BOE 3rd November Rate Announcement
Discussion
Scootersp said:
This why some people call it all a Ponzi?
A Ponzi always gets bigger and bigger.The CBR (Central Banks Runaround) is subtly different, with some control over whether it's getting bigger or smaller, in order to juggle perceptions.
Let's revert to the subject of "stuff" which has value and then put that in the context of Putin.
a. Does he have "natural resources"? Yes.
b. Does he have people who can do work on those resources and create value? Yes.
c. Does he care about sanctions? No. See a and b above.
Ah yes, but his currency isn't worth very much. Maybe. But like any good criminal, when you can nick stuff there's no "cost of acquisition" and his selling price is all margin.
Question: So what, for instance, gives the £GBR its value?
Answer: Your future tax liabilities.
Scootersp said:
OoopsVoss said:
They are not actually printing Money, that's QE where the Central Bank increases it balance sheet taking in the bonds and flowing out USD. The US govt is issuing the additional 3 trillion of debt, which has to find buyers.
I'm trying to understand the chicken and egg nature of this, lots of the buying has to be done with money from previously issued debt, no?So every 100 days there is 1 trillion dollars that comes out of the woodwork to buy US treasuries? That Trillion goes into the system and then at least some of it (or previous debt issuance) works it's way back to buy the next Trillion, and this happens over and over, and the treasury holders are happy getting 5% of whatever, despite that interest also coming from that or future Trillions borrowed.
The bond holders are all due back their original amount lent out at some point and until then they get the 5%, but when the time comes the debt is rolled over and interest received at a revised rate of the time?
This why some people call it all a Ponzi?
It’s all fine.
We just need perpetual growth in a world popping at the seams on problems, and largely so overly efficient at making consumer products and globalised, that inherent deflation is the risk.
But it’s all fine.
We can just keep doing mega fiscal stimulus, into high inflation, with negative returns on debt, and the world itself and societies weeping at the inequality and abuses we impose on it.
I know we keep kicking the can, but anyone even taking 5% now on US debt is saying inflation will be sub 5% for at least 20 years to even get back their principal, IF they don’t even touch the yield and compound it.
With the $Tn fiscal stimulus rate I’d say this is wishful thinking. Perhaps why QT is now being tapered and hype stocks are getting bid to daft levels… the search for real yield/return… with risk ignored because CBs have bred extreme moral hazard.
Maybe if 20yr or 30yr were 10% I’d be more on board with that.
If their inflation keeps moving upwards they’re going to have trouble getting anyone to buy their debt.
And as soon as QE comes in again… oh dear.
Rock and hard place ahead.
Scootersp said:
I'm trying to understand the chicken and egg nature of this, lots of the buying has to be done with money from previously issued debt, no?
So every 100 days there is 1 trillion dollars that comes out of the woodwork to buy US treasuries? That Trillion goes into the system and then at least some of it (or previous debt issuance) works it's way back to buy the next Trillion, and this happens over and over, and the treasury holders are happy getting 5% of whatever, despite that interest also coming from that or future Trillions borrowed.
The bond holders are all due back their original amount lent out at some point and until then they get the 5%, but when the time comes the debt is rolled over and interest received at a revised rate of the time?
This why some people call it all a Ponzi?
It's not.a classic ponzi scheme, there is supposed to be growth in there somewhere. The debt issuance is supposed to do fiscal multiplier (so borrow to invest the economy to get growth). You can also bolt on Monetary stimulus, so the Central Bank takes in the debt (through market intermedaries) who then print more electronic money to give back to banks who then lend (creating leverage growth). QE is probably more efficient in generating economic expansion as its less leggy, has no reliance on government to spend / invest AND this is the biggie - you can further leverage it. So for every 1 the Central Bank buys in, you get multiple effect through the banking system gearing it. It IS inflationary, but it's only ever supposed to be temporary. The problem is we are no reliant in it (or some economies are), they can't get out of it (which weirdly the UK or BoE is planning to do - they are talking about a zero sheet being a real possibility).So every 100 days there is 1 trillion dollars that comes out of the woodwork to buy US treasuries? That Trillion goes into the system and then at least some of it (or previous debt issuance) works it's way back to buy the next Trillion, and this happens over and over, and the treasury holders are happy getting 5% of whatever, despite that interest also coming from that or future Trillions borrowed.
The bond holders are all due back their original amount lent out at some point and until then they get the 5%, but when the time comes the debt is rolled over and interest received at a revised rate of the time?
This why some people call it all a Ponzi?
