Another Day……Another Banking Scandal

Another Day……Another Banking Scandal.

With the number of scandals coming out of the city currently, London must be a laughing stock in the financial world. The latest relates to a £290 million penalty dished out to Barclays. Why? Well, they manipulated the two most important interest rates in the global financial markets during 2005 - 2009 and directly influenced the value of trillions of dollars of financial deals between banks and other institutions. Or to put that another way……they legally and morally cheated to line their own pockets.

Given our lack of trust in the banking sector, there is an assumption that other banks must be guilty also. No surprise then that other big names believed to be under investigation include Citigroup, JP Morgan, Deutsche Bank, HSBC and Royal Bank of Scotland.

But here is my conundrum......

Am I happy that the Financial Services Authority as the banking regulator has actually identified this and can now deal with it?

OR

Am I more concerned that it was permitted to go on in the first place and it took an investigation in the US to highlight it to our regulator?

Answers on a post card……

Regardless, my biggest issue is that we have further reason to distrust the banking sector which is very concerning given that all at Downing Street are pinning their hopes on our banks igniting our dormant economy.

Shameful……yet again.  

Thank You Jimmy Carr

The story to grab the most headlines over the last week has been comedian Jimmy Carr making a one line joke at one of his shows that he avoids paying tax by employing a tax specialist and using an offshore tax avoidance scheme. The media, politicians and the general public cried outrage and Jimmy Carr issued a full apology and withdrew from the tax avoidance scheme to put an end to the negative publicity in the middle of a tour.

Instead of castigating the man, we should be issuing him with a public thank you from the Prime Minister, an open top parade through London and a knighthood from the Queen.

After all, if it wasn't for a joke made by a comedian how else were all in power at Downing Street going to work out that the 'shady', 'underworld' and 'secretive' tax avoidance schemes that have been advertised in the Financial Times for decades were actually depriving the public coffers legally (but not morally) of millions of tax revenue?

Thank you Jimmy Carr - we salute you.

Mr Osborne, Mr Clegg and Mr Cermeron......I am embarrassed for you.

Student Fee Magic

It’s fair to say that we have all been witness to some economic magic that Penn & Teller would be proud of……all in front of our noses.

The average level of debt for graduating students this year in the UK is £53,400. Total student loans currently total £5 billion and will increase to £50 billion by 2030. The magic? The Government has essentially taken a public expense and turned it into a consumer debt and removed it from the Government balance sheet as a liability. Say what you want about the previous Labour Government, but this is genius. Pure and simple.

This passing of £50 billion of Government liabilities to consumer debts ‘magic’, will have consequences. The cost to repay this debt will impact on consumers being able to spend in the future on houses, cars, etc. as the first proportion of disposable income repays the Government ‘magic debt’.

Economic magic but with a long term consequence.

To put things into perspective, the average US student debt level is just $23,300 and they have some 2 million over 60 years olds still repaying!

What a mess.

When Is A £2 Billion Loss A Cracking Return?

That will be Northern Rock.   The National Audit Office has estimated that the government will ultimately lose around £2 billion on the privatisation / unwinding of Northern Rock. This is an outstanding return……it could and should have been a far bigger loss.   The government (on our behalf) is expected to get back all the cash it put into the bank (around £37 billion). What it won't get back is enough to compensate for the loss of any money we could have made or savings we could have created on that £37 billion.   That £2 billion is probably a price that was worth paying in real terms……it prevented a banking collapse that would have been unthinkable and not repairable.   So that leaves just one question……who do I pop over to see to get our £2 billion back?   Mervyn King? Alastair Darling? A whip round from the banking sector as a whole? The FSA?   This list goes on……

Blame The Recession On The Queen

 Top economic experts and the Bank of England (they are clearly very separate groups!) are predicting that Quarter 2 of 2012 is very likely to see our economy shrink again. Even Mervyn King thinks this!   The reason……The Queen’s Diamond Jubilee bank holiday. Essentially, a repeat of last year when the Royal Wedding bank holiday killed our economic output is predicted.   Which leads to a few really important questions……   Is our economy really that fragile that one additional day off impacts so significantly on 3 months of economic performance?   Should we follow Portugal’s lead and cancel all public holiday’s until we are in a much better position?   Is it as simple as the Queen selling off some scraps of land or a few bits of jewellery to cover the losses?   Just a thought……