First find an expert

Do these people know what they are doing?

Christine and George, but who is the expert?Christine and George, but who is the expert?
It is surprising to see the Guardian being so forthright about the EU. With this article they seem to have woken up to the reality behind the financial problems of Greece. Even so they are still behind the curve. By contrast both Christopher Booker and Liam Halligan have moved onto the future risks to the UK. However, the problems highlighted by Booker and Halligan did not arrive overnight. The situation the UK faces has been a long time coming, you might have thought an 'expert' would have spotted this and done something to soften the risk. Well two things to ponder, what is an expert? And what could they have done?

Let's start with another situation regarding John Kay, a former Director of the Halifax Build Society that eventually became known as HBOS. Back in the early part of 2009 he was giving evidence to the Parliamentary Treasury Select Committee. This was looking into the collapse of Northern Rock as part of coming to terms with the general financial situation, the credit crunch. Kay said -

As a Director of Halifax Building Society I was part of the decision to convert to a public limited company.....With hindsight, that was a mistake that damaged a fine business.

From the above it would appear that Kay had his doubts about the way building societies where being turned into banks from the start. Alas he did nothing, other than admit his mistake.

I came to understand the fundamental incompatibility of the cultures of retail and investment banking and why the marriage of the two so often leads to tears. The road to nemesis began, not at conversion, but earlier – on the day it was decided that treasury should be a profit centre in its own right rather than an ancillary activity. Legal restrictions on UK mortgage lenders were relaxed in 1986. Halifax’s main rival, Abbey, converted to a public company and leveraged its deposit base to build a large balance sheet. Most bankers were incredulous that the Halifax had been so slow to take advantage of this opportunity.

However, while Kay was waking up to the 'problems' of 1986 the person usually credited with sweeping away all these restrictions, Tory Chancellor of the Exchequer Nigel Lawson, to this day remains unmoved. For Lawson likes to be remembered for other things, not the start of the trouble that led to the fall of Northern Rock.

It is the same situation today, finding experts is hard work. Take another Tory, George Osborne for example. He seems unmoved by the fact that spending is going up and is possibly out of control as in Greece. As Fraser Nelson, normally a friend of the Chancellor said of Osborne -

he has so far outspent Gordon Brown every month that he’s been in the Treasury. Even adjusted for the runaway inflation, the Chancellor has on average outspent Brown during his first 12 months:

In the same way Lawson started a time-bomb ticking that reduced Northern Rock to rubble has Osborne also created real trouble for the future?

First there is still doubt that the attempts to reform banking practices in the UK are viable. At the moment the phrase used is 'ring fence', applied to the separation of funds from the retail and investment banking sectors with a view to protecting the former. It is also to be noted that Mervyn King is getting jumpy about the Greek crisis as he wants an audit of the UK's banks exposure to the problem. Secondly, it's said that Osborne was an enthusiastic supporter of Christine Lagarde in her bid for the top job at the IMF. The deal here is that the UK will not be taken for a ride and be part of more Greek style bail-outs. Only a fool, and Osborne, would think that this plan will work.

Is Largarde an expert? Oh how funny, for no she is not, well not in the world of finance! Though typical of how these things go she was the French Finance Minister. Lagarde has been more than happy to explain how the odd illegal manoeuvre has been employed to keep the euro afloat, but then she did qualify as a lawyer! And in the run-up to getting the IMF job she did suggest that one of her skills was "reaching out to people". Well Osborne was touched, that's for sure!

So what will Lagarde actually do? You would have thought it obvious, being French she will probably see what's good for France as good for both the EU and the developing world and run these things together. I predict that in years to come her time in office at the IMF will be seen as poor stuff. For she will be tempted to act just like Jacques Delors, who in a shoddy and reckless way stitched together the eurozone. He did his work in a typical Gallic manner, all puff and gesture but no foundation and it was this lack of detail that now shows with the eurozone falling apart.Remember Lagarde's words of not so long ago -

Let's not short Europe and let's not short the eurozone, - she said to applause from the business and political leaders attending the annual meeting of the World Economic Forum in this Swiss ski resort.

But then she was aiming to put up a better show than Angela Merkel at Davos. Not difficult as Merkel was in her frumpy-cum-haughty mood which failed to impress. You might think such rousing talk was a thing of the past now. While it's true the talk has changed the mood remains much the same. Back to the Guardian -

if the euro is to survive with all 17 members, and as a rival to the dollar

For that's the real reason for the euro, a rival to the dollar. All stemming from a silly mix of anti-Americanism and left-wing ideology. Other than that it serves no useful purpose whatsoever. Give it time and Lagarde will come to Osborne for a hand to 'help' her with her work and Osborne will cave in.

But the real experts, the people who work in the markets, they think Greece will default, perhaps as early as the autumn.