FROM THE ARCHIVES: 2008 anxieties brought forward

The piece below was posted at notbornyesterday  early in 2008

‘If like us you’ve got a tidy sum invested with Icesaver (a subsidiary of one the big Icelandic banks) you may have noticed them playing silly buggers of late – denying access to your account and then pleading changed passwords, not answering the phone, not ringing back and….well, obviously doing the Stonewall Jackson act on your money.

In theory,we have not a thing to worry about….the Icelandic Government underwrites any loss up to 50% of £35,000, and the UK savings compensation scheme the other half – if the guys in the longboats cough up. If they don’t…then the SCS won’t either. Plus one must factor in lost Bond Income during the time it takes to get the money back; as most of us know, theories never work the way they should in practice.

However, a dark thought in a brain-place usually only visited in one’s worst nightmares is beginning to haunt the common-sense folks: what happens if three banks go up the pictures? Or six? I raised this point just prior to last Christmas, as usual to a chorus of ‘oh for heaven’s sake’, but the Doomsayer tendency has quadrupled in size since then. A week later I also wrote that the real bill for baling out Northern Rock would be £70billion – to another round of guffaws. Currently we’re at £110 billion and counting. It pays to know people in The Treasury.

A source in Lehman Brothers told nby last week that the Fed didn’t have to overrule Congress on leaving Bear Sterns to fall into Morgan the Pirat’s hands – the White House knows only too well in private that the US is broke – they simply couldn’t afford to promise help for investors and bankers given the likely scale of corporate fallout. The worrying thing is that we can’t either, but we have.

We’ve been here before I know, but bear with me. There was no commercial reason to bale out Northern Rock. In the end (thanks we suspect to the fix put in by new recruit Tony Blair) JP Morgan snapped up the plum bit – the mortgage book – and we the taxpayers took on the debts. As Vince Cable remarked at the time “This is the worst of all options”. It was of course the best option for Gordon Brown, who thought he was about to face an election, and knew a bankrupt Northern Rock in Labour heartlands would destroy his credibility forever. Greater courage hath no man than he lay down his country for his life.

The British Government has taken on a liability (and whatever the Treasury fantasists say, it is a potentially total liability) larger than the annual NHS budget. The probable write-off is twelve and a half per cent of the Treasury’s already enormous tax income. It wouldn’t take eight Northern Rocks to bankrupt UK plc – the National Debt plus the current account deficit would see us off at half that number. Add to this a tax income slashed by the recession which is now so obviously coming, and…..well, it doesn’t bear thinking about.

Americans don’t like thinking about their situation either, but unlike the Brits these days – while even more reckless in their borrowing – they are infinitely more realistic about the consequences. Last week in the financial centres of the East and West Coast, there was glum talk of a US now so beholden to Arab and Chinese lenders, at best there is no way back, and at worst the nation is exposed to very dangerous international blackmail.

Way back at the start of Not Born Yesterday, I argued that our cultural problems in the West were a completely interrelated set of dominoes: familial, community and social collapse had led to a political class lacking any solutions to the problems they’d created, and the unreality of a life led vicariously through debt and brainless celebrity would sooner or later produce the same mad denial in the economic sphere. The key hypothesis I offered, in fact, was that economic and financial disaster would be the catalyst for the arrival of what I still term the New Zeitgeist.

A large part of me has always wanted this to be a self-denying prophecy. Today, a large part of me still thinks that an adjustment of attitude by ordinary people will be enough to ensure a gradual shift into the next era: one in which, hopefully, people wake up and realise that we cannot all be stars, that most of us don’t have the X-factor, that we can’t all drive Porsches and live in large houses, and that sooner or later bills have to be paid. One day qite soon, I want it now and fuck you and there is no such thing as an obscene profit and nothing has changed it’s all in your imagination and have another drink you miserable old git will be gone, lost in the mists of a mad period our grandchildren will see in much the way as my generation saw The Roaring Twenties – or my kids see The Swinging Sixties.

But one enormous obstacle stands in the way of a peaceful change – our political Establishment. This bizarre one-colour rainbow of grasping, superior and delusional control-freaks (in love with what few marketing principles they can grasp) has wasted £2 in every £5 of tax monies for the best part of a generation, and in this – its latest pathetic incarnation as New Labour – has pushed us to the brink with unwise economic devotion to neo-liberalist cheap credit, and ill-judged purchases of IT and third-rate banks. The replacement of this braindead Government with an equally clueless Conservative administration could very easily spell the end of true liberal democracy in this country. And there is a very good reason for this: our political class – obscenely privileged and laughably out of touch – doesn’t seem to be able to grasp that, if a ruined bourgeoisie is added to a Yob-riddled Underclass, then all the conditions will be perfect for The Strong Man to step in.

Despite the continuing charge that my parallel with Weimar weakness and the rise of Hitler is ‘risible’, ‘ridiculous’, ‘like the plot of a second-rate novel’ and all the other smug assertions of those who have been so wrong about so much to date this century, my Strong Man scenario is as real a possibility as ever. Britain has the following symptomology:

* An apathetic electorate

* An alienated Underclass

* A violent culture

* A generation open to a bribe

* A Rule of Law vandalised by naive politico-lawyers

* A hugely unpopular political elite

* A vetoing Chamber whose power is ebbing away rapidly

* A potential for 24/7 citizen surveillance unparalleled in history

* A looming economic and financial crisis.

* External bogey-man enemies

* A super-rich (and widely resented) top 0.4% of aristocrats enjoying ludicrous levels of tax immunity

A very wise young woman ( a Green as it happens) wrote to me as follows recently:

‘On the whole, people don’t want great riches. They want the next step up in life. They want to be a bit better off, to have a better motor bike, to have new clothes and a good feast to celebrate a wedding’.

For what it’s worth, I think this right on the money. The current generation has been led to expect more. They are about to be given a great deal less. Unless this is done with tact, fairness and clear-sighted common sense, our Pariamentary system will not survive.

What happens when the money runs out? As one of Scott Fitzgerald’s characters remarks, “Then there’s none left”. If only it were that simple.


Sequel: Northern Rock continues to struggle, and remains a massive taxpayer liability. It was joined in the bailout by RBS, HBOS, and to some extent Lloyds Bank. The eventual bailout liabilities rose to £1.3 trillion over nine times the NHS budget. Lehman Brothers went bust a few months later. The UK economy went into recession that summer. Barclays eventually required refinancing from Arab wealth funds. The US debt with China now costs one in four of all tax dollars to service. 247 of the grasping UK Establishment control freaks were caught the following year in the biggest expenses scandal in our political history. Events suggest that the Yob-riddled underclass is indeed about to be joined by a pauperised middle class….or ‘squeezed’ as the Coalition puts it.