tag:blogger.com,1999:blog-2546602206734889307.post2765011659119056206..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Negative rates, helicopter money and the Bank of EnglandMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-2546602206734889307.post-60766218813129000702016-11-25T10:23:55.049+00:002016-11-25T10:23:55.049+00:00Is it "given away in return for nothing"...Is it "given away in return for nothing", when Banks and Building Societies<br />have to provide "eligible collateral".<br /><br />Postkeyhttps://www.blogger.com/profile/11747509012748106827noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-39543245191593740072016-11-16T21:58:36.829+00:002016-11-16T21:58:36.829+00:00its a total nonsense
the banks and b societies ha...its a total nonsense <br />the banks and b societies have used FLS and TFS to reduce rates to savers because they simply do not need or want savers money <br />As for complaining the Gov have set terms which mean there is absolutely no complaint possible about anything the B of E does especially the effects of its policies but worse is you cannot complain about all the direct insults that Mark Carney has directed at savers and theres not one single bit of research done which shows the utter hell and hardship all those dependant on savings income are suffering .<br />Mark Carney and the B of E have zero understanding of the effect of their policies on young and old especially pushing up house prices to dizzy heights totally out of reach of the young who are also hampered by having to repay upwards of 44k in student loan fees <br /><br />What Mark Carney and the MPC have acheived is wrecking the country ,destroying the lives of millions of both young and old and leaving the young with no hope of ever owning their own home <br />In short they are all a total disgrace and are only concerned with ensuring their rich friends do very nicelyhelennoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49019124624490877272016-10-01T20:58:49.337+00:002016-10-01T20:58:49.337+00:00No one is allowed to complain to B of E because Go...No one is allowed to complain to B of E because Government has decreed that no complaint whatever can be levelled at the B of E no matter what they do.Even the insults hurled at savers by Carney and Haldane cannot be complained about much to the great annoyance of the Complaints Commisioner who has been beseiged by complaints <br /><br />Savers have been deliberately hung out to dry by Carney and the MPC who refuse to even face the fact that millions of pensioners do not have any form of pension beyond State Pension and interest from their savings...the rich have been showered with benefit from QE<br />Borrowers are doing very nicely but the young who desperately want a decently paid job or to be able to save a deposit for a home of their own have been sabotaged <br />I can but hope Theresa May recognises the hell Carney has unleashed and kicks him out like Ozzy who appointed himhelennoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-37212069639541113362016-08-13T22:33:12.531+00:002016-08-13T22:33:12.531+00:00Forgive the nit-picking, but there's a technic...Forgive the nit-picking, but there's a technicality about helicopter money that I would like someone to clarify for me please. If the BofE prints money and gives it away, its liabilities increase with no matching increase in its assets. How is this reconciled with the necessity in double-entry book-keeping for assets and liabilities to be equal?Geoff Renshawhttps://www.blogger.com/profile/05731857528367989415noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4271253204419958862016-08-10T11:31:12.313+00:002016-08-10T11:31:12.313+00:00One more thing - property prices will likely rise ...One more thing - property prices will likely rise because of 1) lower mortgage repayments 2) the pound's drop will incentivise many foreigners to invest 3) stable demand and permanent housing shortfall in the UK. House prices will likely increase by 2% by the end of 2016 and further in the future (if you are interested how further, go to <a href="https://tranio.com/united-kingdom/analytics/the-bank-of-englands-base-interest-rate-drop-what-to-expect-in-the-real-estate-market_5177/" rel="nofollow">https://tranio.com/united-kingdom/analytics/the-bank-of-englands-base-interest-rate-drop-what-to-expect-in-the-real-estate-market_5177/</a>)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-65031807264802553842016-08-07T18:14:41.335+00:002016-08-07T18:14:41.335+00:00With large amount of monetary stocks, bankers pref...With large amount of monetary stocks, bankers prefer risk free assets to risky assets, because the return of risk free assets is adequate for banks to be profitable. When people take risks? I suppose that when cash flow is negative and survival is endangered. So the problem is not from central bank, but from banks.robinvestmenthttps://www.blogger.com/profile/03075478826094836969noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-45071472790006069172016-08-07T12:47:19.046+00:002016-08-07T12:47:19.046+00:00Ahhhh it just occurred to me: the TFS etc. stimulu...Ahhhh it just occurred to me: the TFS etc. stimulus package smells a lot like a pre-election giveaway.Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-80064666134165627132016-08-07T11:29:49.141+00:002016-08-07T11:29:49.141+00:00«TFS is the complement of the Special Interest Rat...«TFS is the complement of the Special Interest Rate Bonds for Tory Pensioners, it is Special Interest Rate Loans to Tory Bankers and Speculators.»<br /><br />When "Special Interest Rate Bonds for Tory Pensioners" were introduced D Cameron argued that they were a small token of gratitude by the nation to the tory pensioners who had fought in WW2 70 years ago. I guess that M Carney has decided that the middle aged tory bankers and speculators who also fought in WW2 70 years ago deserved their small token of gratitude too :-).<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5425468268195716752016-08-07T11:16:00.660+00:002016-08-07T11:16:00.660+00:00«a *long term* (or even medium term) rate of 0.25%...«a *long term* (or even medium term) rate of 0.25% to fund land and share speculation is a big thing, much bigger than a discount rate of 0.25%»<br /><br />It is even bigger because in effect it is unsecured as per your «If it works perfectly and there are no defaults».<br /><br />«TFS is the complement of the Special Interest Rate Bonds for Tory Pensioners, it is Special Interest Rate Loans to Tory Bankers and Speculators.»<br /><br />Put another way, TFS is the apotheosis of "private keynesianism" well named by C Crouch.<br /><br />Or even worse, compare with J McDonnell's QE for People:<br /><br />* TFS can well be used to subsidize buying imports, or Bermuda hedge funds shorting Taiwanese shares or USA companies building factories in China, not just pumping up margin speculation on UK property and shares; money is fungible.<br /><br />* QE for People would be used to build up UK productive capital while creating jobs (mostly) in the UK. Too bad that would be "inflationary", because the definition of "inflation" is more jobs and better wages for the "moochers and looters" in the bottomost 80%.<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-19938976707414267382016-08-07T10:52:59.528+00:002016-08-07T10:52:59.528+00:00«TFS is definitely a subsidy to banks, but it'...«TFS is definitely a subsidy to banks, but it's more subtle than giving money away. If it works perfectly and there are no defaults, the BoE will break even»<br /><br />Well, if our blogger says «this subsidy for borrowers is financed by creating money» then obviously it is both «giving money away» and «break even» as the "cost" of the gift to the banks is covered by «creating money» seignorage, not by a decrease in the BoE's existing "capital".<br /><br />BTW in an interview E Lonergan said:<br /><br />«There are now two important policy rates in the UK: base rate and the interest rate at which the Bank of England lends under its TFS programme. This is already a major break with history, when the Bank only lent directly to banks at penal interest rates. In future, there is no reason why the BoE cannot continue to cut the TFS rate and leave Base rates unchanged. In other words, there is no lower bound to the interest rate on TFS.»<br /><br />There is a more interesting aspect to this: currently both rates are currently the same. But the discount rate is overnight, while presumably the TFS rate is long term, because obviously it is meant to widen the spread that banks enjoy on mortgages (margin speculation on land) and stock collateralized loans (margin speculation on shares). If that's the case, a *long term* (or even medium term) rate of 0.25% to fund land and share speculation is a big thing, much bigger than a discount rate of 0.25%.<br /><br />TFS is the complement of the Special Interest Rate Bonds for Tory Pensioners, it is Special Interest Rate Loans to Tory Bankers and Speculators. The goal of both is to widen spreads between active and passive rates, the former by paying higher passive rates to Tory Pensioners without raising active rates, the latter by charging Tory Bankers and Speculators lower active rates without cutting passive rates.<br /><br />In essence it is very similar to charging different exchange rates to different people depending on how clsoe "friends" they are, common in banana republics and kingdoms.<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-34083114012058615532016-08-07T10:13:53.000+00:002016-08-07T10:13:53.000+00:00«Labour party started £ 375 Billion of quantitive ...