The Global Banking Crisis

It is interesting to note that Gordon Brown and his merry band of spinners, including John McFall (chairman of the treasury select committee) keep saying that the banking crisis is global.

Well, it is, in the sense that if American and British banks go to the wall, the globe is truly screwed. It does not mean that every bank in the USA or UK were or are on the brink of going to the wall, but enough are.

What it isn´t though is a global banking crisis if you mean everyone´s banks were all at it. They were not. As an example, Spain´s central bank, when asked by its banks if they could get into buying securitised debt said yes, but you will need more share holder capital. Needless to say they did not bother. Lebanon´s central bank just said no. Not only that it told its banks to get out of a number of American banks with so much advance notice that the net loss to them has been $20 million, which is peanuts.

That is a crucial difference. Those central banks were not regulating their banks but supervising them, much as the Bank of England did prior to Gordon Brown taking over and hoarding power to the Treasury, whilst giving away the fig leaf of independence to set interest rates with a government appointed committee to government set targets on what inflation is.

So the banking problem is global in its fallout, but make no mistake, it is not global in its causes. They were for the most part authored in London and Washington.

Waste Not want not, oh, and pass the caviar!

Gordon Brown came up with a priceless comment at the G8 yesterday, along the lines of waste not want not.

If we threw away less food then we would buy less and so prices would not be quite so high, so we would save twice!

Fair enough, however this message was delivered at a summit costing something like $280 million (yes you read that right) and involved an 8 course lunch followed by a 10 course dinner.

You can't blame Gordon Brown for that, but you do have to wonder which 42 carat plonker thought up the idea of having such a lavish summit to discuss poverty and high food prices!

The Sun has this on "waste not want not", and this in its Sun says, whilst the BBC has this on the G8.

Are high food prices a problem?

In the short term yes, especially for the poor, however in the long term it means that there will be money to invest in agriculture. The UN has a plan as reported on the BBC here.

For far too long various governments have interfered with food prices, subsidising here, imposing import or export duties there and we have a mess. Vast areas of agricultural land lye idle or underutilised. African farmers can't make enough of a living so move to the cities.

Higher food prices make it worthwhile to bring areas of land back into production and jobs for the rural poor in places like Africa. With a bit of luck we can also stop subsidising our farmers to grow things to dump in other peoples markets as well. This is good.