Update WOW! This certainly gets Ireland out of jail and anyway– “There has been no stampede on the part of UK businesses to transfer savings to Irish banks, a BBC poll suggests. In a survey carried out with the consultants Unicom, 91.6% of the 312 small businesses quizzed said that they would not consider moving deposits.” Peston adds: “The decision by the German federal government to guarantee all private savings in German banks is momentous. In a globalised banking market, in which money can leak across borders like a sieve, it will be almost impossible for the UK not to follow Germany’s lead. I would be immensely surprised if Alistair Darling, the Chancellor of the Exchequer, didn’t announce a similar commitment within the next 24 hours.” Good to see Slugger’s judgment vindicated! ( phew )
ln the blizzard of Sunday coverage about “staring into the abyss” etc., two pieces in the UK stand out and a couple in Ireland, on what looks like an emerging consensus to recapitalise the banks. The Lib Dems’ Vince Cable by common consent the best Chancellor we havent got, has quietly anticipated the programme Alistair Darling is expected to touch on next Wednesday. Extracts: “One step would be to help banks to raise fresh capital from the markets….An.. approach would be to use the £8 billion the government has committed to social housing for social landlords to buy surplus land and property at the hefty discounts being offered… There will be time enough for post-tsunami reconstruction. The priority now is disaster management
And he has room for a note of hope too….
The financial crisis has touched only the edges of the real economy. Nobody seriously expects that to last.
A big cut conceivably as much as two percentage points would have a big psychological impact on consumer and business confidence when it is most needed.
Hamish Mcraes grand historical sweep in the Independent makes a similar point.
Policymakers coped very badly with the great inflation of the 1970s, but and this is my big point even a poor policy response did not result in a global crash akin to the 1930s.
A few countries, including Ireland, are officially in recession, as defined by having two successive quarters of negative growth. So there will almost certainly be a recession in the UK too. But looked at historically, there is little reason to believe that this could be as deep or prolonged as the recessions of the 1970s or 1980s, and as far as the UK is concerned, the balance of probability remains that this need not be as serious as the slump of the 1990s. Many people may have had their faith in the banking system seriously battered, but unlike a generation ago, we have not lost faith in money itself.
Meanwhile David McWilliams in the Sunday Business Post dismisses the critics of the Irish guarantee plan but goes on to demand a high price from the banks, if the State goes on to do what is necessary to support recapitalisation. The Sunday Times agrees ands is prepared to put a figure to the cost
Robert Peston undaunted by the scale of the crisis points out that this is a good time to invest ( if you can). He offers a variant of a Treasury plan to pump equity into the banks, which is to fund the new state pensions body to do it and benefit not super billionaires but pensioners. Sounds like a good wheeze to me.