There can be no more doubt. Northern Rock is Gordon Brown's Black Wednesday. The Prime Minister, like John Major before him, remains in office, but he is no longer in power. The mini-Budget in October, with its misconceived plagiarism of Tory tax policies, marked the beginning of the end, when Mr Brown handed over his hard-won economic credibility to David Cameron and George Osborne.
But yesterday's statement on Northern Rock represented an even more astonishing - and shocking - derogation of power: Mr Brown handed over the keys to the Treasury to Sir Richard Branson and Goldman Sachs, destroying in the process the entire economic and political framework that he created as Chancellor in 1997. With Britain's foreign policy still firmly in the hands of the White House and European policy managed from Brussels, it is hard to see why Mr Brown bothers to turn up to work.
Financial upheavals so powerful that they topple the whole machinery of government seem to strike Britain about every 15 years - Black Wednesday in 1992, the Winter of Discontent in 1979, the 1967 and 1949 devaluations, the 1933 collapse of the Gold Standard. So far, no government has survived one of these earthquakes. I thought at first that Mr Brown, with the help of the Bank of England, might defy the odds and pass the test this time. But yesterday's statement made clear that I was wrong. Like Major before him, Mr Brown is not being swept out of power by the tidal wave of events but by his own inability to take timely, sensible decisions in response to them.
There was, in principle, no great difficulty in resolving the Northern Rock crisis. Mr Brown could have offered a modest Treasury guarantee back in August to facilitate a takeover by Lloyds TSB. Or he could have told the Treasury to put Northern Rock into administration, buy all the assets and liabilities immediately for £1 from the receiver and then run the bank down in an orderly way. But Mr Brown was too slow and indecisive to take the first option and too timid to face the job losses and temporary opprobrium resulting from the second.
Instead, he has chosen the worst of all possible worlds, described by Vince Cable, of the Liberal Democrats, with his customary precision as “nationalisation of risks and losses, combined with privatisation of gains”. In effect, Mr Brown is offering £55 billion of public money to Sir Richard Branson and other shareholders in Northern Rock, whether present or future, with which to speculate on the housing market and the stock market. If these speculations work out, these private individuals will pocket 90 per cent or more of the profits. If the speculations fail (which is much more likely) taxpayers will bear the entire loss. Looting of public wealth on this scale has not been seen in Britain since the South Sea Bubble.
If you think I exaggerate the egregiousness of the announcement, consider the following facts. The so-called bonds that will be used to “repay” Northern Rock's £25 billion in borrowing from the Bank of England will be guaranteed by the Treasury and will therefore be indistinguishable from any other government borrowing. In addition, the Treasury will maintain indefinitely the present guarantees on £30 billion of other Northern Rock obligations. In other words, not a penny of taxpayer money will be repaid by the proposed “rescue bids”. That much is obvious. What is much worse politically, however, is that Alistair Darling will keep claiming that these bonds constitute some kind of repayment - yet this falsehood is so transparent that what little is left of the Government's economic credibility will be completely lost. Mr Brown is sliding out of an embarrassing admission by insulting the intelligence of the British public. We all know about using our Mastercard to pay off the Visa debt. This is an insult that voters are unlikely to forget.
Once people fully understood that the Government, far from receiving any repayment as part of this “rescue”, will be offering a long-term operating loan to Northern Rock for five years or beyond, the politically embarrassing questions will pour in. If this kind of money is available for a minor bank in Newcastle, what else could the Treasury have done with £55 billion? Here are a few ideas: it could have rescued MG-Rover and turned it into the worlds strongest car manufacturer after Toyota. It could have acquired control of the Airbus programme and shifted its headquarters to Bristol from Toulouse. And even after these industrial subventions there would have been plenty of change from £55 billion to set up a permanent endowment fund to finance Britain's universities, or build a new high-speed rail system covering much of Britain, or a new London airport in the Thames estuary to replace Heathrow or underwrite the entire economic risks of a new generation of nuclear power stations. And what about rescuing the pension funds wrecked by Mr Brown's previous excursions into high finance?
Even if such embarrassing questions die down, behind them will loom an even bigger challenge to Mr Brown. By piling another £55 billion of government debt on top of a government deficit that is already exploding, Mr Brown will explode the entire fiscal framework on which Labour has built its tax and spending policies. By lavishing unthinkable sums of public money on the shareholders of Northern Rock he will directly repudiate the warnings from Mervyn King about the “moral hazard” of subsidising irresponsible banking. It is hard to see how the Prime Minister and the Governor could continue to work together given this fundamental, and enormously expensive, difference of views.
The Northern Rock bailout will demolish or, at best, discredit the entire economic policy framework created in 1997. Since the creation of this framework was his one unquestionable achievement, it seems fair to say that Mr Brown's career as a serious politician ended yesterday.
