Alistair Darling’s debt-defying stunt

As the Royal Bank of Scotland unloads £325bn of dodgy assets on the Treasury, Sunday Daily Telegraph financial journalist Philip Aldrick examines the potentially calamitous asset protection scheme here. We hope events will prove us wrong, but we share the doomsters’ worst predictions.

Too many of these “assets” are loans that people cannot pay back, secured on the bubbled-up house prices, in reality, land prices, that prevailed in the period before the peak of August 2007. As the debtors become unable to repay their loans through having lost their jobs, the “insurers” will end up with real estate on their hands, the value of which will still be plunging. If they unload this “collateral”, the price fall will accelerate.

As was pointed out a couple of days ago, as we see it, this is backing a dead-cert loser. In our view it is not merely potentially calamitous, but a calamity in course of production.

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Anatole Kaletsky