All entries for November 2007

Northern Rock: am I missing something?

Many of the front pages of the front pages of yesterday’s newspapers had the following headline: of yesterday’s newspapers had the following headline:

‘Taxpayers could face a multimillion-pound bill for the rescue of Northern Rock, after Alistair Darling refused to give a guarantee that the £24 billion Bank of England loan will ever be fully repaid.’

But what is the big deal?

Northern Rock had a bank run. This meant they lacked the liquidity to give all their depositors their money back. However this doesn’t mean that they didn’t have the assets. The loans that Northern Rock held are still good. Thus then government lent the bank this money in order to provide them with this liquidity, and then when the loans mature the bank will have the money in order to pay their government loan back. No problem

The only circumstance in which the loan couldn’t be paid back was if there was mass defaulting on loans. This could happen if there was a severe recession in the economy or if there was a severe drop in house prices (thus causing people to have negative equity on their homes). Most economists appear to predict a slowdown in growth in coming years; hence the first scenario won’t happen. In the US average house prices has recently fallen by 8%; thus the second scenario is a possibility.

But surely if there is going to be a massive bursting of the house-price bubble this would make a more interesting headline then noting that the government’s loan won’t be paid back?

Indeed what if this ‘giveaway’? In practice all it really will mean is that a lot of government money is, instead of being spent by the government, is being given to the Northern Rock depositors (i.e. a large group of randomly chosen people) so they can spend it instead.

: 21 Nov 2007 13:48 |  Tags: Economics Politics |  Comments (5) |  Close comments |  Report a problem

ICA newsletter, Week 8

This week:

• Two of the main candidates for the Democratic nomination clashed in a debate, over rumours over ‘scandalous information’ possessed by the Clinton electoral team about Barack Obama. This follows a row about planted questions in one Clinton rally in Iowa, and Clinton has been accused of not giving ‘straight answers to tough questions’ by Obama. So are the Democrats playing into the hands of the Republicans with infighting? And more generally how do we think the US electoral process is going to pan-out?

http://news.bbc.co.uk/1/hi/world/americas/6297545.stm – Guide to the US electoral process
http://timesonline.co.uk/tol/news/world/us_and_americas/us_elections/article2778923.ece – Quick guide to the candidates

• President Sarkozy is facing up to the first challenge to his Presidency in the form of striking public sector workers. Sarkozy was elected on a package of reforms, but the workers are striking over pension reforms. Sarkozy may be comforted by polls showing 55-60% of French opposing the strikes, but a poll in Liberation showed 79% believed that Sarkozy had failed to deliver on his central economic pledges. So is this a key moment in the Sarkozy economic project? And can a French President successfully stand-up to strikes?

http://www.timesonline.co.uk/tol/news/world/europe/article2866153.ece

• Foreign Secretary David Miliband has suggested that the EU should expand beyond Europe, to include Russia, Middle Eastern and North African countries. He claimed that EU enlargement was ‘our most important tool’ for extending stability, seeing the EU less as a potential superpower and more as a bargaining chip in persuading countries to reform and adhere to global standards. So is an ever expanding EU feasible, given the anti-immigration feelings brewing in some sectors of many European countries? And would countries from the aforementioned regions actually wish to join the EU?

http://news.bbc.co.uk/1/hi/uk_politics/7095657.stm

Also in the news:

• Elephant football in Thailand – http://www.guardian.co.uk/travel/video/2007/nov/19/elephant.festival
• Blondes make men act dumb – http://women.timesonline.co.uk/tol/life_and_style/women/the_way_we_live/article2890531.ece
• Ahmadinejad dismisses dollar – http://news.bbc.co.uk/1/hi/world/americas/7101050.stm

: 19 Nov 2007 18:12 |  Tags: Clinton Eu France Miliband Obama Sarkozy Usa |  Comments (1) |  Close comments |  Report a problem

ICA newsletter – Week 6

Hi all, hope you’re enjoying reading week if you’re so blessed, anyway some of the main stories this last week:

• Pakistan seems to be at crisis point after General Musharraf imposed emergency restrictions in order to prevent Pakistan ‘committing suicide’. The stated reason for the restrictions was to control jihadists who have been mounting increasingly regular attacks in Pakistan for the past few weeks. However, the restrictions seem to have extensively targeted Musharraf’s political opponents, including former Pakistan cricketer Imran Khan under house arrest. In total over 500 lawyers, politicians and human rights activists have been arrested. This has led critics to suggest that the General is simply attempting to prevent the Supreme Court from declaring his Presidency illegal. So what will be the outcome of the current protests, if any? Is General Musharraf’s position untenable, even from within the army?

http://www.timesonline.co.uk/tol/news/world/asia/article2810126.ece

• New head of MI5 Jonathan Evans has claimed that Al-Qaeda is specifically targeting people as young as 15 to carry out terrorist acts. He also claimed that the Al-Qaeda ‘franchise’ was spreading and expanding their activities in Somalia, Algeria and that the division in Iraq aspires to promote activities outside of Iraq. His comments come as the government seems set to seek an extension of the time limit under which suspects may be held from 28 to 56 days. After 90 day detention was rejected in the last Parliament is an extension needed? Do our police really need 56 days, when Spanish police are limited to 10?

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/11/03/nqueen103.xml

• The Metropolitan Police have been found guilty of endangering the public over the fatal shooting of John Charles de Menezes. The force was found to have broken health and safety laws and was fined £175,000 plus costs. However, no-one was convicted of personal responsibility for the death. Should Sir Ian Blair pay a, even symbolic, price? Or is the verdict fair?

http://news.bbc.co.uk/1/hi/uk/7069796.stm

Also I seem to remember Scott at least wanted to talk about Saudi Arabia so if others do as well we can carry that over from last week. Also women can vote in Iran, as they can in most Middle-Eastern countries, Saudi Arabia being a notable exception.

Also in the news:

• Supermodel rejects dollar pay – http://news.bbc.co.uk/1/hi/business/7078612.stm
• Mother dies after refusing blood – http://news.bbc.co.uk/1/hi/england/shropshire/7078455.stm
• Chadian adoption scandal – http://news.bbc.co.uk/1/hi/world/europe/7077485.stm

: 05 Nov 2007 18:11 |  Tags: Detention Menezes Mi5 Pakistan |  Comments (0) |  Close comments |  Report a problem