Monday, January 19, 2009

Brown is bankrupting the UK

Bonds tumble as Government admits no cap on taxpayer risk

What happens when government bonds become worthless? Is this what Brown warned the journalist against speculating on this morning?

Posted by paul @ 04:15 PM (2041 views)
Please complete the required fields.



24 thoughts on “Brown is bankrupting the UK

  • Is UK plc now technically bankrupt? The financial position of RBS is horrendous and liabilities possibly exceed the GDP. It is surely only a question of time before the pound sterling collapses. Any one got any ideas as to time frame of what is now unraveling and appears inevitable?

    Reply
    Please complete the required fields.



  • Techieman & 51ck

    Thank you for coming back again on that link, I think I missed the last couple of posts at the time.

    Seems what should be a very safe investment – isn’t.

    Reply
    Please complete the required fields.



  • Anyone have Bloomberg or Reuters (or CMA)? If so what is the current UK PLC CDS spread?

    Reply
    Please complete the required fields.



  • str2007 – i think the point is that the funding requirements will increase the yields. (i dont subscribe – as yet – to the default risk meself).

    If there is an increase in yields how could the banks (supposing they are not 100% nationalised by then) compete with “sovereign debt”?

    If there is a default which would go first (banks or gov bonds) is an academic question, because if there is a danger of that there should be some warnings first… but then again…!!

    Reply
    Please complete the required fields.



  • Generally speaking this would look alot more horrendous if it were in isolation. So many countries are stuffed so it is a question of where will people put their money… Nowhere looks a good bet but they will have to find somewhere that offers the least risky option Abu dhabi cant keep hundred of billions of dollars under some magic carpet!

    Reply
    Please complete the required fields.



  • “dangerous and worrying” ~~~ optimist ~~~ Royal Devonport Dockyard (deceased)

    Reply
    Please complete the required fields.



  • This is turning into a pantomime, the Govt both slamming the Banks for excessive lending (albeit with a decade of not just tacit but active govt encouragement) and at the same time threatening to nationalise them if they don’t resume the excessive lending to support asset prices.

    Also this is not really about Banks but the state of the UK – losses that cannot be stemmed. It amazes me that financials are trading at on average 10% or less of peak value and yet property shares have only reduced by 60% and retailers by less than 50%.

    I sense the crash in finanicals is the begining of the next down leg in the markets – a rerun of oct/nov. TM I know you have been anticipating, is it looking like now to you?

    Reply
    Please complete the required fields.



  • Maddison, I’d agree with you if we were talking about the US rather than the UK, I do increasingly wonder if there will be a flight of capital from the UK and something akin to a run on the currency or at least a continue downtrend similar to what has happened over the past 6 months.

    Incidentally HSBC do an excellent currency dealing account – as long as you want to swap your sterling for Yen or USD’s, exhange rate is almost market. I had been using TD Waterhouse but the exch rate not as good.

    Reply
    Please complete the required fields.



  • quote:-

    they should know the truth about the banking and other economic bailouts; they are a scam, planned and executed for the benefit of parties hidden in the shadows. Brown’s insistence that Germany provide the €50 billion ‘stimulus package’ illustrates the central importance of these bailouts, not in their stated aim, in which they will fail, of rescuing the banking system and small and medium size businesses but in the other effects they will have.

    Quite what these other far more important but unspoken of effects will be is of course a matter of speculation. What is apparent is that governments that use bailouts and fiscal stimulus will end up with immense mountains of debt. This will leave each of these nations in the same position vis-à-vis their bankers as developing countries have found themselves vis-à-vis the IMF. Just as IMF debtor nations have found that all domestic political power has been ceded to the IMF and those that dictate the Washington Consensus, so too will the governments of the world that are currently piling on the debt find that domestic political power has been ceded to the bankers.

    These bankers will determine, by virtue of the economic reins that they hold, the entire activity of government of every nation. They have in fact been in this position since at least the end of the 19th century but now their power will be even greater, if that is possible to believe. It is these same bankers that constitute the modern Money Power that has its direct inheritance from the Money Power of the 18th century.

    but where from?

    Reply
    Please complete the required fields.



  • Get ready for nationalisatiom folks.

    Reply
    Please complete the required fields.



  • I know—Typo——– I’ve got a dislexic keyboard.

    Reply
    Please complete the required fields.



  • plato ~~~ I had one of those ~~~ but I got a new one in a charity shop for a fiver

    and it’s absolutely fime.

    Reply
    Please complete the required fields.



  • @11. plato said…Get ready for nationalisatiom folks. Monday, January 19, 2009 07:05PM

    Yep but not just the Banks under Gordon’s watch – Banks, Car mfr’s – you name it he’ll bail it – welcome to the GDR (Gordon’s Democratic Republic)

    Reply
    Please complete the required fields.



  • jack c……..

    What chance do you reckon on house builders/construction and maybe even estate agents?

