Lifting people out of poverty and into debt?

A modern tragedy, madness not magic

Magic or madness? Magic or madness?
This is the week that Vaclav Klaus, much against the pain in his soul, signed the Lisbon Treaty into Czech law. It's an easy joke to say that Gordon Brown does not have a soul. But unlike Klaus, whose pain was clear, Brown crept through the back door to do his signing. Both leaders have been reduced as a result but only one retains his dignity. And this is the week that David Cameron pretends he has not had his nose rubbed in the dirt by being too clever by half on what his party would do about Lisbon.

This represents a huge loss. But then look at what is happening to our banks.

Two articles will help us understand this, Dan Roberts writes in the Guardian - see HERE. and Mark Bathgate in the Spectator - see HERE.

The vast sums of money lost by UK banks is given by Bathgate - “the IMF estimates that losses could be as high as 25% of UK GDP”. He also adds - “UK banks went on an orgy of lending around the world, becoming the biggest source of credit growth in many countries. RBS trebled its total lending in just three years, expanding its balance sheet to almost 1.5 times the size of the UK economy. Egged on by Gordon Brown – in whose tax receipts he felt he had found the “New North Sea Oil” to fund an ever grander government sector”.

Roberts says - “The final act of Britain's banking tragedy is not a pretty sight. We've come a long way from queues outside Northern Rock branches”, and also says - "the future of the industry is a humiliating moment for all involved".

And also - "This will not be how these events will be described by Alistair Darling, of course. The government has already attempted to claim credit for the EU competition ruling, and token gestures on bonuses will be presented as important concessions. Most importantly (and more credibly), the chancellor will also stress that the extra investment today allows it to reduce the risk of more pain in future. As ever, the key phrase used this morning in the Treasury statement is "value for money for taxpayers".

Bathgate adds “a list of bank failures that started with Northern Rock is now long: Bradford and Bingley, Singer and Friedlander, Dunfermline Building Society, RBS, Lloyds, HBOS.  With over £30 billion handed over today, the direct cost for the taxpayer approaches £90 billion, with no certainty of these sums being recouped. On top of this, there are still over £1 trillion of other subsidies being provided to these banks and others who have not needed direct bailouts, like Barclays, to try and hold the system together”.

And for many, the abiding memory of our Prime Minister was his feeble comment on the financial crisis “it started in America”. Funny how a government that bangs on relentlessly about “lifting people out of poverty” should saddle the people with so much debt. Who is going to pay this debt off and how?