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18 May 2012


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"But then I’m not a politician."

I do wish you were! I caught the Newsnight and BBC News clips and as with your previous appearences you seem to be the only one talking any sense and with any grasp of the reality!

By the way, have suggested you for Question Time on their website, but they appear to stick with the same boring old faces! Peter Hain, for God's sake!

Going to catch up with "The Great Euro Crash" on iPlayer.

keith price

Where do you think the cuts should be made?


Yes, saw you on Newsnight (which I don't usually watch because I consider it to be biased) -excellent performance. That buffoon Hancock neatly skewered! When even the Tories are so financially illiterate we really have got big problems.


Terry, I admire your forbearance in the face of the facile arguments being made by Ann Pettifer (where do such people come from?). To describe them as delusional as you did shows more restraint than your face indicated you were feeling.

On QT, once again we had a member of the audience saying she had had enough of austerity, to loud applause. She drew comfort from the "consensus" in Europe that agreed with her. No doubt they would also vote for Summer to be extended for several years.

How have we bred such people? Derision is far too good for them, it requires the blatant put down of David Starkey to take such people on. Dimbleby would never point out the folly of audience comments when they are of a "progressive" nature.

I am convinced that a big crash is coming, involving most of the West - frankly the sooner the better, because then the idiots (or most of them) will shut up and the rest of us can get down to fixing the country. The longer our politicians keep putting up sandbags against the flood, the worse it will be when the dam bursts.

When it does, the pundits will all be asking "why did no one tell us it would be this bad?". Then people like you will be able to tell them that you did, but they were too interested in balancing your views with those of Ann Pettifer and Ed Balls - giving the impression that the truth was somewhere in between.

Frankly, Terry, I would prefer to see people like you get really angry on Newsnight - it is well past time that someone did.


Given the frequent use of sound bites by David Cameron, I.E 'the big society', 'we are all in this together' etc etc it should not surprise anyone that he will continue to associate with them, together with endless streams of other rhetoric he as come to rely on as a substitute for action.

Terry Smith

Keith Price: I will write a separate blog about that I think as it requires a lengthier post than is usual for this Comment section. I have something written but I don't like to post too frequently as it means some readers may miss a post, so I will do so in a few days.

Terry Smith

James: I regard myself as apolitical - I would support anyone from any party whom I thought was pursuing the right course of action, but I would be willing to help although I rather suspect that the mainstream career politicians view people like me as too much of a threat as I'm apt to tell people the unpalatable truth. I did stand for the Referendum Party at the 1997 election but that was a single purpose party. I would be happy to do Question Time but like you I marvel at the recycling of the same faces on it.

Terry Smith

Alcuin: I agree wholeheartedly.

Where does Ann Pettifor come from? The information I can find online suggest she has never held a job in the real world by which I mean working in a for profit organisation, and lists amongst her accomplishments being a former advisor to Ken Livingston. Birds of a feather do flock together. She is well known to the BBC staff which is a telling sign, and we are dealing with the full blown champagne socialist with the apartment in W1 and cottage in the country. How convenient to get the BBC car to pick her up from W1, take her to the Newsnight studio and waft her back after she has dispensed wisdom to us about how to solve the debt crisis with such gems as having discovered this new source of money which the rest of us had overlooked-the Bank of England can just lend to the government. Utter buffoonery-you are right, my face does tend to betray my views. In a previous Newsnight appearance she told us that Keynes' theories were tried in the Great Depression and so must be employed now, thereby displaying total ignorance of both Keynes and the Great Depression (Keynes' main works were not published until 1933 and 1936), let alone a total lack of comprehension about what will work now. And described my views that the government is heavily indebted as 'rubbish'. I can only hope she's up for round three.

Funnily enough I had a remarkably similar thought about Question Time. The approach seems to be along the lines of saying "Let's have a vote, who wants more money?" and then when there is a massive majority from the show of hands, or in Question Times' case the loud applause, assuming that's the matter resolved. You are right about David Starkey and about Dimbleby-a state broadcaster which was genuinely trying to maintain balance would get rid of him immediately. I watched him in a programme about South America warbling on about how Chile had achieved an economic miracle in spite of the repression of General Pinochet. In reality, Chile owes its economic strength to Pinochet's reforms, but we're not allowed to say that as it does not accord with the BBC rewriting of history.

