating.)

It August 2007 when the short term credit markets froze up, the ECB acted to pump more than 200 billion euros of liquidity into the money markets. The Fed took similar steps whilst the Bank of England did nothing until the end of April 2008 before it pumped 50 billion pounds into the markets under the special liquidity scheme.

As three month Libor is currently at around 5.9% - 6% which is far too high compared with a 5% base rate this suggests that the Bank of England still has not got control of the liquidity crisis and the policy of rationing money to banks under the special liquidity scheme has not worked in the manner the BOE expected.

In my opinion both John Grieve and Mervyn King have failed to act when required during the crisis and the Bank of England (Danny Blanchflower apart) appears to be nothing more than a talking shop of academics who are detached from the real world.

I sincerely hope that his replacement has some practical experience of business or the city rather than another academic.

Re: #4 fireyshandy:

As three month Libor is currently at around 5.9% - 6% which is far too high compared with a 5% base rate...


Indeed, it serves perfectly to illustrate that the MPC have been derelict in their duty by cutting interest rates in the face of surging inflation. The market clearly indicates that the Base Rate should be considerably higher, and having idiots like David Blanchflower repeatedly calling for lower rates is pure financial irresponsibility. At least some of the MPC members considered voting for a rate rise this month, although, yet again, they were again derelict in their duty (in a new way!) by not voting as such because they were worried about the market's reaction: neither the market's reaction, nor the growth rate of the economy are their mandate; they are charged with targetting INFLATION, ie protecting the value of our currency. The sooner they start shouldering this responsibility, the sooner we can begin to put this country's economy back on a sound footing rather than the pyramid-scheme of ever increasing debt-fuelled spending of the last decade as promoted by New Labour.

Bank of England independence?

someone should tell Gordon that although the public might be misguided enough to blame the BofE and not the government for inflation, that trick will not work twice and financial stability is firmly the mess he has caused by running an economy on debt.

AD's speech:-

"It will bring valuable, external expertise with City experience to bear on the Bank's decision making".

Won't these be the same 'City experts' that have helped create and perpetuate the credit crunch?

"The challenge for us is to ensure that the authorities can act quickly and decisively where necessary to support financial institutions".

What about supporting and protecting the voting, tax-paying public? This statement sums up the mentality of this government, protect the few at the expense of the many. The question that must be again asked is 'why should the financial institutions be offered such protection and support in a free market in which they profiteer during times of plenty?'

Banks offer customers an umbrella during sunny days and snatch it back at the first sign of cloud... Time to reap what they sow...

I am still disgusted at the £50billion bail out, is there any wonder that inflation is gaining momentum in an already delicate global market.

Save the banks, to hell with Joe Public!

I wonder where Gordon's next job will be? I also wonder where Labour will find it's cash injection to overcome its £20illion+ party debt?

This week The Royal Bank of Scotland issued a crash warning. It was issued by a man woh apparently predicted the Credit Crunch. It would be very interesting to have this story explored in this blog as some of the possible effects of such a warning and event, if it occurs, may be highlighted.

Its strange how those in charge only see the problem after the event and then claim suprise. Most rational people with some years of common sense behind them could see that the reckless and dodgy lending policy from all the banks would lead to serious fall out. Not our regulators obviously.
There are reports today that past executives of Northern Rock face "Investigations" but already the city press are saying it will be difficult to make charges stick due to the "Unforseen" credit crunch. The reckless lending banks caused the credit crunch so lets not make that an excuse. But, as always, give the worst news and start to mitigate immediatly and quietly drop the issue when everyone has nodded off again.
I was led to understand that the Directors primary responsibilty was to the shareholders of a company and clearly Northern Rock executive decisions cost the shareholders to loose almost all of the value of their holdings. I would have thought those executives should be held responsible and their own assests used to compensate for those losses.
I doubt that will ever happen unfortunatly, but if it did, it could well focus the minds of other boards who treat their shareholders with contempt.
I would add that I am not, nor ever have been a shareholder, borrower or lender to Northern Rock.
I would just like to see those who have brought shame to our once proud nation brought to book and to ensure they are not allowed to live in luxury whilst those they have let down face ruin.

During the Northern Rock crisis Gieve was shown to be totally incompetent.

Will we be told how many millions he is getting as a pay-off?

Reap what you sow...

Well the bankers, the BoE the HMG and the great British public could be argued to be getting their just desserts now.

The teaming masses of the British public are nowadays a small minded selfish grasping bunch with no sense of community.

Gecko said 'Greed is good' .. well the public now despise rich city types but are just as greedy themselves.. just not as capable as Gecko of achieving.

So people have flocked to borrow as much as they can in sheep like greed for consumer goods and bigger houses that they cant afford. They refuse to stop overspending and then blame the banks and the government.

Well... tough luck. . now you've trashed your life you can go bust and dont come crying to the BoE or the Chancellor.

Whether this greed and seflishness was caused by Thatcherism and then new Labour or whether the internet has helped drive globalised consumerism is, to a certain extent, irrelevant.

