Rankings and levers

October 12, 2008

Newspapers have been quoting the survey by the World Economic Forum in which business leaders have been rating the solvency of world banks.

The rankings however were compiled just before the recent £50 billion bail-out by the UK, the nationalisation of the Icelandic banks and the larger US bail-out.

The website has the co-authors interviewed from the 3rd to the 7th of October. The report itself was published on the 8th October.

RANKINGS

1. Canada

2. Sweden

3. Luxembourg

4. Australia

5. Denmark

6. Netherlands

7. Belgium

8. New Zealand

9. Ireland

10. Malta

11. Hong Kong

12. Finland

13. Singapore

14. Norway

15. South Africa

16. Switzerland

17. Namibia

18. Chile

19. France

20. Spain

21. Barbados

22. Bahrain

23. Slovak Republic

24. Brazil

25. Estonia

26. Austria

27. Panama

28. Mauritius

29. Kuwait

30. Qatar

31. United Arab Emirates

32. Trinidad and Tobago

33. Senegal

34. Israel

35. Portugal

36. Iceland

37. Cyprus

38. Botswana

39. Germany

40. United States

41. Lithuania

42. Peru

43. El Salvador

44. United Kingdom

45. Greece

46. Benin

47. Costa Rica

48. Malawi

49. Guyana

50. Malaysia

51. India

52. Puerto Rico

53. The Gambia

54. Montenegro

55. Mexico

56. Croatia

57. Czech Republic

58. Jordan

59. Ghana

60. Suriname

61. Brunei Darussalam

62. Latvia

63. Saudi Arabia

64. Kenya

65. Jamaica

66. Honduras

67. Zambia

68. Burkina Faso

69. Slovenia

70. Sri Lanka

71. Pakistan

72. Philippines

73. Republic of Korea

74. Romania

75. Thailand

76. Madagascar

77. Colombia

78. Cote d’Ivoire

79. Italy

80. Bulgaria

81. Hungary

82. Cameroon

83. Georgia

84. Oman

85. Tunisia

86. Paraguay

87. Nigeria

88. Armenia

89. Morocco

90. Dominican Republic

91. Bolivia

92. Malia

93. Japan

94. Tanzania

95. Moldova

96. Bosnia and Herzegovina

97. Poland

98. Nicaragua

99. Venezuela

100. Uruguay

101. Guatemala

102. FYR Macedonia

103. Syria

104. Albania

105. Nepal

106. Mozambique

107. Russian Federation

108. China

109. Uganda

110. Serbia

111. Egypt

112. Ukraine

113. Vietnam

114. Turkey

115. Bangladesh

116. Azerbaijan

117. Taiwan, China

118. Ecuador

119. Mauritania

120. Mongolia

121. Indonesia

122. Zimbabwe

123. Tajikistan

124. Kazakhstan

125. Cambodia

126. Burundi

127. Chad

128. Ethiopia

129. Argentina

130. East Timor

131. Kyrgyz Republic

132. Lesotho

133. Libya

134. Algeria

Yes. That’s right.

The UK lies behind Peru and El Salvador.

Now given this report was a survey of the world’s economists whose advice our banks were no doubt taking; should we believe it?

Are the UK’s banks really behind Peru, El Salvador and Senegal?

Or is it an accurate representation that is slightly out of date, compiled as it was slightly before the bail-outs?

That must depend on whether you believe the bail-outs will work.

If reports are to be believed the Royal Bank of Scotland is next in line to be nationalised tomorrow. If that happens then there will be further pressure on the remaining UK bank’s to be nationalised too. The banking sector could be picked off one by one by the market and the taxpayer forced to pick up the tab.

On that Iain Dale post there have already been comments about the English taxpayer bailing out the Scottish bank.

It must be a pity, to all those who carp, that Scotland is not already independent.

An independent Scotland with a similar oil fund like our neighbour Norway could be similarly insulated from these turbulent times.

It would also have the economic levers to maintain its economy best, not just for the South-East of England as remains the case today. Remember Eddie George, the former Governor of the Bank of England: Unemployment in the north is a price worth paying for affluence in the South!

Although the credit crunch is global, take a look back at those rankings.

Sweden, Luxembourg, Denmark, Belgium, Netherlands. All small countries lying in the top 10.

Even Ireland, who have recently guaranteed all deposits in their banks, are sitting 9th.

