Here is the news

In the public interest, short-selling is banned until further notice. Minimum buying prices will be observed, enforced by the new market regulator, OfPuff. If necessary, all sales of stocks will be subject to official clearance. Traders must demonstrate an awareness of their social function or attend re-education classes.

Gloom and despondency are prejudicial to the health of our economy, and no responsible Government would stand by while bad news was published without restriction. By order of the Privy Council today, all editors of print and electronic news media (*) are, by virtue of their position, to be deemed civil servants and will be bound by the Official Secrets Act, to which certain annexes have just been appended.

We have pleasure in being able to disclose the final results of the 2010 General Election (for full details, see page 32, or Ceefax page 801). The landslide victory will be welcomed by all true patriots, as will our decision to cancel the Election, for reasons of economic efficiency and also because, given the inevitability of the outcome, the process is otiose and a wearisome distraction for voters and a reinvigorated Government that is determined to get on with the job of steering us through these challenging times.

UPDATE - MY SPOOF WAS FAR TOO TAME:

(*) I should now add, all financial institutions:

"(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;"

See Karl Denninger on this latest, utterly undemocratic outrage by the US Government.

Is the USA still ruled by law?

The London Banker gives the US a magisterial damning, citing many instances of the Executive acting in ways he considers ultra vires in the financial arena.

This sort of talk from someone who generally appears to be a sobersides, echoing the volatile but technically savvy Karl Denninger, really does alter the tone of the debate. Read it yourself, and judge.

UPDATE

Jesse, too:

... Men sneer that outmoded laws and useless principles must fall to vital expediency so that we might be saved. The will to power begins to erode and overthrow justice and the rule of law.

And at certain times in history, in their fears and insensible numbness, people concede first the discretionary choices, then their moral outrage, then the weak, then their wealth, their freedom, and finally comes madness, and then the deluge.

And Tyler:

I'm afraid to say, we're facing much more regulation.

And much more government.

And much less willingness to trust markets.

We're in the Slough.

This is a sad, keening chorus of responsible bloggers.

It won't work

Karl Denninger pours scorn on the latest banking "solutions". I don't pretend to be as techno as he, but I trust my instincts, and they say that this is all like a Christmas play. If Fairy Bogbrush can wave her bristly wand and shazam! the grisly bathroom throne of modern finance is sparkly clean, then why can't she wave it again and make us all rich into the bargain?

But if it was that easy, who'd staff the checkouts, sweep the streets, change the bedpans etc?

Nope, it'll have to be paid for somehow, and I don't think the rich have reserved that pleasure for themselves.

Murky support for the dollar

Brad Setser looks at data from the US Treasury International Capital System (TIC), trying to work out what's been going on in the money supply and why the dollar hasn't collapsed in all this brouhaha. Setser, who gave evidence to a Congressional committee last year, admits that the picture is not clear, despite his expertise.

He thinks real purchases of Treasury securities (2000 - mid-2007) are about double the official amounts, and points out that when the dollar weakens, it is supported by further buying from central banks. Also, Americans have sold a lot of foreign equities recently and the money has come home.

A significant change in the pattern is the reduction of private holdings of Treasury securities - more and more, the support is coming from official sources, as the following graph suggests:

This seems to me like another straw in the wind: "power to the people", not.

300 years of history

"Why am I so sad on my wedding day?"

Gold watch

I think I said $850?

Not to mention the "bear market rally"?

And for now, I'm still a bear.

Not the end, as long as you and I breathe

Looks like the US is in the process of nationalising the banks and the stockmarket, loosely speaking, and the UK is following suit; now Mish says Russia and China are doing the same. All is falling into government hands.

I've been wondering recently: if, in the idealistic pursuit of universal peace and justice, we ever did manage to establish a World Government, and it became (as all human institutions do), inefficient, bureaucratic, undemocratic, corrupt and more or less evil, how would anybody escape? Where could we go to?

And Denninger is now singing a requiem for American government and democracy; perhaps prematurely - hasn't the often-mocked blogosphere uncovered a depth of feeling among the people in favour of liberty?

