Obama’s heart over head

Obama’s heart over head

One can sense it in President Barack Obama’s passionate belief in a form of UK-style NHS. His risk is whether heart rules head in a sovereign culture that still sees self-help as the American way and fears a monolithic socialist state. That is my reading of the lost seat in the Senate held for so long by the late Edward Kennedy.

Now we see it again. His twin attack on the evil American banks is:-

• To forbid proprietary trading

• To slim down banks to become smaller entities.

From the heart, both aspirations are admiral. From the head there are certain practicalities. The US government (like its UK cousin) leans on the investment arm of bankers to find buyers for its own debt. There is plenty of that debt about as we all know only too well. To upset the applecart overmuch might be to cut off ones nose to spite ones face, so to speak.

Is there a measurable difference in risk degree between what banks do for themselves and what they put on the line for their customers? Is it big that is bad per se or the management of risk?

As a big fan of President Obama, I am a little worried. Worried that the heart precedes the head. A big climb-down on either or both the health care and banking issues would set things back considerably.

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Obama the clever, bold and right.

Obama the clever, bold and right.

It used to be American-ese that was sickening. No more. The only world statesman speaking plain English these days is President Obama. These are the direct words that matter in a bold plan for Americans to get their own back on the bankers that have been saved by the taxpayers and are back making mega-bucks.

“Massive profits and obscene bonuses at the very firms who owe their continued existence to the American people.”

“Recover every single dime.”

His plan is a straight right to the goolies. The tender parts in this case being wholesale funding. A 0.15% levy is aimed at twin objectives. First, get our money back and secondly, change your behaviour. If you recall the $700bn TARP (well covered in the credit crunch diary of this website), the President thinks that $90bn will be lost for ever. So he intends to shrink the evil ones’ balance sheets and get it back. And again the Americans have coined the perfect words, Financial Crisis Responsibility fee. Exactly and in straight forward plain English too.

Contrast this to the UK’s plan for taxing bonuses above a certain level. That is both emotive and easily get roundable. They are serious, we fart about.

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German Recession

German recession

Those that followed my credit crunch diary in the crucial year to October 09 will know that the sovereign state of Germany got itself labelled as a maverick by diverging vociferously from the path chosen by the UK and the USA. It did not believe in priming the pump, in printing money and generally spending its way out of the recession. Was it right initially and did it play catch up too late?

Official figures (UK statistics are due on January 26th) say that over 2009 the German economy contracted by a full 5%, that its reliant export trade shrank by 14.7%, business investment was lower by 20% and 3.3 million are out of work – 8.2% of the working population.

Whether this is a price worth paying for what will turn out to be a retained relatively low level of government borrowing is hard to say at this stage. The absolute comparator with the swift moves by the UK and the USA to loosen monetary and fiscal policy will almost certainly turn on long-term legacy debt.

A 5% decline in sovereign wealth is a lot. Is balance sheet strength worth it? We shall see.

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Whether or not

Whether or not

Two days ago I blogged about wanting a bit of the global warming as we continue in the big freeze-up. Last night on TV a reporter who has obviously picked up this theme as being in many people’s mind, said it was very important to distinguish between weather and climate.

Over to you.

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Boiling over with mirth

Boiling over with mirth

You could not fail to see and hear the brown stuff extolling the virtue of a new government initiative. For a limited quantity only, so rush rush to cash in, you can get £400 towards a new domestic boiler. The environment wins, your pocket wins, the UK manufacturers and installers wins, it is a win-win situation all round.

What was not mentioned was that based on the average price of a new boiler, the VAT (non-recoupable for domestic users) is £437.50. No marks for working out who else wins. You have to laugh really.

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Of the white stuff atop the icy layer

Of the white stuff atop the icy layer

To a depth of about six inches the snow covers our rural landscape and as if to mimic, the sound is ghostly too. In fact there is no sound. No traffic, no movement, no sound.

On TV last night was a fleeting glance of northern China and northern India. Their vast landscape was also blanketed in the white stuff. Beauty defeats the industrial push of even these two behemoths.

Was it really only two weeks or so ago that the world was beating its divided chest about global warming? Could you please pass a little of that phenomenon in this direction.

More at www.jgwalkersmith.co.uk