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Oh! Darling, please believe me |
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Judging by the front pages today, the most important financial news story from yesterday involved a former Beatle. The decision to award Ms Mills £24 million in a divorce settlement involving Paul McCartney appears to have overshadowed the announcement that Bear Stearns had been sold to J P Morgan Chase for £116 million, less than one per cent of what it was worth a year ago. Yes, Heather Mills, if she had been given the opportunity, could have purchased 1/5 of Bear Stearns over the weekend. The message is clear: invest time in wealthy husbands not in (previously) wealthy banks.
America is heading into recession, and sadly, Britain appears to be following. The lack of access to credit, both for banks and individuals, will lead to a substantial fall in consumption and a reduction in what people (and businesses) are able to repay on debt. Consequently, there will be a fall in mortgage applications and an increase in the number of mortgage defaulters which, undoubtedly, will lead to a ‘correction’ in the housing market. The ‘boom’ of the last 12 years will now be followed by a relative ‘bust’. So much for Brown’s oft repeated claim of our economy being placed beyond the ‘boom and bust’ of past Tory administrations.
Labour supporters will claim that the British government has been left with few options in what they claim is a global economic slow down. Not true. The handling of the Bear Stearns situation is in stark contrast to the debacle over Northern Rock. The dithering and delay displayed by Mr Darling has lead to a greater exposure of tax-payers money. Remember, Lloyds TSB offered £2 per share for Northern Rock if the Bank of England guaranteed £30 billion of the ‘debt’. Gordon Brown and Alistair Darling turned that offer down last Autumn, no doubt with an eye on the outcome of their planned November election, i.e. the Labour party put their chances of electoral success ahead of what was best value for the British tax-payer. We are all left hoping that the government gets our £110 billion back.
If only it was just the Northern Rock disaster we might be prepared to give Mr Darling another chance. Sadly, it does not stop there: rising debt (£43 billion next year alone), rising inflation, 5 million out of work (and increasing), rising taxes, excessive personal debt, falling house prices, etc., etc..Oh! Darling…So, as Ms Mills counts her cash today she probably feels secure in the knowledge that at present cash is king. For who would invest with confidence in property and shares at the moment. The only good thing one can conclude from this mess is that the economics point towards a change in politics. Thank goodness for that.
