Downturn points to cut in rates

dopester

!!!!!!? wrote: »

If they hadn't kept them so stupidly low in the first place, there wouldn't be a problem with lowering them now.

I don't really blame the BoE for the house price bubble - but see it more as a result of Gordy's tinkering and then Labour's belief in a new paradigm for how the economy works.

From Times Online
November 4, 2008
Banking crisis has roots in Brown reforms

The current banking crisis has its roots in banking system reforms introduced by Gordon Brown in his days as Chancellor, a report claimed today.

Mr Brown's decision to give the Bank of England a 2.5 per cent inflation target was "deeply flawed" and led to excessive borrowing and mortgage and consumer lending, the report from the rightwing Centre for Policy Studies think-tank, said.

Meanwhile, Mr Brown’s removal of responsibility for banking oversight and regulation from the Bank of England in 1999 was followed by a failure to spot the clear signals of imminent problems in the sector, according to Howard Flight, the report's author.

Mr Flight, a former Conservative MP who was shadow chief secretary to the Treasury between 2001 and 2004, also described Mr Brown’s claim of “an end to boom and bust” as an economic failure, which contributed to the current crisis.

In "From Boom to Bust: a plain guide to the causes and implications of the banking crisis" Mr Flight wrote: “The responsibility for the probability of a UK banking crisis can be laid largely at the current Government’s door.

“The roots are in mistaken monetary and economic policies and in regulatory failure. These effectively encouraged banks to lend imprudently as there was too much money around to lend cautiously...

“It is a tragic irony that the once highly acclaimed 1997 Bank of England reforms have turned out to have been the main underlying cause of the unsustainable rise in house prices and of the excessive increase in consumer debt. Together these have destabilised both the UK banking system and the wider economy.”

The 2.5 per cent target did not allow the Bank of England’s Monetary Policy Committee to take into account soaring house prices and the impact of cheap imports from Asia, allowing excess consumer demand to run out of control, Mr Flight said.

He said that the Bank acknowledged in a conversation with him as long ago as 2003 that credit and house prices were rising too fast, but said that it did not have the remit to address the problem.

Mr Flight wrote: “Since 2002, economic growth came not from any material increase in output. Rather it was based on consumption growth, financed by unsustainable mortgage and consumer borrowing, and the massive increase in public sector spending. The UK has been living on borrowed time for at least the last four or five years.”

Even the Government has begun to concede that this is not a crisis that can be wholly attributed to US sub-prime mortgage lending. The origins of the credit crunch are many and varied, but an absence of adequate regulation, and capital and liquidity controls was plainly a major part of it.

More than £500bn of public money has been sunk into the UK banking system over the past year and a half. What the Governor of the Bank of England has described as the worst banking crisis since 1914 surely requires something a bit more substantive by way of public inquiry and accountability. While the Prime Minister lords it around the world championing the "British approach" to its solution, he might do well to reflect on why he allowed it to happen in the first place.

http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-time-for-a-public-inquiry-on-the-banking-crisis-989957.html

In a nutshell our banks and other financial institutions lent too much against the security of over-valued assets, largely residential housing and commercial property. And to obtain the funds they lent to households and business, those same banks were too dependent on credit from wholesale and overseas sources (net wholesale funding of our banks went from zero in 2001 to £625bn by the end of 2007).

So when the penny dropped that the value of houses and property was falling fast, two terrible things happened at the same time: the overseas and institutional providers of all that incremental funding wanted their money back from our banks, because the formal or informal collateral underpinning that funding was shrinking; and the capital foundations of the banks were eroded by actual and prospective losses on loans that had been made into those frighteningly pumped-up housing and real estate markets.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/22/index.html

WTF?_2

Realy wrote: »

OT, we know about your use of "Retard" post so lets stay on topic this time !!!!!!,

Answering my question may be a start.

Know we don't: Feel free to refresh the board on my "use of retard".

chucky

MissMoneypenny wrote: »

I don't like the idea of 100+% mortgages. It doesn't hurt to learn how to budget before buying a house and have the savings to pay for the moving in costs.

this is obviously up to individual choice - it's obviously not for you.

