The Local Government Association say councils were not imprudent for investing money in Iceland. As the body that represents local councils, well they would say that wouldn't they! Or are they just having a laugh at our expense?
If the councils are not at fault, then who is, the local taxpayers who are expected to foot the bill?
It was common knowledge that there was problems in Iceland and this has been known for months. Both the Tories and Lib Dems have said they made warning noises in Parliament about Icelandic banks.
The claim by LGA does not wash, especially when one of their members, Brighton and Hove City Council, decided it would not be prudent to invest in Iceland.
Councillor Jan Young, Brighton and Hove City Council:
'We have no deposits with Icelandic banks. We suspended transactions with the one we had on our books Kaupthing, Singer & Friedlander about a year ago after picking up concerns in the marketplace about Icelandic banks expanding too quickly.'
'Our watchword is caution. We're very aware of our responsibilities in managing taxpayers' money and are very careful both about who we invest with and how much we invest.'
'Clearly the overall financial situation is changing quickly and in an unpredictable way. In the current climate we will continue to monitor the situation on a daily and indeed hourly basis.'
To reiterate what Jan Young, councillor responsible for finance at Brighton and Hove had to say: 'We have no deposits with Icelandic banks. We suspended transactions with the one we had on our books ... about a year ago after picking up concerns in the marketplace about Icelandic banks expanding too quickly. Our watchword is caution.'
If the watchword at Brighton and Hove was caution, and they picked up concerns a year ago, then the conclusion to be reached is that Rushmoor and other councils were reckless with our money, and contrary to the claims made by the LGA, councils that put taxpayers' money in Iceland did not behave in a prudent manner.
Ben Yearsley, investment manager at financial adviser Hargreaves Lansdown:
'Many in financial circles had no sympathy for the council money men. You have to question the logic of why a local authority like Kent has 50m in an Icelandic bank. Why wasn't money like that deposited with gilts, which are more secure? A Government body or public bodies should not have been taking risks with money on deposit.'
'There have been stories about the vulnerability of Icelandic banks for weeks and you have to consider why they were offering such a high rate. They were offering a high rate because they wanted money to come in.'
Iceland has a population of a few hundred thousand. Where was the money coming from to buy up half the UK High Street, to own pub chains, to buy up West Ham football club, to finance management buy-outs? We now know the answer, it was coming from tin pot councils like Rushmoor who were playing in a Big Boy's Game where they were completely out of their depth, as were a few of the big boys themselves. Like for example speculator and asset stripper Robert Tchenguiz, who has lost an estimated 800 million!
LGA are trying to pass the buck. Someone has to pay for this fiasco, and it should not be the local taxpayers, either with reduced services, higher local taxes, or borrowing.
If the money is not recovered from Iceland, as may well be the case as the country is bankrupt, then it has to come from councillors. If needs be, they must be surcharged to recover the money. Maybe then they will learn not to rubber stamp what is put before them.
Even if the money is recovered, those who got us into this mess must resign or be fired.
Many councils took advice from a wholly-owned subsidiary of Crapita!
Do these councils have any more of our money invested overseas? If yes, then it must be repatriated as soon as possible. If invested locally, it will create or help support local jobs.
Some towns are still lucky enough to have local shops left. Sadly there are few left in either Farnborough or Aldershot thanks to the the Rotten Borough of Rushmoor doing its best to destroy local businesses. Too many towns are clones towns with the same High Street names and out-of-town supermarkets. Maybe, if we are lucky, with many of them in debt to failed Icelandic banks, they will go bust. Where local shops do still exist, the council could create and underwrite a local currency (cf Totnes and Lewes), redeemable in local shops and business.
It is important to keep money flows within the local economy. If we look at the developments the Rotten Borough of Rushmoor has pushed, such as the destruction of Farnborough town centre or the edge-of town retail development earmarked for Aldershot, it destroys local businesses, bleeds money out of the local economy. Yet again failing the local taxpayers and local community.
How many local councils have borrowed money to speculate?
In the US, the FBI is mounting criminal investigations into the banking crisis. The same should be happening here. The Serious Fraud Squad should be investigating the Rotten Borough of Rushmoor for playing footloose with our money, and at the very least, an inquiry by the Audit Commission. After all, this will not be the first time Rushmoor has behaved unlawfully.
The street parking in North Camp area of Farnborough is unlawful. It is unlawful for Rushmoor to obtain money on an unlawful scheme, and yet that is exactly what they are doing. Leeds is under criminal investigation for similar activities. Worst still, traders are suffering. The last thing they need as we head into a recession.
High, if not obscene, salaries and bonuses were justified on the grounds that everyone was getting rich. With the taxpayer picking up the bill, we now know it was not true.
If you pay peanuts you get monkeys. At Rushmoor they got gold-plated monkeys with gilt-edged, inflation proof salaries.
Richard Fuld, former boss of the now bankrupt Lehman Brothers, has a $14 million ocean-front home in Florida, his wife has an art collection of million dollar paintings. Reputed to have made $500 million out of the failed Lehman Brothers, Fuld says it was closer to $310!
In contrast, many old age pensioners and others on low income and state benefits, wonder how they will get through the winter.
As always, socialism for the rich, neo-liberalism for the poor.
