BoE Base Rate, What if...
Discussion
sidicks said:
Mr Whippy said:
The basis is the banks are all over exposed and malinvested.
They only paid off their debts because money to lend was offered on the cheap or very cheap. Will that work a second time? Can I take a trillion pound loan at -2% please?
Someone is printing that money. If that is how things are 'paid off' then fine. I didn't think it worked like that because 'China'
Dave
I don't think you understand at all.They only paid off their debts because money to lend was offered on the cheap or very cheap. Will that work a second time? Can I take a trillion pound loan at -2% please?
Someone is printing that money. If that is how things are 'paid off' then fine. I didn't think it worked like that because 'China'
Dave
All I see is evidence that banks are more in need of funding to cover their bad debts than at any time in the recent past.
If they needed QE stimulus/societal bailouts and low interest rates to help before, then they're gonna struggle this time!
Mr Whippy said:
Well if you do then elaborate by all means.
All I see is evidence that banks are more in need of funding to cover their bad debts than at any time in the recent past.
Where are you looking?All I see is evidence that banks are more in need of funding to cover their bad debts than at any time in the recent past.
Mr Whippy said:
If they needed QE stimulus/societal bailouts and low interest rates to help before, then they're gonna struggle this time!
How many needed bailouts?How did QE help the banks?
Previously you were claiming banks received cheap loans to pay off debts!
sidicks said:
Mr Whippy said:
Well if you do then elaborate by all means.
All I see is evidence that banks are more in need of funding to cover their bad debts than at any time in the recent past.
Where are you looking?All I see is evidence that banks are more in need of funding to cover their bad debts than at any time in the recent past.
Mr Whippy said:
If they needed QE stimulus/societal bailouts and low interest rates to help before, then they're gonna struggle this time!
How many needed bailouts?How did QE help the banks?
Previously you were claiming banks received cheap loans to pay off debts!
I don't know how many banks needed bailouts, but anyone with debts that were realised and couldn't be renewed were instantly in the poor house.
QE provided liquidity. Without economic activity banks can't make money.
QE debases the value of money, and so devalues debts, making them easier to finance in future, along with low interest rates.
QE provided cheap money which could be used to buy toxic debts.
So the banks in essence get cheaper money to be able to maintain their bad debts or move them on, without the bad debts being realised.
Pass the toxic debt parcel, funded with easy money.
But how long can easy money continue to be used in that way? Probably not much longer.
So where to find the money? Ah... a direct bailout with depositors money. Yay!
Mr Whippy said:
All over Europe.
From what source?Mr Whippy said:
QE provided cheap money which could be used to buy toxic debts.
QE buys government bonds. Who bought the 'toxic debts'?Mr Whippy said:
So the banks in essence get cheaper money to be able to maintain their bad debts or move them on, without the bad debts being realised.
What do you mean cheaper money to maintain bad debts?How does banks getting 'cheaper money' help them to move on bad debts?
Mr Whippy said:
Pass the toxic debt parcel, funded with easy money.
Who's buying these topic debts (and why)?Mr Whippy said:
So where to find the money? Ah... a direct bailout with depositors money. Yay!
Except the government guarantees the first €100k equivalent of deposits, so that's not really going to work is it?!Edited by sidicks on Saturday 30th April 14:28
sidicks said:
Mr Whippy said:
All over Europe.
From what source?Mr Whippy said:
QE provided cheap money which could be used to buy toxic debts.
QE buys government bonds. Who bought the 'toxic debts'?Mr Whippy said:
So the banks in essence get cheaper money to be able to maintain their bad debts or move them on, without the bad debts being realised.
What do you mean cheaper money to maintain bad debts?How does banks getting 'cheaper money' help them to move on bad debts?
Mr Whippy said:
Pass the toxic debt parcel, funded with easy money.
Who's buying these topic debts (and why)?Mr Whippy said:
So where to find the money? Ah... a direct bailout with depositors money. Yay!
Except the government guarantees the first €100k equivalent of deposits, so that's not really going to work is it?!Government bonds are then sold in the financial system. Once that extra money is there it can be used to basically sustain the status quo. Keep toxic debts from being realised for example, because there is money to borrow that is cheap to refinance the debt.
Cheaper money, the money created was brought into existence with very low repayment requirements.
If money were expensive, it'd be hard to maintain bad debts. I'm struggling a bit here, but I think the lower cost of borrowing widens the spread on the debt so it stays viable for longer.
Toxic debts will destabilise the system if they are realised, so they're bought by the people who can create money from nothing to stop that happening.
Mr Whippy said:
Cyprus.
So 'all over Europe' is now Cyprus? Do you think Cyprus is a good example for the rest of Europe?
