Thursday, October 28, 2010

Labour Government Unleashed Financial Destruction Frenzy

Another piece I did for Newsnet Scotland:

by Alex Porter

Having pressurised the chairman of the (FSA) financial regulator, Lord Adair Turner, to regulate with a 'light touch' and not to be 'heavy and intrusive' with banks like Northern Rock, Gordon Brown created the conditions for banks to indulge in reckless lending which then lead to the financial crisis.

In an article published last week in Angelaki: Journal of the Theoretical Humanities, Dr. Paul Crosthwaite of Cardiff University argued that bankers, used the regulatory holes encouraged by the former Chancellor and then Prime Minister Gordon Brown, to bring the financial system down for thrills.

Dr. Crosthwaite explains that bankers would only have dealt in sub-prime loans and related derivative products, inevitably resulting in catastrophic losses, if they unconsciously desired the thrill of destroying their own institution. The article called 'Blood on the Trading Floor: Sacrifice and Death in Financial Crises' comes almost exactly two years after the crash which brought about controversial bail-outs and nationalisation of many Western banks.

One of the principle causes of the financial crisis is that it is not banking executives who lose out when their banks run up losses but their owners – the shareholders and bondholders. The latter investors tend to be global financial institutions and it is they who were bailed out by former Prime Minister Gordon Brown. The cost was born by British taxpayers and the resultant crisis in public sector finances is being dealt with by David Cameron through austerity cuts.

Dr. Crosthwaite's research uses psychology to show why various booms and busts like the dot-com bubble are expressions of an inner urge for self-destruction, a process termed 'death drive' by the father of psychoanalysis Sigmund Freud. The author draws on a variety of sources such as research studies and even novels about financial executives to argue that there is a masochistic satisfaction in running up losses and that a complete crash causes euphoria as well as despair.

Others will argue that it is simply the profit motive that drove 'suicide bankers' to implode the financial system. With an intricate web of cross-ownership the financial system often seems to exhibit self-destructive behaviour. In the case of the latest crisis traders, who sold fraudulent financial products to their own clients then bet on their clients' share prices collapsing.

Whatever the reasons most observers will agree with Dr. Crosthwaite's recommendations that financial regulations be tightened to stem excessive risk-taking:

"To avoid a repeat of the 'great recession,' it's vital that policymakers and regulators limit the capacity of financial professionals to engage in excessive practices by curbing the disproportionate levels of risk that we've seen in the financial sector in recent years,"

Scottish Surplus

Scotland was hit very hard by the financial crisis with Royal Bank of Scotland based in Edinburgh being one of the worst effected global banks. The bail-out of RBS is controversial and Labour politicians in Scotland have argued that Scotland needed the umbrella of the UK during the crisis and could not have managed the bail-outs alone.

Last weekend the world renouned economist Andrew Hughes Hallett who has been a consultant to the World Bank, UN, ECB and the US Treasury among many other international organisations, central banks and governments emphatically refuted that argument:

"They [HBOS and RBS] have substantial activities in England as well as elsewhere and therefore the burden of bailing them out would have to have been shared in any case.

"..and there are plenty of precedents for that. The Dutch-French banks and the Belgium-French Banks that went bankrupt had to be bailed out jointly by the responsible authorities, and so it would have been shared."

It is a common misperception that the bail-outs compensated Scottish depositors but in reality taxpayers money was used to bailout institutional investors such as shareholders and bondholders who are mostly based in the City of London. In the case of an independent Scotland and England both governments would have shared responsibility based largely on the domicility of the effected investors.

Other economists like Mike Hudson argue that as investors invested their money without proper due diligence they have no right to expect taxpayers to assume their losses. If the electorate decides, during the hightened tensions of austerity cuts, that the bailouts were a mistake then the Labour Party would not only have to explain how they got Britain's public finances into such a parlous state but why they decided to bail out the banks at taxpayers' expense.

With the previous UK Labour government being blamed by Scots, according to the latest opinion polls, for the crisis the SNP will point to Labour's economic record and ask voters why they should trust a party to fix something that Labour themselves broke.

Last week, former World Bank economist and President Clinton key aid Joseph Stiglitz became an advisor to First Minister Alex Salmond. This latest move by Hughes Hallett who is Professor of Economics at George Mason University in Washington DC will support the SNP's case that while the UK's public spending deficit is ballooning it would be in voters' best interests to want to use Scotland's surplus to invest in jobs in Scotland through economic independence.

UK Confidence in Freefall

A piece I did for Newsnet Scotland:

by Alex Porter

British citizens' optimism about their job prospects is rated 98th in the world according to new research. The Prosperity Index, an annual survey of 110 countries that looks at wealth and happiness also rates public confidence in Britain's financial system as 101st internationally.

The crucial finding of the survey, conducted by the Legatum Institute - a Scandanavian think tank, though is in terms of public optimism about expectations of future UK economic performance where Britain is ranked 98th globally. These types of rankings are usually the reserve of third-world nations.

Even more disturbing is that the survey was conducted ahead of the UK coalition governments' announcement that their austerity plans will entail the cutting of almost 500,000 public sector jobs, £7 Billion in benefits and one-fifth from all public spending budgets.

These austerity cuts will be visited upon Scotland despite the Scottish economy showing a surplus according to GERS (Government Expenditure and Revenues Scotland). Taking economic medicine for an illness Scots don't have will conjure up memories of the early 90s when Scottish home-owners had to pay mortgage interest rates of 15% to 'cool' the overheating economy in the south-east of England.

As austerity bites hard, the Holyrood election campaign on May 6th next year will concentrate on jobs and economic prosperity. With unprecendented levels of gloom in the public outlook, the SNP will argue that if voters want jobs, economic stability and growth through economic independence, they have to vote for them.

Over the weekend, world renouned economist Andrew Hughes Hallett backed the SNP's case in respect to the benefits of economic independence. Asked whether Scotland would 'definitely' be better off, Prof Hallett replied:"You can definitely say that it [Scotland] would be better off in terms of the revenue."

Overall, the Legatum Institute survey showed the UK in 13th place, twelve places behind Norway who claimed first prize. Controversially, Britain has fallen behind all of what the former Scottish Secretary Jim Murphy called "The Arc of Insolvency" which includes Norway, Ireland and Iceland.

Economic Credibility
Norway's optimism is largely driven by their North Sea oil fund which invests the nation's oil revenues for future generations. The fund, valued at £327 Billion and growing at 26% per annum, is administered by Norway's central bank, Norges Bank. It is the second largest and most respected pension fund of its kind in the world.

Many economists point to Norway, with similar geographical location, natural resources and population, as an economic model for Scotland. The survey will boost former oil economist, Alex Salmond's case that oil taxation should be devolved and an oil fund established.

This case was further strengthened this month when the former World Bank chief economist and key aid to former President Bill Clinton, Joseph Stiglitz, claimed that successive Westminster governments had 'squandered' oil revenues instead of investing them prudently. Professor Stiglitz now advises First Minister Alex Salmond.

With austerity cuts looming, public optimism in the UK economy will continue to plunge.

In the race to enter Bute House, The Labour Party will seek to deflect blame for Britain's financial crisis by attacking the coalition's austerity cuts. Their trade-union partners are promising a 'class-war' but polls show that the electorate strongly believe Labour is to blame for the crisis.

The SNP will argue, on the other hand, that with the powers of economic independence Scotland could use its surplus to stabilise and grow the Scottish economy, creating jobs and safeguarding public services in the process.

Key to the nationalists closing the gap in the opinion polls with Labour will be to consolidate their message that voters should not trust Labour to fix an economy which they themselves broke.

