Coming out of Canary Wharf yesterday evening, with credit crunch workers streaming round, my son asked me ‘just where did all the money go?’
I made a fist of answering it, but it reminded me of a comment from one investment banker I met recently that it might be that Royal Bank of Scotland, now largely in taxpayer hands, owes more than the GDP of the UK economy. RBS has liabilities of £1.7 trillion, while UK GDP is 1.4 trillion. It does also have assets, but it is the uncertain value of those assets that explains the losses across the banking system.
We are so deep in debt as a result that we can’t really be sure how far under the surface we are. The only silver lining I can see is that three months ago we did not even know whether the financial system would survive. For all its failings, that would have been an economic cataclysm. Even with the US banking stress test results today, we are in a different space today.
On such big numbers, Achim Steiner from the UN Environment Programme was good this week when he said that we had fought for years to get £3.3 billion to accelerate renewable energy worldwide and now £13.3 billion is paid out to save a car company simply to keep it alive…