Terry Smith Straight Talking

Financial Times, Letter to the Editor - Should Greenspan be stripped of knighthood?

Today’s Financial Times published my letter to the Editor concerning Fred Goodwin. Here is the letter in full.

From Mr T.C. Smith.

Sir, For Fred Goodwin to follow in the footsteps of traitors, dictators and fraudsters in being stripped of his knighthood seems extreme. He did not make the decisions that produced such a disastrous outcome for the Royal Bank of Scotland alone. He shared responsibility with the board chaired by Sir Tom McKillop, and the fateful acquisition of ABN Amro was approved by the RBS shareholders. Banking is also a highly regulated industry and his actions were supervised by the Financial Services Authority, then chaired by Sir Callum McCarthy.

But if the current mood is for those in the financial services industry who received honours in those times and who made mistakes to be stripped of their titles in order to “appease” the public, as UK prime minister David Cameron suggests, surely attention should now focus on the honorary knighthood bestowed upon Alan Greenspan in 2002 for his “contribution to global economic stability”.

T.C. Smith,
Chief Executive, Tullett Prebon,
Chief Executive, Fundsmith,
London EC2, UK

BBC Radio 4 World at One Programme, 01 February 2012

Today I was interviewed on Radio 4’s World at One regarding Fred Goodwin being stripped of his knighthood.  We had a lively debate about whether it was right to take his honour away - I think not - and whether other people should have their honours stripped from them. The BBC interviewer pointed out to listeners that the RBS chairman did not receive his knighthood for services to banking and by implication it would not be appropriate for him to be treated in the same manner as Fred Goodwin. I did not have the time to point out that Anthony Blunt received his knighthood for services to art yet was stripped of it for spying. One person that clearly does stand out for scrutiny is Alan Greenspan.

You can listen to my interview here (commences at 20 minutes 55 seconds) and a full transcript is below.

SHAUN LEY: Presenter
Well, Terry Smith is chief executive of Tullett Prebon, a money broker and Fundsmith, a fund management company.  He’s in the City now. Welcome to the programme.
What do you make of the decision to strip Fred Goodwin of his knighthood?

TERRY SMITH: Chief Executive, Tullett Prebon and Fundsmith
I think it’s deplorable.  He’s now been bracketed with traitors, dictators and convicted fraudsters.  If he did something wrong, I’d like to see some proceedings against him – civil or regulatory – and then if he is found to have done something wrong, strip him then but at the moment it looks like a deplorable, political willingness to go along with the sort of morals of a lynch mob.

SHAUN LEY:
But honours are discretionary: there’s no real criteria for rewarding them.  Why should there be any specific criteria for taking them away?  If they’re given by politicians why not allow politicians in response to public opinion, to strip them from those who’ve received them?

TERRY SMITH:
We could do that if people wish.  It would be a break with the way that this has been done in the past, of course – that’s not necessarily a bad thing – but historically, as I say, traitors, dictators and convicted fraudsters have been it so this is a complete change.  If we are going to strip them at discretion for failing though, I would like to suggest to you that the Buckingham Palace probably need a rather large cupboard for returns, because if everybody who fails has to hand back their honours there’ll be a lot.  If we take the specific case of Fred Goodwin, he didn’t make his decisions alone.  The chairman of his board and his board helped him – the chairman, by the way, was Sir Tom McKillop – and he’s in the regulated, highly regulated banking industry where the FSA basically approved what he was doing and that was chaired at the time by Sir Callum McCarthy.  So I presume if we’re going down that route, there will be a lot of other people rather than this lone individual singled out.

SEAN LEY:
I suppose I should say, just in passing, that Tom McKillop’s knighthood was for services to the pharmaceutical industry before he went to banking but I think your point is well made. 

TERRY SMITH:
Who cares what it was for?

SHAUN LEY:
Fair enough and on that basis, are you concerned that this might have an impact on the City, on the attractiveness of Britain for business, particularly this idea perhaps if you fail, which a lot of people do in business, even people who are subsequently successful, you’re going to get punished for it?

TERRY SMITH:
Yes, I think the only way to absolutely guarantee that you won’t fail, is not to try in the first place.  I think it will have a bad effect on people and I think people who either aspire to receive honours for whatever reason in their career, or those who like Stephen Hester, have taken on a job in the public sector who see that something that they were contractually received is taken away for political reasons, must surely think twice about ever taking something on like this again.  But going back to an earlier point: if we are going to take honours away from people because of their mistakes, could I suggest another one that should obviously be called into question?