The argument that Scotland is too small to be financially unstable is farcical! I don’t hear anyone saying that Denmark is too small and should be run from Berlin. (Not since the days of Adolf Hitler and the Second World War anyway!)

As countries large and small struggle with the credit credit crunch from the U.S. and Russia down to Iceland with its 300 000 population, this population argument of independence must be seen to be invalid. Iceland, with a population slightly smaller than North Lanarkshire, isn’t exactly Miramont Gardens in Pimlico!

Passport to Pimlico

What matters now is that we take the right decisions to get out this mess.

Those decisions may be different for each country. They may even be different for England, Scotland, Wales and Northern Ireland.

That’s why its important key economic levers are devolved away from Westminster.

Otherwise the Eddie George syndrome will hamper ‘the North’ recovering for years.

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End of the Bank of Scotland

September 18, 2008

The loss of the Bank of Scotland is a national disgrace.

A disgrace not brought about by Scotland – but by Westminster and this Labour Government.

Selling Scotland by the pound

Some time ago I posted a blog that related how Iceland’s commercial banks – especially Landsbanki and Kaupthing – had high value CDS figures (610 and 856 respectively) which meant that they were particularly vulnerable to collapse in the credit crunch.

The population of Iceland being small (only 300 000) they couldn’t afford to step in and nationalise their banks. Fortunately they organised a loan from their friends in Norway and that sorted things out.

Norway with a population of 4.7 million, slightly smaller than Scotland. It also had the foresight to initiate an oil fund; something that the SNP plans to do with Scotland’s oil.

Back in March the Bank of Scotland had a CDS of 235.

Not in any great danger. And even that number would have been lower without all the mortgages that came with the Halifax merger. Of course, the Halifax merger in 2001 wasn’t the end of the Bank of Scotland; it just renamed its Edinburgh global headquarters and put Halifax in front of its name. It wasn’t moving anywhere.

HBOS Edinburgh quarters

Now of course due to market speculation and short trading on HBOS shares bringing panic it seems there will be a merger of HBOS and Lloyds TSB.

The new bank will be based in London and initial reports are the bank will be renamed Lloyds Halifax.

Its the end of one of Scotland’s leading financial companies, and the end of its proud history. Established in 1695 before the Treaty of the Union with England, it financed Jacobite rebellions and was the first bank in Europe to print paper money.

I would doubt if Scotland had been an independent country this historic bank would have been let to die in such a merger.

If Norway could afford to bail out their Icelandic neighbours with their oil fund, I’m pretty confident that an independent Scotland would have used its oil fund to do likewise, if it became necessary.

And that’s a big if. I’m sure that an independent Scotland would have used all the mechanisms at its disposal to save help our economy through these trying times. Mechanisms that only on Tuesday Alex Salmond was epousing on Newsnight Scotland that should have been applied before now – and that every commentator on Wednesday’s programme bar one agreed with.

Whereas only last week Merwyn King announced the Bank of England SLS – transferring of mortgages into liquid stock scheme – would not be extended. After the run on HBOS it was forced to change its mind Tuesday afternoon.

Of course, Gordon Brown was aware that he had already bailed out one bank, Northern Rock. With his popularity in freefall at the moment and seemingly having no answers to solve this country’s economic problems, he instead pressured Lloyds into the merger.

So should he be praised for saving jobs then? Its his running of the UK economy thats caused the Bank of Scotland to die!

Its like a penniless crofter killing his entire stock of breeding cattle and saying today’s pies tasted nice! It may be true but its not foresighted.

Surely only a fool would praise penniless crofter Gordon Brown for today’s pies? Step forward George Foulkes!

Is this Gordon Brown’s idea of Britishness? Forcing long standing proud Scottish institutions and global financial players to be repatriated to London? Part of his long game to ensure that Scotland’s finances will be bereft and beholden to London? Just like a colony then?

I feel ashamed that under a Scottish Prime Minister’s stewardship of the UK economy that this proud bank and Scottish institution is being allowed to die.

Gordon Brown. The man who killed the Bank of Scotland.

That will be his epitaph.

I doubt even Margaret Thatcher would have sunk so low.

Gordon Brown must go.


Religion and evolution

September 15, 2008

Today the Church of England has issued a posthumous apology to Charles Darwin:

“Charles Darwin, 200 years from your birth in 1809, the Church of England owes you an apology for misunderstanding you and, by getting our first reaction wrong, encouraging others to misunderstand you still.”

Charles Darwin on Bank of England £10 note

Its one example of religion trying to come to terms with the theory of evolution.