Now having your banks grow (given QE), create the demand for the additional govt dept. The BASLE rules incentives the banks to hold it, as its eligible as collateral that underpins the increased leverage / balance sheet size. Its a very well choreographed system. Think if it this way Lehman was a $700bn Bank 15 years ago and nearly took everyone out. Now they wouldn't even be a top 30 Bank. JP Morgan is probably a $2trillion plus Bank now. Growing leverage increases the demand for govt debt. Its almost a perfect circle jerk.
As to the rate you get paid, neutral rate (explained before) but generally 1 - 1.5% above inflation.
All of which is why you want to own "useful stuff" and not "pure financial assets". When you own "stuff" you don't care about how its numerical value is measured or in what currency. Your "stuff" should be floating on a sea of reality, immune from inflation and other such inconveniences.
This current tidal wave of inflation, which the geniuses at central banks declared in 2022 to be "transitory" or "a short term blip" is wreaking dreadful damage at various levels of our society.
https://www.politico.eu/article/central-bank-too-b...
There's no logic behind the massive financial rewards earned by bankers simply because they're handling large amounts of money. It's the equivalent of paying check-out staff at Tesco £50,000 a year just because they handle the payment process.
This current tidal wave of inflation, which the geniuses at central banks declared in 2022 to be "transitory" or "a short term blip" is wreaking dreadful damage at various levels of our society.
https://www.politico.eu/article/central-bank-too-b...
There's no logic behind the massive financial rewards earned by bankers simply because they're handling large amounts of money. It's the equivalent of paying check-out staff at Tesco £50,000 a year just because they handle the payment process.
Panamax said:
All of which is why you want to own "useful stuff" and not "pure financial assets". When you own "stuff" you don't care about how its numerical value is measured or in what currency. Your "stuff" should be floating on a sea of reality, immune from inflation and other such inconveniences.
This current tidal wave of inflation, which the geniuses at central banks declared in 2022 to be "transitory" or "a short term blip" is wreaking dreadful damage at various levels of our society.
https://www.politico.eu/article/central-bank-too-b...
There's no logic behind the massive financial rewards earned by bankers simply because they're handling large amounts of money. It's the equivalent of paying check-out staff at Tesco £50,000 a year just because they handle the payment process.
No. The private sector banks are getting paid to spin up the QE. The CB does the initial print, the banks then gear it up (so QE x 30) - go look at SPX valuations over the period from GFC. Clearest example of private sector spin up. They are NOT getting paid to simply handle cash ala a check-out clerk; but for creating additional leverage (i.e. interest on loans). It's value add, at the expense of increasing risk (which is by design anyway).This current tidal wave of inflation, which the geniuses at central banks declared in 2022 to be "transitory" or "a short term blip" is wreaking dreadful damage at various levels of our society.
https://www.politico.eu/article/central-bank-too-b...
There's no logic behind the massive financial rewards earned by bankers simply because they're handling large amounts of money. It's the equivalent of paying check-out staff at Tesco £50,000 a year just because they handle the payment process.
They will hold, say conditions are getting towards a cut (they might say later this year). They are definitely grappling with last mile inflation cuts that UK government is responsible for. When Rishi says the govt is cutting inflation he's talking out of his arse.
Interesting if they keep up the gas on QT or running down the balance sheet; that's increasing funding costs as liquidity is shrinking (albeit it saves the tax payer money).
Interesting if they keep up the gas on QT or running down the balance sheet; that's increasing funding costs as liquidity is shrinking (albeit it saves the tax payer money).
ThingsBehindTheSun said:
Looks like it will definitely be a hold today. A few months ago everyone was convinced there would be a couple of rate drops this year, in the last few weeks interest rates have been rising.
I think we will be lucky to see a single 0.25% drop this year if anything.
Which, is absolutely fine and dandy, for a saver like me.I think we will be lucky to see a single 0.25% drop this year if anything.
Actually, I wish the BoE would crack the rate right up, 6 or 7% would be perfect
The minutes are long, but this one stood out (for those wanting to know trajectory):
5: In the United Kingdom, all but one of the respondents to the Bank’s latest Market Participants Survey (MaPS) had expected Bank Rate to be left unchanged at this MPC meeting. They had also all expected the next move in Bank Rate to be downwards. The median expected profile for Bank Rate from MaPS implied a cumulative 75 basis point reduction in Bank Rate this year, similar to the profile from the March MaPS, despite the increase in the UK yield curve.
The rest of it's pretty bland although they did pick up on divergence from US rates, and they are saying the US economy is seeing internal demand led inflation - not external pressures.......
5: In the United Kingdom, all but one of the respondents to the Bank’s latest Market Participants Survey (MaPS) had expected Bank Rate to be left unchanged at this MPC meeting. They had also all expected the next move in Bank Rate to be downwards. The median expected profile for Bank Rate from MaPS implied a cumulative 75 basis point reduction in Bank Rate this year, similar to the profile from the March MaPS, despite the increase in the UK yield curve.
