Balls should have told Osborne that MIRs are all b**** anyway..

One of the great services the credit crunch is the revelation that Market Implied Ratings (as plied by Moodys, Standard and Poors and Fitch) are a reactive instrument, followed by a wet thumb in the air before telling us what the markets already know.

Not exactly a load of balls, but something Ed Balls who picked a fight with the Chancellor because, erm, he got a black mark from Moodys ought to have treated with his own professed contempt. Here’s what he should have said, but didn’t:

It will be much more effective long-term to disrespect Moody’s judgment, and say it is an irrelevance, as this creates a continuity as and when Labour needs to get into an aggressive, economy-saving fiscal expansion post-2015 and the cretinous, austerity-crazed credit rating agencies get touchy about it.

This is actually an important moment. I hope Labour HQ has gone over the scenario, and gets its response right, in a way which avoids it being hoist by its own petard in 2016.

More simply put:

Copious amounts of tea, and an unctuously sympathetic arm over the Tory Chancellor’s shoulder saying, “I told it was all balls any way George” would have better strategy.

Then again, Balls will be Balls. Which is why, perhaps, some Tory commentators are beginning to warm to him.

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  • It comes down to possible alternatives:

    1. In May 2015 some Labour bod becomes Chancellor. She (Yvette) or he (Ed, as of now) will go for Plan C, D or E, all of which mean growth. All bets should be on a consumer boost (e.g. reversing, even for a term, the 20% VAT rate).

    2. In May 2015 the Tories are back with an even harder line. Someone like Hammond is installed in the Treasury and it’s Monty Norman with knobs on. Cue squeaking of pips. Then there’s that EU referendum, which would further spook the markets.

    Either way, the Ratings agencies will either put up (junk status awaits) or shut up (wait and see). If it’s alternative [2]
    Who wished on the UK that ancient Chinese curse?

  • DC

    I think they should just arrest the corporate bankers and freeze their bank accounts and assets and cumulatively take back a certain few trillion that was taken out of the system by that lot as a result of them rigging it to suit themselves personally, than collectively on behalf of the nation and its businesses and even the banks that they were/are running.

  • brian2013

    I take anything Richard Murphy says with a pinch or two of salt.

  • Greenflag

    Some headliners and truths from the incoming Governor of the Bank of England (June 2013 ) Canadian Mark Carney .

    ‘Banks should work to restore public trust in their operations by embracing regulatory reforms, including changes to capital levels and compensation, Mark Carney, the governor of the Bank of Canada, said”

    “Bankers need to see themselves as custodians of their institutions, improving them before passing them along to their successors,” Carney said.

    The politicians (All of them ) meanwhile remain on bended knee if not fully prostrate to the City of London & Wall St and elsewhere .

    “It has been said that, ‘trust arrives on foot, but leaves in a Ferrari.’”

    ‘There has been a “significant loss of trust by the general public” due to the excesses that led to the 2008 financial crisis, as well as allegations of wrongdoing in areas such as the setting of the London interbank offered rate, a benchmark interest rate known as LIBOR, Carney said.

    ‘The lack of trust has depressed the stock price of banks such as London-based Barclays Plc (BARC) and Frankfurt-based Deutsche Bank AG, and is “restraining the pace” of the global recovery, Carney said.

    It has also “increased the cost and lowered the availability of capital for non-financial firms.””

    Asked whether he supports proposals by John Vickers, the former chairman of Britain’s Independent Commission on Banking, to have lenders separate their consumer and investment banking businesses, Carney said he was on record as doing so.

    “I believe in my testimony I made it clear that I was,” he said, referring to his Feb. 7 appearance before the Treasury Select Committee in London. “And if I didn’t, I am.”
    Carney said global standards that require banks to enhance their capital are an important part of efforts to rebuild trust. While reforms proposed by the Group of 20 nations “will go a long way,” they will not be sufficient to restore trust, he said.