It is essential to see the Augean stables of the BBC cleaned of this bias if viewers are to have any chance of grasping the enormity of the problem we now face. I would be more than willing to take on Balls, Dimbleby and Ann Pettifor together single handed. However, being proved right after the disaster has overwhelmed us will be much less satisfying than getting people to see what's coming and take some action to prevent or reduce it.

Terry Smith

To MickC: Yes sending someone with no grasp of the numbers and/or an inability to explain them was an elementary mistake. Of course, all these people specify whom they are willing to appear with on Newsnight with so I take it that Matthew Hancock and his colleagues will now put me in the too dangerous category.


Yes i enjoyed your newsnight contribution and have notice you pop up on jeff randall's show a couple of times.

The Peston programme was heavy on history, but disappointingly did not show much in the way of the many warnings which were not heeded at the time.

Dont get your hopes up for BBC QT; which is BBC1 prime time and features celebrities and politicians, whereas they will have anyone on BBC2!

Terry Smith

To BarryOblivion: Barry I agree, too little is made of those who warned about the perils of the Euro and too much airtime is given to those who tried to force the UK into it. I have no hopes for Question Time, merely agreeing with James and Alcuin about it.


The smile of the tiger .................

I note that you are 'apt to tell people the unpalatable truth', and consider yourself apolitical. Virtues indeed, in these days of shallow boardroom ethics and wily corporate rhetoric.

But surely, that has you on collision course with boardroom colleague Angela Knight. Ms Knight, as everyone knows, has spent the last 5 or so years defending the indefensible bankers, with disingenuous and mendacious rebuttals of any criticism of 'her' industry.

I now read that, having done nothing for the reputation of the banking industry, she is about to become chief apologist for the Energy industry. I suppose she has experience in arguing that black, contrary to everyone else's opinion (including I imagine her own) is in fact white.

That's politicians for you. Like felines, they will gladly offer their loyalty to anyone providing a saucer of milk.

Personally, like yourself, I prefer the unpalatable truth,and believe that loyal allegiances are formed from like minds and principles, not monetary reward which merely recruits venality.

Palatable or unpalatable, I trust that this this courteous view will not be moderated.

Terry Smith

James, Thank you. We wouldn’t think of moderating your comment. I try to form my views on the basis of what I believe to be right from my experience and research and to publicise them if I think there is merit in doing so whether it is popular or not. So for example my view has long been that it is indefensible for the banks to continue to combine investment banking and retail banking operations, a view which Angela Knight opposed on behalf of the British Bankers Association. What surprises me is that anyone would listen to a banker or their representative on this subject-to slightly miss-quote Mandy Rice Davies, ”They would say that, wouldn’t they?”. I can only hope that the latest farce at J P Morgan puts the matter beyond debate but frankly these people have no shame and will continue arguing for their self interest even when confronted with overwhelming evidence of the damage their activities have wrought. Their stance is better exemplified in the John Wayne quote “Nerve apologise and never explain”.

I have now reached the point where I despise most politicians of whatever party or persuasion. They seem solely interested in getting (re)elected and in order to do so will certainly assert that black is indeed white and/or tell people whatever it is they want to hear rather than the unpalatable truth. They are mostly career politicians with little or no exposure to the real world which I would define as working for a significant part of their lives in a for profit organisation which did not rely upon charity or taxpayer subsidy, and without financial support from their parents or trust funds. Hearing them discuss our current plight, the only thing which rivals their lack of motivation to do the right things is their breathtaking ignorance.


The disingenuous chameleon ........

Thank you for the kind courtesy of a full and frank response. Our spirits are more kindred than I at first thought !

Yes, like yourself, I find no merit in telling the naked emperor, with fawning sycophancy, that I like his fine robes. I would rather save my breath to cool my porridge.

As for a strict demarcation between bread and butter banking and casino banking, I fail to grasp why anyone would argue otherwise (Ms Knight excepted of course). Why these money traders are allowed such unfettered discretionary power leaves my jaw on the ground. If they have breached their discretion why don't fuses blow ? If Joe Soap exceeded his £100 overdraft limit, his bank card wouldn't work, and all his regular payments would be frozen. The fact is, these people act, seemingly with total impunity. The only person to feel any semblance of heat was (not Sir) Fred Goodwin, and even he still enjoys a material life that would turn Avarice green.