At least Gordon Brown DEALT with his 'Black Wednesday'. John Major and his Chancellor had not a clue what to do in a crises.
'Je ne regret rien' was all the help the economy got in 1992. Brown has at least tried hard to get us out of this crises.
Joan Davis, London, UK
Much as I have total disrespect for Brown and his inept colleagues, he did inherit Tony Blair's disaster. This landslide is not just about Northern Rock - it's about the wars in Iraq and Afghanistan, the education system, the health service, crippling inheritance tax, and dishonest politicians.
JAN ELLIOTT, Portrush, Northern Ireland
Every commentator keeps saying how academically brilliant GB is. How is this reconciled by current performance (or past performance). I think he is an appalling example of a manager and a politician.
roger, arundel , UK
Brown's mistake was to remove the Bank of England's power of oversight of dodgy banks. His second mistake was to blatently gerrymander by supporting northern rock when it got into difficulties. Bucking the market is a weakness of any leader and lethal to the economy in the long term. Fire him.
mike lincoln, wakefield,
Tony Blairs fake smile won't be so fake now, he knows Gordon Brown will only be a very short term PM.
John, Essex, UK
Brown keeps claiming credit for the low inflation that we all know was due to China and India, and for the "stability" where the truth is that with Brown the UK had the lowest growth rate among english speaking countries.
Brown sold the Bank of England gold at 200 dollars an ounce, now it is 900 dollars an ounce !!!!
Brown is delusional and the real problem is that he believes the rubbish his increasingly desperate spin doctors are still producing.
The longer Brown stays at 10 downing street, the larger the damage he will inflict to the UK economy.
With the Northern Rock bonds Brown is adding 55 billion pounds to the 180 billions he already hid under he carpet in the last 10 years with off balance sheet liabilities due to PFI and PPP.
Brown has done 100 times more damage than the rogue trader at SG in Paris but he has not been sacked yet.
The UK now risks to plunge into recession, the Brown recession.
PMV, London,
Brown always was a bureaucrat and ex history lecturer rather than an economic guru as his spin doctor's claimed.
He is an easyrider on the back of taxpayers and the easy money economy created by the licensed - yet unregulated - money lenders he has been so weak in managing. He is not even as good a liar as Blair.
This man is a danger to the moral and financial standing of the citizens of this country and it is time true patriots mobiliosed themselves to the task of destroying this incompetent, immoral and corrupt regime.
SB, London,
Now, if it had been Southern Rock?
Paul, London,
Cannibal Brown and Gonzo Darling are just not competent!
riccardo, brussels,
There is one item that Kaletsky left out of his hypothetical shopping list and that is that Brown with the money he has thrown at Northern Rock could have properly equipped our armed Forces. It appears that it is financially preferable to be a mocked lesbian than to lose a limb in combat. What a joke country we have become, run by a schoolboy Foreign Secretary, a Chancellor who has never run a sweet shop let entrusted with our national economy and an unelected (by the populace) PM who heads a government that failed to gain a majority of the popular vote, but who is too arrogant to admit that he has ever been wrong. Bring on the clowns.
B.Forbes, Virginia Water, UK
Nitin, Portsmouth said
"1) selling our precious gold at US$267 an ounce. well correct me if i am wrong but he cost us £4.2bn (adjusted for euro strength)
2. raided 35bn a year from pensioners
3. gave us a 55bn liability on northern rock
4. how much has goldman sachs advise cost us? for something so inept???they are laughing all the way to the bank...
he never was, andnever will be a prudent chancellor.
i run a hedge fund, so i think i have a little insight into markets and banks...i also teach corporate finance for free in my spare time, which gives me some authority to speak on this subject."
Shocking that someone who "runs a hedge fund" and "teaches corporate finance in his spare time" can't even spell, isn't it? Not the kind of person I would want running a hedge fund in which I had anything invested that's for sure.
josh, London,
Its only the commentators in the left wing media such as yourself that gave Brown credabililty for his economic framework. Trouble is that the framework was always flawed as it relied on tax and borrow both by the Government and Public. Now the the results are coming home to roost, a country up to its neck in debt. Brown was always a disaster, even the dumbist of people should understand that finances built on debt is just rubbish. Even now, we dont know the true level of debt that Brown has created as he always moved the goal post or kept it off the balance sheet e.g. PFI
chris, Woodbridge,
If £2000 per household is what it costs to see the back of Brown now, then maybe it's a price worth paying. The costs of his calamitous tenure will surely only continue to accrue to the taxpayer in this alarming fashion!
RH, Cambridge,
There's nothing quite like the vitriol from a once believer who's beliefs have been so so dashed...
If this had been handled appropriately then NR would be sold off:
The mortgages should be bundled up and sold off after determining the position of the Granite SIV. If they fetch less than face value that cost must be born by shareholders.