MissMoneypenny wrote: »

Sometimes selling mortgages within the specifics still causes problems. I hope the banks learn from the mistakes that B&B and NR made.

B&B and NR problems weren't due to the selling mortgages out of the specifics they were due to the savings vs borrowing ratios that they had that could not be managed due to the availability of money on an institutional level not a mortgage level.

WTF?_2

dopester wrote: »

I don't really blame the BoE for the house price bubble - but see it more as a result of Gordy's tinkering and then Labour's belief in a new paradigm for how the economy works.

http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-time-for-a-public-inquiry-on-the-banking-crisis-989957.html


http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/22/index.html

I'd put their policy more as:

Low rates to make the economy boom.
Credit for all, to make things boom soom more..
We won't ask the markets too many questions where all that credit is coming from.

Realy

!!!!!!? wrote: »

Know we don't: Feel free to refresh the board on my "use of retard".

Even better here is every post you have used it on.
http://forums.moneysavingexpert.com/search.html?searchid=41140319

Stop going OT

Still have not answered the question!!!!!!!
3rd time.
If interest rates were 15% (during the last 5 years) and the money was still lent to people with no job at 130% do you think we would not be in the same mess?:rolleyes:

WTF?_2

Realy wrote: »

Even better here is every post you have used it on.
http://forums.moneysavingexpert.com/search.html?searchid=41140319

That link is just a generalised search for the word "retard" on MSE. :rolleyes2


Whoops - I 'used Retard' again :rolleyes: Twice! D'oh! What an evil person I am 'using' such a word.

Here's the actual thread in question:

http://forums.moneysavingexpert.com/showthread.html?p=12325361#post12325361

(minus DDs posts which, like Chucky, he's goes back and removes when they make him look bad)

dopester

!!!!!!? wrote: »

I'd put their policy more as:

Low rates to make the economy boom.
Credit for all, to make things boom soom more..
We won't ask the markets too many questions where all that credit is coming from.

BoE had no remit apparently for house prices, thanks to Gordy slicing all the powers up and shunting stuff over to the FSA, and seemingly each organisation unsure of its entire role to play or how to employ their powers.

The 2.5 per cent target did not allow the Bank of England’s Monetary Policy Committee to take into account soaring house prices and the impact of cheap imports from Asia, allowing excess consumer demand to run out of control, Mr Flight said.

He said that the Bank acknowledged in a conversation with him as long ago as 2003 that credit and house prices were rising too fast, but said that it did not have the remit to address the problem.

chucky

!!!!!!? wrote: »

I'd put their policy more as:

Low rates to make the economy boom.
Credit for all, to make things boom soom more..
We won't ask the markets too many questions where all that credit is coming from.

I've seen 22 posts where you have used the word "Retard" that is totally wrong and the self proclaimed high moral ground must be embarassing for you now.

Back on topic now - No-one here has said low rates and credit for all - this is just YOU.

We have all been saying that low rates is good for people to service debt not to provide credit for everyone.

Can you answer if this is a good policy without avoiding the question and answering a question a on with a another question!!

Realy

!!!!!!? wrote: »

Realy wrote: »

Even better here is every post you have used it on.
http://forums.moneysavingexpert.com/search.html?searchid=41140319

That link is just a generalised search for the word "retard" on MSE. :rolleyes2


Whoops - I 'used Retard' again :rolleyes: Twice! D'oh! What an evil person I am 'using' such a word.

Here's the actual thread in question:

http://forums.moneysavingexpert.com/showthread.html?p=12325361#post12325361

(minus DDs posts which, like Chucky, he's goes back and removes when they make him look bad)

Look stop going off topic.
4th time
Still have not answered the question!!!!!!!

If interest rates were 15% (during the last 5 years) and the money was still lent to people with no job at 130% do you think we would not be in the same mess?:rolleyes:

MrDT

guys, this argument is just !!!!!!.



oh, snap