In the UK, sub-prime lenders were deliberately targeting those they knew could not afford the debt, people on benefits, people in mortgage arrears, people with County Court Judgments against them for debt. These individuals did not apply to take out a loan or mortgage, they received cold calls, home visits and hard sell. All that mattered was that they had some equity in their property to cover the loan. The loans were packaged up and sold on. No one knew what they were buying, but if the price went up, it must be good. The Economics of the Greater Fool. Eventually the world ran out of fools. Those who could not afford the debt and were now in danger of losing their homes, were offered debt management services by the very same companies that pressurised them into taking out the loan.
The banking crisis and Rushmoor's part in it is as nothing to what is about to come. We are about to hit the limit of the earth's natural resources. What we are seeing is a small taste of things to come.
Gordon Brown has been willing to toss 500 billion, a third of our national economic output, at failing banks. All to no avail. George W Bush has pumped nearly a trillion dollars into the US banking system, and still bank shares go into free fall.
This morning Gordon Brown injected 37 billion into three banks, 20 billion into Royal Bank of Scotland giving the taxpayer a 60% stake and 17 billion into HBOS and Lloyds TSB giving the taxpayer a 40% stake. Nationalisation in all but name. Strings have been attached. Lending has to to be made to small businesses, which is good news as that is where jobs are created. But mortgages to be brought back to the levels of a year ago is sheer insanity, as that is what caused the property bubble, a major cause of our current woes, that and High Street consumerism, all supported by a mountain of debt.
Germany is to spend 500 billion euros to prop up its ailing banking sector.
Iceland is effectively bankrupt.
Speaking with an economist in the Czech Republic, she said they had no banking crisis.
A couple of years ago I was at a meeting with Treasury officials. It was an open secret that we were staring into the abyss. We were where we were before the Wall Street Crash and the Great Depression. The problem was debt: personal debt, government debt and national debt. No one knew what to do, no one dared voice their concerns for fear it would precipitate a loss of confidence and cause markets to crash.
In the past banks invested in companies that produced added value. The economy grew. Now we have consumerism, zombies in the shopping malls buying the latest tat from China, and soaring house prices. All fueled by cheap oil and floating on a mountain of debt.
What got us out of the Great Depression was World War II and Keynesian economics. John Maynard Keynes has had short thrift of late. Eclipsed by Lawrence Freedman and the Chicago School and their failed experiments in Latin America.
Franklin D Roosevelt brought in the New Deal to drag the US economy up by its bootstraps out of the Great Depression that followed the Wall Street Crash.
We are at that same epoch in history. We have to move forward with a Green New Deal. A Marshall Plan for the 21st Century. We have to grasp the opportunity to construct a fairer society. It cannot be business as usual, only this time propped up by the taxpayer.
reference and further reading
Stephen Bates, Rebellious town of Tom Paine and bonfire revels prints own banknotes, The Guardian, 10 September 2008
John Bingham, Town launches its own currency as rival to the pound, Telegraph, 9 September 2008
Lester R Brown, Plan B 2.0, Norton, 2006
Noam Chomsky, Failed States, Metropolitan Books, 2006
Crash! Bank! Wallop!, In the City, Private Eye, 3-6 October 2008
Jared Diamond, Collapse: How Societies Choose to Fail or Succeed, Penguin, 2005
John Kenneth Galbraith, The Great Crash 1929, Penguin, 1961
John Kenneth Galbraith, The Affluent Society, Penguin, 1970
John Kenneth Galbraith, Money, Penguin, 1976
John Kenneth Galbraith, The Age of Uncertainty, BBC, 1977
Julie Hyland, Brown’s National Economic Council consolidates government by the super-rich, Indymedia UK, 13 October 2008
Internet buyers snap up currency, BBC news on-line, 15 September 2008
Paul Krugman, The Great Unravelling, Allen Lane, 2005
Jerry Mander & Edward Goldsmith (eds), The Case Against the Global Economy, Sierra Club Books, 1996
Susan Meeker-Lowry, Community Money [in Jerry Mander & Edward Goldsmith, The Case Against the Global Economy, Sierra Club Books, 1996]
George Osborne, The job needs doing - but this bail-out is no triumph, Evening Standard, 13 October 2008
Keith Parkins, Localisation: A Move Away From Globalisation, November 2000
Keith Parkins, A sense of the masses - a manifesto for the new revolution, October 2003
Keith Parkins, Curitiba Designing a sustainable city, April 2006
Keith Parkins, Transitions towns, Indymedia UK, 9 October 2008
Keith Parkins, Beyond sustainability, to be published
Keith Parkins, Sustainable living, to be published
George Soros, The Crisis of Global Capitalism, Little, Brown and Company, 1998
Rob Sharp, They don't just shop local in Totnes - they have their very own currency, The Independent, 1 May 2008
Michael H Shuman, Going Local: Creating Self-Reliant Communities in a Global Age, The Free Press, 1990
Joseph Stiglitz, Globalization and its Discontents, Allen Lane, 2002
Towns banking their own currency, BBC news on-line, 2 April 2008
UK needs Green New Deal to tackle triple crunch of credit, oil price and climate crises, New Economics Foundation, 21 July 2008