SHAUN LEY:
Go on, briefly.

TERRY SMITH:
How about the 2002 honorary knighthood given to Alan Greenspan, the chairman of the Federal Reserve and the citation was “ for his contribution to global economic stability”.  I’ll believe that people are not on a witch hunt for a single man when they proceed against Alan Greenspan and strip him of his knighthood.

SHAUN LEY:
OK, Mr Terry Smith in the City: thanks very much for joining us.

The Sunday Telegraph - All Britain is isolated from is a looming eurozone disaster

I wrote an article for yesterday's Sunday Telegraph. Here is the article in full.

David Cameron was right not to agree to the proposed changes to the Treaty of Lisbon at the latest summit.
The immediate cause of this was that the other EU leaders (in reality Germany and France) refused to give the safeguards that he demanded that they would not impose regulatory and tax changes which would adversely affect the UK’s financial services sector.
He had no choice. Financial services are a far more vital part of the UK’s economy than they are of any European country.
The City provides services to a large part of the world, and financial services are our biggest sector for employment, taxes and exports.
The EU, and Germany and France in particular, envy that position. They would like to divert as much of that activity as they could to Frankfurt and Paris, hence the proposed regulations to move the markets in so-called Over the Counter Products such as foreign exchange, and bonds onto exchanges, like Deutsche Borse and Euronext.
The eurozone leaders also fear the markets because they are the last thing which holds them to account.
Because the eurozone countries are running such large budget deficits they are answerable to the bond markets which are now refusing to supply those funds.
The attempts by the EU authorities to silence the markets by devices such as bans on short selling are a clean sign of their wish to shoot the messenger, but they are ineffective whilst those market are in and regulated from London.
We are told by critics like Labour’s Douglas Alexander that this move has left Britain isolated from Europe. This might be worrying if it were not for the fact so far the Euro has proven to be an unmitigated disaster and there is nothing from this latest in the seemingly endless series of summits to suggest that this will change.
We are told that the whole point of the treaty changes was to ensure that there was some central authority which would ensure that, in future, eurozone countries cannot run up the sort of debts which they now have.
Didn’t we already have such rules in the ironically named Growth and Stability Pact enshrined in the Maastricht Treaty which were disregarded?
Introducing new rules strikes me as like the former Labour government’s approach to knife crime, which was to pass more and more legislation (in 1997 and 2007). Stabbing people was already illegal, what was required was some enforcement.
The same is true of the eurozone - already there are weasel words in the summit agreement about limiting 'structural’ deficits. When you spend more than your income, it’s a deficit. What’s a structural deficit? I suspect it’s a device to ensure there is no penalty when you exceed the limit.
The summit agreement also talks about funding a bailout fund and sending money to the IMF for them to lend to back to the eurozone. This is all circular. If you are spending more than your income, at some point you need some third party to lend you money.
And finally, neither this summit nor any of the others has even sought to address the underlying flaw at the root of the Euro: Greece, Portugal, Spain, Italy, Ireland and even France, cannot make their economies competitive in a currency union with Germany.
So all the UK is isolated from is an impending disaster: the eurozone will fragment with countries leaving and debt defaults. It is like being as isolated as a man who failed to get onto the Titanic before it sailed.
Terry Smith is chief executive of Tullett Prebon and Fundsmith

BBC Radio 4 Today Programme, 09 December 2011

I was interviewed this morning on the Today Programme regarding last night’s EU summit talks in Brussels in which David Cameron declared Britain’s official decision to isolate itself from the EU. Britain's isolation from the EU is like someone who refused to join the Titanic before it sailed as there is nothing that guarantees that the euro will survive at all.

You can listen to what I had to say here.

The full transcript of the interview is below.

JUSTIN WEBB: Presenter
Is it a good result for the euro? The markets, Robert Peston was telling us a few minutes ago, have not been too impressed, at least in their early thoughts. Let’s go to Terry Smith who’s chief executive of Tullett Prebon and Fundsmith, and what do you make of it, Mr Smith?