Wednesday, October 27, 2010

Scotland: Let's Go Baltic!

Anyone who has read this blog will know that the 'crisis' is nothing to do with business cycles. Recovery and recession are propaganda. The problem is systemic fraud and policy failure i.e. the government can't protect us because its captured.

Here is a video that is urging Americans to wake up and take their country back. When the Soviet Union broke down Latvia and Lithuania declared independence.

With the Western empire ending and the collapse of Britain around the corner (austerity), Scotland should be ready to do the same.

Let's go Baltic!

Monday, October 25, 2010

Surge in Support for Independence As UK Economy Plunges

Here's another article I did for Newsnet Scotland:

by Alex Porter

A new YouGov opinion poll shows that support for Scottish independence has risen by 6% to 34% since the UK elections in May this year whilst support for the Union, at 50%, was down 8% over the same period.

The poll also showed that almost twice as many Scots would prefer to see Alex Salmond as Scotland's First Minister than support Iain Gray (41% versus 24%).

The findings will be a major boost to the SNP ahead of next year's Holyrood elections and are an indication that the Scottish electorate are beginning to question whether Scotland's interests are best served by maintaining the Union.

The SNP welcomed the survey which also shows that a majority Scots favour Holyrood acquiring significant economic powers as the effects of Labour's deficit begin to bite. The Sunday Express/You Gov survey found 56% of the 1405 people questioned want to give the Scottish Government the ability to raise taxes and borrow money to help offset the effect of the UK recession.

Crucially for Labour and the Lib Dems, a majority of their own supporters were also in favour of the idea, putting the supporters at odds with the party leaders who favour a more cautious approach. The SNP have argued that economic independence is essential if the Scottish economy is to grow and jobs are to be saved.

Scottish unionist parties have argued that as the crisis deepens Scots will care less about independence and more about public services. This poll shows that analysis is fundamentally flawed as the Scottish electorate clearly equate independence with jobs and economic improvement.

Commenting on the findings the Depute First Minister and Depute SNP leader Nicola Sturgeon remarked:

"With the powers of independence we can genuinely protect the things Scotland holds dear and deliver the jobs and economic growth we need to recover strongly from recession."

The call for economic independence was boosted over the weekend by world renouned economist Andrew Hughes Hallett who argued on the Radio Scotland 'Newsweek' programme that Scotland had subsidised the UK for years:

"When you get down to it, on the current account for the last five years at least, maybe longer, Scotland has had a current account surplus, which is currently according to the national accounts in Scotland £1.3 billion." said Professor Hallett.

Asked whether economic independence would 'definitely' leave Scotland in a better financial position Hallett remarked:

"You can definitely say that it [Scotland] would be better off in terms of the revenue."

As David Cameron's coalition government implements the deepest public sector cuts seen in generations, Labour strategists are failing to shift the blame over causing the crisis in Britain's public finances onto the issue of whether Tory cuts are necessary.

Opinion polls show that most of the electorate blame the last Labour government for Britain's ballooning public sector deficit. 42% of Scots blame Labour for the crisis and over 80% of Scots blame both the current UK coalition government and the previous Labour governments.

With the Scottish elections nearing and with the SNP fast closing the gap on Labour's popularity poll ratings, the reputation of economic credibility will be wrestled over by the two main party contenders.

If Labour fail to deflect blame for the crisis by the time the campaign gets into full swing, Alex Salmond will feel more confident of his party's chances of winning a second term at Holyrood.

First Gold Vending Machine in UK as Pound Plunges

Another piece I did for Newsnet Scotland:

by Alex Porter

As Mervyn King at the Bank of England continues a policy of devaluing the British pound the price of gold in pounds is rocketing. This has lead to a sharp increase in demand for owning physical gold.

With a sharp fall in the tax-base caused by Britain's financial crisis, quantative easing - also known as money printing – is surging past the £200 Billion mark.

Money printing causes the pound in your pocket to be devalued as you can afford less imported goods or products manufactured in the UK with foreign-sourced materials and/or components. Quantative easing is effectively a tax on the citizens' wealth who become poorer as their purchasing power diminishes.

The dramatic fall in confidence in Britain's currency is causing investors to flock to gold, traditionally seen as a hedge against currency volatility and collapse. In the last year alone sterling has lost over 30% of its value against gold.

Gold and Silver are hedges against currency devaluation. This is because as ‘fiat currency’ (currency backed by government guarantee) like the pound is devalued by the printing press, gold and silver are finite – you can't print precious metals. Gold has held its value for thousands of years while paper currencies have come and gone.

As the Western economies face a debt crisis Britain and the US lead the way in currency devaluation. Emerging markets like China own a lot of UK and US sovereign debt. Since the financial crisis began Western governments have suffered a drop in tax income and so deficits are climbing and debt repayments are consuming a greater percentage of government expenditure.

While governments need to borrow more money to plug the hole in their budgets observers believe that the US, UK and others are simply printing money to repay those loans. This is called 'debt monetisation' and angers those investors who bought government debt in good faith.

The consequence of such a policy is that investors will leave the bond market. Commentators suggest that it is now the Bank of England which is mostly buying Britain's bonds, or working in tandem with the US as both nations print money and buy each others' bonds. International economists and investors like Marc Faber warn that this policy will lead to hyper-inflation.

As the sterling crisis takes grip it is no longer institutional investors who are running to the safe-havens of gold and silver but retail investors too. There is a sharp increase in the number of small investors who are buying bullion and gold and silver coins to protect their family wealth.

Demand for the yellow metal will see Britain's first gold vending machine in Harrods next month. There are now 9 machines in Germany with 1 opening today in a luxury shopping centre in Berlin. Germans are acutely aware of the effects of hyper-inflation since their currency collapse in the 30s and people had to carry cash around in wheel-barrows.

Another way to look at it is that it is not the price of gold going up in pounds but pounds losing value against gold. Five years ago £260 bought an ounce of gold whereas today you will need £845 to buy the same ounce.

Scottish businesses are deeply troubled by Westminster's policy of currency devaluation. Buying from abroad is becoming a lot more expensive at a time when consumers have stopped spending. Britain's consumers can not afford more debt while credit from banks has receded sharply.

As the Holyrood elections near the SNP will argue that Scottish business would be better off in an independent Scotland with North Sea oil revenues stabilising public finances. News that Norway's oil fund reached $513 Billion dollars will be pointed to by SNP leaders as evidence that independence offers economic security and growth at a time when Britain has simultaneous sovereign debt, financial and currency crises.

Investing: My own feelings are that small investors should wait for a correction and consider silver rather than gold (silver is still 50% off its highest ever price), buy from reputable agents and take delivery or hold gold in 'allocated' accounts. My own preference is

Sunday, October 24, 2010

More Polls Show Electorate Blame Labour For Crisis

Another piece for Newsnet Scotland:

Newsnet Scotland are currently looking for citizen journalists. If you fancy a go, write an article and send it to the editor - there's nothing to lose but an election!

by Alex Porter

As the UK's coalition government rolls out its austerity cuts opinion polls show that voters blame the last Labour government for the crisis in Britain's public finances.

Asked by YouGov: "Who's to blame for the cuts?", only 17% directly blamed the new coalition government whereas 47% blamed the last Labour government, 20% said both were culpable and 11% said neither. (1)

These finding are supported by a recent ComRes poll which elicited voters opinions on the causes of the crisis and asked if the "Last Labour government bears most responsibility". 59% of voters agreed with statement and 39% disagreed. (2)

The polls put increasing pressure on the Labour Party in Scotland ahead of the Holyrood elections on May 6th next year. As David Cameron's austerity cuts take grip the economic battle in Scotland will focus on jobs and the economy.