Why don't the Tories now declare themselves on Europe, etc?

Supposedly the Conservatives are as far ahead as they've ever been since Mori started doing polls. Meanwhile, the economy is set for a hard, hard landing and Labour have been in power for far too long to be able to blame anyone else.

This is a golden opportunity. The Tories should make clear their policies, including all the contentious and painful ones. In or out of Europe? In or out of our various war zones? Higher taxes or cut spending? What to do about the NHS, education and welfare? About our corrupt and overpaid financial community? About importing low-paid people; trapping our underclass in unemployment and benefit dependency, and rotting their health and sanity; and exporting people that it cost us a fortune to support, educate and medicate? And what about the dreadful farce of the voting system itself?

Because one of two things will happen:

1. The Tories will win, have a mandate to sort things out, and have plenty of time between now and 2010 to make the people understand who made all these adjustments necessary. Once in power, they can keep repeating these messages so we will remember who's responsible for making us drink the nasty medicine. Fair blame to be apportioned to those Conservatives who failed us in the past, too - in reality, it's hard to find anyone among the British public so ignorant and cretinous as to think that either party can present a perfect record. Whom do the spinmeisters think they are kidding?
2. Or they will lose, and Labour can try to clean up after itself, fail disastrously, and shuffle into the shadows of history.

Or of course, the Tories can continue to do what they are now doing, and let us draw our conclusions. Then both major parties can fragment and, with any luck, die.

So, three choices: win straight, lose straight, or be unmasked. Because I'm darned if I'll vote for a Buggins'-turn pack of careerists, merely for the sake of a change from the conspiratorial, traitorous dictators we've got now.

"... return OF capital, not ON capital"

I noted yesterday that foreigners were rushing to stuff cash into the US Treasury pillow. Brad Setser chimes in, explaining that although there's no yield (see his graph below), at least the capital is safe. We hope.

Banks: justice will not be done

Financial website ThisIsMoney speculates that the FTSE could drop another 20%. I couldn't resist commenting there:

20% down would be about right. The banks have blown up a balloon for the past 5 years and then popped it - it's what they do. They cannot be punished severely enough, nor can the regulators who shrank reserve requirements. If the FTSE hits 4,000 I will finally be able to invest again.

This temple-cleaning call is also pretty much the view of Karl Denninger, but he's doing more emphatic bold, capitals and underlining - unconsciously betraying that he knows, deep down, that "it ain't gonna happen, Cap'n."

Gold pogoes up

Oh, look (14:49), gold's sprung upwards (see sidebar widget) - nudging $800.

UPDATE: ... or rather, $838 (17:50).

An 11% gain since I flagged it up 6 days ago. But when should the short-term speculator sell? $850?

And in the comments to the same piece I said I was wondering what was holding stocks up. Now I know - nothing much. But there'll be a bear market rally shortly, doubtless.

Is the "cash" in your pension fund safe?

There's been much talk of keeping the balance in your bank account/s below the insured limit - but if you are cautious and want to preserve the value of what's in your pension pot, how can you do it?

"Mish" reports a massive write-off by a money market fund manager, following losses with Lehman.

UPDATE:

If you have funds in a money market and it is not backed by only Treasury debt, you need to consider moving that money right here, right now. - Karl Denninger

Financial stocks at risk

Denninger explains why rescuing banks and insurers mean the shareholder should exit now. Perhaps this explains the ruckus with HBOS?

UPDATE: looks as though Lloyds is angling to buy HBOS!

More money piles into US Treasuries

Published today: US Treasury information shows that in July, another $10 billion poured into their securities from the UK's direction. I had no idea that (a) we were so keen and (b) could afford it.

The same or more each was committed by Japan, China and the Caribbean. All hands to the pumps?

What will happen to interest rates?

Jim in San Marcos envisages eventual interest rate rises worldwide, to 10-15%. Commenting on the preceding post, Nikolay disagrees and James asks the question. I'm trying to understand the situation, like everyone else, so I'll have a go at thinking aloud:

Nikolay makes the point that people are becoming more concerned about the return OF their money, than the interest ON their money. So money-holders will limit demand for their cash by being picky about who they'll lend it to; control by quality screening, not by price.