TERRY SMITH: Chief Executive, Tullett Prebon and Fundsmith
What I make of it? I’m not sure that this leaves Britain isolated, we’re still members of the European Community. But if we are isolated, we might be as isolated as somebody who refused to join the Titanic just before it sailed.

JUSTIN WEBB:
It’s still the Titanic?

TERRY SMITH:
Yes, it’s still the Titanic. I mean, there is nothing that guarantees that the euro will survive at all, or in its current form in this. The essentials that would be needed to make that work just aren’t obviously present in the deal that’s being done.

JUSTIN WEBB:
What’s the one big thing, or one or two big things that are missing?

TERRY SMITH:
Well, the one big thing which may be missing is whether or not you can have any central control over the individual governments’ budgets and, of course, that is something that people say is going to be incorporated in this, but frankly, there was already that in the growth and stability pact and it’s not unknown – in fact it’s well known – for a lot of the countries involved to disregard rules.

JUSTIN WEBB:
I haven’t seen this in the details of what was agreed, but certainly before last night one of the differences was going to be that they were going to have to put it into their own internal domestic constitutions as well. But that doesn’t impress you?

TERRY SMITH:
No, not really. I mean, we’ve seen so many proclamations. The new rules to make people behave remind me of the former Labour government’s passing of two pieces of legislation, ‘to bear knife crime’. It was already illegal to stab people. And there are already rules that the countries are supposed to keep to; they’ve disregarded them. So that’s one. The other thing is, I think for the countries at the periphery, who’ve clearly got massive financial problems - including France I might say - whilst they remain in a single currency unit they will never be able to become competitive.

JUSTIN WEBB:
Ah, well, this is the other question, isn’t it, whether…

TERRY SMITH:
It is.

JUSTIN WEBB:
Just assume for a second that they do come together, that they do do the things that they’ve been saying the last few hours that they’re going to do, there is an argument, isn’t there, that actually it’s just the wrong prescription, if you’re doing the wrong things.

TERRY SMITH:
It is. I think it is. I mean, because what it will amount to is central control and more austerity for those countries. I don’t think that you can cure their position by more austerity. Greece cannot become competitive, in terms of its major industries like tourism and agriculture, whilst it’s in a strong currency caused by the membership of Germany. Neither can Italy, certainly the south of Italy, Spain, Portugal, Ireland and France, basically. In my view a single currency unit for those countries is misconceived.

JUSTIN WEBB:
And yet… a final thought, Terry Smith. I mean, you would have heard what the Chancellor said yesterday and a number of people who are in the know about these things, suggesting that the cataclysm that would result, economic cataclysm - possibly political as well but let’s stick with economic - as a result of the euro breaking up, would be so huge that really everything has to be done that can be done to shore it up.

TERRY SMITH:
I don’t think that’s the case really. I mean, if you look at what’s happening economically, as a result of the existence of the euro, it’s not exactly a bed of roses at the moment and it may be, if the only way for those countries to become competitive is for them to leave the euro, the sooner they do it the better. People have left currency unions before: we left the ERM, Italy left the ERM in 1992; we actually had some of our most prosperous years after that.

JUSTIN WEBB:
Terry Smith, thank you very much.

BBC News 24, 01 December 2011

On Thursday afternoon I was interviewed on BBC News 24 about the recent action taken by the central banks and comments made by Mervyn King, the governor of the Bank of England.

 

Here is the full transcript:

JON SOPEL: Presenter
Well, let’s speak now to Terry Smith, the chief executive of City brokers Tullett Prebon. He’s in our central London studio for us now.
Very good afternoon to you, thank you very much for coming to talk to us. Listening to Mervyn King today, it almost sends a shiver down the spine.

TERRY SMITH: Chief executive, Tullett Prebon
Yes, it’s a pretty grim set of circumstances that we face, and I think the governor of the Bank of England has been pretty clear about it recently in terms of those conditions.

JON SOPEL: Presenter
Should we feel reassured or worried by the concerted action of central banks?

TERRY SMITH:
I would be worried. The reason to be worried is that they have clearly foreseen some pretty grim circumstances in which banks in Europe, in particular, can’t fund the assets which they’ve got in dollars – their loans and bonds that they’ve got in dollars – in the normal markets by borrowing money. Therefore they’ve had to supply – or put in this potential supply – to prevent those banks going bust.

JON SOPEL: Presenter
Yes, because there was a rumour that one was wobbling.

