Nationalizations in the UK
Britain under Gordon Brown is doing what a lot of folks — Paul Krugman, Nouriel Roubini, and others to whom I’ve pledged my financial crisis allegiance — have been saying the United States ought to do — putting up a big kitty of money to buy stakes in banks that need recapitalization rather than to buy bad assets from banks. Under the circumstances, I think it’s genuinely unfair to do what the New York Times does and call Brown’s plan a “huge bank bailout.” Private firms don’t ordinarily relish a scenario wherein their partially nationalized at bargain bin prices, and that’s what Brown’s doing.
Meanwhile, my sense is that the nature of this problem is that a medium-sized country like the UK or Spain can’t, fundamentally, do very much to resolve the issues. They can perhaps take stopgap measures to stave off total collapse, but economic globalization has gone far enough that there’s a real need for coordination among all the major countries.
19 Responses to “Nationalizations in the UK”
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October 8th, 2008 at 8:16 am
We need Mike Huckabee to investigate to see if Gordon Brown has been goin’ to Yurrup and comin’ back with all these foreign ideers. Or maybe Mitt Romney can tell us if Brown’s been hangin’ with those East Coast Elitists.
October 8th, 2008 at 8:36 am
gordon brown, sex pistol.
October 8th, 2008 at 8:49 am
Yeah, does anyone know why everyone and their grandma’s economy is collapsing. No more oil perhaps?
October 8th, 2008 at 8:50 am
“a medium-sized country like the UK”
Fifth largest economy in the world?
October 8th, 2008 at 8:52 am
http://www.nytimes.com/2008/10/09/business/09fed.html?_r=1&hp&oref=slogin
A coordinated interest rate cut. Is that that you mean by coordination between major countries. Although I don’t think this will have a huge effect it may give investors some confidence that finance ministers are working together.
October 8th, 2008 at 9:09 am
On the other hand, guaranteeing £250bn of new wholesale funding of up to three years in maturity and providing long term liquidity against £200bn of mortgage backed securities seems like a bailout to me. Still, I think the UK’s actions are much more sensible and in principle likely to succeed than the US’s. The problem is, as you say, that it doesn’t matter if one country comes up with a decent plan if bigger countries don’t.
October 8th, 2008 at 9:53 am
I think the physical concepts of ‘constructive and destructive interference’ may be salient…
Five of the largest investment banks in the world no longer exist: Bear Stearns was gobbled up; Lehman sank like lead; Merrill-Lynch was eaten whole; Goldman Sachs and Morgan Stanley have decided to stop being investment banks and are now ‘traditional banks’. That’s a huge re-alignment in a very very short amount of time…
Bear-Stearns and Merrill-Lynch were very bad, and Lehman was very much worse. Each was like an earthquake on the sea floor causing a huge tsunami that raged through the markets. Goldman-Sachs and Morgan-Stanley are like smaller earthquakes, but closer to shore, able to do direct damage without creating tsunamis…
And while a single quake/tsunami is a disaster in and of itself, each successive event adds to the havoc in a geometric progression: interfering with each other to create orders of magnitude more damage than would be created individually.
Yes, it really is that bad…
October 8th, 2008 at 10:03 am
It’s paralysis. The problem is the commitment to the European Union: A lot of of the member states in the EU don’t wish to act individually, in the fear that individual (local) fixes might aggravate conditions in neighboring states… but the EU lacks the institutions to address the problems directly. They need to co-ordinate their efforts.
October 8th, 2008 at 11:48 am
Ojj,it’s because people here in UK and US were given more money than they could afford,in US they were even given mortgages to the unemployed,and in UK giving up to 7 times of a fictitious wage,how these guy’s could afford to pay i don’t Know,the greed to get on the property escalator asp.May be now prices will get to a level were normal wage earner can actually buy a house,not the ridiculous situation for two earners to but a one bed flat,mind you one of the main reason for high prices is the lack of building brought about by huge influx of immigrants,allied to all the nimbys,that don’t give a damn but for themselves .
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