Friday, Nov 27, 2009

UK Guarantee

Times Online: London shares fall as Dubai debt fears mount

The bubble development in Dubai seems to have been partially financed by UK banks, who are currently guaranteed by the UK taxpayer. Whether this will be the straw or the first of many straws on the overloaded camel, are we really obliging the poor indebted in the UK to pay off debts run up by speculative property development abroad, in this case, artificial islands in the shape of a palm tree offshore from a ghost town.

Posted by stillthinking @ 09:09 AM (5007 views)
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47 Comments

1. tyrellcorporation said...

I particularly liked this paragraph.

'Despite fears of exposure, RBS shares rose by 5.53 per cent today to 34.8p after it announced it had signed an agreement to enter the Government's Asset Protection Scheme.'

I can imagine the scene now at an RBS board meeting as news of Dubai troubles come in. 'Oh FFS! quick call Mervyn now and sign up to this scheme before it's too late!'

Friday, November 27, 2009 09:32AM Report Comment
 

2. stillthinking said...

This reminds me a lot of the last Douglas Adams book, when the economy collapsed because based on telephone cleaning or some such.

"The final straw for the British Empire, spanning the planet, the largest empire in the history of the world, was an ill-conceived gamble on demand for condos on artificial land in the shape of an exotic fruit tree."

Its starting to become like the economic version of Red Dwarf.

Friday, November 27, 2009 09:36AM Report Comment
 

3. down wave said...

On the 23rd of October 1929, a metal spire was added to a New York skyscrapper that made it the tallest building in the world. The next day was the day of the Great Crash. Sorry I cant recall the name of the building.

Then came the Great Depression and World War II. The common man, the needy, paid the price and suffered the greatest.

The same is occuring today and it will be the common man and his children that will pay dearly the price.


That crash and this one today are entirely due to the infaltion of Man's ego and his addiction to ego boosting symbols and tokens..

Friday, November 27, 2009 09:56AM Report Comment
 

4. cat and canary said...

castles made of sand

Friday, November 27, 2009 10:05AM Report Comment
 

5. smugdog said...

Downwave, don't forget trinkets and ornaments. Stupid Sreet can't live a fulfilling life without these precious things.

Friday, November 27, 2009 10:08AM Report Comment
 

6. estrader said...

You can buy a Hannah Montana dance mat for only £0.90/week !!!

Friday, November 27, 2009 10:13AM Report Comment
 

7. mark wadsworth said...

@ stillthinking, this is just one straw out of a whole pile of bales, it's not the first and it won't be the last. This will just go on and on for at least another five years, or possibly twenty if Japan post 1990 is anything to go by. Every single spare penny in the real economy will be scraped up by governments and used to patch one leak after another in the property price bubble.

Which makes it even more ironic that UK voters so strongly oppose taxes on property values (Land Value Tax, Council Tax, Business Rates, whatever) - but they are reasonably happy to pay hundreds of billions in extra income tax/VAT/National Insurance to bail out banks to enable them to prop up property values.

Isn't that a kind of negative "land value tax" - instead of the landowner paying it (and keeping a lid on property values), everybody else is paying it to prop up property values, including, they hope, their own?

Friday, November 27, 2009 10:29AM Report Comment
 

8. tudorian said...

Seems appropriate to repost this ...


I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip, and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away

Friday, November 27, 2009 10:44AM Report Comment
 

9. the number cruncher said...

mark wadsworth @ 7

My fear is that just like the First world war and the second, that the vested interest which privately own most of our asset base would rather see war as a means to quash the aspirations of the great majority of people, than allow a political moment to arise that will address these imbalances.

Did you see Andrew Marr's Making of Britain and coverage on the the Kibbo Kift green shirt movement of the 30's? While it smacks of fascism and is probably very dangerous - I do find the economic model of a social dividend very appealing. http://www.kibbokift.org

I ware a green shirt myself every day...

Friday, November 27, 2009 10:48AM Report Comment
 

10. mark wadsworth said...

@ TNC commetn 10:48 am, while it is true that in Olden Times "they" used to start wars to keep the masses in their place, "they" have now developed up a much better scam - it's called Home-Owner-Ism - all surplus in the economy, which could be used to improve people's health and welfare, shorter working hours, better education etc is sucked up into ever spiralling house prices and the financial system. So the vast majority of people, who only really have one asset - their skills, energy, labour etc - are running to stand still.

