Is this contagious!?
Gordon Brown brings Britain to the edge of bankruptcy
Iain Martin says the Prime Minister hasn't 'saved the world' and now faces
disgrace in the history books
They don't know what they're doing, do they? With every step taken by the
Government as it tries frantically to prop up the British banking system, this
central truth becomes ever more obvious.
Yesterday marked a new low for all involved, even by the standards of this
crisis. Britons woke to news of the enormity of the fresh horrors in store.
Despite all the sophistry and outdated boom-era terminology from experts, I
think a far greater number of people than is imagined grasp at root what is
happening here.
The country stands on the precipice. We are at risk of utter humiliation, of
London becoming a Reykjavik on Thames and Britain going under. Thanks to the
arrogance, hubristic strutting and serial incompetence of the Government and a
group of bankers, the possibility of national bankruptcy is not unrealistic.
The political impact will be seismic; anger will rage. The haunted looks on the
faces of those in supporting roles, such as the Chancellor, suggest they have
worked out that a tragedy is unfolding here. Gordon Brown is engaged no longer
in a standard battle for re-election; instead he is fighting to avoid going
down in history disgraced completely.
This catastrophe happened on his watch, no matter how much he now
opportunistically beats up on bankers. He turned on the fountain of cheap money
and encouraged the country to swim in it. House prices rose, debt went through
the roof and the illusion won elections. Throughout, Brown boasted of the
beauty of his regulatory structure, when those in charge of it were failing to
ask the most basic questions of financial institutions. The same bankers Brown
now claims to be angry with, he once wooed, travelling to the City to give
speeches praising their "financial innovation".
Does the Prime Minister realise the likely implications when the country joins
the dots? He has never been wild on shouldering blame, so I doubt it.. But
Brown is a historian. He should know that when a nation has put all its chips
on red and the ball lands on black, the person who made the call is
responsible. Neville Chamberlain discovered this in May 1940 with the German
invasion of France.
We're some way from a similar event. But do not underestimate the gravity of
the emergency and potential for disgrace.
The Government's bail-out of the banks in October with £37 billion of
taxpayers' money was supposed to have "saved the world", according to the PM,
but now it is clear that it has not even saved the banks. Our money kept the
show on the road for only three months.
As the Liberal Democrats' Treasury spokesman Vince Cable asks: where has the
£37 billion gone? The answer, as Cable knows, is that it has disappeared down
the plug hole.
It is finally dawning on the Government that the liabilities of the British
banks grew to be so vast in the boom years that they now eclipse the entire
economy. Unfortunately, the Treasury is pledged to honour those
liabilities because it has guaranteed not to let a British bank go down. RBS
has liabilities of £1.8 trillion, three times annual UK government spending,
against assets of £1.9 trillion. But after the events of the past year, I wager
most taxpayers will believe the true picture is worse.
Meanwhile, the assets are falling in value. This matters, because
post-nationalisatio n these liabilities are now yours and
mine.
And they come piled on top of the rocketing national debt, charitably put at
£630 billion, or 43 per cent of GDP. The true figure is much higher because the
Government has used off-balance sheet accounting to hide commitments such as
PFI projects.
Add to that record consumer indebtedness and Britain becomes extremely
vulnerable. The markets have worked this out ahead of the politicians, as
usual, and are wondering what to do next. If they decide our nation is a basket
case, they will make it so.
The PM and the Chancellor , both looking a year older every day, tell us that
for their next trick they will buy more bank shares, create a giant insurance
scheme for bad debt, pledge to honour liabilities without limit, cross their
fingers and hope it all works. The phrase "bottomless pit" springs to mind for
a reason: that is what they have designed.
In this gloom, the Prime Minister has but one slender hope: that somehow, by
force of personality, the new President Obama engineers a rapid American
recovery restoring global confidence, energising the markets and making us all
forget this bad dream.
Obama is talented but he is not a magician. Instead, Gordon Brown's nightmare,
in which we are all trapped, is going to get much worse.
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