«Labour party started £ 375 Billion of quantitive easing to save the world economy from an unanticipated subprime crisis,»<br /><br />That "unanticipated" and "world economy" is a bit rich here: the UK specific version of the financial crisis was largely homemade, as New Labour, to create electorally advantageous consumption and property price booms, pulled out all stops in financial speculation, and pushed up lending leverage, for 15 years. Lots of people thought and said that would make for a very big build-up of private debt risk, which would eventually happen. The trigger perhaps came from the USA, but the private debt based financial crisis had been baked in by New Labour, with the enthusiastic complicity of the Conservatives and the Liberals too.<br /><br />Note: as SimonWL well argued, New Labour did not create a fiscal crisis as such, with excessive *public* debt, contrary to the laughable propaganda of the Conservatives. But that's quite a different topic, that of "private keynesianism" from C Crouch.<br /><br />The Conservatives in government have also «pulled out all stops in financial speculation, and pushed up lending leverage». What voters in the higher 50% of the income distribution want is Barber or Lawson private debt booms, ideally both.Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-56919085276727171402016-08-07T00:06:16.663+00:002016-08-07T00:06:16.663+00:00What's so crazy about all of this are the foll...What's so crazy about all of this are the following:<br /><br />a) Loans create deposits.<br /><br />b) Building bank reserves will not expand credit.<br /><br />c) Building bank reserves is not inflationary.<br /><br /><br />The Bank Of England themselves done a report on this<br /><br />http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf<br /><br /><br />Yet, Carney has just declared the exact opposite of what was in their own report.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33412372628736597082016-08-06T22:23:07.158+00:002016-08-06T22:23:07.158+00:00But would that not bring down the banks' profi...But would that not bring down the banks' profits as "old" borrowers would want to renegotiate to the lower rates as soon as they possibly could. Switch banks if need be?Sukh Hayrehttp://www.youdontknowwhatyoudontknnow.canoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-51917684078985107172016-08-06T14:53:39.947+00:002016-08-06T14:53:39.947+00:00TFS is definitely a subsidy to banks, but it's...TFS is definitely a subsidy to banks, but it's more subtle than giving money away. If it works perfectly and there are no defaults, the BoE will break even (not counting administrative costs). In other words, the BoE is taking a risk and getting nothing in return. This can be obfuscated as not costing the treasury, unlike an outright gift.<br />Maxnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5006190183139318662016-08-06T10:25:39.505+00:002016-08-06T10:25:39.505+00:00«Credit growth boosts demand (as Steven Keen point...«Credit growth boosts demand (as Steven Keen points out), and assuming there is room for that extra demand, then the result will be increased growth»<br /><br />But demand and growth where? Because credit growth can boost demand for imports, for example. When the right-wing parties in Greece 2004-2012 borrowed up to 15-20% of GDP per year and distributed that to their constituents, imports also got up to 15-20% of GDP, and thanks to the trade activity based on imports, GDP also went up by 20%. That however seemed to me a "distortion".<br /><br />You also surely know that in the medium-long term it matters what that «extra demand» is for; if for productive investment then it generates value, if for asset speculation it just has a redistributive impact, for consumption it just has a time shifting effect.<br /><br />Plus «credit growth» does not come free; while interest rates can be low, and rolling over ever greater levels of debt may be easy with the "cooperation" of the central bank, if there is a difficult moment the amount (and profile) of debt outstanding does become an issue, as M Pettis has amply shown.<br /><br />But all of the above is irrelevant in the UK in practice; UK politicians know very well that to win elections they need a credit fueled "Barber" consumption boom, or a credit fueled "Lawson" house price boom.<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-75037627293113427432016-08-05T21:46:11.462+00:002016-08-05T21:46:11.462+00:00Ralph, I don't think the move was mainly desig...Ralph, I don't think the move was mainly designed to boost lending and debt. In reality a 25bp rate cut will have only a marginal impact on credit demand. (There is possibly a boost to credit demand via increased confidence from those who think the Bank is acting decisively, although I also have sympathy for those claiming it shows desperation and may thereby lower confidence and credit demand.) Instead the impact will be felt mainly through lower mortgage repayments for those on tracker-type mortgages. TFS is a clever way of making sure that happens without affecting savers, as Simon indicates. <br /><br />I'm also happy the Bank has started corporate QE, with a focus on investment grade non-financials that make a significant contribution to the UK economy - I await the inevitable controversy.