Tag Archives: Coalition Government

Economic ruin: The Root (Banking) Cause.

Here is some simple high-level analysis which always helps to crystallise issues:

The 2008 mortgage-driven banking industry meltdown was directly responsible for the Eurozone debt crisis, political chaos, austerity, recession (in some cases – depression) and mass unemployment.

The  multi-billion bank and government bailout costs were borne by the surviving taxpayers through increased taxes, constantly inflating prices as well as erosion of their capital and their pensions.

The ROOT CAUSE of this catastrophe was the design and distribution by the banks of technically ill-conceived products which were designed for no other purpose than to optimise bank profits.

Mortgage Securitisation, Default Swaps, PPI, Interest Rate Swaps etc were (are) all bad products.

Against this background, the British Chancellor, on behalf of the Coalition Government wishes to do everything he can to preserve the banking status quo. An “industry” which continues to grind the economy into the ground whilst sucking more cash out of the economy than it is putting in.

Meanwhile, it declares largely illusory profits upon which to base eye-watering bonuses.

The argument that the financial services industry represents a substantial percentage of the United Kingdom’s Gross Domestic Product used to be a good one!

But if the economic collateral damage being inflicted by the banking industry continues, its contribution to GDP will soon tend towards 100% – once everything else disappears!

(On the subject of Root Causes – the NHS is failing to deliver because it is TOO BIG and over-populated by over-promoted Administrators rather than Managers!)

HS2 high-speed rail route. The Coalition’s next train crash?

Everything that our Coalition government has touched so far has been a train crash. Today’s initiative, announced by the Secretary of State for Transport, will be no exception.

The latest economic miracle-cure is the HS2 high-speed rail link between London and Birmingham  ………. and maybe beyond to some of the outer planets such as Manchester and Leeds!

I just want to go on record to say that no matter what the cost assumptions are in respect of this rather grandiose and quite unnecessary scheme, the “guesstimates” made by proponents of the scheme are bound to be incorrect. Why? Because they’re ALWAYS wrong!

The government  intends to invest £32.7 billion. Their advisers (whose computations, as we know from bitter experience, are always SO accurate!!!!!) have convinced the Cabinet (and others)  that this investment (after factoring-in new job creation, less road congestion and profits from ticket sales etc.) will produce up to £47 billion in benefits!

On the face of it….a “No Brainer”. So…what’s the problem?

The major problem is the Law of Unintended Consequences, such as creating a gradual shift of trade from North to South……. “Accidental” Economic Engineering.

But the most obvious is the cost – and this is why I want to be on the record.

As government is dealing with Private Enterprise it will be ripped off.  The Private Sector ALWAYS rips-off the government.  It’s a national sport.

I predict that after factoring the pre-scheme aggravation, NIMBYS’ and government lawyers’ fees etc with ongoing expenses such as the crippling financing costs of such a project, this scheme cannot be delivered for less than about £250 billion.

Yes….a quarter of a billion!

£32.7 billion? Don’t make us laugh……and by the way…what do THESE GUYS think?  They seem quiet….

(Thanks for your emails . For the moment, I cannot see Twitter or Linkedin.  Back later this week.)