As a young man, I still recall a work colleague whose enduring passion was the horses, or more precisely their racing form. His nose was always in the racing page and he would bolt to the bookies at lunch-time. Like all punters he would win on some occasions, and lose on most occasions, although his passion had no pecuniary detriment on his stable family life. Why ? Because he ran two entirely separate bank accounts, he had a joint household account and second 'horse' account to which he transferred a small sum monthly. He would never ever increase the transfer, nor encroach on the household funds. This segregation made his gambling a manageable and pleasurable hobby. Had he operated his horse flutters through the household account, he would have certainly become a Mr. Macabre stereotype, no question in my mind. This is not fiction, it is my real life experience, and a fair analogy of the banking context, albeit on a different scale.

I smiled to see your "well they would say that wouldn't they" quote. We all use it, although the accreditation is rather esoteric. It is quite surprising though, just how many people will attribute the quote to Christine Keeler - you are correct of course, it was M R-D.

As for Ms Knight, the disingenuous chameleon, we are of course all very different, and it would be a bland World were we not. However, I could never espouse views with faux honesty (this sounds better than lying) that I did not fully support or believe in. As you say, that is the forte of politicians. They never tell it as it is, or how they really see it. They are the masters of obfuscation, mendacity, filibustering, and rhetorical circumvention. In this regard Ms Knight's qualifications are superb !

Anyway, thank you for this exchange, as BT would say 'it's good to talk', providing of course we know what a spade is called. As for Ms Knight, I suppose we had now better get used to hearing that our Energy providers are a warm and avuncular bunch, who never forget that it is the consumer that pays their salaries, and of course, they will always pass on wholesale price reductions in a fulsome and timely manner. Whoops there goes another pig past my window !

Good luck in pursuing your views. Whether people agree or disagree, they will always admire someone who sticks to their guns, and is not deflected or persuaded from their opinion by ulterior motives.

As for austerity, I suspect there is plenty of work for the paring knife yet. My litmus test is the House of Lords. When the point is reached where we can no longer justify stuffing that 'place' with ermine clad geriatrics, who earn £300 TAX FREE, courtesy of you and me (that's £600'ish for the higher tax payer) for every somnolent visit, then I will know that politicians truly mean what they say about austerity.

I am sure that most Peers are dropped off and collected by their carers, and would have little recollection of their day one hour after departing. I am almost at this point myself ! We have a similar place locally where the elderly meet to play whist etc. for social companionship - they call it a club though, and you and I don't pay them £300 TAX Free for every visit. I muse mischievously that the entrance to the House of Lords must be littered with zimmer frames, rather like those trollies at the entrance to Sainsbury's.

Must go, I am beginning to chunter.


Oh dear - I wouldn't make a proof reader !

I see that my Wilkins Micawber was deemed to be Mr Macabre by the rather inadequate spellchecker - I am sure you knew who I meant.

David Lilley

Avoiding a Lehman 2 and a Second Great Depression.

I’m afraid a second Great Depression is a possibility.

The only doctor that can cure the problem is the G20.

The debt situation is far bigger than 1929 when many US citizens jumped on the stock bubble with credit. But many would be less than 10% unlike the many that jumped on the worldwide property bubble.

We cannot unilaterally change our interest rate without consequences affecting FOREX, capital movements and balance of trade. The US can.

The US is like the sun and the rest of us are like planets. If the US gets hot or cold the rest of us get hot or cold.

We have just witnessed a bubble busting, the tech bubble of 2001. We couldn’t possible walk right into another but we did.

The tech bubble burst thanks to tiny calculations showing that the emperor had no clothes and 90% of the new Internet companies disappeared overnight. It cost the US 2m jobs and Alan Greenspan took advantage of the US’s reserve currency status to reduce interest rates every 6 weeks 11 times in a row.

I’m not looking at any references. This is all from memory. I follow these things like a hawk.

Easy money put on 7m new US jobs

When the US reduces interest rates we, and others, can follow and we did. We went down to 3.5% and it occurred to me that that was ¼ of the base rate when I bought here. Therefore another could get 4 times his mortgage for the same cost as his 1991 mortgage and that is what happened here and across the world.

The UK house price rose to 9.3 times average income when the norm is 3. US house prices went to 6.