As Labour's lead in the Holyrood opinion polls show to be narrowing, the SNP will hope to capitalise on these findings. Iain Gray will be pressurised into answering to the electorate for the crisis but more critically have to explain why the party that caused the crisis, Labour, can be trusted to fix it.

With the key battleground being economic credibility, the SNP will point to the endorsement of its policies on oil revenues by the former World Bank chief economist, Joseph Stiglitz as evidence that they can guide the economy better. Professor Stiglitz, a former key advisor to President Bill Clinton is now an advisor to First Minister Alex Salmond.

These polls follow in the footsteps of another poll by Ipsos-Mori which shows 42% of Scottish voters blame Labour for the crisis and 39% the current coalition government. (3) With over 80% blaming Westminster governments for the crisis, Alex Salmond will seek to argue that economic independence for Scotland would create an environment of stability and growth needed for business and jobs whereas Westminster's austerity cuts will mean volatility and uncertainty.

Comparing the Scottish poll to the UK-wide polls it is clear that although Scots blame Labour for the crisis they are less critical of the party than British voters as a whole. Normally Labour in Scotland benefit from its exposure to a British audience but with the coalition parties determined to keep the pressure on Labour, UK-wide coverage may become a hindrance to the party in Scotland.

At the weekend the world renowned economist Andrew Hughes Hallett backed the SNP's case that Scotland has been subsidising the rest of the UK for years and that the Calman proposals are, as they stand, unworkable.

While these polls show Labour's economic record under strain the support of economists with world-class reputations for the SNP's arguments will lead nationalist strategists to believe that the burden of proof of economic credibility has shifted onto the Labour Party.


Norwegian Oil Fund Surpasses $500 Billion

Here is a Newsnet Scotland piece I forgot to post.

If you are interested in Scotland's oil story then visit to see read about how oil will play a large part in Scotland's future.

by Alex Porter

The central bank of Norway announced today that it's oil fund, also known as Pension Fund Global, now stands at $513 Billion.

Yngve Slyngstad, chief executive of the Norges Bank Investment Management (NBIM), which manages the fund, said: "The fund has grown faster and bigger than most people expected since getting its first inflow of capital in May 1996."

The announcement will heap pressure on the coalition government in Westminster to establish an oil fund for Scotland. First Minister Alex Salmond has already called for such a fund to be established and for oil taxation to be devolved to the Scottish parliament.

Norwegians are now the second richest people in the world with wealth per person standing at $326,530 representing an increase of 195% since 2000. The sovereign wealth fund of the nation, which has a population less than Scotland's at under 5 million, is the second largest in the world and growing annually at a staggering rate of 26%.

With the Holyrood elections just around the corner, the announcement will add weight to the SNP's demands that instead of oil revenues being used to plug the gap in Britain's public finances it should be set aside and invested for future generations.

This case was underlined recently by the former World Bank chief economist Joseph Stiglitz, in an interview with Newsnight Scotland's Gordon Brewer, when he argued that previous Westminster governments had squandered the wealth instead of investing it prudently.

In a sensational development at his party conference on Sunday, Alex Salmond revealed that former President Bill Clinton's key aid would join Scotland's Council of Economic Advisors (CEA). The CEA which advises Scottish ministers has many prominent members but Professor Stiglitz, perhaps the best known living economist, is a coup for the SNP government as it seeks to establish its economic credentials with the Scottish electorate.

As the parties jostle ahead of the Scottish elections on May 6th next year, jobs and the economy will be key deciding issues.

While the crisis in Britain's public finances deepens the Scottish economy is in surplus. This divergence will focus the economic debate in Scotland on whether Scots should accept David Cameron's austerity cuts or move towards economic independence.

To convince Scots of the benefits of independence, the SNP will seek to contrast the UK's worsening budget defecits with Norway's spectacular economic success.

Niall Ferguson - A Stimulating Failure

Anyone following this blog will no that I have been no fan of stimulus.

With credit frozen because of debt it was crazy to increase the debt load for the purpose of stimulus and would be counter-productive. There has never been a case that I know of where an alcohalic was cured by increasing his or her dosages of alcohal.

The idea of stimulus originated in the work of John Maynard Keynes. He is fawned over by the left and that has become a problem. Stimulus is supposed to protect jobs during a recession. The idea is that during a downturn in the business cycle a government can spend rainy day savings to create demand ahead of time.

The problem is that we are not in a recession. We are sufffering a systemic collapse brought about by fraud and a failure to regulate the financial sector. The government borrows money but there is no growth and so government debt is put onto the taxpayer. Only the lenders benefit. The left should really review the benefits of Keynes in light of this development.

Keynes himself would be none too happy at having the current malaise of stimulus parked at his door. The British government had no savings during the good times - indeed the 'good times' were a consequence of debt driven economics - an illusion. Now we have to pay for that illusion and there's nothing set aside for this downpour.

To make matters worse it is the productive, high-value part of the economy which has to pay for the temporary jobs. When the stimulus is withdrawn the companies and taxpayers who subsidised them will be pulled down by the weight of subsidy. Hundreds of thousands of job losses have been caused by this 'medicine'. Clearly this should be a hot topic of left debates.

Here for your pleasure is a video of Niall Ferguson discussing the failure of stimulus:

Norway's Oil Fund Most Respected in the World

Another piece for Newsnet Scotland:

Anyone interested in Scotland's future relating to the 'Peak Oil Crisis' should visit an important new website:

by Alex Porter

Norway's oil fund goes to the top of the class according to a world-famous think tank.
Run by Norway's central bank Norges Bank, the pension fund - Statens pensjonsfond utland - is fuelled by oil revenues and is now worth £327 Billion.

In terms of size Norway's fund is the second-largest in the world trailing only Abu Dhabi. For every man, woman and child in Norway the fund manages £67,000. Last year the fund grew by a staggering 26% - the equivalent of more than 2 years grant from Westminster to Scotland.

Now the prestigious US think-tank, the Peterson Institute for International Economics, based in Washington DC has awarded the fund 97 out of 100 points when measuring it for structure, ownership, responsibility and management. (1)

This is the highest score of any fund and ahead of California's state pension fund (calPERS) on 95 points and New Zealand's Superannuation Fund on 94.

Norway's Finance Ministry owns the fund on behalf of the people of Norway but the Norges Bank Investment Management (NBIM) unit of the central bank manages it on a day to day basis. Almost all of Norway's oil and gas revenues are invested into the fund and invested for future generations. Some 60% of the fund is then reinvested in company shares in stock exchanges around the world. Only 4% of the revenues from the oil and gas sector are used for public spending.

Talking to the newspaper Dagens Næringsliv. Norway's Finance Minister Martin Shancke said of the rankings: "We’re satisfied that we score so highly, and higher than the last time"

In a recent interview with Newsnight Scotland's Gordon Brewer, the former chief economist of the World Bank and former key economic advisor to President Bill Clinton, Joseph Stiglitz explained that successive British governments have squandered North Sea oil revenues instead of investing them. Joseph Stiglitz is now an advisor to Scotland's First Minister, Alex Salmond.

As the crisis in Britain's public finances deepen companies in the North Sea oil sector are set to represent 20% of all UK corporation tax. The success and first-class international profile of Norway's oil fund will be pointed to by SNP leaders as evidence that oil taxation powers should be transferred to the Scottish government and an oil fund established.


World Renowned Economist says: 'Scotland subsidising rest of UK'

Here is the latest piece I did for Newsnet Scotland in conjunction with their excellent team:

by Alex Porter and NS Team

A leading Professor of Economics, Andrew Hughes Hallett, has sensationally confirmed that Scotland has been subsidising the UK treasury in London for years and that the Calman Commission recommendations are unworkable and potentially damaging.