The rest of it's pretty bland although they did pick up on divergence from US rates, and they are saying the US economy is seeing internal demand led inflation - not external pressures.......
Rufus Stone said:
Slow to raise, slow to fall. Consistent at least.
Didn't Hunt tell us we had turned a corner? Into a dead end most likely.
That's not what Bailey is saying at the press conference - a June cut is still in play. There is thinking that the BoE maybe more aggressive on cuts - if data doesn't surprise to the upside.Didn't Hunt tell us we had turned a corner? Into a dead end most likely.
The vote split was 7 hold 2 cut, a June cut shouldn't be ruled out yet. Cable is a hinting that - 2 week lows.
G-wiz said:
Which, is absolutely fine and dandy, for a saver like me.
Actually, I wish the BoE would crack the rate right up, 6 or 7% would be perfect
Seems to me the higher rates are only in higher inflationary times, so you aren't exactly winning anything as a 'saver', your cash is likely worth considerably less than you think given the last couple of years!Actually, I wish the BoE would crack the rate right up, 6 or 7% would be perfect
Hunt saying BOE should think twice before dropping rates.
"Asked if he had been hoping rates would be cut ahead of the general election, the Chancellor said he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage”.
"Asked if he had been hoping rates would be cut ahead of the general election, the Chancellor said he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage”.
lost in espace said:
Hunt saying BOE should think twice before dropping rates.
"Asked if he had been hoping rates would be cut ahead of the general election, the Chancellor said he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage”.
Guess that doesn't apply to tax cuts though."Asked if he had been hoping rates would be cut ahead of the general election, the Chancellor said he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage”.
lost in espace said:
Hunt saying BOE should think twice before dropping rates.
"Asked if he had been hoping rates would be cut ahead of the general election, the Chancellor said he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage”.
It's government policy that's fueling inflation right now. Look where it's coming from. Minimum wage uplift, duties on booze etc, plus a difficult labour market bidding up wages means the BoE have a tricky job."Asked if he had been hoping rates would be cut ahead of the general election, the Chancellor said he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage”.
BUT..... there is a lot of talk of 0.75% or 3 cuts this year and Bailey didn't do a lot today to change that view.
OoopsVoss said:
That's not what Bailey is saying at the press conference - a June cut is still in play. There is thinking that the BoE maybe more aggressive on cuts - if data doesn't surprise to the upside.
The vote split was 7 hold 2 cut, a June cut shouldn't be ruled out yet. Cable is a hinting that - 2 week lows.
I'm still not convinced the BoE will do anything until the US show them the way. At best they might try to pre-empt the fed for kudos points. The vote split was 7 hold 2 cut, a June cut shouldn't be ruled out yet. Cable is a hinting that - 2 week lows.
https://youtu.be/SjrOBxnYubs?si=IdVmd2klhGvkegQH
OoopsVoss said:
It's government policy that's fueling inflation right now. Look where it's coming from. Minimum wage uplift, duties on booze etc, plus a difficult labour market bidding up wages means the BoE have a tricky job.
BUT..... there is a lot of talk of 0.75% or 3 cuts this year and Bailey didn't do a lot today to change that view.
I’d be surprised if that number/extent of cuts materialise. BUT..... there is a lot of talk of 0.75% or 3 cuts this year and Bailey didn't do a lot today to change that view.
DonkeyApple said:
I'm still not convinced the BoE will do anything until the US show them the way. At best they might try to pre-empt the fed for kudos points.
https://youtu.be/SjrOBxnYubs?si=IdVmd2klhGvkegQH
I think it's a fair reading, however:https://youtu.be/SjrOBxnYubs?si=IdVmd2klhGvkegQH
1) the BoE was the first CB out the blocks to start hiking - they didn't wait for the Fed.
2) the MPC report did talk to the US / UK dynamic and it seemed to suggest decoupling is a possibility.
3) the ECB is cutting next month. Whilst the Fed and BoE are closely linked, with the ECB firmly into cut territory no matter what Nagel says they look to be doing 3 cuts this year.
4) absolutely no one here is talking about QT. They are absolutely still gunning it on asset sales. That is causing some front end chop, but they able way more committed to this than any other CB. I think that favours a cut as it "might" compensate for the QT. They really want to hit zero sheet.
It's interesting Baileys language was quite clear - the market is mispricing the amount and velocity of cuts. If they are not seriously thinking about it, he's taken leave of his senses to say it. The key message is always in the speech and minutes, not the headline action.
I do think the BoE and Bailey appear timid, but is a decent chance data allowing they are considering 3 cuts this year. Now he might be caught in the gilded hall of mirrors or maybe they are thinking something more nuts like cut-pause-cut, but I wouldn't rule out the possibility.
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