    “Bankers need to participate actively in reform, not fight it,” said Carney.

    Those reforms have changed the economics of capital markets operations, the central banker said. “The amount of capital an institution needs to carry for the trading book has tripled, effectively,” he said. “It does, if you’re a bank CEO, make you think about how much weight you want to have on the capital markets business, maybe not this year but five years or 10 years out.”

    Carney also called on banks to improve the transparency of their accounting and conduct regular “stress tests” of their balance sheets.

    One of the biggest blows to public trust came from the “perception of a heads-I-win-tails-you-lose finance,” he said.

    “Bankers made enormous sums in the run-up to the crisis and were often well compensated after it hit. In turn, taxpayers picked up the tab for their failures.”

    Financial reforms must include “measures that restore capitalism to the capitalists,” Carney said.

    Global financial institutions need to rediscover the connections with their clients, he said. “The LIBOR-setter sees only the numbers on the screen as a game to be won, ignoring the consequences of his or her actions on mortgage-holders or corporate borrowers.”

    Banks’ manipulation of interest rates has spawned probes by half a dozen agencies on three continents in what has become the industry’s biggest and longest-running scandal. More than $300 trillion of loans, mortgages, financial products and contracts are linked to Libor.

    Carney urged banks to return to their “core values.” Senior management and board members should promote a “culture of ethical business” throughout the organization, he said.

    The Financial Stability Board, a Basel, Switzerland-based body that Carney chairs and that recommends global financial reforms, has suggested changes to compensation plans in the banking industry, such as the payment of bonuses in stock rather than cash.

    While an important lesson of the crisis was that large bonuses encouraged risk taking, compensation reforms alone can’t “ensure virtue,” he said. “Integrity cannot be legislated, and it certainly cannot be bought. It must come from within.”

    Will they (the banksters ) crucify Carney ?

    They’ll certainly try .He’s not talking their language . As for Mr Cameron and the Chancellor -where did you say that fence was 🙁

    The full article for anyone interested

    Meanwhile our politicians (all of them ) meanwhile remain on bended knee if not fully prostrate to the City of London & Wall St and elsewhere .

  • DC

    “perception of a heads-I-win-tails-you-lose finance,”

    Aka – USA Financial Imperialism.

  • Greenflag

    @ DC ,

    Aka USA Financial Imperialism ?

    The UK had it’s period of financial imperialism and so too had all of the imperial powers tho none to the degree of todays global financial nexus of banksters .

    The ‘financialisation ‘ of western economies is seen from within these economies as a transfer of total profit share from the more productive sectors of their economies to the financial sector .Thus in the USA the financial sectors share of total profit in that economy has gone from approx 12% in the 1970’s to over 40% . The same trend has happened everywhere else as well .

    The gist of Mark Carney’s message appears to be that banks are there to serve the economy and not vice versa .
    The ‘heads I win tails you lose ‘ is the hallmark of the hedge fund sector and it proffers the ultimate dream investment for those on the inside track i.e no losses on the downside and massive gains on the upside .

    Brought into existence by modern technology and the ‘Quants ‘ . Thirty years ago these people were working away productively for the USA economy in the fields of physics and mathematics until the USA decided to stop building their equivalent of the CERN Hadron Collider and Wall St ‘lured ‘ these folks to create via sophisticated math those weapons of financial mass destruction that Warren Buffet named .

    The above is just one small link in the transfer that has taken place . While tens of millions around the world may sympathise with your desire to arrest and jail the corporate banksters the latter have taken great care over the past couple of decades to ensure that the LAW was written in such a way as to protect them from any downside they might suffer from using their new ‘gouging ‘ tools .

    Our politicians of course went along for the ride and could’nt wait to sign up for the banking lobby to ensure their re-election funds .

    Mark Carney is I believe the only major figure in international banking who is speaking up for essential reforms .

    I guess somebody has to save the nuttier neo con financial capitalists from themselves and the path of anti democratic destruction on which they are set 🙁