Professor Hughes Hallett (pictured) also rubbished claims by leading Scottish Labour politicians that an independent Scotland could not have survived the banking crisis by explaining that much of the liabilities suffered by HBOS and RBS would have fallen on England.

Hughes Hallett, who is a Professor of Economics at George Mason University in Washington DC and St Andrews University was appearing on Radio Scotland’s ‘Newsweek’ show when he undermined much of what Unionist politicians and Scottish media commentators have been saying about Scotland for years.

Professor Hughes Hallett confirmed that Scotland subsidised the UK and also described the perception that public spending in Scotland is 20% per head more than the UK average as “misleading”. He gave, as an example, the defence figures where the actual monies spent in Scotland was £0.8 billion LESS than the official treasury figures.

Prof Hughes Hallett said:“The usual perception is that Scotland spends about 20% on public services more per head than the UK average...

“Those numbers are very misleading mainly because the spending in that part is what’s spent on behalf of Scotland but not necessarily in Scotland.

“The estimate for Scotland’s share, that’s contributions to defence, is 2.8 billion but it’s roughly 2.0 billion are actually paid out in Scotland

“So there’s an implicit subsidy going south in that sense and you can think of lots of other examples ...”
Hughes Hallett added:“At the moment, on the current account, there’s a subsidy going to London, which is helping London.

“When you get down to it, on the current account for the last five years at least, maybe longer, Scotland has had a current account surplus, which is currently according to the national accounts in Scotland £1.3 billion.”

Asked whether Scotland would definitely be better off, Prof Hallett replied:

“You can definitely say that it [Scotland] would be better off in terms of the revenue.”

Scottish revenues and banks
Prof Hughes Hallett pointed to ‘missing’ income that is generated in Scotland but is actually attributed to London, giving the Crown Estate as an example saying:

“The Crown agents who take fees for electricity generation and give it to the Treasury...”

Professor Hughes Hallett also destroyed one of the myths surrounding the bail out of HBOS and RBS claiming that their dealings in England would have meant that England would have shouldered a significant part of their liabilities.

Professor Hughes Hallet said:

“They [HBOS and RBS] have substantial activities in England as well as elsewhere and therefore the burden of bailing them out would have to have been shared in any case.

“And there are plenty of precedents for that. The Dutch-French banks and the Belgium-French Banks that went bankrupt had to be bailed out jointly by the responsible authorities, and so it would have been shared.”

Professor Hughes Hallett’s experience has covered many areas and range from international economic policy to financial market stabilisation. Apart from a wide range of academic posts with Princeton, St. Andrews and other universities around the world he has also acted as a consultant to the IMF, World Bank, Federal Reserve, UN, European Central Bank, UNESCO, OECD, numerous central banks, governments and other organisations.

His comments will have strengthened John Swinney’s case that Scotland would be better off financially with economic independence. They also come on the heels of the assertion by former World Bank chief economist, and key aid to President Clinton, Joseph Stiglitz that successive Westminster governments had 'squandered' North Sea oil revenues instead of investing them.

To listen to Professor Hughes Hallett’s interview visit Newsnet Scotland here.

SNP MSP Joe Fitzpatrick seized on Hughes Hallett's comments arguing that Scotland is not dependent on hand-outs as argued by his unionist opponents:

"Professor Hughes Hallet has confirmed what John Swinney and the SNP have been saying for years. It’s economically unviable for Scotland to remain part of the union and subsidise the rest of the UK. For years Scotland has more than paid its own way, only for unionist parties in Scotland to peddle the myth that it is the other way around."

As the crisis in Britain's public finances deepens and David Cameron's austerity cuts start to kick in, the debate in Scotland, in the lead up to the Holyrood elections next year, will focus on jobs and the economy.

With polls showing most Scots blaming the Labour Party for the critical state of Britain's public finances Iain Gray, Labour's Holyrood leader, will try to shift the focus of the campaign onto Tory cuts. As the SNP government's principle rival though, Labour will be forced to defend a union in economic dire straits and explain why voters should trust them to get Scotland out of a hole dug by Labour.

With world-renowned economists such as Stiglitz and Hughes Hallett endorsing the SNP's case and with London spending deficits ballooning, nationalist leaders will calculate that the burden of proof of economic credibility will shift from the SNP to Labour.

Saturday, October 23, 2010

Blogging and Political Innovation Event - Edinburgh Sat 13th November

How are political blogs changing politics?

This is the question that Mick Fealty and his team at the famous slugger o'toole blog has partnered up with Channel 4, NESTA and others to find out.

This 'political innovations project' rolls into Edinburgh on Saturday 13th November. See details here.

One subject which is coming up a lot in the blogosphere is how to aggregate blog content and Mick promises that one of the attendees is an expert in ways to share content to maximise effect.

Naturally, the organisers would like to encourage politically-minded people whose knowledge of the blogosphere is limited to go along and find out what the low-down is. So every blogger can take a friend;)

Here are the event's objectives:

1. To discuss some of the ideas that we’ve turned up so far on Political tnnovation - here (more to come)

2. To introduce people who work around politics (either politicians, campaigners, civil servants etc)to some of the people and ideas that are floating around the blogosphere

3. To get bloggers together to discuss political blogging – it’s impact and where it’s going in Scotland (lunch and drinks will be laid on!!).

The event will have ‘open sessions’ anyone who wants to get something on the agenda will be able to. We’re also going to have a few ‘sidebar’ sessions where projects or software gets demonstrated and where some set-peice discussions (around blogging and libel, or around the way bloggers and journalists feed off each other).

So the organisers hope you:

a) Come along yourself on the day
b) Blog about the event in advance – we’re *really* keen to get some politicos who don’t fully understand the blogosphere and e-democracy along
c) Pick up any of the ideas that appeal to you / annoy you and blog about them as well?

For further information you can contact Mick Fealty and his team:

Friday, October 22, 2010

British Currency Crisis Threatens Future of Scottish Importers

Latest piece for Newsnet Scotland:

British Currency Crisis Threatens Future of Scottish Importers

by Alex Porter

The plunging pound is threatening the survival of businesses in the Scottish imports sector.

Yesterday the Bank of England (BoE) governer Mervyn King indicated that the bank would increase quantative easing (QE). QE, or money printing, has caused the value of the British pound (GBP) to fall rapidly against other currencies.

In the last 3 years for example sterling has fallen against the Japanese Yen by 61%. This means buying products from overseas has become much more expensive for Scottish importers who have to pass on those costs to consumers or go under.

Since the financial crisis began the Bank of England has created new money to the tune of £200 Billion. With more pounds in the system the value of each one falls and so you have currency devaluation.

Newsnet Scotland interviewed one Scottish importer who complained that the fall in the pound was driving up costs:

"In the last two years we have had a constant barrage of letters from suppliers informing us that the costs of their goods have risen, in some cases by over 25% per year, due to the weakness of the British Pound against the Euro, Dollar etc."

The Westminster policy of currency devaluation is causing this importer to rethink the value of remaining within the UK currency:

"Many of our imported goods come from France, Italy, China and America. Goods that we sold in 2007/8 for £20 are now having to be sold for £30 plus. If ever there was a time to be in the Euro, the last two years were it. Because of these unaffordable rises many small businesses have gone to the wall."

As Britain faces a rapid decline in its tax-base so Westminster deficits are accelerating. The coalition governments hopes that by increasing the money supply consumer demand will increase and taxes will rise as the economy grows. The problem with that analysis is that credit is frozen because of debt saturation and so lending more money to stimulate actually has the opposite effect.