TERRY SMITH:
Indeed. There’ve been rumours from people who track the borrowing rates that the banks pay for those funds. People have highlighted one of the banks as apparently paying a bit more, and therefore maybe in difficulty; but I think – even if that’s true – there’s a more general problem. Funding may be necessary for quite a few banks, not just for one.

JON SOPEL: Presenter
Now, help us with this. The governor of the Bank of England has said, ‘right, you’ – the banks – ‘you need to reinforce your balance sheets because you don’t know what’s coming down the track’. At the same time we’ve got the Chancellor saying banks need to lend more to customers. Now, are they going to be able to do both?

TERRY SMITH:
No, you can’t do both. The capital is only a ratio, in the end. Banks hold a percentage of capital – usually around 5% – of their total assets, or their loans. There are two ways of correcting the capital problem that the Bank of England Governor’s talking about. One is to raise more capital; that’s not always easy, who’s going to supply it in these circumstances? The other way they could do it is to shrink the denominator in that ratio calculation, and not lend as much. Frankly, that’s what they’re doing and they’re helped in that by the fact that, quite honestly, people don’t want to borrow money anyway. When the Chancellor talks about ‘banks should lend more and support the economy’, I think you find that, actually, quite a lot of people don’t want to borrow. And there are now net repayments going on in mortgages in the UK.

JON SOPEL: Presenter
Which, in turn, might be re-helping the balance sheets of some of these banks. I mean, the other thing that Mervyn King said was, ‘well, slash bankers’ bonuses’. Now, I’m sure that has a great popular appeal; but I would imagine an awful lot of these banks are tied in contractually. If banker A or banker B or C achieves certain things, he or she will get this bonus.

TERRY SMITH:
Yeah, there are problems. You can’t just unilaterally – however popular or even sensible it may be – go and change people’s employment contracts. If you do, I’m afraid they’ve got recourse. That’s one issue with it. Another issue with it is these banks pretty much all operate in genuine international money and capital markets, and of course at the moment there’s no sign of anybody in the other major areas of operation for them – like the United States of America – doing anything like that. So you do face competitive problems in doing that.

JON SOPEL: Presenter
And when you talked about one of the choices for the bank being to borrow more – presumably the governments aren’t that willing, because they’ve got huge debts themselves, as we’ve seen in the whole Eurozone crisis?

TERRY SMITH:
Yes. There isn’t a third party outside the banks and the governments that can supply money here. Whenever people talk about ‘a new supply of debt to rescue this situation’, what you get back to is its circular, and many of the banks around Europe have had to have liquidity and capital supplied by their central banks and their government, and that’s really the only source of capital and liquidity they’ve got at the moment. So you are in this closed system now, where there isn’t some outside new source of financing. You might recall, a few weeks ago, there was talk about the European Financial Stability fund going up 1 trillion euros in order to support the Eurozone bond markets of governments and so on. The immediate question which sprang to mind is, where’s that money going to come from? And, of course, it’s not coming from anywhere.

JON SOPEL: Presenter
Right. So there’s less to that than meets the eye.

TERRY SMITH:
Yes. There’s less to almost all these things than meets the eye. You can’t borrow your way out of a debt crisis. If you were to stop a selection of people in the street and say, ‘I’ve borrowed too much money and I’m living beyond my means, what do you think I should do? Do you think I should borrow more money and continue spending?’ They would rightly look at you as if you were mad. That’s collectively what people are trying to do here.

JON SOPEL: Presenter
I’m tempted to wrap this up with the happiness index that the Government has also been looking at. You don’t seem very optimistic at the moment?

TERRY SMITH:
No, I’m not very optimistic. I’d be quite happy to be proved wrong, by the way. It would be nice in terms of my own net worth and companies that I run, to be proved wrong about all this; but I think the facts are pretty clear here. You can’t borrow your way out of a debt crisis. Whilst measures these central banks are taking will hopefully prevent there being some sort of financial armageddon with the banking system collapsing and so on, I think it’s still going to come down. When people ask, ‘what’s the solution’, there isn’t one in the sense of a painless way out of this. You mentioned, in the earlier part of your report, the fact that people in Britain in 2015 are expected to be worse off than they were in 2002 – I think that will be quite general. We will end up accepting that we were living beyond our means, we’ve mortgaged the future, and we’ll be quite a lot poorer for a while.

