Curtains come down on Brown's bankrupt Britain.

ruggedtoast

http://www.atimes.com/atimes/Global_Economy/KA27Dj05.html

Death agony of Thatcher era
By F William Engdahl

During the end of the 1970s into the 1980s, British Conservative prime minister Margaret Thatcher and the City of London financial interests who backed her introduced wholesale measures of privatization, state budget cuts, moves against labor and deregulation of the financial markets.

They did so in parallel with similar moves in the US initiated by advisers around Reagan. The claim was that hard medicine was needed to curb inflation and that the bloated state bureaucracy was a central problem.

For almost three decades, Anglo-American university economic faculties have turned to Thatcherite deregulation of financial markets as "the efficient way", in the process, undoing many of the hard-fought gains secured for personal social security, public health care and pension security of the population. Now the poster-child economy of the Thatcher revolution, Great Britain, is sinking like the proverbial Titanic, a testimony to the incompetence of what is generally called neo-liberalism or free-market ideology.

As the neo-liberal revolution began in the economies of the US and the UK, it should not be not surprising that the epi-center of catastrophe in the global crisis now unfolding also lies with the economies of the US and the UK, as well as a handful of economies, including Ireland, Canada, Australia, New Zealand and Iceland, all of which embraced the free market Thatcherite agenda most strongly in recent years.

Notably, the man who personally implemented Thatcherite financial market reforms and deregulation during the era of Tony Blair in Britain was Gordon Brown, then Treasury secretary.

A sample of most recent British developments is instructive. Britain's economy is about to suffer its most vicious slump since 1946, shrinking by a drastic 2.8% this year, according to the European Union's latest estimates. The UK is predicted to suffer the worst recession of any large European economy.

The consequences for the UK will include soaring unemployment, while the economy also teeters on the brink of full-blown deflation. Unemployment will rise by more than 900,000 people over the next 12 months, driving the jobless total to 2.55 million by the end of the year, or 8.2% of the workforce, from 5.3% at present.

In parallel, the the pound, which is not part of the eurozone currencies, has fallen dramatically against the euro and even the US dollar in recent weeks over growing fears of the collapsing UK economy and banking system. Sterling has fallen below US$1.40 to its lowest point in seven-and-a-half years because of concerns about the depth of Britain's banking crisis and the government's rising levels. This coming year the UK government's borrowing levels may exceed ฃ118 billion, equal to 8% of GDP.

Britain will not be able to reap much benefit from a lower pound for exports because, as part of the Thatcher revolution, the national economy has out-sourced, de-industrialized and turned into a service economy where, as in the US, finance and banking became the motor of economic growth the past two decades. That motor has now broken.

Public debt soaring
Fueled by the cost of state bank bailouts, the UK's national debt is set to rise to ฃ1.06 trillion, or 72% of GDP, by 2010, a sharp rise of more than 70% from present levels.

Last week, the Brown government, only three months ago hailed as the institution that was taking effective action to control the global financial meltdown, was forced to introduce yet another new bank bailout package of measures designed to rescue the country's banking sector.

Brown refused to put any ceiling on the amount that he might ultimately need, creating great distrust in the Brussels and across the EU.

Combined, British banks have some US$4.4 trillion of foreign liabilities. That is twice the size of the British economy. UK foreign reserves are virtually nothing at $60.6 billion. Little wonder that savvy currency traders and have decided the British pound can go only one way - down. Swap markets for CDS now price in an alarming 10% probability of Britain having to default on state debt obligations in the next few years as public debt explodes.

The last time England had a default on state debt was in the early 14th century, when King Edward III decided to declare default on his then huge debts to the large Italian banking house of Bardi & Peruzzi, taking the large bank down with it and spreading ruin across Europe.

Kiss of life to a corpse
Brown admits he does not know whether the second bank rescue package the government just launched will work, senior ministers admit. One minister is quoted anonymously in the British press, "The truth is that we can't be sure whether it will be effective. We have to look calm to try to instill some confidence in the system. But we don't know what will happen next. No one can be sure that this is the end of it. We are in completely uncharted waters. The position is changing all the time."

In brief, the authorities have lost control in the UK.

Brown and Treasury Secretary Alistair Darling claim the second bailout did not mean the first package they unveiled last October had failed. That deal, they insist, was about preventing banks from going bust; this one was about ensuring they had the confidence to lend to businesses and the public.

The government refuses to reveal how much it will cost taxpayers. Officials dismissed talk of a ฃ200 billion bailout, saying some measures had a low risk and figures were still being calculated. Labour Party backbenchers conceded it would be difficult to "sell" the rescue plan to an increasingly hostile public. Not surprisingly, polls have turned dramatically against Labour and Brown, now showing that were elections held today the Conservative Party would secure a win over Labour of 9% to 13%. An astonishing 49% of all Britons fear losing their job this year.

A major impediment to swift and consequent government action to contain the impact of the banking crisis has been the dominance of Thatcherite ideology as an almost religious dogma that permeates even Labour, where Brown's predecessor as prime minister, Blair, was portrayed as a Labour version of Thatcher. The ideological absurdity of the situation was underscored recently when the Conservative opposition offered broad support for measures, even though their concern over soaring borrowing led them to oppose the government's ฃ20 billion fiscal stimulus designed to keep the economy moving.

