Where Does It Go? - UK Money Blog £

In case you have been living under a rock you’d be aware of the turmoil of the financial markets at the moment, with not a week going by without a UK or US bank having to be nationalised or taken over by rival firms.

Is the credit crunch really ending?

The Governments in the UK and US are literally on their knees as they try to correct the mistakes made by greedy banks, with just today giving news that the Spanish bank Santander are taking Bradford and Bingley over to avoid it being nationalised for £150 billion, and the US basically nationalising almost every sub-prime mortgage in the $700 Billion rescue.

America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it’s just bailing out financial institutions

…says Jim Rodgers, CEO of of Rodgers Holdings.

As discussed by James Bennett, capitalism was a term spoken by Marx to explain market economies, saying that eventually centralised economies would dominate. That inevitability of the process has been said to be dis-proven in recent times, incorrectly given recent events?

As each news story about the credit-crunch’s effect happens, I feel I am watching the end of an era. I can dimly remember the Berlin Wall being torn down as a kid, and I have a feeling the winter of 08 will have just as much of a significance when looking back in the future.

Letting finance markets police themselves is over - American dominance of the finance markets is over - voter dissatisfaction is going to be at all time high in America and the UK with rising unemployment, crime and living costs. Labour is doomed, but what will the market loving Tories do to a UK in the midst of a recession?

A figure totted about at the moment is that for the $700 Billion the US is planning to use to buy up toxic assets, it could provide free gasoline to America for 1 and a half years.

That is an immense amount of money, but there will be long term recovery of that figure as they sell off the assets in the future. Indeed, it could be possible in a few years time America will have money to pay off its immense national debt, most of which it owes to China.

And that is the Elephant in the room - the emergence of Russia and China as the new world order opens up is the end result of all this financial chaos.

The global centre is swinging faster than ever from West to the East; in the future if may be said the East beat Capitalism at its own game - being able to switch off gas to Europe in the height of winter gives Russia immense political weight in the region, as Georgia announced to the world. (How are those break away regions now? Colonies of Russia?)

And China, buoyed up by its Olympics, ready to provide the world’s cheap goods as long as we behave and don’t piss it off too much, since China could dump the dollar and drive America into even greater recession; Foreign investors own 47% of Americas Treasury bonds.

Interesting Times, there is not much we can do but hang on and enjoy the ride.

More doom and gloom on Radio 4 on the way to work last week - Centrica who own British Gas have announced that average annual gas bills could raise to £1000 a year - an increase of 60%.

As oil prices have risen, gas which is an immediate product of crude oil has had to walk in step. To be honest its been a long time coming - follow the money - oil and gas company shares have not historically walked in step with the price of crude for a few years, as this graph shows:

It was only a matter of time before the utility companies started putting up prices.

This is all happening at the same time as the credit crunch starts taking hold - there are some estimates that house prices could dip by 30% and stay there for 20 years! More conservative estimates talk of a four year gap until they reach 2007 levels.

Will the banks learn their lessons? Will sub-prime mortgages be consigned to the past as a silly un-prudent idea, never to be repeated?

As repossessions continue, we could see houses being sold only to the cash rich, leaving less and less people in control of more and more property - we’ll become a nation of renters and a tiny minority of landlords. If it really goes tits-up we could even see those landlords falling foul of high interest rates and rising costs, with more nationalisation of banks to prevent the economy collapsing.

I sit here working, earning more than I have ever done before, yet find myself with less and less disposable income. I work to keep myself in just enough comfort to continue working.

Why does this all sound familiar?

The
worker becomes all the poorer the more wealth he produces, the more his production
increases in power and range. The worker becomes an ever cheaper commodity the more
commodities he creates. With the increasing value of the world of things proceeds
in direct proportion to the devaluation of the world of men. Labour produces not
only commodities; it produces itself and the worker as a commodity — and does so
in the proportion in which it produces commodities generally.

Marx - Economic and Philosophic Manuscripts (1844)