Also, if people who habitually live on credit become frightened - and I think they are - then they will start trying to live within their means.

And discretionary expenditure could be reduced and/or redirected, not necessarily towards the cheapest end. I was listening to someone in the UK fashion industry on R4 yesterday, and they said far from everyone turning to Primark, the trend was to buy better quality, less of it, and make it last longer. Note that it's budget airlines like XL (competing on price) that are in danger of going down - they don't have much "fat to survive the winter".

From another angle, as the supply of cash and credit is dwindling, so are prices of houses and many other big-ticket items - look at the deals on cars and computers.

So it's possible to imagine that the contraction in credit may be approximately matched by a contraction in demand for credit, at least for a time. Bankruptcies and house repossessions will burn off a lot of debt, so we'll see a lot of ordinary people cleaned out and possibly more bank failures, especially as (in response to reduced expenditure) unemployment grows.

Thus we could see a recession in which the government tries to stimulate consumer demand by cutting interest rates - and this may not work, because many won't want (or be able to afford) to take on debt at any price; and those who do have cash and are watching prices fall, will hang off, waiting for further falls - as happened in Japan.

But Jim himself has acknowledged that rates may be cut in the short term. What about the longer term?

More unemployment, lower profits etc will shrink the tax base and increase the benefit burden. The budget won't balance without cuts in the public pay sector (= even less tax, even more benefits) or more government borrowing - I don't see how we in the UK could be taxed much more. So there's a danger that while consumer debt leads the way into recession, increased government demand for debt (and increased concern about government creditworthiness) may then lead the way to higher interest rates on State bonds.

When the State has more dependents, it will also find that not everything is going down in price. Food and fuel are must-haves, so benefits will have to be increased to cover the cost of such items. There will be more poor, and they will each need more. And the government will have to borrow more.

Or start devaluing the currency. Then all bets are off.

So here's a scenario: interest rates kept low, or cut; then government borrowing rises, while the economy burrows into a slump; then the real "credit crunch": the moment when the government, like an ad-man under pressure, needs a feelgood episode and, despite having sworn off it for life, reaches for the booze or the white powder, in this case inflation.

More and more, Michael Panzer's dire financial drama seems plausible.

Bonds to crash?

The Fed may lower its funds rate in the short term, but Jim in San Marcos is predicting steep rises in worldwide interest rates and (therefore) a sell0ff in suddenly-very-uncompetitive bonds.

Finance in Wonderland

We're in a surreal phase. As Denninger points out, there is no legal authority for the Federal Reserve to accept stocks and shares as collateral, which it is now doing ("was that a wooden horse that came in through the gates?"). There is an air of unreality - huge firms suddenly going down, one by one, while we're trying to make ourselves believe that it's all still normal, somehow.

And now that Lehman has bitten the dust, we shall see whether London Banker was right - whether Lehman was calling in foreign investments in order to give US domestic creditors an unfair share in the asset recovery scramble.

A letter to the Spectator

I am constitutionally a sceptic ( a term which, like "humanist", has been degraded to mean simply atheist, a sense I don't intend), but not being cocksure either way, I think civilised life depends on a benevolent forbearance that is being eroded by Puritans of all stripes.

I've submitted the following letter to the Speccie in response to this by Rod Liddle, but like as not it will not be published, so you may as well have a preview.

Sir:

In typically flippant manner, Rod Liddle (13 September) mocks the alleged stupidity and cowardice of would-be Islamic martyrs. It’s true that there is an adolescent power-seeking element: I was confronted by a serious-faced posse of 15-year-olds in a school corridor on 13 September 2001, and the spokesman said, “Sir, what happened on Tuesday: good, innit?” With that, leaving their kaffir teacher satisfyingly speechless, the delegation walked off.

But the self-appointed leader was far from stupid, as I knew: he could probably have got his inflatable A* in GCSE English a year early. And teenagers mind-manacled by a few simple ideas can be very brave, which is why armies everywhere have been glad to use them.

