alstry (35.70)

Is Paulson "straight" with America???? England in TURMOIL

August 31, 2008 – Comments (3)

The government was plunged into turmoil yesterday as the chancellor admitted the full scale of Britain’s economic crisis.

Downing Street and the Treasury launched a desperate damage limitation exercise after Alistair Darling declared that Britain was facing “arguably the worst” slump in 60 years. As Treasury aides claimed that he had been misrepresented, Darling took to the airwaves to clarify his remarks.

However, instead of reassuring voters, the chancellor risked compounding the crisis by failing to modify his dire assessment. Darling insisted it was his duty to be “straight” with people. His warning that the slump will be “more profound and long-lasting than people thought” comes at the worst time for Gordon Brown as he struggles to shore up his leadership.

Hazel Blears, the communities secretary, moved to reassure voters, saying: “We know things are tough and understand that people are worried. But Britain’s economy is fundamentally strong.”

One senior Labour figure, who was out canvassing voters, said: “This hardly gives activists a morale boost. We are out on the doorstep, trying to reassure people, at the same time as Darling is telling them we are all doomed.”

http://www.timesonline.co.uk/tol/news/politics/article4641381.ece

 We are all doomed??????  Even I don't think I have gone this far.....but I can understand the logic.  If you think England has more problems than we do....just wait.

Chancellor Darling is Paulson's counter in England.  The behavior in England by government seems to mirror ours by sweeping everything under the rug.  How long can officials keep the levee from breaking???  To understand Darling's position only takes a basic understanding of accounting.  Up until recently, Paulson was telling us everything is fine but we now know different.

Including BearStearns, the 11 banks that have failed this year approach the assets of the over 1500 banks that failed for the entire S&L crisis.....and we are just at the beginning of this crisis.  But for some creative accounting....many more would have also failed.

The problem now is trust.  Without trust....the entire system breaks down because it is a system of counterparty promises.  The customer promises to pay the storeowner.  The storeowner promises to pay the landlord.  The landlord promises to pay the bank.  The bank promises to pay the depositor.  The government promises to provide services in return for the citizens promise to pay taxes....ect......

When trust breaks down and promises are broken, the system breaks down, and we all live in the system.

Folks, there is simply tooo much debt and payment obligations out there for too little income.  And income is shrinking.  That means defaults will rise.  When we live in a country where the debt exeeds the cash savings by 5,10, 15 to 1, once you can't service the debt......defaults occur.

Loaning more money to money losing GM where debt exceeds cash over 25 to 1 is insane...especially since GM's revenues are now contracting and margins getting smaller.  Until we restructure and relieve GM of its debt burden, it will not be able to make money and innovate.  The same is true for many other businesses and municpalities in America where debt is suffocating a declining revenue stream.

The private and municpal debt burden in America is HUGE.  Until we deal with it...the problems are going to get much worse very very soon.

The cracks are becoming more visible....when will the system come clean????