The US will announce today that it’s setting aside $250bn of its massive rescue package to take equity investments in its nine biggest banks – including Citigroup, Bank of America and Goldman Sachs. The news sent Asian markets soaring overnight, which in turn has provided a big boost to European markets this morning. Like many European countries yesterday, the US has seemingly decided that the UK-style plan is the best way of getting us out of the current mess. After a year in which his economic reputation has taken a battering, that’s quite a feather in the cap for Gordon Brown...
After the US Dow Jones index closed up 11%, Asian markets soared overnight, with the Japanese Nikkei posting its biggest ever one-day gain of 14%. This morning, the FTSE 100 is currently up about 175 points to 4,432, while the French and German indices are also up by about 4%. The gains suggest that all these state capital injections have finally restored a bit of confidence to markets that appeared to be in a downward spiral – even it did take several trillion dollars and the part-nationalisation of some private sector behemoths to achieve it…
One of the biggest winners from all this will be Gordon Brown. Seemingly dead and buried in the polls a few weeks ago, he’s already enjoyed a bounce as the financial crisis went global – now, as the nominal architect of a plan adopted around the world, his stock is likely to rise even further. Yesterday, even the newly-crowned Nobel economics laureate Paul Krugman hailed the UK scheme as ‘a combination of clarity and decisiveness [that] hasn't been matched by any other Western government’. The PM’s been hailed in the European press for his skill in co-ordinating a response to the crisis (well, except by Icelanders). And today, he’s self-consciously emulating Winston Churchill by calling for ‘a new Bretton Woods’ – a global summit of world leaders, like the one after the second world war. That’s quite a turnaround.
On the other hand, there’s a good argument that Brown was largely responsible for getting us into this mess in the first place, by his failure to prick the property bubble or curb personal debts, and his reckless public borrowing. That’s certainly the Tory view: in the Evening Standard yesterday, Shadow Chancellor George Osborne called it: ‘the final, sorry chapter of the Age of Irresponsibility... The moment when Gordon Brown was finally forced to confront the consequences of building a 10-year economic boom on a mountain of debt.’ (And to be fair, the Tories are still 10 points ahead in the polls.)
However, we can see why many people think the dour bank manager-style Brown/ Darling combo is better suited to these troubled times than their fresh-faced Tory counterparts. Although after the recent travails of HBOS and RBS, the reputation of Scottish bank managers isn’t what it used to be...
In today's bulletin:
Markets surge as Brown plan goes global
Has inflation finally peaked?
FTSE bosses get double digit pay rise
MT's Little Ray of Sunshine: Women on top in Iceland
Oldies get with the programme