The State should extract itself from its commitment to the retail depositors by paying them off in 25 year Government Bonds which they can sell at par through depositing them at their new bank.
I sense that there may be a problem re. FSA as the regulator and if any or all depositors have a claim against the FSA for not regulating NR appropriately- and oif so then the State/taxpayer will end up funding thsi debacle. Equitable Life comes to mind.
Under such circumstances the architect of the 1997 re-arrangement of banking regulation should resign as I am sure I'm not alone in saying that one forecast that this type of debacle would occur..
DM, Eastbourne,
More recruits for the British Nationalists Party! Thank you Mr. Brown!
dave, manchester, U.K.
Why is this man Prime Minister? He was not elected by any one, but thank God we were not subjected to the "Deputy Prime Minister" taking the reins of government.
It all gives more credence to the British Nationalist Party!
For whom I shall vote.
dave, manchester, U.K.
I totally agree wit your article 22.01.08, It is a disgrace and the final nail will be Branson- Virgin - with no banking experience picking up millions with no down side for the Company at all.
The other point that seems to be forgotten is that investors continue to withdraw their money - let it go to the wall is my view and have done with it
Mike Evans
Mike Evans, Budens, Portugal
"the loan from BoE is a market rates - they should make a profit from the loans."
What a ludicrous comment. If this kind of funding were available from the private sector, it would have been taken already by Northern Rock or by one of the potential bidders. It isn't available. There is no market rate. The private sector won't touch this situation with a bargepole - it is demanding government funding and that is what Brown appears willing to offer in a transparent attempt to save himself from political difficulty.
David Boycott, London,
Spot on from Anatole Kaletsky. Contrary to some narrow minded Labour responses, Northern Rock failed because it was overloaded with sub prime loans and its limited assets couldn't cover them. This is the same as having a mortgage far in excess of the value of the house and is an irresponsible way to run ones finances. The run on NR was quite predictable once it got out that they'd couldn't cover their savers money and was NOT scaremongering but factual reporting. NR's problem isn't a sudden failure but a progressive & systematic failure of all the finance systems that Brown has been presiding over and hiding for 10 years. His subterfuge was to pretend the economy was safe in Labours hands and especially as Law & Order, the NHS & Education have all gone south since Labour took over. Unfortunately for Brown, the scale of the problem at NR has finally flushed him out like a startled fox from his usual SOP in hiding away until trouble goes away. He can run but he can't hide anymore.
Mike, Alicante, Spain
Tony Blaire must be wetting himself with merth at Gordons plight!
His timing in leaving 10 Downing Street was excellent, and his future still glows...Golden Boy!
Gordon...always his no.2...on the other hand, is heading for a pile of S$£t at speed, and no one will want to have him as a future speaker to remind us how he stealthily stole from our pensions, and left us taxpayers with a £2,000 rock around our necks.
Thanks Gordon....you will be remembered always!
Christian, London, England
Brown and his predecessor Blair have been insulting the intelligence of the British public for the last 10 years, and why should they care when 34% of the population would STILL vote for them.
Peter Grimes, London,
What is S. Barraclough worried about. Gordon has guaranteed his money in NR. It's my money he's thrown away, along with everyone else's in the country - into S.Barraclough's pockets. And probably his pal Sir Richard's.
eric campbell, harrogate, uk
What exactly will I get for my purchase of £1800 of what in Northern Rock?
Gordon Brown is proving easy to hate on grounds of deceit and incompetence. And the national deficit has even bigger holes in it than Northern Crock's business model.
Dr Peter Davies, Halifax, West Yorkshire
I don’t understand the fixation with Branson in this saga. In recent news clips he says adding the Virgin brand will revitalise NR, but I wasn’t aware Virgin Money was such a big financial player.
It is true, Virgin Atlantic is a large successful airline, but does it not benefit from scarcity of slots at Heathrow, a situation regulated by government?
It is true, Virgin Trains is a large company too, but I’ve read that it receives a large public subsidy.
I’m sure I’ve also read that Branson’s complicated business interests are, quite legally, arranged to reduce payments of UK tax by means of domiliciation outside of the UK.
It seems to me that RB only gets involved where there is state protection of his risk in some way – but what do I know?
I only hope that if Virgin gain control of NR, they will be able to pay the interest on the bonds without invoking the guarantee given by the British government, sorry – UK taxpayers who cannot escape being domiciled in the UK.
Nick, St Ouen, France
Enough of all this bickering. Why don't we all just get together and demand that this dithering idiot and his multi-minnions of over paid advisors give us what we want
PUT IT TO A VOTE wee GORDIE
Tich, York,
"This is an insult that voters are unlikely to forget."