JON SOPEL: Presenter
Final thought, if we could – on the euro itself, do you think it’s going to survive?

TERRY SMITH:
No, I don’t think the euro will survive. I think that it’s…

JON SOPEL: Presenter
Sorry to interrupt, I just want to qualify it slightly: you don’t think it will survive with the 17 members that are currently there, or you think that the whole thing could go?

TERRY SMITH:
I think it’s certain that it won’t survive with the 17 members there. I think there’s no doubt that Greece, and Portugal, and Spain, and probably Italy shouldn’t really be in the euro and will have to drop out of the euro in order to become competitive economies again and survive economically.

JON SOPEL: Presenter
Timescale?

TERRY SMITH:
Well, I’ve no idea on timescale, it could be anything from this afternoon to sometime next year. No idea on timescale, I’m afraid. Whether or not some kind of central euro persists with Germany at the core of it is a more difficult question. There, I think, the real critical question is what happens to France. Because France – whilst it would, obviously, for political reasons, want to stay in a central euro – actually has more economically in common with the countries on the periphery that are in trouble.

JON SOPEL: Presenter
Terry, I’m struck by the certainty that you showed there. Normally when BBC correspondents go on the telly, we say, ‘on the one hand… on the other… it’s possible this might happen; it’s possible that might happen’. When I said to you, ‘will the euro break up’, you say, ‘it’s certain’.

TERRY SMITH:
Yeah. I regard certain facts as inevitable. I’m the equivalent of the one-armed economist that you want to employ – because he couldn’t say, ‘on the other hand’.

JON SOPEL: Presenter
What a good gag. I don’t know whether it’s politically correct, and I’ll be very cautious at the moment, given all the trouble that the BBC’s in. Right, Terry. Thank you so much for being with us.

TERRY SMITH:
Thank you.

JON SOPEL: Presenter
Very good to talk to you. Thank you.

The Spectator: Get it right, George!

In this week’s edition of The Spectator I comment on what I think the Chancellor should do to kick-start the UK economy. To save Britain, you can’t keep going a little slower in the wrong direction.

http://www.spectator.co.uk/essays/7396838/get-it-right-george.thtml

BBC Radio 4 Today Programme, 27 October 2011

This morning I was interviewed on the BBC Radio 4 Today Programme. Twenty five years ago today, the Big Bang completely changed the face of British finance. Here is what I had to say on the matter (click here to listen to the full clip):

EVAN DAVIS: Well, we go straight to the City now, Simon Jack is there. He’s not in a tent or outside St Paul’s but he’s down there to gauge the market’s reaction.

SIMON JACK: Morning, Evan. Yes…

EVAN DAVIS: Morning Simon.

SIMON JACK: Good morning. I’m on the trading floor of RBC Capital Markets in the City. Initial indications are that the deal has been received positively. Shares in Asia – the Nikkei, for example – up nearly 2% and all indications are that we’ll get a strong opening on financial markets here in Europe when they open at eight o’clock, so a big day for the market.

It’s a big day for another reason as well. Twenty-five years ago today was the ‘Big Bang’, that’s when rules and regulations were stripped away, open outcry was replaced by the banks of screens I can see in front of me now. The Square Mile since then has been a hotbed of financial innovation. I met Terry Smith, the Chief Executive of Tullett Prebon in the City, he’s a veteran of the City and I asked him how life and work here has changed since that day.

TERRY SMITH: It’s become more professional, in most senses at least. People used to get in late, go home early and have a long, often liquid, lunch, now it’s quite an intense working environment. Secondly, the ownership has changed. The City was dominated by partnerships owned by individuals who took unlimited liability often for their actions; and of course, the really big change was that people either acted for clients or they traded on their own account as a principal and they didn’t do both. And that’s the big thing that changed because I think it introduced some quite big conflicts of interest.

SIMON JACK: Do you miss the pre-Big Bang days?

TERRY SMITH: Yes, I think anybody who was there before is bound to have a touch of nostalgia for it. I mean, it was much more of a club and people knew each other and it was a jolly environment. I mean, everybody had a nickname in those days. There was a member of the Stock Exchange who had a Victoria Cross and his brother who had the Military Cross, and his brother’s nickname was ‘The Coward’, and it was just a bit of… a bit of fun, that kind of thing really.