We first heard the term sub-prime mortgagee in 2007. But the fact is that since Carter the NINJAs basically had to be given a mortgage and if he didn’t get one he could get legal assistance from Barac Obama, the solicitor, to get his right to a mortgage. The banks found a way of selling on sub-prime mortgages as securitized bonds (mortgages are securitized loans as the lender has his name on the title and can reposes the asset and sell it if the mortgagee fails to pay). The rip roaring Northern Rock was giving 125% loans but it was selling them on and was outstanding in the building society market with a great business model for many years.

Securitized bonds paid as much as 18% and there was massive appetite for them. The more sub-prime the better the bond paid and house prices just went up and up and up (as bubbles do). US banks were actively seeking NINJAs and Northern Rock was reaping them in with its 125% deals. In the US you got a three-year easy start to draw you in. These bonds were triple A and when you think that interest rates in Japan were 0% for seven years you can see where the appetite came from. Foreigners held 80% of US treasuries. They were AAA and paid 4% when your bank paid 0%. Buyers of MSB looked no further than the 18% and the word “securitized”.

So my point is that the US, with its reserve currency status, had a licence to reduce interest rates and it paid them well, putting on 7m extra jobs and expanding GDP. The cost of Medicare and Medicaid increased 10 fold in twenty years and Bush signed the cheques. The cost of Iraq was small fry by comparison. The US debt ceiling was increased with a nod some twenty times and no one was bothered.

That is what was happening to the world economy. The sun was getting hot and we all benefited from the low interest rates.

But back home we were wanting in parliamentary debate and scrutiny. This is what parliament does. The massive Labour majority of 1997 led to a situation where it was not necessary for Labour MPs to attend debate but only to attend for the vote. Typically few or no Labour backbenchers attended a Finance Bill debate. Try keeping Ken Clarke, John Redwood or Peter Lilley away when money was on the table. But Labour MPs, who actually thought that GB was a super economist (when he only studied modern history), never received or contributed to debate and scrutiny.

Labour (when we talk about labour we are only talking about the handful of middle class privately educated politics, philosophy and economics graduates, PPEs, who traditionally take all the top jobs) (prior to 1965 every member of a conservative cabinet had a PPE from Oxford, you need a PPE to govern) jumped on the easy money decade. They borrowed £30-£40b every year since 2003, grabbed £15b pa from pension funds (forcing employers to scrap their defined benefit schemes or fund the missing £15b from profits which in turn takes £15b from investment in UK wealth creation), drove people into property as the FTSE suffered the loss of £15b pa, ran up an off-balance sheet debt of £300b in PFI, allowed mortgage debt to sky-rocket to £1.2t, allowed £400b of home equity release and allowed banks to multiply their lending reserve by as much as 30 times deposits.

The result is that today we have personal debt of 1.06 x GDP, corporate debt of 1.26 x GDP and sovereign debt of 89% of GDP. All affordable when interest rates are low but all having to be paid back.

Debt is where you go when you cannot make ends meet. It is bringing forward future earnings. It is like earning £100 per week and taking a one-week sub and telling everyone you are on £200 per week.

GDP is measured in three ways that all give the same answer. It is basically the summation of all transactions. It peaked at £1.5t in 2007, as did personal debt (£1.2t of which was mortgages).

Nevermind GB’s claim of 53 quarters of growth and the best chancellor ever. Just looking at a simple model; personal debt rising from 0 to equal to GDP between 1997 and 2007, and assuming it is linear, it takes real GDP from +3% to –7%. We were spending money and providing jobs that derived from home equity release, PFI, mortgages and personal, corporate and sovereign loans.

30,000 extra doctors, 90,000 extra nurses, 80,000 teaching assistants and 118 brand new schools in 2007. It all sounded great. A doubling in the spend on pupils pa and a tripling of NHS spend but all based on borrowing and not what we can afford but passed off as the latter.

The illusion was first broken when the Daily Mail ran the story that 90% of all the new jobs that Labour boasted about went to migrants who came here from 2004 onwards to get paid 6 times what they could get back home for the same work. The £ fell and the Ztolti rose and many went home but we still have 1.35m doing work that Brits will not do because they are much better off on benefits. Then it transpires that many of the 5.2m Brits on benefits are basically unemployable and industry will always choose a migrant over a Brit because the Brit is less educated, less presentable and has a lower work ethic.

