"Credit Crunch" Reading - 14 October

Larry Elliot on the slaying of sacred cows:

"Last week's fall in the Dow Jones Industrial Average was the biggest in its 120-year history. Even during the Great Depression, the Dow never fell by 18.2% ... Structural adjustment plans for the poor have involved privatisation, liberalisation and deregulation. Structural adjustment plans for the west, it seems, comprise of nationalisation, subsidisation and re-regulation. The one-size-fits-all model of development is just one of the many sacred cows to have been slain over the past 14 months ... Gerard Lyons, the chief economist at Standard Chartered, believes the loss of output next year could be close to 2%, which would make 2009 a contender for the toughest year Britain has suffered since the second world war. As things stand, that looks entirely feasible."

Jeremy Warner on the effect of nationalised banks:

Counting the already nationalised Northern Rock, the Government thereby ends up effectively in control of three of Britain's largest lenders ... The competition issues posed by hegemony on such a scale, already bad enough as a result of the Lloyds TSB/HBOS merger, are extreme. It's as if the Government was suddenly in control of Britain's big four supermarket groups. You can imagine what the imperative of maximising returns across all four would do to prices at the tills.

Liam Halligan on the credit crunch and sovereign nations:

"All these multibillion dollar bail-outs are pushing Western governments closer to bankruptcy. Iceland shows it can happen ... Credit default swaps on the sovereign debt of some Western nations have shot up. The markets don’t yet think the likes of Italy and Spain will go bust, but the chances are growing they could ... The Treasury claims our national debt is around £550bn. That number – how can I put this delicately? – is total nonsense. I’m thinking, in particular, of the private finance initiative, quasi-private debts held by the likes of Network Rail and – above all – our enormous public sector pension bill. The UK’s true national debt – even before last week’s multibillion pound package – exceeds £1,300bn (some £50,000 per household)."