Building Society Lending Down over 90%!

WTF?_2

Sir_Humphrey wrote: »

So you have no evidence that it is causing the oil price rises I presume.

Of course, an alternative point of view is that the rights issues, raising mortgage rates etc are designed to plug the gaps that will be created when the BoE money is paid back.

If the BoE were simply letting the banks off, then why are their share prices trashed, and their shareholders being pumped for cash?

If you want to see banks being bailed out to the detriment of the public, look to the USA.

It certainly isn't straightforward supply and demand.

Even factoring into account the weaker dollar there is no way that supply and demand factors have changed to explain the remarkable rise in the price of oil over the last six months or so.

When you have a lot of money floating around then any supply/demand imbalance even slight can quickly turn into a huge speculative bubble and that's exactly what is happening here. Same as the housing bubble but more directly economically destructive and hopefully not as long lived.

As the high price causes economic recession the demand for oil at current high price levels will fall back sharply, at which point a lot of people stand to get very burned and will start exiting their positions precipitating a rapid drop in the price. The only question is when we hit the tipping point.

Sir_Humphrey

!!!!!!? wrote: »

It certainly isn't straightforward supply and demand.

Even factoring into account the weaker dollar there is no way that supply and demand factors have changed to explain the remarkable rise in the price of oil over the last six months or so.

When you have a lot of money floating around then any supply/demand imbalance even slight can quickly turn into a huge speculative bubble and that's exactly what is happening here. Same as the housing bubble but more directly economically destructive and hopefully not as long lived.

As the high price causes economic recession the demand for oil at current high price levels will fall back sharply, at which point a lot of people stand to get very burned and will start exiting their positions precipitating a rapid drop in the price. The only question is when we hit the tipping point.

I agree with that, although I think the source of the money sloshing around is not likely to be Western banks, which was our point of argument.

Personally, I think that some of the rise is down to fundamentals. I also expect a fall in price at some point, which is why I am not convinced that huge IR rises are needed any more than huge IR cuts at the present time.

WTF?_2

Sir_Humphrey wrote: »

I agree with that, although I think the source of the money sloshing around is not likely to be Western banks, which was our point of argument.

Personally, I think that some of the rise is down to fundamentals. I also expect a fall in price at some point, which is why I am not convinced that huge IR rises are needed any more than huge IR cuts at the present time.

Yes, other people with large amounts of cash are out there too. And with a determined attempt to inflate the money supply by central banks combined with low interest rates (meaning essentially, you lose money by banking it) that means a lot of cash overall looking for good returns.

The end result may well be deflationary but the inflationary policies being persued to save the banks' necks are going to cause this sort of thing in the short term.

It would be nice to think that this shock is going to encourage longer term development of alternative energy sources but I suspect that when oil comes back down to something more reasonable people will be consuming it greedily again and ignoring the more expensive alternatives.

Sir_Humphrey

!!!!!!? wrote: »

Yes, other people with large amounts of cash are out there too. And with a determined attempt to inflate the money supply by central banks combined with low interest rates (meaning essentially, you lose money by banking it) that means a lot of cash overall looking for good returns.

The USA may be pursuing inflationary policies, but neither the UK nor Eurozone are doing so.

The supply of broad money is normally largely determined by the demand for loans. In any case, there is a poor correlation between money supply and inflation anyway (and no, they are not the same thing, no matter what the internet Gold-licking Austrian "economics" cranks may say). An increase in broad money is not "cranking up the presses" because it directly results from a demand for money.