SIMON JACK: What was your nickname?

TERRY SMITH: I think it was Top Cat actually, if I think back to it.

SIMON JACK: That’s not a bad nickname.

TERRY SMITH: Well, my initials are TC, that’s why. The Coward’, I like that.

SIMON JACK: Now, we’ve now come inside to one of the City’s well-known restaurants, we’re now heading towards lunchtime. This would have been quite a big part of the day, wouldn’t it?

TERRY SMITH: Yes, it would. Lunch was a very important part of doing business prior to Big Bang. Cheers.

SIMON JACK: Cheers.

TERRY SMITH: And it would have been quite normal for people to be lunching with clients and it would have been quite normal for them to be drinking.

SIMON JACK: Has the fun gone out of it, and how did that happen? Was it the arrival of American, more professional organisations, in the ‘80s?

TERRY SMITH: Yes, it was really. The working day expanded; people started earlier. The lunch went out of the window, so to speak, and the trading day just continued to go on. Once people were no longer subject to going on to a floor to trade with each other, they could do it electronically, you’ve got to the point now where people will quite regularly trade on their BlackBerry from home.

SIMON JACK: And 25 years on have things changed for the better?

TERRY SMITH: No, I would say they probably haven’t. There were certainly some things that needed reform - Big Bang - but it basically took away the regulation based upon principles where people knew what was right and wrong and didn’t need a rule book and it took away people acting in the interest of customers, people started to act for their organisation trading against the customers.

SIMON JACK: And ‘twill ever be thus?

TERRY SMITH: Yes, I think it will ever be thus unless you go back to a world in which you just had a set of very loose principles and you have a wise man or woman at the top. The thing that used to exist before Big Bang was the Governor’s eyebrow. If the Bank of England Governor in a meeting with you raised his eyebrow when discussing what you were doing that was enough to make you stop.

SIMON JACK: Both eyebrows raised at the moment I think.

TERRY SMITH: I would think the Bank of England Governor is in danger of getting into the position of the boy with the chemistry set who blows both eyebrows off in the lie of events.

SIMON JACK: Terry Smith, thank you very much.

TERRY SMITH: Thank you.

BBC Newsnight appearance on 26 October 2011

Last night I appeared as a guest on the BBC programme ‘Newsnight’ presented by Jeremy Paxman. We discussed the EU summit talks in Brussels. Here is what I had to say:

Jeremy Paxman: Are you going to be pacified by the markets backing off?

Terry Smith: The peripheral countries are still all falling short of their deficit reduction. It’s quite clear that Greece has defaulted and will go further into default, and that some of the countries will have to leave the currency to recover.

JP: The banks have to agree on recapitalising, and they haven’t agreed, have they?

TS: But it’s not just that the banks have to agree. There’s the other point: where’s the capital going to come from? It’s just an expression of wishes. The only place the capital is ever going to come from is the governments who are putting this forward, who are already too heavily indebted, and will be putting more money into the banks. It’s not a solution.

JP: What are your thoughts on bailout?

TS: If you stop somebody on the street outside and explain that you were going to solve this problem of being over-indebted by borrowing more money, they would look at you rather strangely.

JP: What about the idea of forming a non-euro group?

TS: What is the worry about not being part of the euro? It sounds like the people who used to say that when we were being urged to join in the first place. We were told it would be a catastrophe if we didn’t join the euro, whereas the precise opposite would have been true.

JP: Where are we going to be in a year’s time?

TS: In a year’s time, I think that Greece will have defaulted. It's defaulted already. The attempt to defend Greece may make it impossible to defend the position of Portugal, Spain and Italy. Or they may have to go for capital controls like we had in the UK, and we had exchange control before 1979 to stay in there.

JP: What happens if Greece defaults?

TS: all of the euro deposits in Portugal, Spain and Italy are going to get up and leave if they’re allowed to. And that will then cause a domino effect which will be, I’m afraid, very, very bad. So they either have to follow [Greece] out of the euro or they have to put in some capital controls such as we used to have.

Financial Times, Letter to the Editor - We have to be told just how bad the situation is

Today’s Financial Times published my letter to the Editor concerning the financial crisis. Here is the letter in full.

From Mr Terry Smith.