As Scotland moves closer to the Holyrood elections, Labour will have to defend the case for staying within the union and dealing with a crisis in UK public finances and a plunging British currency. The SNP will offer to relieve Scottish business of those burdens and map out a transition to an independent Scottish economy boosted by North Sea oil revenues.

The news this week that the Norwegian oil fund reached $513 Billion , the equivalent of 10 years of Scottish public spending, will be exploited by nationalist strategists when seeking to establish their economic credibility with Scottish business leaders.

Thursday, October 21, 2010

Calling Citizen Journalists! (Scottish or not)

For those who would like to see a balanced political debate in Scotland, the arrival of Newsnet Scotland didn't come quickly enough. For long and weary the media in Scotland has been viscerally anti-SNP and especially so since the nationalists won the Scottish elections.

Newsnet Scotland has a core of over a thousand members and on top of that has over 2, 000 unique visits per day. The content is increasing in quality and the site is screaming out to evolve.

Newsnet Scotland Seeks Writers:
To evolve into a mainstream weapon against Scotland's media bias, Newsnet Scotland now needs people out there to contribute articles. This is your big chance. If you follow football send in football articles. If you like international relations submit articles, if you like fashion send copy or if the cut and thrust of politics cooks your goose fire off a piece to the editor.

Bloggers Alliance:
There are bloggers out there with excellent writing skills. Blogs are great but they have their limitations. So, if you write a blog then maybe once a week send in an article to Newsnet and then post it to your blog.

let's build an alliance that can take on the nasty propaganda machine that holds Scotland's democracy back!

Join Anyway:
If you don't want to or prefer to wait then join anyway and try and get some friends to write.

For Scotland!

Wednesday, October 20, 2010

Sterling Crisis Distorting Scottish GDP

Here is my latest piece for the excellent Newsnet Scotland:

Sterling Crisis Distorting Scottish GDP

The plunging value of the British pound (GBP) is making it difficult for Scottish firms to plan for the future.

Mervyn King hinted today that UK base rates would remain at their all time low of 0.5%. Making it cheaper for commercial banks to borrow money and lend it out into the economy will cause an increase in the money supply further devaluing sterling.

Quantative easing (QE) also known as money printing dilutes the wealth of the citizens but makes exports cheaper. In the last 3 years the GBP has dropped against the Euro 23%, US$ 26%, Swiss Franc 46% and the Japanese Yen by 61% respectively.

It is difficult to truly compare the drop in the value of the pound against other currencies which are also being devalued and so the best indicator is the price of the pound is in terms of gold. In the last year alone, sterling has fallen 30% against the yellow metal.

By increasing the money supply the British government and the Bank of England (BoE) hope to stimulate the economy but the effect is that business can't tell if orders are temporary and based on short-term stimulus or a real improvement in economic fundamentals. QE now stands at £200 Billion and the BoE have been given the nod by the UK government to print further.

This week CBI Scotland reported (1) that Scottish exports were up in the last quarter to October but that overall manufacturing had stalled and while orders had risen, businesses were not increasing staff. This picture indicates that Westminster policy is causing volatility and uncertainty for Scottish businesses.

As the tax-take shrinks Britain's budget deficit is spiralling out of control. Government borrowing now stands at £15 Billion per month.

When that £15 Billion is spent by the government it goes into the economy and used for consumption. It is therefore calculated as part of the GDP figure. If you take the borrowings out of the GDP figures it is clear that the British economy is contracting rapidly as debt is being used to drive the economy instead of organic growth.

With an injection of money into the system there is the illusion of wealth but it is actually debt. This distorts economic planning as sales often go up as a result of 'stimulus' but decline when the 'stimulus' is withdrawn. To make matters worse repaying what the government borrows will come from productive companies who will suffer by subsidising the temporary 'stimulated' economy. The net effect could be hundreds of thousands more unemployed at a time when public sector jobs are to face an austerity cull.

Holding interest rates down artificially renders most economic data meaningless. Not only is GDP misleading but the market loses its vital price discovery mechanism. Flooding the system with more money creates artificial demand for products and so prices do not reflect their true economic value to the economy.

By increasing the money supply, Westminster and the Bank of England distorts the economy by re-inflating bubbles caused by too much credit in the first place and so prevents a market-led correction. The economy wants to correct itself but that process is suspended while the currency is being debased. Another downside is that the money the government is borrowing will have to be paid back at interest meaning increased deficits.

The only beneficiary of this monetary policy are the high street banks who borrow money almost zero cost and lend it out at commercial interest rates which on credit cards can be as much as 50% APR. Some commentators argue that this policy of low interest rates is simply to help the banks pretend that they are solvent.

Banks' debts are being transferred to the British taxpayer so that what was a financial sector crisis is now becoming a sovereign debt crisis.

Bankrupt Britain
As more international investors like Jim Rogers warn of Britain becoming bankrupt the debate in Scotland will focus on whether to accept David Cameron's austerity cuts or move towards economic independence.

With receipts from North Sea oil set to account for 20% of all the UK's corporation tax, the SNP will argue that the Labour and Conservative parties in Scotland will have to defend a British state with a worsening crisis in its public finances.

Recent polls show that over 80% of Scots believe that the current coalition and the previous Labour governments are to blame for the crisis.

As the race to enter Bute House heats up, the nationalists will hope to exploit these findings by comparing Westminster's economic competence to Holyrood's.

The agreement last week of the former World Bank chief economist and key aid to President Clinton, Joseph Stiglitz, to advise Scotland's First Minister Alex Salmond, will be calculated by SNP strategists to underline that case.


Saturday, October 16, 2010

What will Scotland's role in the world be now that global oil supplíes have started to fall? It seems that with demand for oil in the world rising 'peak oil' is becoming a serious problem for global security.

Oil affects the price of 95% of everything we buy. As oil supplies drop so the global economy will stop growing. The financial system of the world is based on 'growth' and so when growth begins to decline so that system goes into crisis.

This issue is starting to seriously worry industrialised nations as a dramatic report by the Germand military and leaked by Der Spiegel reports:

Market failures: The authors paint a bleak picture of the consequences resulting from a shortage of petroleum. As the transportation of goods depends on crude oil, international trade could be subject to colossal tax hikes. "Shortages in the supply of vital goods could arise" as a result, for example in food supplies. Oil is used directly or indirectly in the production of 95 percent of all industrial goods. Price shocks could therefore be seen in almost any industry and throughout all stages of the industrial supply chain. "In the medium term the global economic system and every market-oriented national economy would collapse."

And this will have a major political effect on nations like Scotland according to the report:

Increasing importance of oil exporters: For importers of oil more competition for resources will mean an increase in the number of nations competing for favor with oil-producing nations. For the latter this opens up a window of opportunity which can be used to implement political, economic or ideological aims. As this window of time will only be open for a limited period, "this could result in a more aggressive assertion of national interests on the part of the oil-producing nations."

The debate about how Scotland will relate to the outside world diplomatically and geo-politcally in relation to 'peak oil' must start now! It is in everyone's interest to raise the issue on to the political agenda in Scotland.

That debate has started on:

Thursday, October 14, 2010


Going back to the Joseph Stiglitz (former chief economist of the World Bank) theme of Britain living off of North Sea oil 'wealth' we can now see how well Norway has performed over the last 10 years.

You can see Norway's wealth per capita and compare it to the UK's. (I think the UK's growth is illusory but that's another story about adding borrowed money on to GDP figures and then distributing said borrowings to London). You'll have to imagine Scotland's growth but I reckon that it will come in under the UK's in general.