The book 1984 was written before H-O-ism really took off, so George Orwell assumed that "they" would continue to use permanent warfare to get rid of the economic surplus. He didn't live long enough to realise that "they" had learned from his book - instead of The Masses being tricked into accepting their lot because the austerity measures are necessary to defeat Eastasia/Eurasia, nowadays people will put up with paying all that extra tax (and having a correspondingly lower disposable income) to bail out banks because they think that nominally rising property prices makes them wealthier.

Friday, November 27, 2009 11:13AM Report Comment
 

11. Rental John said...

http://dubaithoughts.blogspot.com/2009/08/dumped-cars.html

Friday, November 27, 2009 11:38AM Report Comment
 

12. mountain goat said...

In 2007 we had Northern Rock, in 2008 Iceland, Bear Sterns, US government takeover of Fannie Mae and Freddie Mac, Lehman Brothers bankruptcy, sale of Merrill Lynch & Company, bailout of AIG and UK banking.

We have had a period of calm where some are now worried about inflation effects of the bailouts. But inflation will have to wait because we are not through with the defaults yet. IMO this the start of the next phase of defaults which involve sovereign risk in the more financially opaque countries, Middle East, Eastern and Southern Europe and finally the biggest malinvestment bubble of them all China.

Although we had a credit bubble, it was not as big as the globalisation fad credit bubble that sloshed into these developing countries, not used to this kind of hot money. As Buffett said When the tide goes out you find out who is swimming naked. Despite all our failings and corruption, the UK and USA have a better financial transparency and regulation than most countries. So it has taken longer for the toxic slime that results from hp and other malinvestment to surface around the world. Dubai is not alone in having a 50% hpc so far. Add to this the UK and USA has a stronger tax base to finance bailouts of defaulting financial entities. We caught a cold but thanks to globalisation the world is going to get pneumonia. Don't sell your GBP just yet...

Friday, November 27, 2009 11:40AM Report Comment
 

13. rumble said...

MG, interesting. Do you lump BRIC together, or a BI/RC? Any developing nations which missed the credit boat?

Friday, November 27, 2009 11:52AM Report Comment
 

14. tom101 said...

So once everyone realises Britain isn't the only country in deep trouble and that other countries / regions have larger malinvestments will Sterling be seen as a safer haven than other currencies, albeit temporarily....? (Opinions appreciated as I know little about currency trading. Thanks)

Friday, November 27, 2009 11:53AM Report Comment
 

15. mountain goat said...

Rumble - I think Argentina and Russia have had their crises in the recent past so possibly there was enough experience and maturity there to avoid the worst problems. But being opaque means it is impossible to know.

Tom101 - I am invested in the safest things I can think of, dollar, US and UK short term gov bonds, cash, short stocks, all the things the inflationists have dumped, and sitting back for the ride.

Friday, November 27, 2009 12:02PM Report Comment
 

16. rumble said...

Hang on. If UK banks have been providing Dubai boom fuel, Dubai defaults, UK banks almost fail but propped up by UK taxpayer. Add in Dubai's defaulting friends around the world, also fuelled by UK, and we have given away all our wealth? Big debt, big printing, big taxes?

Friday, November 27, 2009 12:06PM Report Comment
 

17. mountain goat said...

Rumble - Barclays were recommending people buy Dubai debt earlier this month would you believe. About turn yesterday of course in their advice. But yes we might be owning some more banks soon, which is worrying.

Friday, November 27, 2009 12:11PM Report Comment
 

18. techieman said...

The interesting thing is there is now a gap on the charts when the US opens (because of Thanksgivng) what happens when they come in - are the septics going to fill the gap or is it a measuring gap to the downside???

MG - that Daneric blog view - i.e. that this is a small C wave of an ABC to find support for the last up move into year end or early january is still on the table. (infact the small c of B was really predicted the other day). The alternative is that P2 is in, and this is indeed the first part of P3.

Daneric blog actually mentions Mr. Ps recomendation to go 200% short

"I will also remind that the last time I thought a B wave was playing out in June and that the market would head up, it never happened. So I naturally question my current count. And Prechter said to go 200% short, and that I have to respect.

So what am I saying? I am saying I am ready to abandon the thought of a Minor B wave (and hence the triple zigzag count altogether) because I have a particular habit of pushing for that one last push when its not really there. It remains a possibility but after the market spoke today in the overseas venues, its hard to ignore a 3% drop that ended on the lows (Europe). another bad session on Monday and they will close under the monthly 20 MA."

For the "pretty pictures" see : http://danericselliottwaves.blogspot.com/.