Mr Whippy said:
Government bonds are then sold in the financial system.
Under QE, the Government bought their own bonds and stored them away, they weren't 'sold into the financial system.Mr Whippy said:
Once that extra money is there it can be used to basically sustain the status quo. Keep toxic debts from being realised for example, because there is money to borrow that is cheap to refinance the debt.
If the debt is 'toxic' who is going to lend against it?Mr Whippy said:
Toxic debts will destabilise the system if they are realised, so they're bought by the people who can create money from nothing to stop that happening.
So now you think governments and banks have been buying up the 'toxic debt' ?I think we're wasting time here. QE and negative rates hurt banks (eur2bn p.a. is the latest estimate I saw). Regardless the central banks are trying to increase monetary supply the banks are backing up with cash as they can't get rid of it. I think one of the key points Mr Whippy fails to understand is that the market for unsecured cash, especially interbank no longer functionally exists. You need collateral.
However, the toxic assets can't be used, not because they are low grade but they are illiquid and virtually impossible to value on a mtm or default scenario. If the collateral can't be valued it means your collateral is worthless and your credit / capital charge higher (for Mr Whippy). Furthermore a lot of these toxic instruments are issued in relative small size (50m clips) and held by one bank. It's pretty stupid to take 100% concentration on collateral; and there not enough takers to slice it up effectively. The toxic assets are simply being balance sheet funded by the banks. And that's before we even talk about increasing liability terms to prevent bank runs.
The regulations on solvency, liquidity and balance sheet make it much more difficult to be the one / off ramps for monetary policy.
It seems to me, My Whippy thinks anyone whom works in banks, finance or a regulator is an idiot; but himself has little understanding of the basic functions of Finance.
However, the toxic assets can't be used, not because they are low grade but they are illiquid and virtually impossible to value on a mtm or default scenario. If the collateral can't be valued it means your collateral is worthless and your credit / capital charge higher (for Mr Whippy). Furthermore a lot of these toxic instruments are issued in relative small size (50m clips) and held by one bank. It's pretty stupid to take 100% concentration on collateral; and there not enough takers to slice it up effectively. The toxic assets are simply being balance sheet funded by the banks. And that's before we even talk about increasing liability terms to prevent bank runs.
The regulations on solvency, liquidity and balance sheet make it much more difficult to be the one / off ramps for monetary policy.
It seems to me, My Whippy thinks anyone whom works in banks, finance or a regulator is an idiot; but himself has little understanding of the basic functions of Finance.
stongle said:
It seems to me, My Whippy thinks anyone whom works in banks, finance or a regulator is an idiot; but himself has little understanding of the basic functions of Finance.
I don't need to understand it in detail unless I need to enter into too and fro discussions over exacting terminology which isn't the intention at all. The overall view is what is important here.My point has been from the very beginning that I'm not happy with perpetual failure under the excuse that it's complicated.
Obviously within the economic and finance industries this may be a reasonable thing to say. Torture the numbers and they'll tell you anything. Say it's complicated and baffle a layman and you're safe from scrutiny.
I've even had the misfortune to work in financial propaganda where bad news is sold as good news so I'm aware that turds can be sold as gold.
If the fundamental problem can't be resolved down to a simple few scentences then someone somewhere is adding their bulls
t layer over the top to make things sound under control, palatable, or even preferable and good news!Perhaps this is just a failing of the economists for being able to talk in laymans terms?
Or if it's really so complicated that it can't be resolved to simple terms, then I'm curious if economists even really understand it properly.
Mr Whippy said:
I don't need to understand it in detail unless I need to enter into too and fro discussions over exacting terminology which isn't the intention at all. The overall view is what is important here.
Your previous posts confirms you understand very little, not just 'exacting terminology'!Mr Whippy said:
My point has been from the very beginning that I'm not happy with perpetual failure under the excuse that it's complicated.
Perpetual failure of what / who, exactly?Mr Whippy said:
Obviously within the economic and finance industries this may be a reasonable thing to say. Torture the numbers and they'll tell you anything. Say it's complicated and baffle a layman and you're safe from scrutiny.
I've even had the misfortune to work in financial propaganda where bad news is sold as good news so I'm aware that turds can be sold as gold.
I guess you didn't understand what you were doing?I've even had the misfortune to work in financial propaganda where bad news is sold as good news so I'm aware that turds can be sold as gold.
Mr Whippy said:
If the fundamental problem can't be resolved down to a simple few scentences then someone somewhere is adding their bullst layer over the top to make things sound under control, palatable, or even preferable and good news!
t layer over the top to make things sound under control, palatable, or even preferable and good news!
Mr Whippy said:
Perhaps this is just a failing of the economists for being able to talk in laymans terms?