Chart by Credit-Suisse

Not bad eh? I wonder how Scotland would look with a tripling of her per capita wealth over the last ten years like Norway?

Remember to CHEQUE YOUR OIL before you drive to the polling stations!

PS. Don't forget to sign up to

Sunday, October 10, 2010

Labour's Bankrupt Britain

Here is an article I wrote for Newsnet Scotland. I hope you enjoy and join the Newsnet Scotland revolution!

Labour's Bankrupt Britain

by Alex Porter

In the vacuum caused by want of political principle or ideology, big business – sly, genius and organised – instilled in The Labour Party an ideology of their own – 'New Labour'. It was all about focus groups and soundbites signifying nothing. It was a display of government instead of actual government. In reality it started off as a cover for a system of influence, access and kick-backs but soon became an integral component of the biggest heist in history.

Labour had cosied up to special interests and became bosom buddies but while the British political class lost sight of its ultimate purpose - public service - big business had not. Labour politicians, many of whom joined the party for laudable reasons, were now in the belly of the beast. They became that which they set out to defeat – agents of injustice. While the greedy took control of the levers of state, the party followed a strategy of transferring wealth from the people to the super-wealthy. The historic Labour movement born to fight for the workers was now in the business of offering services to clients such as war and wealth confiscation.

Recession or Systemic Collapse?
One myth that has to be exploded is recession. The 'Crisis' is not a recession and we are not in any recovery, whether it be a double-dipped or v-shaped one. Blaming it on business cycles is convenient but let's be honest - the crisis is a structural collapse caused by policy failure. Until this is acknowledged there can be no planning and the economy will continue to fracture.

Central Banks
"Give me control of a nation's money and I care not who makes its laws" (Mayer Rothschild)
Banks sell debt. If the citizens, business and government have no debt then banks have no market. The strategy of the bankers, consequently, is to create the market for their product. It doesn't get any better then than to have a monopoly over the supply of money. All the money in the British economy is issued by the Bank of England. This is lent to commercial banks at interest and then lent out into the economy, mostly through employers but also through credit cards, mortgages and so on.
When you see a ten pound note, it represents debt. It has to be paid back and at interest. So, once all the debt is paid back, there’s still debt (interest) and to pay this back, more money has to be created (inflation) and lent out and you get ‘compound interest’. More money in the system means more interest payments in the system.
This cycle continues until the volume of debt is so great, you simply can’t borrow anymore. You have nothing to borrow against. The currency will no longer have value. Everything that you own loses value along with the currency devaluation. In the end wealth has been transferred to the lenders - the banks and their shareholders. The central bank system is designed to eventually collapse the currency. The parasite consumes the host – the economy is bankrupt.
This central banking system (credit monopoly) ensures that there'll always be economic injustice and the super-rich get a free ride. Those who understand the system and can, charge interest and those who don't or can't, pay it. If you want to know who the rich and powerful are – they're bankers.

Fractional Reserve Banking
When a deposit of £100 enters a bank the bank can lend £90 of it out. Ideally, the system works in that the banks lend to someone who will pay them back or if they can’t then they have security such as a house or land – that would be sold and the loan sum recovered. If there’s a fraud event and the bank needs to replace the original deposit it gets 'bailed out'. For this system to work banks must have good security and minimise risk with deposits. When securities are batched together into a package (derivative) and then 'rated' they can be bought and sold in large quantities at the flick of a switch. Every time a derivative is bought and sold it generates commission and fees meaning the 'assets' inside it become even less valuable. The leverage designed to help small businesses and ordinary depositors became an engine of wild speculation and profit.

Gordon Brown, then Chancellor and ultimate supervisor of the Financial Services Authority (FSA) pressurised the regulator into regulating with a "light touch" or not to be "heavy and intrusive" with banks like HBOS and Northern Rock, according to the head of the regulator, Lord Adair Turner. High street banks continued reckless lending. Rather than lending out money to small businesses for example they began buying and selling derivatives. The £100 that you deposited saw a bank buy £90 of derivatives and then repackage and sell that ‘asset’ to another bank. That other bank would then use 90% of that £90 to buy some more derivatives and resell them to another bank. In the end your £100 deposit became thousands in the worlds’ economy. All this multiplication of money in the banking system is ‘leverage’. In the end the same ‘asset’ behind the derivative was owned by numerous investors.

Rating Agencies
How did the entire developed world, with mature democracies get into massive debt? The answer to this £500 Trillion question was derivatives. Britain or should I say the City was the global epicentre of the derivatives market. Selling derivatives was selling assets which have a calculated financial return. The flaw with derivatives was that the assets were never going to pay those returns - they were toxic. However London and Wall Street sold them to banks, governments, local governments, pension funds and individual investors all over the world. Derivatives were very complex 'financial instruments'. Very few understood them and if they did then they were designing new ones. Given the complexity of these products investors depended on rating agencies such as Standard & Poor or Moody's to assess their value. If a rating agency said that the product was rated AAA, that meant they were the least risky investments on the market. Great thought investors – give me lots. World-wide £500 Trillion were sold yet the world’s GDP was only £40 Trillion. Something didn't add up and it turns out it was the rating agencies.

Western Banking System
The IMF is interlocked with the World Bank which is 51% owned by the US Treasury which in turn works hand-in-glove with the US Federal Reserve Bank – a private organisation owned by the richest banks in Europe and America. Various ex-CEOs of Goldman Sachs and other private banks have recently and are currently heads of each and all of these institutions. The network means that the same people who create money also sell derivatives and can bail themselves out using public money.

Corporate Strategy: Rolling Out Crisis
The predatory nature of banking means that poorly regulated competing banks will incline towards speeding up the process of debt saturation. The banks shareholders want to maximise profits and market share is the all important 'performance' indicator. A full and frank confession (to investigative journalist Greg Palast) by the former chief economist of the World Bank, Joseph Stiglitz, exposed a corporate strategy of getting whole nations into debt and then asset-stripping them using World Bank loans to the third-world.
This strategy was confirmed by John Perkins in his book Confessions of an Economic Hitman where he explained that trained economists where sent in to manipulate and bribe leaders of target countries. If leaders remodelled their countries, according to the neoliberal principles of privatisation and deregulation and undertake hugely expensive, and of course outsourced, infrastructure projects (such as the hydro dam in Iceland) then that nation could be asset-stripped by the corporate empire. If the 'hitman' failed, as in Ecuador and Panama in John's case, then assassination or coup strategies would commence. If that failed, as in the case of Iraq said Perkins, the military option would be taken.
To plunder a modern democratic nation like Britain with a developed economy though the corporate elite needed a different plan. To lure Britain into debt, crash the economy and then asset-strip it, would require some refining of the IMF/World Bank model. Joining the 21st century corporate empire religion would require a blood sacrifice. That's where the City of London and the derivatives market came into play.
In short the new template was pump Britain (or any other developed nation) full of cash, get its government borrowing based on future growth and go on a spending spree. When the cash is pulled out there's a crash and the nation is asset stripped and unable to get out of the hole. The global bankers make money speculating and selling government debt on the way up and they make money asset-stripping on the way down.