As well, it is clear, following the nationalization last year of the Northern Rock home-loan firm and the forced state share of 70% in the Royal Bank of Scotland, that a type of approach is being adopted similar to that used in the early 1990s' Swedish banking crisis, in which the state nationalized banks that were insolvent and unable to raise private capital.

Sweden then split the banks into "good banks" and "bad banks". In the good bank, the business of lending to the real economy continued unabated. The assets in the bad bank, largely illiquid Swedish real estate holdings, were held by the state until economic growth again allowed the government to sell the assets in a healthy market. The ultimate taxpayer cost of the "Securum" model were estimated to have been zero or even a tiny profit when all costs were factored.

The ideological Labour government is stubbornly refusing to admit the logic of the situation, and ends up cutting the dog's tail off by inches. As certain Labour MPs call for the full nationalization of the banks, the government says that is not its goal. Darling stated, "We have a clear view that British banks are best managed and owned commercially and not by the government. That remains our policy."

John McFall, Labour chairman of the Treasury Select Committee, who believes full nationalization of the banks is inevitable, asked Darling in a recent House of Commons debate if the government would take a 100% stake in the banks if the new package did not restart lending.

Vince Cable, who watches the Treasury for the Liberal Democrats, said, "The government increasingly resembles somebody who is trying to give the kiss of life to a corpse. The government now effectively controls one of the largest banks in the world. It will almost certainly have to put more money in; it may well acquire other banks." Cable had predicted the bursting of the house price and [COLOR=green ! important][FONT=Arial,Helvetica,sans-serif][COLOR=green ! important][FONT=Arial,Helvetica,sans-serif]personal [/FONT][/FONT][FONT=Arial,Helvetica,sans-serif][COLOR=green ! important][FONT=Arial,Helvetica,sans-serif]debt[/FONT][/color][/FONT][/color][/color] bubbles - and the nationalization of Northern Rock.

Royal Bank of Scotland next
The same day Brown's government announced the second bank bailout attempt, the Royal Bank of Scotland issued a statement revealing it expected losses of ฃ28 billion for 2008, far greater than anyone was expecting and triggering a further selloff in shares of all major British banks.

The huge losses announced at RBS were mainly the result of its acquisition of ABN Amro in 2007. RBS paid a high price for ABN and admitted last week that the business was worth around ฃ20 billion less than it had previously thought. This unexpected announcement resulted in a 67% fall in its shares.

Brown, in a pathetic attempt to deflect blame, has said that he was particularly "angry" at the record losses racked up by the Royal Bank of Scotland, and the large write-offs of foreign debt. Lloyds Bank is rumored to be the next bank in need of emergency help as the economy of Britain goes into free-fall, the tragic eulogy to Thatcherism.

Origins of the neo-liberal model
The so-called neo-liberal finance model espoused by the Thatcher government after 1979 had its origins in a decision by leading Anglo-American financial powers and their circle that it was time to begin a wholesale clawing back of the concessions they had granted under, as they saw it, duress, during the Great Depression of the 1930s and in the case of Britain the post-war economic difficulties.

The origins of the effort in the United States go back to a seminal little-known book by a scion of the vastly wealthy Rockefeller family, the late John D Rockefeller III, titled The Second American Revolution. There, amid soporific rhetoric about creation of a "humanistic capitalism", he called for a drastic reduction in the role and size of government in the economy. That theme was then propagated through the efficient propaganda apparatus of the Rockefeller imperium, aided by the economist guru of the Rockefellers' University of Chicago, Milton Friedman.

Amid the misnamed "stagflation" - sluggish growth, high inflation - era of the late 1970s into the 1980s, that propaganda machine blamed all ills on "big government", conveniently ignoring the pivotal role of the manipulated oil shocks, shocks manipulated and brought about by the same Rockefeller family, as I detail in A Century of War: Anglo-American Oil Politics. Rockefeller protege Paul Volcker of Chase Manhattan Bank was sent to president Jimmy Carter on orders of David Rockefeller to "wring inflation out of the system" in October 1979, the same general time Thatcher's Bank of England imposed its own form of economic "shock therapy".

The true economic causality was obscured and reams of press copy from the Friedmanite free-market camp during the Reagan and Thatcher era claimed that the "defeat of inflation" had been due to the ruthless discipline of Volcker and Thatcher. That was, we were told, again and again, the reason why the market should be unfettered from government regulation, freed to the devices of its own unbounded innovative genius.

The results of that unfettered "humanistic capitalism", or what now former Federal Reserve chairman Alan Greenspan approvingly called the "revolution in finance", is bringing both Meccas of neo-liberalism, the United States and Great Britain, to economic ruin. Somewhere between this and Joseph Stalin's Soviet central planning there lies a better way.

F William Engdahl is author of A Century of War: Anglo-American Oil Politics and the New World Order (Pluto Press) and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation (www.globalresearch.ca). The present article is adapted from his forthcoming book, due in summer 2009, Power of Money: The Rise and Decline of the American Century. He may be contacted through his website, www.engdahl.oilgeopolitics.net.