When even the French more egalitarian economic model is being binned then I'm afraid we are going to be stuck with destruction of community and haywire debt.

As for regulating banks .. don't be silly. The small ones wont listen (they are usually pretty crap and badly managed.. why else do they need to pay so much for deposits) and the bigs ones will regulate themselves as best they can primarily and secondly work to also comply with external regulation.

The banking regulation arm (the market regulation arm can tinker but cant stand against a tsunami) of the BOE / FSA / HMG is redundant. Its just difficult for that to be accepted politically.

Until a better economic model than the gold standard or Keynes or free market economics etc can be found (and it would have to be a global one.. so no chance of it working realistically) then we have interest rates as a punishment weapon for consumer spending to help combat inflation .. and we do not want high inflation, nor does Europe, the US or developed Asia (China and India will do their own thing for now of course).

Glad I'm retired and not a policy maker!

No 12: eloquentsillyperson.

Pheew! That is a rant. You have a very low opinion of your fellow travellers my friend.

Alistair Darling really does have some front.

New Labour have presided over a massive increase in the money supply during the last decade. With astonishing arrogance, Gordon Brown announced the end of boom and bust, as if he somehow possessed the ability to defeat the economic cycle. He has taxed heavily - primarily by stealth - and yet managed to spend even more heavily! The consequences of his and Tony Blair's combined mismanagement of the economy are finally starting to emerge. The surging prices being seen are the destruction of the value of the British currency as a direct result of New Labour's actions, and then they have the gall to ask people simply to accept that the Government have made them poorer and not to seek corresponding increases in income just to maintain their standard of living. Ain't gonna happen.

As for Mervyn King, he is rapidly losing any of the little credibiliity that he still possesses.

"Insisting that the Bank's rate-setting Monetary Policy Committee (MPC) 'is prepared to take whatever action is needed' to bring inflation down..." Oh really??? So it wasn't the MPC that instigated 3 (yes, three, not one, not two, but three) cuts in the base rate in recent months while CPI was above (ABOVE AND RISING) the 2% level they are mandated to target??? Indeed, no doubt it was another MPC that voted to leave the Base Rate on hold just a couple of weeks ago with all the indicators showing that inflation is continuing to get quite considerably worse??? Apparently the idea of voting for an increase was dismissed because it might spook the markets, so that "prepared to take whatever action is needed" is obviously with the understood proviso that such action doesn't spook the market in any way...

"But he added that no monetary policy could prevent the current effects of rising food and energy prices on living standards." Hmmm... except maybe if interest rates had not been slashed to such ridiculously low levels at the turn of the millennium, and then left there for a protracted period of time??? And Gordon Brown had the arrogance to celebrate repeatedly his self-proclaimed brilliance at achieving such historically low interest rates!!!

"Neither could interest rate cuts coax banks, which are currently re-evaluating risk and keeping a tight grasp on their balance sheet, to be more generous in their lending to house buyers." FINALLY!!! So, why exactly have the MPC been cutting interest rates lately???

"But he said these pressures would be temporary - the opposite side of the coin to the falls in price of manufactured goods from countries such as India and China, which over the past few years allowed our standard of living to rise at a rate faster than productivity." So, when the Chinese effects were temporarily deflationary, it was OK to use this as a basis for cutting interest rates, but now that these effects have reversed and are "temporarily" inflationary (yeah, right...), the converse argument does not apply??? It's not even as if they left rates on hold while inflation was rising, they started cutting them!!! Credibility rapidly evaporating as more and more desperate arguments are made against raising interest rate in the face of inflation that is on the brink of running completely out of control.

And, to cap it all, this morning retail sales figures were announced: 8% (yes, EIGHT per cent) higher than a year ago!!! Interest rates are simply too low, and the MPC must raise them to limit the damage from the coming inflation bomb.

There was a time when this country had some backbone. Maybe the coming economic crisis will see its re-emergence.

(All quotes from

There are some angry people here. That in itself is interesting.

I am pleased that some credibility is being given by the regulatory authorities for the need for financial stability. I hope as a consequence some heads will get banged together in certain quarters.

The question has to be asked why this was not so important this time last year and the year before. The answer appears to be that Gieve has to go.

Is he an innocent victim or was he just in the wrong place at the wrong time? I think the latter as if he had raised the issues that we now know about with the previous Chancellor a year or so ago you can imagine the response he would have got.

We are slowly seeing the regulators getting to grips with where the economy has landed. This is reassuring. Of course, we would rather it had not got to this circumstance but, as I have often said, we are where we are.

The wider economic consequences of the credit crunch, commodity and fuel inflation and the eventual savage cut in government spending are going to have to work their way through society and this will be a painful experience for us all.

The political fall-out will be significant and substantial and the country will have become a different place at the end of the process. So who cares about here-today and gone-tomorrow politicians? Only the people endure.

One hopes that all this furore will be for the better, one fears that it might not be. We should allow our hopes every opportunity to be expressed.

We live in interesting times.