Proof of Concept: Argentina
Wall Street insiders attacked Buenos Aires. During the 90s the Argentinian President Carlos Menem’s government had embarked on and was speeding up a programme of privatisation and deregulation. Perfect. In 1996 Goldman Sachs sent out the word to its client investors in a report entitled “A Bravo New World”
Investment bankers, analysts and bond traders piled into Argentina – investment followed. International investors started speculating on the country’s 'fantastic' prospects. So much money piled in that politicians felt good about the financial situation and started spending. The tax take was going up and up and so the government borrowed money (selling bonds) that it was sure it comfortably pay back and so asked for more.
In the years between 1991 and 2001 investment banks pocketed $1 billion in fees from Argentina's bond sales. The government got to spend on infrastructure, welfare and whatever else took their fancy. When there were some warnings that things had gone too far, the analysts (who are paid bonuses by banks based on 'performance') kept shtum. The fees were enormous and so the more debt the merrier.
The tax-base crashed and so did the economy. In came the IMF with loans and those ‘conditions’ known now as austerity. The loans were given to help Argentina pay their creditors - banks. The more money they borrowed to pay the creditors the worse the situation became. Unemployment hit 20%, the banks froze people's accounts, there were riots and finally Argentina did what it should have done before the IMF came along – declared bankruptcy.

Strategic Partnership
While Goldman and JP Morgan were busy gutting Argentina, New Labour came to office. Tony Blair was going to clean up Tory sleaze.
Within a year of being in office 'Cash for Access' hit the news stands. People like Derek Draper who were close to the New Labour project set up Lobbying firms. Their firms, allegedly, could provide access to government, provide confidential information on legislation and spending policies before being made public, obtain environmental waivers and have legislation altered. A network of key New Labour politicians including Blair and Brown, banks, energy and media companies and others were interlocked via lobbying firms according to The Observer newspaper's exposé.
New Labour built an influential network of contacts and they especially liked American ones like Enron, PowerGen, Bill Clinton and friends. Tony knew he hit the big time when Brazil got looted and British Gas picked up the Sao Paolo Gas Company on the cheap. Blair had been initiated into the global game of plunder. Britain was back doing what it was conceived for - empire.
In Scotland, the Scottish parliament was being set up. And before the elections were held, lobbying firms were gearing up for business. Labour insiders or family members such as John Reid's son Kevin worked for Beattie Media. The former Scottish Secretary and ex-NATO General Secretary George Robertson’s son Malcolm also worked for them. In 1999, again an Observer investigation alleged that Beattie Media was offering privileged access to ministers in the Scottish Parliament including Jack McConnell, then Finance Minister before becoming Scotland's First Minister. Again, the story went away but the impression was left that devolution was never designed to be about Scottish democracy but about New Labour's business aspirations.
The dividing lines between big business and the New Labour government were, confusing.

Marketing Mix
To really drive the derivatives market Britain needed more debt. Expensive projects, that meant lots of future earnings for banks to lend against and leverage, would do the trick. Financial wizz-kids came up with the Private Finance Initiative (PFI). With PFI you could have infrastructure projects like schools built now but paid for later. Brown forced councils to use PFI finance to construct buildings like schools and in city council’s like Edinburgh, they did. The shiny schools arrived without any public outlay but in the end the public would have to shell out four-times the cost of the schools and then still not own them. That policy has brought Edinburgh council’s education department to the point of bankruptcy. PFI was rolled out all over Britain and now, during 'crisis' a heavy price is being paid.
There really is no better way to wrack up a nation’s debt than war. Oh how the US wanted one in Iraq and oh how the British public didn't. Tony Blair showed his true colours – they were painted into stars and stripes. After the conquest of Iraq, JP Morgan was given the contract to run the Iraq Trading Bank. Two days after leaving his job as Prime Minister, Tony Blair was a consultant with JP Morgan paying him a cool £2 Million a year. Tone is now worth tens of millions and is a highly successful consultant to oil producing governments in the Gulf region. In 2007, while still PM the ‘deal in the desert’ with Libya's Muammar Gaddafi regarding the prisoner transfer agreement to Libya from Scotland of the man convicted of the Lockerbie bombing, Abdelbaset Ali Mohmed Al-Megrahi, was an early sign of Tony’s oil consultancy potential. Apart from the human cost, 2 million Iraqis and many 'coalition' soldiers have lost their lives because of the war, Britain was paying a heavy financial price (£20 Billion: Iraq and Afghanistan, so far).

Sell and Lease Back
The 'crisis' arrived and suddenly all tax from the British financial sector dropped off a cliff. More immediately, the fraudulent derivatives had seized up the global credit markets, banks didn’t trust each other and stopped lending to the general public and each other. Debt reached saturation point.
This was a historic moment in British history. Gordon Brown had two choices: 1) He could let the financial sector go into bankruptcy (banks’ shareholders and bondholders would lose their investments), cancel all mortgage and credit card debt in the nation and create a new financial architecture with the citizens in a position to buy and save, or 2) He could use the citizens’ money to bail out the fraudulent financial sector.
It was an old-fashioned class war of finance against labour and industry. The party of the socialist tradition, of the welfare state and of trade-union partnership chose finance. The super-rich had lost their money at the casino and wanted it back. The Prime Minister transferred those private debts, running into hundreds of billions of pounds, to the British public. The irony was that he had to borrow money on the British citizens’ behalf from banks who used the people's own deposits to pay for the bail outs. Britain's future was now mortgaged, indebting unborn generations.

Overdraft Extension
With credit frozen the economy contracted. Gordon borrowed yet again to pay for ‘stimulus’. This made no sense. It was like curing a heroin addict by increasing his number of hits. The theory goes that if you spend money into the economy then people will be back consuming and business will survive long enough until the recession is over. However this was not a recession. Debt had frozen the economy and borrowing more money to spend was therefore counter-productive. Money was taken from the productive economy to pay for jobs that had less economic value. The real economy paid the price of propping up temporary 'stimulus' jobs throwing hundreds of thousands out of work and many more into low paid jobs. Cast as the prodigal 'son of the manse' Gordon Brown became the father of the sweatshop.
As it started to sink in that ‘stimulus’ wasn’t doing the trick so Gordon had Mervyn King at the Bank of England reduce interest rates further, meaning banks got money almost free but instead of offering businesses credit, the bankers hoovered it up in bonuses and fees. The banks though were in so much debt themselves it still meant they wanted that cash to help clean up their balance sheets and so still didn’t lend.
As Gordon was having problems raising money on the bond markets so Gordon and Mervyn turned to quantative easing (QE) also known as money printing and bought bonds that way. Money printing caused the currency to lose value and Britons became poorer as their wealth was diluted. The pound fell 20% in a single year and quantative easing has now reached the £200 billion mark.
Reducing the value of a currency means the people become poorer but it helps exports become more competitive. However Britain under Brown became an importing economy (based on speculation and consumption rather than production and savings) and so for an import economy a fall in the value of your currency means importers pay more for overseas’ goods and the country loses money. The only reason you would print money in this scenario is to meet debt interest payments that you can't otherwise meet.
And thus ‘Labour’s Bankrupt Britain’ moved from the balances sheets to the history books.

Now that New Labour is out of office where lies Britain’s finances? To balance the budget in the single month of August 2010, Britain had to borrow £15.302bn. That’s half of what Scotland spends on public services for a whole year. With tax receipts falling that is only going to get worse.
Now Britain moves into the austerity phase. Public sector cuts, rising prices and taxes will squeeze the population until the pips squeak. As the public sector is downsized so former public servants will need to be paid benefits, meaning a drop in income tax and an increase in benefits. Social security will be slashed so those dependent on them will not be able to spend in shops. More jobs will go and VAT payments will plunge.
The only tool Britain will have left, to try and balance a budget, will be quantative easing (money printing). Those who buy Britain's debt will not be happy about that. If the government wants to continue borrowing to balance the budget, investors will demand more interest for accepting the risk. When interest rates go up and the economy doesn’t grow, all the money the government borrows will go on meeting interest payments alone. To avoid default the printing press will be speeded up and eventually the currency will crash. In history this is generally referred to as 'hyper-inflation' where the currency, the financial system and the economy crash all at once.
The people will be begging for the IMF to lend some money. With the money will come conditions; trade-union reform, an end to the minimum wage, charges to get hospital treatment etc. Local government will be owned by investors all looking for a return and Britain will no longer be a 'developed' nation.
Almost two years ago the famous international investment guru Jim Rogers, former partner of George Soros, advised young Britons to emigrate. He envisioned the collapse of the pound and a Britain not worthy of its status as a first-world country.