What's the betting the voters will forget? The other lot don't sdound convincing at all - perhaps because they have no convictions - so I don't see the Great British Public getting rid of a known incompetent just to put in an unknown incompetent..
Amin Aswet, Gibraltar,
If, as you say, the reasonable solution to Northern Rock is obvious, then I think we can conclude that Gordon Brown knows something we don t, or there is something we cannot discuss in the context. I feel sure that is the case, given that he has only just finished a tenure of 10 years as Chancellor. Perhaps you would like to speculate as to what this may be.
Henry Percy, London, UK
"i run a hedge fund, so i think i have a little insight into markets and banks...i also teach corporate finance for free in my spare time, which gives me some authority to speak on this subject.
nitin, portsmouth, "
Times certainly must be bad if hedge funds are moving from Mayfair to Portsmouth. This just adds credibility to the article.
Edward, London,
Excellent article, as usual. The Government's behaviour over Northern Rock has been scandalous. Have Goldman Sachs suggested they can deem these guarantees to be off balance sheet and so might even be forgotten by the next election? Fat chance! And Goldmans should be ashamed of such advice, favouring the private sector few over taxpayers. But what do they care; another outrageously fat fee to the gullible client? (When will some big corporate stand up and point out what remarkably bad value the investment banks give? Guy Hands got close but of course then remembered he had to play their game as well.) Whilst the Lib Dems remain largely irrelevant on the political stage, Cable is spot on here. Even Branson may feel just a little embarrassed to accept such largesse from this incompetent government.
Simon, Hampshire
Simon Constantine, Hampshire,
At a time of impending doom all we need is the looming costs of carbon trading and the imposition of the EUs energy policy. The thing about a bureaucracy is that nothing is natural, nothing consensual, targets rather than sentiment. Add to this the socialist never-never land of its views on humanitarianism and you have meltdown. In his recent encyclical, Spe Salvi, the Pope writes of the iniquities of Marxism. It is a situation not unknown in Iraq; the war is won but there is nothing coherent to follow. The EU is premised on a variant of socialism recognisable by its unelected heads and its 'on-the-nod' affirmation of policy. Spe Salvi might as well be commenting on the way that the EU searches for a raison d’être, carving a niche where none should be inscribed, over reacting. It has created an environment of imperatives where apparatchiks are judged by their unquestioning adherence to their allotted tasks. The vehemence with which they attack their targets is catastrophic, doomladen.
Malcolm Turner, Alsager, England
Gordon Brown was lionised over ten years as the man who transformed the UK's economy, despite there being no evidence whatsoever that he had done a thing to bring this transformation about. That much-trumpeted record-breaking period of continuous quarterly economic growth began four years before he walked through the door of Number 11.
And who did the lionising? Financial journalists and economists such as Anatole Kaletsky.
Ray B, Stockport, England
We all know about using our Mastercard to pay off the Visa debt. This is an insult that voters are unlikely to forget."
Couldn't agree less!
Only the top 10% of voters will be educated enough to see through this farce. The next election, 2.5 years away, will see Beans majority slip, but with his deal with the lib dums, he will reign for (at least) another 5 after that.
This, my deluded friends, is what you get when you voted this lot in 3 times in a row!
wen d, London,
All you have to know with Brown is that he had more money than any other Chancellor in the UK in history. And he still couldn't balance the books. Borrowing more and more he has left us in a horrendous position. Look at the way the pound is tumbling. Prudence was and is a myth. He spent our future on civil servants and layabouts. It doesn't matter who is going to be in power - we are in for a rough ride.
Pat, Blackpool , Lancashire
1. £55bn plus financing to private Northern Rock based in a Labour stronghold risking billions and billions of taxpayer money
2. Stealth taxes on pension funds destroying billions in value ruining the quality of life of thousands of tax payers who had attempted to provide for themselves
3. Selling gold reserves at the bottom of the market costing taxpayers billions
There is a theme of disastrous and massive incompetence here - Brown is the common denominator! He has been protected in part by rising markets but now it will all come home to roost and Britain is in for a very rough ride. Britain needs to wake up and we need an election asap and Labour out!!
PS Livingstone as London's mayor must go as well!
Caroline, London,
I wonder what Anatole Kalestky is talking about?
Mr Kalestky do you mind, if you clarify the word-frasiology-you
disaster&storm in teacup, was exactly in the era's of Norman-
Lamont was it, or is this another filthy politics of those i'll never
understand, please explain plain language, thanks:Ken (Ox)
Cllr Ken Tiwari (independent), Oxford, United Kingdom
When I owe the bank 5000 dollars I have a problem. When I owe the bank 5 million dollars the bank has a problem. When the bank owes the government 55 billion dollars we need a change of government!
- that is so true !
and well done Vince Cable - a very neat summing up. I can hear some (free range of course) chickens coming home to roostr!
