I was just reading this article one the BBC about the Treasury Committee blaming the FSA for Northern Rock’s unsustainable business model when I came across this statement:

Unlike the great majority of UK banks, Northern Rock relied upon borrowing funds from the wholesale money markets to fund its mortgage business, rather than the usual method of using savers’ deposits.

Surely the BBC’s Business editors can’t be so naive as to not understand that the greatest majority of mortgage lending in the Western World is funded by fractional reserve banking.

Fractional-reserve banking refers to a financial system where the bank uses a fraction of its deposits to finance borrowers ie: It does not have the money as deposits to give out as loans. It ‘creates’ the money for the loan by starting a line on a ledger or in a database. The money is ‘created’ on the promise of the loan’s repayment.

Now, I can understand “Joe Bloggs” on the street believing that mortgages are only lent from deposits. After all, the banks do seem to spend some time and effort supporting this myth. However, I’d imaging that a great many people in business and finance circles are fully aware that mortgages are almost entirely funded by fractional reserve banking these days.

This begs the queston; why are the BBC business editors propagating a myth about banking which plainly isn’t true? Are the business editors really this naive?

The Clyde Arc Bridge in Glasgow which earlier this month suffered a snapped suspension cable looks likely to remain shut for up to 6 months after a crack was found in a second suspension cable.

The Bridge, known locally as ‘The Squinty Bridge’ due to it’s unique off-set shape was originally expected to reopen after just a couple of weeks. The Bridge carried traffic from Finnieston to Pacific Quay.

Speculatively, the second cracked cable could indicate either a metallurgical issue with the steel used or a design-load issue which is built into the bridge.

Photo Credit: Jonathan Cameron cc-by-2.0

The AAIB has released a further update on their investigation into the cause of Boeing 777 crash at London Heathrow.

Boeing 777-236 G-YMMM of the British Airways fleet crashed with no loss of life 300m short of the threshold of 27L at Heathrow on the 17th of January.

In the preliminary report it was established that neither engine responded to either autothrottle commands or manual throttle inputs during the last 40 or so seconds of flight.

The investigation has now revealed that the engines initially responded and then became asymmetric before both engines dropped to a power setting above flight-idle but below the requested setting.

From the report update:

As previously reported, whilst the aircraft was stabilised on an ILS approach with the autopilot engaged, the autothrust system commanded an increase in thrust from both engines. The engines both initially responded but after about 3 seconds the thrust of the right engine reduced. Some eight seconds later the thrust reduced on the left engine to a similar level. The engines did not shut down and both engines continued to produce thrust at an engine speed above flight idle, but less than the commanded thrust.

The full text of the update is available HERE

The AAIB will continue to investigate the accident and while a full report may be many months or even more than a year away, they will undoubtedly update manufacturers and operators of the 777 if they find any critical flaw in the design of the aircraft or systems.

Photo Credit: Adrian Pingstone

Documents leaked to the UK Conservative party suggest that the roll out national ID cards for every citizen may have been delayed to beyond 2012 for UK residents.

The controversial ID card scheme which would see 50 or more points of data about an individual held on both a card and a national database has been heavily criticised due to the British governments apparent inability to protect personal data.

Both the Conservative party and the Liberal Democrat party oppose Labour’s ID card scheme on the up to £19.2 billion cost, the risks to civil liberties and the significant increase in risk of wholesale identity theft. The new Liberal Democrat leader, Nick Clegg has advocated civil disobedience should the scheme be rolled out.

Often Labour politicians will tell you how ID Cards are needed to ‘prevent id theft’. The opposite is unfortunately true. The only way to be sure that a database will never be compromised is to disconnect it from all other networks. The NIR (National ID Register) would be connected to a myriad of other networks and it only needs to be compromised once for all of the data to be invalidated, including your personal identity. Another risk is that such credence would be put in this card for verifying identity that criminals who had stolen data either from cards or the NIR would find identity fraud exceptionally easy.

In 2008 it now seems true to say that the only way to be sure a database will be compromised is to place it under government control.

The US Federal Reserve has today cut the base rate of lending by three quarters of a percentage point from 4.25% down to 3.5% amid fears of a major recession in the US economy.

The stock markets have been tanking since yesterday and it seemed that they were briefly buoyed by the news of Federal Reserve Chief Ben Bernanke’s interest rate cut but they may be slipping again as I type. I’m wondering if the situation with the Federal Reserve is rather like kicking a dead cat in a vain hope of making it bounce.

Update: Various commentators in the media have been suggesting that this cut is a sign of desperation and that if it proves ineffective, the Federal Reserve will have severely harmed it’s reputation.

The NASA Messenger probe has been busy sending back images and data from it’s first pass of Mercury.

One which caught my eye was this image which the NASA/John Hopkins University team are calling the ‘Phone Crater’.

I’m calling it the ‘Copyright Crater’ because I think it looks more like a 50 kilometer wide ‘copyright’ © symbol. Clearly the Mercurians are asserting their intellectual property rights to the design of the surface of Mercury. Whether NASA’s pictures constitutes copyright infringement under interplanetary law is anyone’s guess at this stage.

You can view more images of Mercury at the project’s gallery. (Just look out for Mercurian copyright lawers)

Image credit: NASA/Johns Hopkins University Applied Physics Laboratory/Carnegie Institution of Washington