Like most people, I'm mesmerised by what's happening to the UK economy. There are so many questions, and it seems that there are no answers to many of them. What has really shocked me is that the Government committed £37 billions to banks last October without having a clue what liabilities were hidden in the bank's books. What on earth is the FSA for. Anyway it looks as if most of that money has gone - and today the Prime Minister has had to announce that he's committing billions more. Its like watching a huge car crash - fascinating and horrifying at the same time.
Two questions occur to me. Perhaps some of my readers can help with answers. Firstly, since the Royal Bank of Scotland is now 70% owned by the Government, and the value of shares has dropped from 600p to 12p, what's the difference between the current position and 'nationalisation'? It looks to me as if the Government is nationalising RBS by the back door.
The second question concerns the Government's amazing new insurance scheme. It seems that we have no idea what premium the Government is going to charge the banks for insuring their duff loans - or how much dodgy debt banks have on their books which they may want to insure. We could be talking hundreds of billions here. If Dan Brown or Tom Clancy had set one of their thrillers against this sort of financial background, the plot would have been dismissed as too bizarre for publication. And what are we to make of Gordon Brown's supposed shock that up to 80% of these dodgy loans are with foreign borrowers. How can he not have known that? And is this insurance scheme going to cover them. And if its only going to cover the remaining 20% of loans (those lent to UK borrowers) will it make any significant difference to the position of the banks.? I have no idea what the answers are to these questions. Thats not a problem - but it is a bit worrying that neither our Prime Minister or Chancellor has the slightest idea either.