I broke the story that to halve the deficit in four years also meant to increase the national debt in five years. I put it on lots of financial sites prior to the election. Obama first used the phrase and I thought it was good news until I realised that he would be halving the deficit and not the debt. Labour picked up on it and even made it law and I knew it was a persuasive mantra.

You only had to add a few numbers together to understand that halving the deficit in four years meant doubling the debt in five. Debt was £650b. Add £178b, £130b, £110b, £89b and a further year and you doubled the debt. I posted it on Jeff Randall’s Telegraph column and the following day was budget day. He never mentioned the budget on his Sky news show when every other channel was budget, budget, and budget. He just repeated that debt was different to deficit and the debt would double in five years. The Treasury Secretary, Steven Timms, was a guest and Jeff asked him what would happen to debt and Steve didn’t know. Jeff pointed out that it would double and that it was in the budget document that Steven had just written.

We are paying £43b pa in debt service charges and this will grow to £63b at the end of the coalition term. But we will miss this target, as it is so difficult to get the structural deficit down to 0 in a five-year term.

Please ask yourself what you think about halving the deficit in four years? It does mean paying £120b pa in debt servicing in four years time, equal to the cost of the NHS.

The NHS costs £120b pa, out of a total government spend of £700b pa, of which £200b goes on benefits and pensions. Does any one really think that paying the cost of the NHS in debt service charges is a good idea?

The numbers are the key to understanding the problem and understanding a problem is the key to solving it.

Management is what we need.

Spending money on the most vulnerable in society was hard to control and ended up multiplying the poor are diverting money from the most vulnerable in society.

We introduced IB (incapacity benefit) for a target audience of 175,000 but soon there were 20 times that number claiming that they couldn’t work a day in their lives due to incapacity. Including 200,000 teenagers.

We went easy on single mums and their numbers grew by three fold in the last twenty years. Often due to LAT’s (live apparts). Those who choose to recover the lost income of the female when a child occurs by claiming to live apart and get everything funded by the state (or as I put it, by their neighbour).

We have to swallow some facts about Labour’s Britain that are not well aired by the media.

-The BBC delighted in telling us that the kids would go back to 118 brand new schools in September 2007 but omitted to tell us that even the primary school children would have to pay the PFI (generally 17% pa over 20 years) as it would load their council tax in years to come.

-600,000 LAT’s all getting all their home bills paid by the taxpayer.

-a career choice for 3.5m, less 175,000, was to graduate from JSA (job seeker’s allowance) to IB for the extra money and to save Labour the embarrassment of high unemployment figures. The most common illness being depression.

-1.35m quest workers doing the work we refuse to do.

-14,000 children excluded from school who will never learn to read and write.

-the average cost of a truant was £2m some 15 years ago. Yet we have more truancy today than ever.

-15% leave school with no qualifications despite a doubling of the spend on schooling.

-public sector workers get 43% greater remuneration than private sector workers doing the same work when their 7% extra wages, lower hours, longer holidays, earlier retirement and better pensions are accounted for. The reason being that for 13 years the union (Labour) has sat in the employer’s chair.

-only 64% of working age men work, one in four children live in a home without a father (2m children), 5.2 m of working age do not work, one in four households of working age has no worker.

This list is endless.

I have not mentioned all the assaults on employers. We are beginning to realise that we quite like employers as they provide employment. That is what it says on the can. If you kill an employer you loose the tax they provide and the rest of us have to pick up the tab for benefits necessary to fund the workers that he funded before you hit him with CGL (climate change levy), NMW (national minimum wage) and increased employer NI and UBR (uniform business rates).

None of the Labour stimulus went to employers.

Going forward.

Before going forward let us please get the problem properly identified. There is no point in trying to solve the wrong problem.

Do we all agree that the above is the correct characterisation of the problem?

David Lilley


I hope that you like my blog above. I wrote it in three hours, initially to my sister, about a year ago. Some of the numbers came from your Tim Morgan and other facts came from the ether.

The funny thing is that wherever I post my one and only blog I get no comments. None ask me to post my prescription which is over three years old and still seems appropriate.

David Lilley

Please see my comment tonight on Mindfulmoney,com...economic impact...financial crisis;alternative routes to recovery. I am only six years old but I can nevertheless identify a "debt problem" before and after it occurred.

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