Tony , Cardiff,
With five years (or whatever) of time bought over which the government guarantees are set to operate, avoidance of the original panic seems to have embedded this affair at an uncomfortable level.
The idea that this has potential to be the largest transfer of public wealth to private pocket since the South Sea Bubble seems truly shocking, and makes some alleged diversion of aid via some African governments to dictators and cronies appear crude and almost comparatively trivial .
In the event that the conditions which enabled, for a while, the success of the Northern Rock business plan do not return, any need for the guarantees to be called could impact on a public purse sufficiently less able to afford such generosity as to wash away a significant part of recent economic gains.
dr venables preller, Warminster, UK
Sorry to appear so dumb. Can somebody tell me where the £55 billion has gone? Has it been spirited away to an offshore or Swiss bank account, to enable some unknown person to live the high life when 'the heat is off'? Has it been paid out to N R depositors, to be deposited in the NatWest? Staff wages? Shareholder dividends? Is there no collateral securing these funds? What about the much discussed £100 billion prime mortgage book? The properties these loans were secured on? Can anyone answer these questions? Or is there still political and journalistic mileage to be had from this sad affair?
david, london,
expect the pro euro pigeons to start the soft sell on the end of sterling, the perfect city types know the well has been ransacked by northern rock, plus the punters now know how exposed sterling will become in the future.
michael joseph heavey, cahersiveen>adams towns, madness
"A politically biased article, if ever I have read one"
Marc, St. Barthelemy.
Marc, have you read any of Kaletsky's articles in the Times? Politically biased? Do you mean he's a Conservative? Get real!! Kaletsky has always metaphorically (and maybe actually for all I know) written with his left hand and I'm sure he'd be the first to admit it. I think you are reading this through red rose tinted spectacles if you believe AK is a closet Tory.
As jollytall writes, AK has always heaped praise on Brown as anyone would know who's read his column.
As far as the £55billion is concerned, the NAO will not allow it to appear as debt on the government balance sheet. Just look at what happened to PFI .
Steve, Barnsley,
The unbelievable irony is that Gordon Brown will probably be able to find some sort of post-PM showboating, glamour opportunity in the private sector.
Peter from Geneva, Geneva, Switzerland
Colin is right. Some time ago I said we should stop using the word 'billion' and use 'thousand million' instead. Fifty five THOUSAND MILLLION pounds begins to sound like money.
eric campbell, harrogate, uk
Brilliant article.All necessary comments have been made.
EDWARD SYNGE, TISBURY, UK
The scale of the bribe to the North Eastern voters to protect "their" investment in "their" company is staggering--I wonder what your average African President makes of this and how they will react to more lectures by us to change their corrupt ways!
Richard Barker, Bath,
It is a monitisation of debt on a vast scale!
(you go to the Bank of England with a debt and they "print" new bonds to pay for it. )
The Federal Reserve in the USA (and most central banks in the west) have been doing it for years>
Until we re-anchor money to something tnagible and real the problems of debt and inflation are just going to get worse.
We are constantly forstalling the day of reckoning!
Global reflation efforts (money printing and low interest rates)will eventually fail. Pencil in a global depression-2009-12 ?
odelldom, London, UK
Superb.
For an example of straight-talking, hard-hitting, well-written journalism, look no further.
This article should put Anatole top of the list for a 'Journalist of the Year' award.
Alan Knell, Leamington Spa, UK
Gordon Brown? Prime Minister?
Don't make me laugh. We haven't had a Prime Minister for ten years, but that clown Blair was closer than this.
Simon O'Riordan, Dorchester, UK
I never subscribed to the 'Brown is the best Chancellor ever' spin; while Brown didn't change any of the policies he'd inherited, life pootled along as normal. As soon as Gordon put his great shaking mitt (or should that be his clunking fist?) on the tiller, the boat started to veer off course. Now it looks as though we've hit a Northern Rock and we're holed below the waterline.
Andy, Whitchurch,
The Times a serious newspaper.... No!. Anatole Kaletsky's article, like so much of the media espouses rubbish about NR (much in common with todays editorial).
All business face some risk, NR stance was more risky than most and it was simply caught out by very unusual circumstances. Its assets are sound and the loan from BoE is a market rates - they should make a profit from the loans. It matters little that NR is borrowing from private banks or the BoE. The loans will be repaid and the business continued, even if with new owners.
The run on the NR and the following hysteria can be fairly blamed on scaremongering and stupid reporting in by most sections of the media, including the Times. Kaletsky needs a basic schoolboy's economics course to put him right.