Friday, November 27, 2009 12:13PM Report Comment
 

19. techieman said...

and if people are thinking WTF is he going on about then this "big picture" might explain.

http://1.bp.blogspot.com/_TwUS3GyHKsQ/SqrcXKrcFKI/AAAAAAAABvM/yXNPTb87AgQ/s1600-h/2009-09-11-PROPHET.png

MG - did you see the EWI report?

Friday, November 27, 2009 12:16PM Report Comment
 

20. hpwatcher said...

Tom101 - I am invested in the safest things I can think of, dollar, US and UK short term gov bonds, cash, short stocks, all the things the inflationists have dumped, and sitting back for the ride.

Sorry MG, but it sounds like a very risky strategy to me.

Friday, November 27, 2009 12:18PM Report Comment
 

21. techieman said...

MG @ 14 - my sister has quite a few bob to invest and the boyz from the banks are sniffing round her a ridiculous amount.. Its outrageous really and really f**cks me off. She has told them she wants to be safe but they keep trying to sell her some stock market linked plans. They are saying to her if she doesnt invest in the stock market her value of money will decrease anyway because it will fall in value because of inflation.

I agree with you (well i would i 'spose) stay safe!

Friday, November 27, 2009 12:20PM Report Comment
 

22. techieman said...

hpwatcher "Sorry MG, but it sounds like a very risky strategy to me." Well it would wouldnt it!!!

Gold took a bit of a tumble didnt it?

Friday, November 27, 2009 12:21PM Report Comment
 

23. mountain goat said...

TM - you mean the advice to go 200% short? Yes thanks, although made little difference to my actions, since I am already committed.

Last year the first defaults led to a cascading flight to safety. Might happen now, or in months or years, but good to know we deflationists weren't barking up the wrong tree.

hpwatcher - yes I bet a lot of people think this is risky. But I have not been deflation ranting here the past months just for release of hot air. My money is where my mouth is, 90% deflation orientated, was itching to sell my remaining gold and silver coins.

TM - sorry about your sister. My gold bug friend wrote to me the other day saying he wanted to buy gold juniors. I hope I didn't ruin the friendship with my reply!

Friday, November 27, 2009 12:27PM Report Comment
 

24. techieman said...

MG - no she didnt take the advice - she listened to big bruv instead..... wise gal!

The gold chart though still looks ok though for the bulls, but we shall see!

Friday, November 27, 2009 12:30PM Report Comment
 

25. rumble said...

MG, I saw that turn around. I'd put it down to opacity if I had the slightest bit of faith left in the banks.

So how are thinking the UK debt gets sorted out?

Friday, November 27, 2009 12:30PM Report Comment
 

26. mountain goat said...

TM - "The gold chart though still looks ok though for the bulls, but we shall see!"

Good I was hoping to start selling my coins at $1300.

Friday, November 27, 2009 12:33PM Report Comment
 

27. rumble said...

Drawn out attrition of defaulting.

Friday, November 27, 2009 12:38PM Report Comment
 

28. mountain goat said...

Rumble - "So how are thinking the UK debt gets sorted out?"

I did say short term gov debt. I think GBP and USD will be trashed in the long term and gold and commodities will be king. But the defaults are not even half-way yet so we are in deflation now. Just think of the UK housing situation. If the hpc resumes how much more defaulting debt will there be? So ultimately the inflationists are right, it's just they bought the line that GB saved us, when there is still much more pain to come.

Friday, November 27, 2009 12:38PM Report Comment
 

29. hpwatcher said...

hpwatcher "Sorry MG, but it sounds like a very risky strategy to me." Well it would wouldnt it!!!

Gold took a bit of a tumble didnt it?


There has always been the occasional sell off when the price has been rising; the real question is what is behind the rise? In the case of the stock market, absolutely nothing. In the case of gold, a declining economic situation, which will get worse.

Though, I think you are holding too much paper money; I'm in the same boat too, I have far too much in cash.

Friday, November 27, 2009 12:41PM Report Comment
 

30. rumble said...

Big government supporters are idiots. My brain's in a muddle trying to think through the basic elements, they want the government to think of everything. Inevitable disaster.

Friday, November 27, 2009 12:46PM Report Comment
 

31. fubar said...

"Call out the instigators, because there's something in the air. We've got to get together sooner or later, because the revolution's here and you know it's right..."

This shit spans political divides, has there ever been a right/left cooperation based -revolution? Come together to stop this madness. I think now would also be the time to consider a sweepstake on how long till the first bank-branch is burned to the ground.

Friday, November 27, 2009 01:03PM Report Comment
 

32. refusetobuy said...