<br /><br />For what it's worth, I think the Bank did the right thing but it is at the limits of what it can do. £20 or so extra a month on average will not reignite the economy. We get bigger moves in the tax codes from year to year without batting an eyelid. <br /><br />It's down to Mr Hammond and the Brexit negotiators now.<br /><br />SAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83004567379359462262016-08-05T21:18:01.459+00:002016-08-05T21:18:01.459+00:00When in 2009 the Labour party started £ 375 Billio...When in 2009 the Labour party started £ 375 Billion of quantitive easing to save the world economy from an unanticipated subprime crisis, the Conservatives were quick to blame the Labour party of financial miss-management. But when in 2016 the conservatives inject £ 70 Billion of quantitive easing (19% of the above figure) to cover up their wrecking of the economy... It almost goes unnoticed.Anonymoushttps://www.blogger.com/profile/03612254103494948635noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71554135251463913942016-08-05T19:53:51.231+00:002016-08-05T19:53:51.231+00:00I think you are being overly optimistic about the ...I think you are being overly optimistic about the time scale; in the 34 years that I have lived in the City of London I would be hard pressed to find any year when we were not reaping what we had sown. My personal experience started with the Sovereign Debt fiasco and moved on to the Savings and Loans debacle; as far as I am aware the world record set then for a loss on one single trade of a quarter of a billion $US still stands. After that things went downhill...pascalhttps://www.blogger.com/profile/06163257887071459639noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1347161546879622502016-08-05T16:17:31.049+00:002016-08-05T16:17:31.049+00:00Gyrations in the amount of lending and debt are ce...Gyrations in the amount of lending and debt are certainly helpful, or if you like, they are "malign". As to whether the bubble brought genuine growth, I'd say "yes", at least in this sense. Credit growth boosts demand (as Steven Keen points out), and assuming there is room for that extra demand, then the result will be increased growth.<br /><br />As to whether that was a "distortion", that depends on what the genuine free market rate of interest is, which is not an question to which there is an easy answer. But I go along with Milton Friedman and Warren Mosler who claim governments should borrow nothing. In that sense, the "genuine" free market rate is zero. Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-2329757705839270072016-08-05T16:10:14.152+00:002016-08-05T16:10:14.152+00:00That article lays great stress on WHO OWNS a centr...That article lays great stress on WHO OWNS a central bank. Ownership is actually irrelevant: the important point is the RULES a central bank has to obey. E.g. most central banks (private or publicly owned) hand over all profits to their treasury. So what does "private ownership" amount to?<br /><br />The Bank of England is actually owned by UK Treasury solicitor. Lucky old him or her, is all I can say. Don't see where that gets the Treasury Solicitor.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-67726610033345137732016-08-05T15:39:37.220+00:002016-08-05T15:39:37.220+00:00«Given inadequate demand, [ ... ] more lending and...«Given inadequate demand, [ ... ] more lending and hence more debt?»<br /><br />But the new phase of the "Help to Borrow" policy is actually not quite *just* "Help to Borrow", even if that's the spin.<br /><br />What our blogger is describing is actually a policy to widen the "spread" for banks.<br /><br />That is if the banks were borrowing at 0.5% and lending at 3.5% to mortgage speculators, with a 3% spread, now the BoE is giving the banks an extra spread 1% or 2% or whatever, doubling or tripling their net profitability. The banks can use that extra spread to pay their managers more, or build up capital, or even to bring down the interest rate on mortgages and thus give more cheaper borrowing to asset speculators, generating an even bigger asset price boom.<br /><br />But giving the banks extra spread is even "better" than that: the banks can currently borrow at 0.5% (actually now 0.25%) to buy long term government bonds that pay more than that, e.g. 1.5% for 30 year gilts, for an effortless risk-free (because the government will bail them out) spread of around 1%. But if the BoE gifts them 1% of extra spread, uncork the champagne!