The BBC purports that 47% of Americans reject the theory of evolution.

That to me is a startling figure but it goes some way to explain how a creationist like Sarah Palin can be considered a viable Vice President candidate.

The BBC also found that in the UK only 48% of its poll believed in evolution.

Another startling figure.

Hopefully, the Church of England apology will begin to see religious attitudes to evolution change for the better.

On a tangential note, its sad to see that Paul McCartney has given a death threat over his plans to play a concert in Israel.

Perhaps we should not be surprised by religion’s out of date coming to terms with Darwin and evolution.

It seems religion has not came to terms with The Beatles yet either.

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Survival of Scottish banknotes

June 12, 2008

The famous Scottish banknote.

The Bank of Scotland was the first bank in Europe to produce banknotes. The Scots took to banknotes so readily that England’s attempts to block their production – after most English banks had failed – in the early 19th century, caused a national outcry and a popular campaign by Sir Walter Scott helped secure their future.

Indeed, the Westminster parliaments subsequent inquiry found that the Scottish banknote was more successful and stronger than the English note.

Notwithstanding the legal tender argument; Scottish bank notes are not legal tender in Scotland or the rest of the UK but are promissary notes – a situation that has recently provoked anger in the House of Commons. The Labour Government at Westminster refused to alter their status; They are still in use and as popular today, and the three main Scottish banks print them.

Incidentally, English bank notes (or Northern Irish notes for that matter) are not legal tender in Scotland either. The English £1 note did have legal status for a while – the Currency and Banknotes Act of 1954 gave English notes of under £5 legal tender status in Scotland; and basically allowed the use of English notes in Scotland. Since the Bank of England removed its £1 note from circulation in 1988, now no paper money is legal tender in Scotland!

The Scottish and Northern Irish notes have to be backed by the Bank of England. (The Bank of England was founded by a Scotsman, William Paterson!) That means the these banks put a sum of money – the Scottish banks give the Bank of England almost £5 billion pounds every weekend – into the Bank of England before they produce their notes.

The UK government had planned to tighten those backing rules which would have had the effect of stopping the Scottish and Northern Irish banks from producing their notes.

But under intense pressure from the banks themselves and the Scottish Government and Northern Ireland Assembly these plans have been watered down so that both these countries’ notes are safe.

Alex Salmond has hailed the U-turn as a victory:-

“I’m delighted the Treasury have dropped their ludicrous proposals that threatened the very existence of Scottish bank notes. Let’s hope they’ve finally learnt their lesson and never jeopardise our bank notes again.”

“Although some concessions have been made, this is a substantial victory and, as such, we welcome it. All those who took part in the campaign deserve congratulations – their determination ensured success.”

So the SNP are happy now.

They have already said that if the referendum on Scottish independence is won in 2010 then Scotland will keep Sterling as its currency at least for the short term.

Any move to the Euro will only take place after a referendum.

Currently the European Central Bank believes that if the UK moved to the Euro that would mean the end of the Scottish notes as they are not legal tender. As the UK government has recently refused them legal tender status, it leaves their survival hanging on the UK’s continued refusal of joining the Euro, a position that could easily change in the future.

However, if Scotland was independent then I’m pretty sure the Scottish notes would have legal tender status assigned to them almost immediately by the Scottish Government.

So that argument by the European Central Bank would immediately be circumvented. The Scottish banknotes survival then would be best placed in an independent Scotland.

There is another problem though. The European Central Bank is used to dealing with countries with one central bank (like the Bank of England for England); in Scotland the three note issuing banks are retail banks – the Bank of Scotland, the Royal Bank of Scotland and the Clydesdale Bank.

Hence the European Central Bank allows countries to issue their own versions of the Euro note. Since they all have one central bank its not a problem, and France happily issues its own designs for their Euro notes for instance.

Which bank in Scotland would then get that honour? I believe it would not come to that. If Scotland voted for the Euro, one of the preconditions could be that the three banks could issue their own notes and the Scottish Government could easily negotiate a derogation on the matter.

But is it likely that a UK Government on past form would insist on a Scottish (or Northern Irish) derogation if they joined the Euro? On past evidence in Europe – in a leaked memo by senior Scottish civil servant, Michael Aron – when Labour Scottish ministers were left in the hallway and ignored by the Labour UK ministers before a Council of Ministers meeting, I think not.

Scottish banknotes will always be dear to Scotland. Sterling or Euro they must survive.

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