According to http://en.wikipedia.org/wiki/Islamic_banking

"in accordance with the rules of Shariah [...] there are no additional penalties for late payment"
So there should be no problem with this 6 month delay.

There is also this bit which is interesting
"participatory arrangements between capital and labor reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy"

Friday, November 27, 2009 01:25PM Report Comment
 

33. rumble said...

RTB, no penalties for Dubai if it borrows from Abi Dhabi, but what about the late, if at all, repayment to UK taxpayer-supported banks?
If Dubai borrows from UK banks, are those Shariah deals?

Friday, November 27, 2009 01:44PM Report Comment
 

34. Cheekie Charlie said...

Comment 11 MG Says:
"Despite all our failings and corruption, the UK and USA have a better financial transparency and regulation than most countries."
Do you include secret £61bn loan, MP's expenses and propety flippings in this transparency?

Friday, November 27, 2009 01:45PM Report Comment
 

35. mr g said...

Rumble@32 "If Dubai borrows from UK banks, are those Shariah deals?"

The answer to that is yes if they used a branch in Dewsbury or Bradford.

Friday, November 27, 2009 02:56PM Report Comment
 

36. rumble said...

Mr G, seen any Sheikhs wandering around there?

One for the goldbugs: gold pullback on risk aversion - contrary to goldbug mantra...?

Friday, November 27, 2009 03:10PM Report Comment
 

37. hpwatcher said...

One for the goldbugs: gold pullback on risk aversion - contrary to goldbug mantra...?

I think people are in panic. Only the weeks ahead will tell us the truth!

Friday, November 27, 2009 03:17PM Report Comment
 

38. mountain goat said...

Cheekie Charlie - point taken, but at least everyone was shocked about it being secret.

Friday, November 27, 2009 03:26PM Report Comment
 

39. jack c said...

Banking crisis explained

Young Paddy bought a donkey from a farmer for £100.
The farmer agreed to deliver the donkey the next day.
The next day he drove up and said, 'Sorry son, but I have some bad news. The donkey's died.' Paddy replied, 'Well then just give me my money back.' The farmer said, 'Can't do that. I've already spent it.'
Paddy said, 'OK, then, just bring me the dead donkey.'
The farmer asked, 'What are you going to do with him?'
Paddy said, 'I'm going to raffle him off.'
The farmer said, 'You can't raffle a dead donkey!'Paddy said, 'Sure I can. Watch me.. I just won't tell anybody he's
dead.'
A month later, the farmer met up with Paddy and asked, 'What
happened with that dead donkey?'
Paddy said, 'I raffled him off. I sold 500 tickets at two pounds a
piece and made a profit of £898'
The farmer said, 'Didn't anyone complain?'
Paddy said, 'Just the guy who won. So I gave him his two pounds back.'
Paddy now works for the Royal Bank of Scotland

Friday, November 27, 2009 03:55PM Report Comment
 

40. rumble said...

Class.

Friday, November 27, 2009 04:10PM Report Comment
 

41. icarus said...

39....and the farmer works for AIG

Weren't the Dubai crowd thinking of investing in Liverpool FC a year or so ago? Who the hell is advising these guys?

Friday, November 27, 2009 04:13PM Report Comment
 

42. str 2007 said...

I thought the guy who bought Manchester City was a big property developer involved with Dubai.

Friday, November 27, 2009 04:29PM Report Comment
 

43. str 2007 said...

Gordon Brown was on the Radio saying words to th eeffect it was no big deal and can be contained.

Which is probably correct, it doesn't take long to produce a few more billion digitally.

Friday, November 27, 2009 04:31PM Report Comment
 

44. rumble said...

Str, man city sheikh mansour is ruling family of abu dhabi, about to become a very big investor in dubai.

Friday, November 27, 2009 04:46PM Report Comment
 

45. jack c said...

@str 2007 - I sent over an e-mail with the presentation notes but I'm not sure if you have received anything as the file size was quite large?

Friday, November 27, 2009 05:00PM Report Comment
 

46. techieman said...

str 2007 - i posted especially for you last weekend. i thought it might be of interest:

http://www.housepricecrash.co.uk/newsblog/2009/11/blog-apologies-in-advance-but-this-one-is-for-str-26522.php

Especially the charts.

Friday, November 27, 2009 05:28PM Report Comment
 

47. mr g said...

Rumble @36 "Mr G, seen any Sheikhs wandering around there?"

Plenty of people with similar physical features and religion.

Friday, November 27, 2009 05:51PM Report Comment
 

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