Another Bank of England warning on debt- Are we doomed?

[anonymous-user]

Digga said:

And yet there are lots of reports highlighting the problem of persistently low levels of bank lending to SMEs since the GFC.

Banks make money on the spread between where they borrow and where they lend. Raising rates isn't going to make lending to SME's more lucrative for banks, in fact hiking rates is likely to flatten the yield curve and make lending even less desirable for longer loans too and obviously higher rates are also bad for the borrower; raising rates is absolutely not going to cause an increase lending; those arguing that it does are confusing correlation with causation.

[Atomic12C]

Is this vid an accurate account of the current situation?

https://www.youtube.com/watch?v=PHe0bXAIuk0

[anonymous-user]

Atomic12C said:

Is this vid an accurate account of the current situation?

https://www.youtube.com/watch?v=PHe0bXAIuk0

It's a brilliant explanation of how the economy works, as you would expect; Dalio built and runs a $150bn macro fund. Is it 'an accurate account of the current situation'? That depends if you think 'this time it's different' or not, other investors think it is. Look for a video of El-Erian explaining 'the new normal' or 'secular stagnation' for a more depressing outlook. (Warning: it's not going to be nearly as watchable as your Dalio vid).

[Digga]

fblm said:

Digga said:

And yet there are lots of reports highlighting the problem of persistently low levels of bank lending to SMEs since the GFC.

Banks make money on the spread between where they borrow and where they lend. Raising rates isn't going to make lending to SME's more lucrative for banks, in fact hiking rates is likely to flatten the yield curve and make lending even less desirable for longer loans too and obviously higher rates are also bad for the borrower; raising rates is absolutely not going to cause an increase lending; those arguing that it does are confusing correlation with causation.

No, I understand that, but more what I was saying was, even at low base rates, there is already - for numerous reasons - a breakdown in small business funding.

[anonymous-user]

Digga said:

fblm said:

Digga said:

And yet there are lots of reports highlighting the problem of persistently low levels of bank lending to SMEs since the GFC.

Banks make money on the spread between where they borrow and where they lend. Raising rates isn't going to make lending to SME's more lucrative for banks, in fact hiking rates is likely to flatten the yield curve and make lending even less desirable for longer loans too and obviously higher rates are also bad for the borrower; raising rates is absolutely not going to cause an increase lending; those arguing that it does are confusing correlation with causation.

No, I understand that, but more what I was saying was, even at low base rates, there is already - for numerous reasons - a breakdown in small business funding.

Apologies I thought you were agreeing with the quote I was replying to. Is there a breakdown? Lending might be lower but you'd expect that after the 'balance sheet recession' that we went through. Speaking generally not specifically SME's, about wot I no nuffink.

[hyphen]

So the stress test results are released today. If interest rates rose to 4% and unemployment reached 9.5%, the banks would be facing £30Bn in losses. More than expected so banks are being told to hold £10bn more in capital (on top of the £11.4Bn already ordered recently).

Guardian said:

The FPC said it had concluded that lenders “have been attributing too much of the improvement in consumer credit performance in recent years to underlying performance in credit quality and too little to the macro economic environment”.

Stress tests reveal lenders are underestimating exposure to bad debt in face of an economic downturn