Business Environment
And so the juggernaut goes on. The European Central Bank (ECB) which prides itself on being independent from political control is not independent from its member banks. Governments in serious crisis such as Spain, Ireland and Greece who were 'helped' by Goldman Sachs are now being told that they can't borrow directly from the ECB to balance their budgets but must sell bonds i.e. borrow from private banks at interest. (Many European countries have now joined Argentina in refusing to allow Goldman, JP Morgan and others to operate in their countries.) The European Commission has been hoodwinked into demanding that instead of taxing banks to pay for budget deficits they should instead borrow from them. The agenda is clear and explained well by Mike Hudson in his Counterpunch article A Financial Coup d'Etat:
"At issue are proposals to drastically change the laws and structure of how European society will function for the next generation. If the anti-labor forces succeed, they will break up Europe, destroy the internal market, and render that continent a backwater. This is how serious the financial coup d'etat has become. And it is going to get much worse - quickly. As John Monks, head of the European Trade Union Confederation, put it: 'This is the start of the fight, not the end.'"

The global elite, determined to reduce the working citizens of Britain to debt peonage, simply had to proclaim Gordon Brown as 'prudent' and they succeeded in their aims. The invites to Washington, top spot at the G7 'saving the world' and good coverage in the Murdoch press, paid off. In the end Tony and Gordon just wanted to be in the inner-circle with the Bushes, the Clintons, the Haliburtons, Goldman Sachs, JP Morgan, Credit Suisse, Deutche Bank, Barclays, the billionaires in the middle-east and so on.
New Labour got to play with the big boys. Their language, the G7's and the World Bank's were one and the same - the neoliberal cosmology of deregulation. Brown prised open Britain and the speculation and derivatives party was in full swing. When it all went wrong, Brown shackled Britain with the losses of his high flying, wheeler-dealer 'buddies'. It was Brown, after all, who established the template with the bailing out of Northern Rock back in 2007.
The guiding hands behind the global corporate empire, whose storm-troopers were Wall Street merchant banks like Goldman Sachs, had Tony Blair and Gordon Brown on the pay-roll. Goldman Sachs were described by Matt Taibbi of Rolling Stone magazine thus:
"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
New Labour facilitated and the 'vampire squid' reduced Britain from a social democracy to a neo-feudal colony. What began as Tony Blair's management project, bereft of any political convictions, ended up as 'Labour's Bankrupt Britain'.

In Scotland Labour still seeks to win the Holyrood elections by blaming job losses on the premise that it was the SNP at Holyrood, with virtually no economic powers to effect any economic change at all, that lost them. It’s ‘Salmond’s Slump’ that has brought mass unemployment and increased poverty to Scotland. After all these policies of stimulus, bail-outs and quantative easing which subsidised the City of London, Scottish unionism still holds to the belief that Scotland is lucky to be economically sheltered by Britain. However with oil off Scotland's coast set to contribute 20% of the UK's corporation tax (and that's ignoring tax at the pump), it turns out that unionism is the fox guarding the hen-house.
To throw salt on the wounds, Iain Gray - Labour’s parliamentary leader in the Scottish Parliament - last week pointed to the Joseph Rowntree Foundation’s report that child poverty in Scotland had grown faster in Scotland than England since the recession as evidence that the SNP government had failed Scots. The reality is that having bankrupt Britain Labour tried to save its skin by sucking capital into London City from outwith. These policies are still exacting an enormous cost on the Scottish economy. In the absence of anything approaching sound, economic journalism in Scotland though, we are going to be subjected to the unedifying spectacle of Labour taking the moral high ground as protector of the people against ruthless Tory cuts.

Osborne Backs More Money Printing

It is clear that the Britain's only answer to the current economic crisis is to print money. This policy will only lead to disaster. Now Bloomberg reports that the Chancellor George Osborne has stated that he will back any request that the Bank of England calls for to print more money:

Osborne Says He'd Approve a Bank of England Request for Monetary Stimulus

This money will go to banks who will simply buy and sell fraudulent derivatives and so suck in bonuses and fees but there will be no economic benefit to the people. At the same time increasing the money supply will dilute the wealth of the citizens.

The government and the Bank of England are destroying your way of life. You must try to stop them! These people are not looking after the citizens. They are not your friends. You are being robbed.

Saturday, October 9, 2010

Britain Debt Trapped

Now that Britain is suffering from debt attacks by international merchant banks (bailouts, speculation and money printing) so, at last, the people of the 'developed world' can relate to what these banks and their IMF/World Bank front have been doing to third-world and developing countries for decades.

When we saw scenes on TV of riots, war and chaos in places like South America, we switched off and went shopping for play-stations, DVDs, Ipods and blackberries.

Well now the same forces are pillaging their way through Britain and the rest of the developed world, we can't say we weren't warned - even if the BBC didn't tell us the whole story. We really should start taking notice of these things..

Ecuador has suffered more than most in the corporate world's game of plunder. Jaime Roldós had an unfortunate plane accident in 1981 and at the beginning of this month President Rafael Correa (who has a PH.D in economics from the University of Illinois) was almost ousted in a coup attempt.

It is the same game of plunder that is now going on in Britain, the US and Europe. For another angle on this story see this documentary courtesy of the Real News Network:

Friday, October 8, 2010

More Bailouts: It Will Never End

IMF Calls For A New Round Of Huge Bank Bailouts

Reports Business Insider.

The Banks were involved in a fraudulent derivatives market valued at $700 Trillion. To hide those losses they caused the crisis. The crisis is not a recession or part of a business cycle it is a systemic collapse caused by government policies. The IMF is simply a cover for the derivatives selling banks.

The $700 Trillion hole will never be filled - regardless of bailouts or quantative easing or austerity or any other mechanism that is used to transfer money from the people to finance.

The banks must be brought down as soon as possible before they bring us all down.

Thursday, October 7, 2010

Under Pressure!

Why the people will win.

In the current war of finance against labour and industry the people are struggling. The word 'on the street' though is that there is a force far more powerful than greed - love:

Monday, October 4, 2010

The Next Crisis is Imminent

The banks will soon be back for more bailouts. They're not telling you and they're denying it but they will. This time though, the government will also be broke and the people too. This is going to be a crisis that no-one can fix.

If you want to know why the next crisis is imminent I suggest you read this FREE report by the New Economics Foundation here called 'Where Did Our Money Go?'



Royal Bank of Scotland may take legal action against Goldman Sachs according to The Irish Times. The story relates to the RBS acquisition in 2007 of the Dutch bank ABN Amro. It seems that the world of global banking is starting to turn in on itself. Read the story here.

Sunday, October 3, 2010

North Sea oil and Former World Bank Chief Economist

I would urge any blogger who cares about the Scottish economy to run this video of the former Chief Economist of the World Bank Joseph Stiglitz talking about North Sea oil and the idea that the SNP are forwarding of an oil fund for future generations to enjoy. This video clip should be a major reference point in the debate over Scotland's economic future. Let's make it famous..

Banks Held To Account 3!

Another movie coming out showing how banks caused the crisis and are still destroying the economy whilst making themselves fabulously rich. Are we going to keep bailing out private companies who failed?