Or if it's really so complicated that it can't be resolved to simple terms, then I'm curious if economists even really understand it properly.
Because a layman like you can't understand 'it' (whatever you mean by 'it') then no-one can?Or if it's really so complicated that it can't be resolved to simple terms, then I'm curious if economists even really understand it properly.
sidicks said:
Mr Whippy said:
I don't need to understand it in detail unless I need to enter into too and fro discussions over exacting terminology which isn't the intention at all. The overall view is what is important here.
Your previous posts confirms you understand very little, not just 'exacting terminology'!Mr Whippy said:
My point has been from the very beginning that I'm not happy with perpetual failure under the excuse that it's complicated.
Perpetual failure of what / who, exactly?Mr Whippy said:
Obviously within the economic and finance industries this may be a reasonable thing to say. Torture the numbers and they'll tell you anything. Say it's complicated and baffle a layman and you're safe from scrutiny.
I've even had the misfortune to work in financial propaganda where bad news is sold as good news so I'm aware that turds can be sold as gold.
I guess you didn't understand what you were doing?I've even had the misfortune to work in financial propaganda where bad news is sold as good news so I'm aware that turds can be sold as gold.
Mr Whippy said:
If the fundamental problem can't be resolved down to a simple few scentences then someone somewhere is adding their bullst layer over the top to make things sound under control, palatable, or even preferable and good news!
t layer over the top to make things sound under control, palatable, or even preferable and good news!Mr Whippy said:
Perhaps this is just a failing of the economists for being able to talk in laymans terms?
Or if it's really so complicated that it can't be resolved to simple terms, then I'm curious if economists even really understand it properly.
Because a layman like you can't understand 'it' (whatever you mean by 'it') then no-one can?Or if it's really so complicated that it can't be resolved to simple terms, then I'm curious if economists even really understand it properly.
Failure. The system has failed. We're in a conundrum where solutions that no one knows if they'll work or not are being utilised.
GDP growth falling below projections year on year, projections which don't seem to be improving with time.
Unless this is classed as not failure in the world of economics?
No wonder I'm confused
Credit could be described as a quantum word. It's definition is relative to subjective perspective, but fiat is infinite bound.
Only an alien takeover of planet Earth seems more likely than a guide rate you could retire on. (During their eons of civilisation they might have discovered what credit ultimately means).
Only an alien takeover of planet Earth seems more likely than a guide rate you could retire on. (During their eons of civilisation they might have discovered what credit ultimately means).
Mr Whippy said:
Oh ffs.
Failure. The system has failed. We're in a conundrum where solutions that no one knows if they'll work or not are being utilised.
GDP growth falling below projections year on year, projections which don't seem to be improving with time.
Unless this is classed as not failure in the world of economics?
No wonder I'm confused
If GDP is growing that's a success, we are getting better off so the system is working. If it's below projections then it's the projections that are failing. Failure. The system has failed. We're in a conundrum where solutions that no one knows if they'll work or not are being utilised.
GDP growth falling below projections year on year, projections which don't seem to be improving with time.
Unless this is classed as not failure in the world of economics?
No wonder I'm confused
fblm said:
Mr Whippy said:
If they needed QE stimulus....
How many times have we done this? Seriously this is basic stuff. QE has fvck all to do with banks other than as a conduit between the central bank and the owners of government debt.Which leaves helicopter money but that still irks a lot of people. It's taxation and redistribution of wealth by stealth. Sort of central banks doing what governments wont, capitalisms socialism.
However all these things are options because inflation (both CPI and wage growth) is so low.
That is always what puzzles me, why are measures like productivity and wage growth so poor? Companies have adopted technology, recruited professional managers, hired a plethora of consultants, hired staff and fired staff, tried to grow business within their areas of expertise, tried entrepreneurial approaches to produce new products, tried to consolidate their businesses, tried to financially engineer success, tried to get people to work from home, tried to get people to enjoy being in the office more, tried to get rid of offices, asked people to retire early and tried to allow people to work beyond normal retirement age. Result: No growth. Whenever I think about what is going on in companies this is the stumbling block to my thinking. It's difficult for me to pinpoint why we are here and why there is so little progress on this issue but clearly there is actually something we're overlooking.
Mr Whippy said:
My point has been from the very beginning that I'm not happy with perpetual failure under the excuse that it's complicated.
First of all if it's perpetual failure what is creating nearly 2 trillion a year GDP? If you want to see failure look at Venezuela or North Korea.Secondly, an economy of 60 million people making individual decisions and influenced by the decisions made in the rest of the world is pretty complicated. Do you accept meteorologists failing to predict a rainstorm 3 weeks ahead because weather is complicated? Or football pundits failing to predict that Leicester would finish top of the league?
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff