Feeling cheerful, are you? Well, I'll soon see to that!

I know, I know, it's Monday morning and most of you poor saps are working, plus, it's pissing down with 'Global Warming' again and what do you get from me - a deluge of bad news!  In a preceding comments thread, 'SoD' (Son of Duff), produced a dollop of really bad news from Liam Halligan in The Daily Telegraph.  Halligan has form in the production of truly awful, depressing news so if you're feeling a bit off already then skip the rest.  It can be summed up in this diagram:

 

As your eyes slide over those figures at the end of each block give yourself a pinch to remind yourself that these are "undeclared losses" and that we're not talking in the millions but in the billions!  In a nutshell, our upright, decent British banks whose premises adorn every High Street in the land are broke, bust, skint, insolvent, call it what you will, and they're not telling us!  No wonder 'Dim Dave' was pleading with the 'Iron Lady' - no, no, not her, the one forged in Germany - to start an airborne drop of gazillions (that is a technical monetary term meaning more, oodles more, than just mere zillions!) into the hands of, er, well, anyone who asks for it, really. Because he knows that if a run on the banks begins in euro-Europe it will instantly spread here and all those black holes so carefully hidden from view by our corrupt bank accountancy rules will suddenly have a searchlight on them.

As Halligan points out, all the banks know their own true situation and they can guess that it is the same, if not worse, with their competitors, hence, inter-bank lending which is critical for a thriving economy has simply withered.  There-in lies one of the reasons why our economy remains moribund - not only will they not lend to us they will not lend to each other!  Nothing much will change unless a market catastrophe sweeps everything and everyone away, or, until truth be told:

The banks whisper Armageddon will occur if they’re required to recognise their losses. While this might be true of executive remuneration, and the reputation of certain City grandees, it’s not true for the economy as a whole.

Fundamentally sound banks can still operate and extend loans even when they have negative book capital. But they need to retain earnings, and end bonuses and dividends, during the period their capital is rebuilt. So far, the raw power of the banking lobby, its attack-dog PR tactics and political donations, have kept demands for “full disclosure” at bay. Those of us who’ve made such calls have been consigned to the outer fringes of polite society — the same place we were banished for arguing that the euro could eventually break up.

Truth?  Hmmmn!  'Elf 'n' Safety' warning: Holding your breath can be dangerous!

(I'm away for the rest of the day)

 

Comments

[dearieme]

Of course they're insolvent. Most (all?) of the banks in the world are insolvent. What you have to ask is why G Broon decided to pass much of the burden from the banks' bondholders on to the british taxpayer. When you've answered that, we can jail the bugger.

[Whyaxye]

One of those longer red blocks near the bottom is looking after most of my worldly wealth, in the form of a deposit account and an ISA. Huge, astronomical sums of money. If they can manage to turn my trust and such massive amounts into a negative figure, then there is truly something wrong. Maybe they don't deserve it. I might even withdraw it, and then the buggers would be in trouble...

[rogerh]

Banking busts and prodical governments have existed forever, the problem is always dumped on the common herd because it must be - the lost cash never actually existed and there is no one to grab it back from. Take a look at Fred Schwed's 1940 book 'Where are all the customer's yachts?' (an old Wall Street joke) in which he explains why banking regulation will always fail.

Relax, debts can be run up forever - until the Sun expands to Earth's orbit and crisps debtors and debtees alike, the trick is to give the illusion debts will ever be paid off. What is in doubt is whether any individual country's debts can be expanded - confidence can evaporate here and move over there.

[David Duff]

Buddies, can you spare a dime?