Mike Higgins, Ilford, Essex
Gordon Brown wrong about anything? That man is so thick skinned he will hang on to No. 10 by his fingernails, and keep employing others churning our new ideas and spin in a last ditch effort to convince us that he is the man! Why is it with all the brains we have in this country we get lumbered with this worse than useless Labour government and total looser of a Prime minister. It's no wonder we are becomming a 3rd rate country.
christine marshall , Cambridge, England
brown never was the 'wonder' chancellor.
the only reason he was able to throw money at every thing,was of his plundering of the pension funds,selling off gold at the the lowest possible price etc.
we are now seeing the real brown two faced and incompetent.
ray
ray, ware, england
It's interesting how all that experience with markets and banks has yet to familiarise 'nitin' with the capital letter.
Eddie, London,
I blame Tony Blair - he knew Brown's shortcomings, but neglected to articulate them to the country. Instead, he meekly handed over power, smug in the knowledge that he would mess things up, so showing Tony in an altogether better light.
Tony Pegg, Leicester, England
£1,000,000 per job saved doesn't seem to me to be good value, let alone prudent.
What happens if Northern Rock folds at some point in the future and poeple start cashing in their bonds. Is Gordon going to come cap-in-hand to every taxpayer in the country to ask for £1-2K to help him out?
Mike Carter, Bristol, Avon
Perhaps rather than condeming the actions that the government has taken you might consider the consequences for the public if they hadn't taken these actions, and how significant those consequences might have been for individuals.
Amy, Liverpool,
Isn't hindsight amazing? Except you seem to have ignored the fact that for his first three years in office, Gordon Brown followed the three-year plan laid down by Kenneth Clarke. Actually, that was the only sensible thing he did. Then the left-wing instinct took over. Hike the taxes and don't account for the spending - as per labour normal and straight into a financial black hole of his own devising. It's little wonder that he wants new global funding mechanisms established. Once they are in place, then he can go to them cap-in-hand, just like Healey did, and beg the world to bail us out.
KR, Stockport,
It has taken a little while but finally all can see that Labour never changed; they are still the party that ultimately recks the economy and leaves the mess to a tory government to clear up.
Remember Brown/Blair have only survived as long as they have because they have been living off the very considerable achievements of the Thatcher administration.
John Lewis, Upminster, UK
mr kaletsky
do you remember
1. selling our precious gold at US$267 an ounce. well correct me if i am wrong but he cost us £4.2bn (adjusted for euro strength)
2. raided 35bn a year from pensioners
3. gave us a 55bn liability on northern rock
4. how much has goldman sachs advise cost us? for something so inept???they are laughing all the way to the bank...
he never was, andnever will be a prudent chancellor.
i run a hedge fund, so i think i have a little insight into markets and banks...i also teach corporate finance for free in my spare time, which gives me some authority to speak on this subject.
nitin, portsmouth,
What a brilliant piece! Everyone should read it and weep.
RB
Richard Burns, Lutterworth, UK
And this is the very same Labour party who disgracefully claimed that voting for the SNP would lead to a £5000 per family black hole in Scotland's finances!!
Gav, Glasgow, Scotland
Well said. I think the only thing missing is that the government should have actually closed the Northern Rock down and repaid the depositors 80 p on the pound as well. It is simply not credible for there to be an expectation set that you bear no responsibility for where you deposit your money.The message from this debacle is that any bank will be bailed out with consequent implications for the competitive position of those banks that are run prudently.
Secondly the bank regulators at the FSA should be held to much clearer account for allowing a bank under their supervision to beach the capital adequacy safeguards through such '' exotic'' schemes as a jersey offshore company which held all the mortgage liabilities.
Its a disgrace - Gordon should go and the incompetent FSA should be removed from any bank supervision.
franc petersen, london, england
Nothing to add.
Frightening isn't it?
Sally C, York, England
Fantastic article Anatole, one of your best in years if I might say so. I almost felt like punching the TV tonight when Darling was still making out that the golden, should I say tinpot, rule was still being met. This Northern Rock affair is a perfect metaphor for everything that is wrong with the UK, smoke and mirrors operations masking a dreadfully shaky economy, staggering given their economic legacy bequeathed in 1997.
Andrew Rowe, Abingdon,
The problem with matters like the £55bn is that few people in the UK grasp their sheer size. When a shop assistant grabs her calculator to work out a 20% discount on £10, you know that numeracy is not prevalent. So it's especially helpful to have Anatole place its size in context . But there is a tangible difference between giving a guarantee and actually spending the money and that's the slippery nub of the matter that gives such scope for obfuscation. Brown and Darling must be praying that they can kick the ultimate conversion of the guarantee into hard cash towards their successors' watch (a favourite Bush tactic), as 2008 is not going to be a good year for mortgage collateral even for solid portfolios, let alone Northern Rock's. Nor for the PSBR, either. And I thought the Tories were hopeless at finance! Let's hope the EU kicks the whole idea out and forces the Rock into administration. Our national reputation for Financial skill just went down the pan.