It's strange that after all the greed fulled mistakes and collapses that Brown still thinks that the solution to this problem lies somewhere in the City, if only he could find it. That if you tinker here or there you can make the bad thing go away.
He's mistaken the disease for the cure.
The problem is, was, and has always been, the City.

Wonder where Gorden will be working five years from now when the little people are crawling in the gutter.

# 15

"The political fall-out will be significant and substantial and the country will have become a different place at the end of the process."

It certainly will as the political entity 'Britain' approaches the end of days.

In my opinion, the Tories to fill-the-boots of Government, by default, in or around May 2010.

Then Alex Salmond will call the independence referendum in Scotland ... which I expect him to win ... and then political Britain will be done for.

I'm very much looking forward to the rebirth of political England, which should coincide with an economic upturn later in 2010.

#8 - a very good point.

My current annoyance is with the phrase 'city whizz kid' - who ultimately thought up CDO's and the like and created 'something out of nothing'.

I only took my Economics to A-level at school, but I still learnt the fundamental rules of banking (the 10% rule) as this dramatically reduces the liability on default.

Nationwide and other traditional building societies have used this for years, funding their lending with savers money.

So why did the board at NR think they could re-write the Economic theories of the past that served us so well? They were being touted as 'financial whizz kids' before the crisis for the impressive growth and profits NR was making.

I don't expect the ordinary Joe Public to understand or care, but I am very concerned that the highly skilled MPC, the highly skilled FSA and the highly skilled Treasury all failed to spot this was going to happen.

Surely all these people couldn't have been wrong? Sacking people isn't really the answer unless you understand why it failed. I'm sure the new team won't make this particular mistake again, but the next one won't be like this one - they never are...

The next financial crisis will be when there are power shortages and EMP strikes from the sun. With the mass failure of electrical equipment our finanical industry will go into meltdown because most of the employees cannot add up without a calculator! - once again the fundamentals have been ignored for the promise of easy money.

re #18 "surely all these people couldn't have been wrong?" ie FSA, MPC, Treasury etc

Well they (we?) have all been living in a state of denial. The real world consists of ordinary practical things like growing food to put on the table; mending roads; building houses; looking after children etc etc not devising fancy ways to pull the wool over the eyes of those less knowledgeable than yourself as all those city whizz kids were doing to make a fast buck egged on by dishonest politicians like Tony Blair who I would suggest was the chief instigator. He set the tone (no pun intended) of the last 10 years with his fancy talk and we the public fell for it.....well obviously not all of us who have seen previous high spending, high taxing labour governments. Many of those younger than most of the contributors to this blog fell for all of it hook line and sinker. Unfortunately the chief culprits make their money and get out quick leaving others to pick up the pieces.

We need a short sharp shock as happened when Margaret Thatcher took over in 1979. It was very painful but better in the long run than a long drawn outpainful process. Raising interest rates is probably the only solution.

Delegation by using one or more of the words independent, trust, free of politics is an excuse of passing the buck and making someone else the scapegoat.

Outsourcing is also another means of enabling others to take the balem when something goes wrong.

The FSA and BoE effectively stop the Prime Minister being blamed for the mess or should that be state the we're in.

By the way I think Chancellor Darling is doing a very good job. Could you do any better if your boss had messed up prevously without dissing the boss?
He gets on with his work without obviously trying to blame anyone.

Umm ! Arrests in the US revolving around sub prime ?

Will investigations move to the UK ?

One wonders if some people may not be having a good nights sleep for the next few weeks.

Message 17 John Constable

I think you will find that Scots nationalism is just another big bubble.

Please can you all stop thinking bubbles have a greater substance than soap and water? They are nothing more than individualised and, presumably, alienated froth.

#22

I disagree completely.

Do you live in Scotland?

Since Salmond and the SNP gained control, the Scots have been energised ... people tell me there is a real buzz up there now.

It should really have happened about 30 years ago, but the piece-meal devolution process was designed to delay/stall the breakup of the UK.

Anyway, it is far too late to stop it now.

Soon we English, Scots and Welsh will all be free to tread our own political path.

Message 23 John Constable

If there's a buzz it is the midges. I don't live there as my forebears were forced to take the advice of Sam Johnson and go south.

There is no economic plan for Scotland other than the oil and even that is arguable. Salmond will prove to be as useless as all the other stooges in Westminster and Holyrood.

You have a strange idea of freedom: without the Union we are all nothing.

# 23

Aye, I remember the midges well when I worked up there a while back.

At least Salmond was an economist in an earlier life, which I think is a more useful qualification for First/Prime Minister than 'academic historian' - Brown.

The pro's seem to think that Salmond is currently the most capable politician in Britain.

Apart from the oil, you are overlooking a resource which Scotland is well endowed with - the new oil in fact - water, which we English need plenty of.

Without the Union, we are English, Scots and Welsh - which is certainly not 'nothing'.

We are also European citizens, which one day will have as much political status as being an American.

We are also members of the Commonwealth, which also means something - even if it is deliberately neglected by our shameless politicians.

So, all-in-all, we do not need the 'Union' for our identity.