Added 9 February 2009: reporting today Barclays shows a profit over 2008. However concerns continue over its £33bn exposure to CDOs and similar instruments and its capital base remains weak.
In reality all our banks are essentially insolvent by traditional accounting standards - the reason they won't lend to each other is because they know that this is so. My point below that they will ultimately need nationalising remains valid although interestingly the Nobel prize-winning economist Jospeh Stiglitz recently suggested the unthinkable, that it would be quicker in the long run to let them fail and which is what I personally would have preferred to see in the first place.
Writing 16 January 2009 I give links showing the progress of Barclays share price over
one year and over
five years.
Over the past year it has lost 75% of its value and it has altogether now lost more than 85% of its value at its all-time high at the beginning of 2007.
Barclays was one of our stronger banks and it emerged from the financial crisis last autumn sufficiently strong not to need support from the government and to go it alone.
What has brought it down is its exposure to yet another financial derivative called
CDOs. The credit rating agencies such as Moody's have now called foul on these and Barclays will
inevitably have to write down the value of its assets.
There can be little doubt now that our entire banking industry will have to be nationalised or at least placed in the government's guardianship in some way. Given the state of financial markets the world over there can also be little doubt that we are to enter the worst recession in living memory and most likely a deflation equalling or surpassing that of the '30s depression last century. To avoid that we shall have little choice but to print money and accept the resulting inflation it will generate.
Economists are agreed we shall likely lose around a million jobs in the course of this year. It could just as plausibly be ten million as we enter uncharted territory.
The affluent middle class will suffer as much as any and especially the half of our households bringing up children that are dependent on both mum and dad working.
Such is the scale of the disaster upon us and no I haven't the faintest idea how best to tackle it.
But I am quite sure however that the totalising and destructive ideologies of such as the British National Party or the National Secular Society have nothing to offer us but pain and disaster and I passionately warn you against such dogmas and creeds.
There can be no simple answer but there is happily one simple and undeniable thought to guide and cheer us through and that is that we as a people have always responded to crises just as bad as this and we have alway won through and we will do so again so long as we keep our faith in our customs traditions and institutions.
We are strong enough and so are they.