17-10-2008

GORDON BROWN'S DILEMMA,


For all the years Gordon Brown was Chancellor he almost constantly attempted to hammer home the message to the leaders of Europe that his view of liberalisation of the markets was the way forwards.

He, ad many times almost lectured the other leaders on the benefits and need to de-regulate.

The European leaders broadly disagreed, and the happenings of the last couple of weeks have shown that they were right to be cautioned about his lectures.
Indeed the occurrence of the last week or so did indeed silence his arguments for liberalisation.
His reaction was a turn around of the idea’s, a new view, not that his earlier view was complete wrong but that in his new view, a more stringent control was needed and in such a situation only a Government, read Gordon Brown, could stop the total financial wipe out.

After he completed his turn around of his earlier wisdom, he now sees himself as the saviour the inventor of a new solution. A new type of Government control, to interfere to re-capitalise or to nationalise financial institutions. At the same time he injected
large amounts of money into a financial bottomless pit if no controls were put in place.

With the new controls in place, he could stop financial institutions to foreclose.
What is unclear today is what kind of measures he will create for the victims of the financial institutions and the utillities.

Till now we have only the in a cloud rapped suggestion that houses could be obtained at discount by the rsl's making the rich again richer. But no measures otherwise are taken.
The must of tight control regarding interlending and lending general is still ignored.

The bringing under control of the utillities on penalty of being nationalised is not even mentioned, although they have already made moves for further increases by sharp falling oil prices.
Note: in the UK the gas/electricity prices are about 50% higher then on the continent were controls are in place and uttilities are whole or partly nationalised.

Sofar we have to admire Gordon Brown for his courage to turn around a principle. We have to see however, what he will do for the not so rich the ones losing their homes, the poor, the old and the disabled. It will show of he is a man or a mouse, a man of statue and vision or a climber to the rich and power-full, by stepping on the rest.

To turn the screws on the Utillities will give him a clear advantage to win the coming election, the lack of it will have him go down in history regardless whatever he has done so far, as a wimp.

In Europe the other leaders gloated, at this Gordon Brown turn around, but they were wrong, and although in disagreement with Gordon Brown before, they also had to set in place similar controls.

To view it simple they followed reluctantly Gordon Brown’s lead. Pro and against liberalisation made both the same valuation mistakes. Both missed as did the Free market of the US, how interconnected the international finance service and markets and become.
They were woven into each other. Governments in Europe as in the US and worldwide did not keep up with the inter-globalisation of business.
There were for years many signs that this was happening, we wrote already in 2006 the warning that the lack of control and the creed of financial institutions the utillitie and of the construction companies were running out of control.
That the free for all lending, inter-lending, and putting further and further the boundaries of restrictions would lead to a collapse of the financial services and the construction companies. It needed just a spanner in the wheel to make it collapse.

The spanner was the oil activated by the wars in Iraq and Afghanistan and the fear for new war instigation by the US.

Does this now mean that the European system and the Free market system of the US are come to an end, in my opinion no. Gordon Brown liberalisation and the free market of the US were in principle right, what was missing was Government control, without this control, creed steps in, and boundaries are demolished.

Now with Gordon Brown’s turn around, those measures could be set in place for the future. This will in time stabilize the markets, the financial institutions and with that keep the utillities and the construction under control. Liberalisation could progress, the free market could develop further with strict controls worldwide.

Lending to be set at Government levels, by Government, and under control of the Governments. This special needed to control the Housing markets in Europe as in the US, but special in the UK were the Government did not build affordable new housing for a very long time. This in turn create a urgent housing shortness in some cases exploited by housing associations who did see rich pickings via the Housing Corporation, not leading to the much needed more housing but to richer housing associations were directors earn more then ministers, with Government funding.

The Government, instead of feeding the housing associations, could start building themselves new affordable homes under the tightest of controls.

This would mean a down turn in house valuations that are even on this moment at a barmy level of height, but would benefit the State in the long turn.

It would mean not only a strict control on financial institutions regardless of they are owned partly by the Government, nationalised or independed, but also on the utillities and the construction companies.

Construction companies had a free hand in charging where as by the building cost and the house selling price were in no relationship to each other.
Those actions led to higher lending and more risky lending for no other reason then creed, the same creed as was at the bottom of the financial institutions.
Those controls should be indeed included the financial institutions,the utillities, the construction companies, but also the housing associations, who also till now, have a free almost uncontrolled hand.

The free market of the US and the liberal Eu markets will be still in existence when the markets have found a solid footing again, and the developing countries could learn of the present situation.

Let us be clear the present situation will be in say 3 years a memory, unless the US starts yet another science fiction war for oil although under a different heading.

With the measures of Gordon Brown in place and if strict new rules and controls are in place on financial, the utillities and construction companies, we will have once again a stable economical situation. In that situation is place for the Free market and the liberal economical views of Gordon Brown, a factor for expansion and growth.

We have seen the comments on Gordon Brown his turn around and his new view, it is however to be remembered that only the great can make such a turn around and admit a situation has come to an end and a new one is needed.

Future will show who was right or wrong.

However, the direct way Gordon Brown dealt with the situation can only attract admiration.