    Cheers troy…….

    They’ll be the biggest retailers operating soon the way things are going.

    Reply
    Please complete the required fields.



  • @ plato – no problem if they scream loud enough Gordon will bail them with Tax payers cash (that must be drying up I’d have thought following the changes to IHT, CGT, SDLT, reduced VAT and the fact that unemployment is rocketing)

    Bellway, Barrett Wimpey your treasury backed builders working on behalf of the nation to provide that much needed affordable housing all sold at affordable prices by Rightmove the treasury backed estate agent of the people.

    Reply
    Please complete the required fields.



  • Yes the banks’ losses are capped but the taxpayer’s are unlimited.

    Reply
    Please complete the required fields.



  • stillthinking says:

    What taxpayers? People will leave. You can’t just expect people to pay a year’s salary just to stay in the UK, while unemployment is rising and wages are falling in real terms, and they can’t get a proper house to live in. No way. This is back to the 70s and people will attempt to get out, maybe unsuccessfully but who wants to pay off this debt? Its huge.

    Reply
    Please complete the required fields.



  • Bellwether – sorry have not been on since your post. Actually this level is quite critcal in the Ftse. Also re the banks, the question now is how much further can they fall? The answer is i am not convinced this is the big downmove. Between here and 4000 is the 61.8% level, so unless we have a violation of the 4000 level i am (believe it or not) not bearish (although im not exactly a bull). The retracement from the lows COULD be over and i am not confident in what i have just written, but thats my intuition. If i do trade to the upside i wont be putting large lumps on the table.

    Reply
    Please complete the required fields.



  • techieman

    Re: No. 5 : The increasing yield caused by falling bond price surely – hence not a good investment ?

    Re: No. 19 : You were having a conversation with S2R1 the other day, tell me I’m wrong but didn’t your charts correspond in mid-April this year pointing to the lows you’re talking about occurring then ?
    I seem to recall there was also talk of a date, I think 23rd January 3 days into the new Presidency.

    Maybe S2R1’s charts are more date specific than yours.

    Reply
    Please complete the required fields.



  • str 2007 – re: no 5. The point i was making (badly) is that the yields imo will increase because of the funding but currently that is (was if we have had a top in treasuries) offset against deflation. i.e. the deflation pushes the yields down but because of the funding requirements (regardless of any default risk or hyper-inflation concerns) we will have increasing yields. Now that means they are bad investments in the medium term – although in the very short term they may be good investments because the deflation is a bigger stick currently. However once the yield rises to correlate to the funding requirements you may very well get big redemption yields at both ends of the curve.

    At that p[oint a decision is either that the sovereign debt will default (in which case they would be a bad investment) or the economy hyper-inflates or the funds are obtained but at high rates. So yes i think rates rise in the medium term and then it MAY be worth buying to get a good interest rate. At that time this (if i am righ) will increase the demand for funds (and the cost) from other players.

    Lots of ifs and buts. Will deal with 19 next.

    Reply
    Please complete the required fields.



  • I have said that i expected a rally in the last qtr of 2008 and first of 2009, after which i expect the market to fall. I was pushed to give an upside target (which i dont like to do) so i said around 5,000. Now i dont know if 4680 satisfies that rally (we have had 1,000 rise from the lows) or if we have more upside. Having said that i have been going long but getting out of most of the position quickly and for relatively small positions. I thought there would be a pullback off the 4680 high and was looking for a signal to re-enter on the long side (which is why i say point 19). I got out very near the high of a call and trebled the money on half the position but on the other half i let that run and at one point on Friday was showing a health profit – i was long January calls. However as you know the last hour the index fell 100 points and so on the rest of that position i lost the premium. Overall i made a smallish gain (for my normal size i would have made a decent gain but as i said i dont really trust this bull market and there is event risk at every turn!).

    s2r1 – stated that “something would happen” – and ive not looked back – around the 20th January, i THINK it was something bad, so if thats correct i think hes saying more downside (but that could be the bank falls we have just had). This is based on Armstrong.

    The Armstrong model predicts a low of “something” in mid april. The conversation was that Armstrong uses the year and a decimal point. We were discussing the application of that. I will post in the next comment the link. So basically the model predicts a bull move in “something” until mid April, when things turn bearish.

    Reply
    Please complete the required fields.



  • Thanks for coming back on that one techieman.

    You do a good job of logging previous threads.

    Do you just save them in a HPC folder in Favorites with a brief description of the conversation or have you devised a better method for recalling interesting links and getting back to ones you posted on earlier without forgetting where you put the posts (on a busy blogging day) ?

    To summarize point 21. Index linked government bonds should be ok if inflation takes off, but if it does the cost of them should rise. (assuming default wouldn’t be an issue).

    Given the 61.8% range this could’ve turned into a crash – but I guess the way things are looking as I post (4175) a recovery is in progress – for the time being.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>