Category Archives: Ratings Agencies

The Glencores, Xstratas and Blairs

Almost 18 months ago Glencore first featured on this blog – Glencore and others are screwing the world – a posting which highlighted the predatory nature of financial monsters like Glencore. The Financial Times had reported Glencore’s ability and willingness to fix commodity prices for their own profit and everyone else’s loss and how they were expected to increase their monopolistic stranglehold in key markets. Glencore was in the news at that time because of its imminent initial public offering of shares to the London Stock Exchange which was expected to value the company at between £60 billion and £73 billion and facilitate its further expansion through mergers and acquisitions. The FT also reported how the world’s largest commodity trader had paid “almost no corporate taxes on its trading business for years in spite of bumper profits.”

The FT’s report described how Glencore had exercised their monopolistic power to raise prices in the Russian wheat market for a quick profit, at the expense of those millions already struggling on the breadline. That was revealing of the sort of business Glencore is, and the sort of business practices it was prepared to embrace in order to make its money.
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Our Madmen in Authority: the Bullingdon intellectuals

When J M Keynes used the term ‘madmen in authority’ he was referring to his contemporary equivalents of David Cameron and George Osborne. At the end of last year, though he talked about it incessantly, it was clear that Cameron had limited understanding of the need to rebalance the economy – see http://www.gordonpearson.co.uk/09/mr-cameron-doesn%e2%80%99t-understand/. The real business of making and distributing things for people to use and consume creates real jobs. But Cameron didn’t seem to understand the difference between that real economy and the speculative, bonus driven financial sector. He said he understood, but then always succoured up to his friends in the City.
His lack of understanding, or his duplicity, seems only surpassed by fellow Bullingdon intellectual and purveyor of the greatest budget shambles in living memory, Chancellor George Osborne.

The financial columns have recently suggested full state ownership of RBS was being discussed by senior ministers and treasury officials. It would cost around £5bn. But Osborne was against it. A rational objection was that it would mean taxpayers taking on full responsibility for the bank’s toxic debts, as opposed to the 82% responsibility they already have. But Osborne’s real reason was his dogmatic focus on cleaning RBS ready for sale back to the private sector, even though that won’t happen any time soon. Only Vince Cable has come out publicly in favour of nationalisation so as to boost lending to industry, especially innovative SMEs, in order to get the real economy moving again.
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Pushing the Economy with AAA Rated String

Following the demise of Lehman Brothers almost three years ago, the then UK government, being committed free market idealists and N word phobic, pumped trillions of taxpayers’ money into the economy to keep it buoyant. But it did so by funding banks which would otherwise have collapsed, and then trying lamely to persuade them to pass it on to real economy businesses so as to maintain employment. But the banks were reluctant to pass the money on because they needed to rebuild their own balance sheets, having themselves made such a mess of them. The phrase ‘quantitative easing’ was really bank balance sheet easing, and had limited impact on real business and real jobs beyond the financial sector.

Now we are back in the same mess and the talk is again of quantitative easing for the same purpose. The insanity of persisting with the same dysfunctional strategy is the result of the apparently unshakeable belief in free trade, open markets, with minimised government, taxes and public spending. But quantitative easing won’t stimulate the economy and create jobs any more than it did the last time. The only difference between now and then is that instead of the banks being in greatest need, it is now nation states which are seen as the key problems and the focus of the credit rating agencies.
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