Greenspan spills the beans on Iraq and the UK economy

[Monday]

I know Alan Greenspan has a book out, but telling the truth like this is indecent:

the former head of the US Federal Reserve, says oil was the primary motive for the Iraq war.

Mr Greenspan, one of America’s most respected elder statesmen, said it was politically inconvenient to acknowledge the fact.

No shit. This result of that political inconvenience was hardly splashed across the front pages of all of the newspapers last week:

The British polling agency ORB reported Thursday that the death toll in Iraq since the 2003 US invasion has passed the one million mark.

According to ORB, US-occupied Iraq, with an estimated 1.2 million violent deaths, has “a murder rate that now exceeds the Rwanda genocide from 1994 (800,000 murdered),” with another one million wounded and millions more driven from their homes into internal or external exile.

But wait, there’s more from Greenspan:

The 81-year-old economist, an adviser to Gordon Brown, insists that the recent increases in house prices – particularly those in London and the South East – are unsustainable.

“There are going to be some difficulties,” he has said in an interview with The Daily Telegraph. “Can [the boom] last? No.

“You’re already beginning to see the mortgage rates are moving, a lot of the two-year fixes are beginning to unwind, and the teaser rates are going,” he adds, referring to mortgages where rates jump after an introductory period.

He says that banks are already being forced to write off billions of pounds of debt.

“It’s going to turn, it’s got to turn,” he warns.

Mr Greenspan also believes that Britain is more vulnerable to the effects of the credit crunch than the US.

“Britain is more exposed than we are – in the sense that you have a good deal more adjustable-rate mortgages,” he says, referring to the standard variable rate loans that many households have chosen over fixed-rate deals.

More exposed?

Apparently so:

As Charles Dumas of Lombard Street Research put it: “Britain is threatened by its position as globalisation’s epicentre. Any seize-up of global financial markets affects London and the British economy more than any other. Lower real incomes combined with tight monetary conditions, and the overhang of a very high exchange rate, could hammer growth during 2008.”

And as for that run on Northern Rock

Chancellor Darling had told the BBC’s Radio 4 Today programme that the money of Northern Rock depositors was safe.

‘If people want to get their money out of Northern Rock bank, they can do it. The money is there and it is backed by the Bank of England so they can get it,’ he said.

Savers took him at his word and got their money out of the bank while it was still there.

Chancellor Darling and Prime Minister Gordon Brown met US Treasury Secretary Hank Paulson yesterday afternoon to discuss Paulson’s concerns that a de-industrialised Britain, whose City of London has an inflated economic importance, was far more vulnerable to the threat of financial collapse than was even the United States.

The meeting came after a grim warning given to the Daily Telegraph by the ex-Federal Reserve Bank chairman, Greenspan.

He warned that inflation would double in Britain in the coming years and that the Bank of England was heading for a double digit interest rate as in Black Wednesday 1992.

This was when hundreds of thousands of homeowners were savaged in the aftermath of a massive run on sterling that forced it out of the EU Exchange Rate Mechanism.

Greenspan’s remarks were on the eve of today’s decision by the US Federal Reserve bank Chairman Bernanke, whether to cut its interest rate as is being demanded and risk a run on the dollar, or keep it as it is and see further mortgage bank collapses.

The two British banks who were interested in acquiring the beleaguered Northern Rock bank have meanwhile got cold feet after they were overcome by their fears about doing such a dodgy deal amid such chaos in the money markets.

They also found that raising money from other banks and financial institutions proved to be impossible.

Meanwhile, the London stock market was 106 points down at 1 pm yesterday, with share prices falling by £25 billion.

Banking shares have fallen across Europe, but none as bad as Northern Rock, which is sure to slide again tomorrow, despite the government guaranteeing all savings (alas, this has no legal substance).

Bad news for the six thousand employees of Northern Rock whose jobs may sink with the bank. Staff are facing added pressure as a result of frustrated customers.

And what of the (mainstream) politics of this crisis?

Conservative leader David Cameron has said the government has mishandled the crisis, arguing that the chancellor’s appeal for banks to lend responsibly had come too late.

“The government has presided over a huge expansion of public and private debt without showing awareness of the risks involved,” he told the Sunday Telegraph.

Liberal Democrat treasury spokesman Vincent Cable, speaking at the party’s conference in Brighton, said: “The British economy may have been reasonably successful but it is also highly fallible.

“The house that Gordon Built may not be built on sand but it has certainly been built on a floodplain.

“The water is now pouring through the defences after the near collapse of Northern Rock; a product of greed and reckless gambling by overpaid executives; lax, indulgent bank regulation; and a complacent government. I warned Gordon Brown of a looming debt crisis four years ago.”

First of all, New Labour has been doing what the Tories started, in terms of financialisation and de-industrialisation, and the Liberals have colluded with Labour for years…

Good news for BAE, however:

Saudi Arabia is to buy 72 Eurofighter Typhoon jets BAE Systems, the Ministry of Defence (MoD) has confirmed.

The deal is worth about £4.4bn but contracts for maintainance and training are expected to take the bill to £20bn.

The Serious Fraud Office (SFO) dropped a probe last year into a sale of jets to the Saudis in the 1980s.

The UK government said this was on national security grounds, but reports said the Saudis had threatened to pull out if the probe went ahead.

And as if to prove that it’s all about profits, the jets will apparently be built for the most part in Saudi Arabia… so much for the claims about “British jobs”.

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