(Copyright 2009 F William Engdahl.)

purch

Gordon Brown, then Treasury secretary.

Whilst it is a very interesting and compelling piece,it is hard to take seriously a "writer" who does such !!!! poor reseach, that he thinks the U.K. has the post of Treasury Secretary.

ruggedtoast

purch wrote: »

Whilst it is a very interesting and compelling piece,it is hard to take seriously a "writer" who does such !!!! poor reseach, that he thinks the U.K. has the post of Treasury Secretary.

He's not writing for a British audience. Most people outside the UK wouldnt have a clue what a Chancellor of the Exchequer is.

wintersunshine

Yes dear - we're all doomed.....:rolleyes:

Really2

ruggedtoast wrote: »

He's not writing for a British audience. Most people outside the UK wouldnt have a clue what a Chancellor of the Exchequer is.

Does that not make you think why is he writting it?

F William Engdahl is author of A Century of War: Anglo-American Oil Politics and the New World Order (Pluto Press) and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation (www.globalresearch.ca). The present article is adapted from his forthcoming book, due in summer 2009, Power of Money: The Rise and Decline of the American Century. He may be contacted through his website,

:rotfl:
Sorry now I know why.

Why do people forcast the end of days" and write a book about it and sell it.
If no one is going to have any money in the future what point is the book? expensive fire starters?
Also he would be better preparing for this "end" (If he actualy belived it:rolleyes: ) rarther than writting a book.

purch

Most people outside the UK wouldnt have a clue what a Chancellor of the Exchequer is.

Well I hope they understand what a Parliamentary Select Committee is and does, or that bit won't make any sense at all to them !!!

I keep forgetting how stupid "Johnny Foreigner" is :eek:

robin_banks

This guy has also written about how Major food manufacturers slip contraceptive drugs into wheat and other crops before being exported to the likes of Mexico and the Phillipines.

TBH the guy is a crank, writing about conspiracy theories etc.

mizzbiz

It's a bit rich to blame Thatcher when she hasn't been in power for almost 15 years.

How about we blame the people who have emulated the Thatcherite model and got it wrong? How about the current government, who presided over this climate of greed and false wealth for 11 years finally take not just some of the blame, but all of it.

What the are now realsising (I hope) is that you can't have a socialist infrastructure (benefits and Civiil service) paid for on the back of a capitalist model. Has to be one or the other. The past 11 years has not been the Thatcherite model, it's been the neo-commie, back patting, false aristocracy model of greed and lies.

StevieJ

Dangerous fiction, a mixture of truths and untruths :eek:

For example:

Combined, British banks have some US$4.4 trillion of foreign liabilities. That is twice the size of the British economy. UK foreign reserves are virtually nothing at $60.6 billion. Little wonder that savvy currency traders and have decided the British pound can go only one way - down. Swap markets for CDS now price in an alarming 10% probability of Britain having to default on state debt obligations in the next few years as public debt explodes.

I have quoted this before, but I think I should do again, ref David Smith - Sunday Times last Sunday.

People get things wrong. One scare story is that UK banks have foreign-currency liabilities equivalent to three times gross domestic product. If the government was liable for these, we could be in trouble.
But this refers to all banks in London, whether owned by EU countries, America or Japan. These foreign-currency liabilities are £4.6 trillion, which is indeed about three times our GDP. But they also have foreign-currency assets of £4.7 trillion.
British banks account for less than a third of these liabilities, just under £1.5 trillion, with foreign-currency assets of more than £1.5 trillion. Compared with Switzer-land, where such liabilities are 2½ times GDP, or Iceland’s seven, the UK’s liabilities – roughly equal to GDP – look comfortable.

Thrugelmir

mizzbiz wrote: »

It's a bit rich to blame Thatcher when she hasn't been in power for almost 15 years.

How about we blame the people who have emulated the Thatcherite model and got it wrong? How about the current government, who presided over this climate of greed and false wealth for 11 years finally take not just some of the blame, but all of it.

What the are now realsising (I hope) is that you can't have a socialist infrastructure (benefits and Civiil service) paid for on the back of a capitalist model. Has to be one or the other. The past 11 years has not been the Thatcherite model, it's been the neo-commie, back patting, false aristocracy model of greed and lies.

Maggie stood down in 1990. So a whole generation would have no idea who she is even and the good things that she did for the country while in office.

Governments backed by the "expertise" of the civil service should have seen the problems in the economy.

The real issue for international trade is now the Chinese who appear to be fixing their foreign exchange rates for their own agenda.

carolt

I find conspiracy theories generally a bit off-putting.

I can agree with the last paragraph, though:

"The results of that unfettered "humanistic capitalism", or what now former Federal Reserve chairman Alan Greenspan approvingly called the "revolution in finance", is bringing both Meccas of neo-liberalism, the United States and Great Britain, to economic ruin. Somewhere between this and Joseph Stalin's Soviet central planning there lies a better way."

Let's hope we can locate it.