Sir, I refer to the debate being conducted in the pages of the Financial Times between those who propose further Keynesian measures, such as Martin Wolf ("Struggling with a great contraction", August 31), and those who do not accept that they will work, such as Wolfgang Schäuble ("Austerity is the only cure for the eurozone", September 6).

Such so-called Keynesian measures as advocated by, among others, Ed Balls, Samuel Brittan, Paul Krugman, George Magnus and Barack Obama as well as Mr Wolf have not worked to date, and they will not work. Their advocates seem to assume that their repeated failure to solve our economic problems just means that the medicine must be repeated, which reminds me of Richard Nixon's motto that "if two wrongs don't make a right, try three".

I say "so-called" Keynesians because these advocates seem not to realise that Keynes' theories did not rescue us from the Great Depression. They are also asymmetric in their application of his theories - calling for ever larger deficit spending, having overlooked the bit about running a surplus in a boom. But above all, they do not seem to realise that they cannot work in a period of debt deflation in which a recession is preceded by the collapse of the banking system, as their current failure is demonstrating.

To the ordinary person in the street, the idea that we can rescue ourselves from a crisis caused by excessive borrowing by borrowing even more must seem mad. In this respect they are possessed of far more common sense than those who are currently advocating just such a course of action and purport to be our leaders.

The first step in rectifying this situation should be to make a clear and unambiguous statement about the actual debt the UK is carrying.

To give a lead to this, today we have circulated to every member of parliament a tin can emblazoned with the UK debt figure - £3,589bn including commitments for public sector pension commitments, private finance initiative and banking sector guarantees, so that they can see what it is they are metaphorically "kicking down the road" with their present policies. This, ahead of the party conference season, I hope might spur some considered and honest debate on this issue.

It is time for those who wish to lead us out of this crisis to tell people how bad the current situation really is and the painful remedies which will be needed to remedy it.

Terry Smith, Chief Executive, Tullett Prebon, London EC2, UK

Commenting on the euro crisis on the Today Programme, BBC Radio 4

Events in the financial markets are sometimes accompanied by similar events in the natural world almost as mood music-nature doing its worst to match man. The 1987 stock market crash was preceded by an extremely rare  hurricane in the UK. I have been in New York for the past two weeks where I have had the experience  of a rare earthquake and we are currently awaiting Hurricane Irene. I was interviewed this morning by Evan Davis on Radio 4’s Today programme about the tremors affecting the global economy and the ominous storm clouds that are closing in on the financial markets.

Credit Default Swaps (CDSs) on many banking institutions across the world, essentially the cost of insuring against the bank failing, are implying significant risks of default, similar to those after the collapse of Lehman Brothers in 2008.  This is not without good reason.  Banks across the world have significant and potentially fatal exposures to the sovereign debt of countries which are increasingly looking insolvent and in many cases have yet to come clean about the true depth of problems in their mortgage and real estate lending.  Whereas in 2008 governments had the capacity to support the debts of these ailing institutions this is no longer the case.  That particular solution or rather palliative is no longer workable as many governments are no longer seen as creditworthy and cannot borrow. There is no one else who can stump up the money needed.

As a result, the solution is unpalatable.  As I have said many times before, the Western world has been living beyond its means for a very long time and as result the debts we are now faced with are insurmountable.  In the intervening period until we work them down by the tried and trusted method of spending less and saving more, we will all be a lot poorer than we thought we were. The so-called Keynesian solutions are not working and will not work. Despite huge deficit spending to stimulate economies and support the banking system, Western economies are stalled and likely to remain so. Further deficit spending and stimuli will not change this-they will merely make the problem bigger. The problem being that we entered this depression a) with too much leverage and consequently the banking system went bust as  precursor of the downturn; and b) with existing large deficits (the so-called Keynesians are asymmetric in their attempts to apply his theories-they only want to run ever growing deficits in the downturn-they forgot the bit about running a surplus in the boom so as to prevent excesses and provide ammunition when spending needed to be ramped up).

If you asked a man or woman in the street if the solution to being in too much debt was to borrow more I think they would regard you as mad. Because in these circumstances the rules for finding yourself in a  hole apply-stop digging!

I will lend my full support to the first political leader of any persuasion or party who has the insight and courage to stand up and tell us the truth about the situation we are faced with.

You can listen to a clip of the interview here.