<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-85283725249476890582016-08-05T15:20:02.614+00:002016-08-05T15:20:02.614+00:00For the sake of this post please assume there is n...For the sake of this post please assume there is no taxation!<br />For the economy to get into the mess it’s in (& we wouldn’t even be contemplating helicopter money if it wasn’t) then the only cause of this mess can be the deals done in the market! If the price is too high then it drains money from those that are being over priced,if the price is too low it stops re-investment and therefore being able to bring your product to market!<br />Whilst this simplistic view isn’t particularly realistic of the world in effect all trades do break down to its simplest form(otherwise we wouldn’t be experience what were going through)it does open the window into the problems we face,it is very obvious from the data that bad deals have been done and one side of the equation is and has been suffering and now that suffering is impacting on the side that did rather well from the bad deals!<br />QE is to buy assets but only those that benefited from the bad deals can afford them and it therefore creates asset bubbles that only makes matters worse.(Wrong Taxation can make this worse) <br />Helicopter money going to everyone will not help,since the asset bubbles are priced out of reach since the helicopter money also goes to those that gained! The asset will rise proportionately to the part of sum that is administered)<br />Only by targeting those that lost out in the bad deals can helicopter money reassert that those deals are made good! (Or brought back to anything like equilibrium or there abouts + or - some small differences).between the amount of helicopter money used and the true effect of the bad deals (good taxation would normally help in this matter) (bad taxation hinder)<br />If there isn’t any tax has i have asked you to believe then prices would have to drop to the level that are affordable otherwise there will be no reason to bring products to market because no one CAN buy!,We see all sort of chocolate bars shrinking to make them affordable but this destroys the value in the deal even more,because of the knock on effect using lower and lower amounts (whilst actually increasing the amount of money created) the market destroys itself through bad deal after bad deal and breaking the window of opportunity,taking this line explains why we're in a mess why we can’t escape the mess and even if we target helicopter money to the losers we will soon be back in this mess!<br />Obviously knowing which are good deals isn’t simple,but knowing who the winners and losers is! (& taxation is the best way to solve the problem of bad deals)<br />paulhttps://www.blogger.com/profile/03431327179470830789noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86541836966829333382016-08-05T15:14:34.250+00:002016-08-05T15:14:34.250+00:00«The Bank introduced such a scheme yesterday, call...«The Bank introduced such a scheme yesterday, called the Term Funding Scheme (TFS). What is more, this subsidy for borrowers is financed by creating money. [ .... ] can expand TFS to make borrowing as cheap as it likes, which could even mean negative interest rates for borrowers. [ ... ] is creating money to give away with nothing in return, but just giving the money to one particular group: borrowers.»<br /><br />So the BoE is subsidizing leveraged asset speculation on margin with their "Help to Borrow" policy. Who could have imagined... :-)<br /><br />«the credit-bubble years before the crash did not represent any real economic growth, and it was a distortion»<br /><br />It generated a lot of real economic growth for leveraged asset speculators on margin, for example landlords in London and the south east, and they regard it as a splendid reward for being "wealth creators", not a distortion.<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-38355278727412583612016-08-05T13:42:36.505+00:002016-08-05T13:42:36.505+00:00At what point does the world accept that the credi...At what point does the world accept that the credit-bubble years before the crash did not represent any real economic growth, and it was a distortion that has projected its malign effects into the subsequent decade?StuartPhttps://www.blogger.com/profile/13748038209546648459noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-62498956981995202742016-08-05T12:44:09.153+00:002016-08-05T12:44:09.153+00:00The Bank of England is doing a fiscal policy becau...The Bank of England is doing a fiscal policy because it carry a unresolved liability for banknotes in circulation. Here: Seigniorage: The Honest Government's Guide to the Accounting of the Revenue from Money Creation http://leconomistamascherato.blogspot.it/2016/07/banknotes-and-currency-are-liability-of.htmlCélinehttps://www.blogger.com/profile/13815693535197405585noreply@blogger.com