Colin , Shrewsbury,
It's interesting that Mr Kaletsky compares Brown to Major, because it is difficult today to remember with how much goodwill behind him Major became PM.
British politics is pretty evenly balanced most f the time. For one party to win multiple successive elections requires something that is unusual; it requires that people who would normally vote for Party X to nevertheless vote for Party Y because of its leader.
Maggie drew votes from instinctive Labour voters who recognized in 1979 that Labour had hit a period of intellectual bankruptcy from which it would take a decade to recover. Tony Blair drew middle class Tory voters who were shocked by Tory "sleaze" that today seems tame.
But depending on votes from the "other" party is a strategy built on sand, and the moment voters begin to say "Brown's just another Healy, not another Blair" the sand begins to fall away. The next election will be Tory versus Labour, with little or no cross-voting, and Labour will lose as a result.
jon livesey, Sunnyvale, CA/USA
So it wasn't quite storm in a teacup, was it Mr kalesky ? More of a calm before the storm...
jollytall, Suffolk, UK,
But Mr Kalesky, you have always heaped praise on Mr Brown, when Chancellor for his prudence and handling of the economy whereas I'd say he's probably the most reckless Chancellor ever.
jollytall, Suffolk, UK,
Sock it to 'em Anatole. Great stuff!
But if you are worried that not everyone reads The Thunderer, rest assured that the demolition of the line that some debt is being paid off by the analogy with borrowing on one credit card to redeem another was in use on BBC Breakfast as early as 0815 on Monday morning.
Stephen, London, UK
Brown never has had any economic credibility in my book.
Nobody who has allowed household debt and the trade deficit to grow to the extent it has has any right to claim any credibility whatsoever. The man is a fraud.
DickW, Aberdeenshire, Scotland
If the bank had been in Surrey I bet Brown would have let it fail.
Once again politics trumps everything else so he deserves what's coming his way.
Stan(expat), USA, USA
Mr Kaletsky paints a very vivid picture of the scale of the £55 billion loss. Maybe the Brown visit to China should have been with a begging bowl tilted at their sovereign wealth funds.
Tim, London,
Three cheers for Anatole! Bye, bye Gordon!
John, London, UK
And, of course, McAvity Brown was nowhere to be seen when Darling stumbled through his Commons speech.
Nicholas Barrett, volterra, italy
Anatole, I never in my long life so fervently wished that anyone was wrong! My fortune is not entirely wrapped up in Northern Rock, nor even the bulk of it, but what I have there of my cushion for my old age, has suffered badly these past few months. If Branson were to have weaselled his way as firmly as you seem to hint into Brown's favour, I despair for what value is left to me in it! I wish both of them would stay in Beijing and out of my life, and Britain's!
S. Barraclough, Huddersfield, W. Yorkshire
Gordon Brown will always remain Gordon Bean, a figure of ridicule, but a figure who does not make us laugh. The problem lies in the fact that Governments in this country only require 27 per cent of the vote to have a "majority". Our Parliamentary system is little better than that which prevailed prior to the 1832 reform Act. Isn't it time we introduced democracy?
Neil, Gloucestershire, England
Anatole is telling us what bears do in the woods. The most interesting side comment he makes 'And what about rescuing the pension funds wrecked by Mr Brown's previous excursions into high finance?' completely negates convoluted arguments he has put forward in the past defending the then Chancellor.
Alan Tayler, Wivelsfield, England
When I owe the bank 5000 dollars I have a problem. When I owe the bank 5 million dollars the bank has a problem. When the bank owes the government 55 billion dollars we need a change of government!
Adam, London, UK
the 1933 collapse of the Gold Standard.
1931 is the usual date. The simple fact is that Brown sought to save a NuLabour cash spigot in the run up to an October General Election. It has now spiralled out of control and will destroy Labour as a party come the poll.
Brown has burned his boats and faces an economic downturn with nothing but public spending cuts and tax increases
CCTV, Bristol, England
I have to say Marc (from St. Barthelemy) that rather than discuss the factual discourse of Anatole, you have launched your own rather trite personal (political) attack. I do not read one single error in the article presented and even for the more sanguine reader, it would be hard to miss the ramifications of the £55m loss on the economy.
David, Adelaide, Australia
It'sonly last week that we were told that UK citizens were, for the first time in the last 100 years, richer than the US, Germany and France. I can remember years of being negatively economically compared to the Germans, Japanese and the US. Gordon Brown cant win - the media love to hype someone up and then beat them to a pulp. If Gordon Brown had done the things suggested above, he would have been called a centralist control freak. As it is he is recognising that although some private sector managers such as those at Northern Rock dont always get it right, industrial affairs are better left to entrepreneurs on the whole, not Governments. Neither can you cannot micro manage people's financial affairs - there are constant warnings to save into pensions and not to borrow more than you can afford. I would guess that a lot of default payments on mortgages are from the buy to let market, not people's personal homes.
sk, East Sussex,
A politically biased article, if ever I have read one. If Gordon Brown were to prevent all car accidents, Mr Kaletsky would say that he had destroyed the jobs of pallbearers.