Moreover, this is not a Children’s Crusade, but a war of ideas. We had our own a generation ago: “Smash the System”, Ho Chi Minh’s lantern fizzog stencilled on Oxford college walls, etc. If Liddle wishes for an answer, it is to be found in the article immediately after his own, where Harry Mount quotes Philip Larkin: “A hunger ... to be more serious.” Wiffy-woffy liberal democracy is under attack from both domestic Left and alien religious Right. The politico-religious settlement that was the Church of England is crumbling.

In a Gramscian campaign, the means of cultural transmission (the educational curriculum, the broadcast media, even some of the clergy) have been captured and turned against what used to unite us. Recently, we have gone from the martyrs’ certainty of Latimer, Ridley and Cranmer to the confusing fast-talk of Bishop David Jenkins, the slapstick clerical comedy of Dawn French and the nihilistic assertiveness of that scruffy peacock Richard Dawkins. When, a year or two ago, the BBC transmitted “Any Questions?” from a church at Christmas, the panel inevitably included a smug young atheist exhorting the faithful to “embrace the dark.”

The real Delusion is that we can cut down the ancient forests of our history and expect a lovely garden to spring up among the stumps. As Robert Bolt’s More says, “Do you really think you could stand upright in the winds that would blow then?” The seriousness for which people hunger is not found in the drunken debauchery alternately promoted and lamented in Parliament and the newspapers, and that which is being destroyed will find its replacement.

At last, BBC News says something useful

And so tour operator XL goes down, as City Unslicker warned.

But from the pile of horse-puckey that is BBC News gleams a speck of gold: advice on how businesses must survive recession. Participating in a price war isn't the way to do it, since you make yourself vulnerable to misfortune, such as the 44% increase in fuel costs (and tightening bank credit) that did for XL. No, here's their three valuable tips:

1. Go for custom with higher profit margins, like BA's focus on business class flights.
2. Hold lots of cash, like Ryanair.
3. Cut costs, like Flybe with their modern, larger, more fuel-efficient craft.

Things are a little different from the consumer's point of view, of course. We came back from Dublin a few years ago on a certain airline, and the electrics failed before takeoff. They fiddled with them for a bit, then we flew to Birmingham, where they promptly failed again just as we were taxiing to the terminal.

Good job they hadn't failed halfway across the Irish Sea, or we'd have been up there all day.

LHC update

Two days after the Mighty Marmite Machine was switched on, and no news. Did they run out of shillings?

Or is this proton recycling thing one of those EU subsidy scams? * At 11,000 circuits a second, the turnover would much quicker.

But I still think it's really a bunker and escape tunnel to Switzerland (geographically the sane eye in the mad mask of Europe). The elite have something to flee from, as Tony Sharp points out - this is the 14th consecutive year of accounts rejected by their own Court of Auditors.

So how WAS the £4.4 billion spent, exactly?

I don't care; I'm off to look for the Great Wine Lake. If they'll tell me where it is, I'll sign the bl**dy accounts myself. **

* "In 2003 German authorities combined isotopic evidence with paper-trail analysis to put a stop to a sophisticated scam, known as "carousel fraud". A group of German companies had been illegally claiming subsidies by trading EU-made butter to and from Estonia (then not a member of the EU). Each time a butter lorry crossed the border from Germany to Poland the companies were given EU export subsidies. Once in Estonia the butter was repackaged and labelled to make it look like it had originated in Estonia, heaved back on a lorry and hauled back to Germany. This time, the importers took advantage of a tax break on foreign imports aimed at increasing trade with prospective EU member countries, as Estonia then was. The investigation revealed that 22 out of 25 butter samples taken from Estonian-labelled butter imported into the EU were not Estonian. In at least one case, the isotopic ratios of hydrogen and oxygen in a butter sample indicated it could only have come from Ireland."

** Wasn't a Chinese emperor deposed for excessive taxation, which he used to create an artificial lake and fill it with wine so that ships could sail on it and have mock battles for his entertainment?