Mr Kaletsky, egregious is a fabulous word and it describes this article to the full (not in it's archaic meaning.)
Marc, St. Barthelemy,
As I said while Blair was in power, Brown was no great Chancellor. After all, he held a fire sale of Britain's gold reserves when prices were rock bottom. But the media was determined to replace Blair with Brown. Partly out of boredom with Blair, and partly because Blair was prepared to run the country without reference to the media or the latest fads. A crime unforgiveable by the media. Brown was always going to be an 'outlet store' version of Blair. But the media and public needed someone to feel superior to, and Brown filled that role much better than Blair ever could. So now you have your flawed Prime Minister. And you might as well admit, you are happy moaning and slagging off his imperfections. So much so, you will probably vote him in again. Serves you right.
Paul Francis, Brisbane, Australia
I seem to recall that one of Gordon Brown's teachers or school reports said that he was not very good at sums?
But is Mr. Kaletsky blaming the wrong man - is not Ed Balls at least as much to blame?
Idris Francis, Petersfield, UK
Speaking as someone who never thought that Brown was the genius we were told he was I ought to feel quite smug. Unfortunately he's ruining our country.
Brown is resembling John Major more and more every day, the difference being it seems unlikely that he will ever win an election.
The dark days of Labour economic crises of the 60s and 70s seem remarkably real again right now. The irony is that Brown is assembling this farcical rescue of Northern Rock precisely because he fears such comparisons to Harold Wilson et al. Too late Mr Brown.
Paul Owen, Birmingham, UK
Relax Anatole, relax! Those of us who have always seen through the chimera of Brown's so-called miracle are entitled to our moment of satisfaction. And, since we see nothing but hard times ahead for the 'Anglo-Saxon' economies for the next few years, there is no hurry in young Dave taking over. Better he do this when the electorate is thoroughly jaundiced and fed -up ,as they will be by 2010.
oldasiahand, Guildford, UK
I have great admiration for Mr. Kaletsky and enjoy reading his articles. However; on this occasion I disagree with him on one point - the guarantee on the bonds issued by Northern Rock does not necessarily mean the government inevitably has to physically pay out 26 billion pounds to protect the bondholders. The pay out only happens when there is a default on repayment, which will only occur if the future company makes a significant loss. Even then the loss may not amount to 26 billion pounds. If Mr. Kaletsky still believes the worst of the credit crisis is over there is every chance that the situation of the financial market will improve over time. And if the new management team have the ability to turn around Northern Rock the opportunities will be there for Northern Rock to become profitable again. In this likely scenario both shareholders and taxpayers will get their money back. Under the circumstances Gordon Brown has made the least worst decision. Time will tell if he is right
Canh Linh Humphries, Beckenham, UK
It's clear now that Brown wasn't the great Finance Minister that everyone seems to make out, as all the present troubles stem from his time as Finance Minister. The point is that any economic action taken has to be seen to have a long lead time to fully come into effect. He kept saying "Prudence, Prudence, Prudence!" Yet, it was on his watch that prudence went out of the window; the government borrowed and spent, people borrowed and spent, the banks borrowed and loaned. Nothing was saved for the 'rainy day' to come, and, boy, has that 'rainy day' come! Indeed, it's positively pouring down!
Dick, Durham, UK
Brown is truly a disaster. His monumental incompetence and that of his colleagues (especially the recently departed slimeball Blair) has wrecked our pension system and taxed the middle class to the hilt to lavish the money on the unreformed rathole called the NHS. He has flunked welfare reform making the disincentives to work and save worse than ever. He has built up enormous liabilities for future generations through the PFI and gold plated state pensions. A generation have been conned into getting into debt for almost worthless degrees. Education, infrastructure, law and order remain abysmal. The lights might just go out because of prevarication over future energy policy. Our sovreignty has been given away, freedom of speech destroyed, jury trial threatened and foreign hordes are pushing at our door. I could go on but for want of space. The only thing that amazes me Anatole, is that you took so long to see through this bunch of liars and traitors.
Steve Parr, Swansea, UK
You tell 'em, Anatole!
Peter Adam, Chevy Chase, MD
"Mr Brown's career as a serious politician ended yesterday". Maybe, but don't write him off too soon - the man has a lot of damage still to inflict on this country.
I'll keep the champagne in the fridge, if you don't mind, until we actually see the back of him. We already know that Mr Brown is one of those modern politicians to whom any price is worth someone else paying, to avoid having to admit being wrong. So he'll stay on until the last minute.
P Orphyry, Skipton,