Quantative easing - good time to have a mortgage?

Radiantsoul

I can't see a painless way of doing it.
But I suspect that the government might increase banking reserve requirements, as greater regulation of the banking sector seems inevitable. The precident has probably already been set for this with the government demanding banks recapitalise to a certain level or be capitalised by the government.

Generali

Radiantsoul wrote: »

I can't see a painless way of doing it.
But I suspect that the government might increase banking reserve requirements, as greater regulation of the banking sector seems inevitable. The precident has probably already been set for this with the government demanding banks recapitalise to a certain level or be capitalised by the government.

That was a major monetary policy tool in the 1960s and 70s. Instead of controlling the supply of money via its price it was done by varying the quantity.

setmefree2

Generali wrote: »

The banking system will get back on it's feet I believe. When? Nobody knows. It took 10 years and a world war for the US banking system to recover from 1929-31. It took a year or so for the UK to shake off the secondary banking crisis of the 1970s. What exactly do you mean by the shadow banking system? Do you mean commercial and investment banks?

I was thinking about this when I said shadow banking system.


When do you think (if ever) any of the shadow banking system would want to buy a MBS?

Do you think governments should buy MBSs?

purch

I don't think there will be much left of what they call the Shadow Banking system left, once this is all over.

There could be good reasons for any part of the financial system including Governments and Central Banks to buy a Mortgage Backed Security, but it will depend on what that security is and how it is structured.

setmefree2

purch wrote: »

I don't think there will be much left of what they call the Shadow Banking system left, once this is all over.

There could be good reasons for any part of the financial system including Governments and Central Banks to buy a Mortgage Backed Security, but it will depend on what that security is and how it is structured.

But if the Shadow Banking system is not coming back, does that mean central banks hold MBSs forever? Does that mean that the Central Banks are taking on the role of the shadow banking system forever? Is that, in effect, the Nationalisation of the shadow banking system?

Sorry for all the questions:o:D.

purch

Does that mean that the Central Banks are taking on the role of the shadow banking system forever

I think the role of what is referred to as the shadow banking system, was one that they invented for themselves, along with the synthetic products and illusion of liquidity that went with it.

Generali

setmefree2 wrote: »

I was thinking about this when I said shadow banking system.


When do you think (if ever) any of the shadow banking system would want to buy a MBS?

Do you think governments should buy MBSs?

I see. I'd call that the Secondary banking system. I think my term is a bit old fashioned.

I think the shadow banking system would be a seller not a buyer, almost by definition.

I don't think Governments should buy MBSs. I also don't think Governments should buy banks. If a bank is insolvent it should be allowed to go bust like any other company. Its creditors should be treated in the same way as those of World of Leather.

Banks should be kept small so their becoming insolvent doesn't become a systemic risk.

Thrugelmir

If you have savings would it be better to change the savings from pounds to a currency less likely to be devalued, and let rapid inflation shrink the mortgage e.g. £100,000 becomes worth about USD50,000! Then pay back the mortgage and have Euro or Dollars left over - or invested in something tangible, like another property?

Why is sterling going to devalue further? The US$ so far has remained strong on the back of the Obama effect. At some point people will realise that he is just an ordinary being that has inherited a worse economy than here in the UK. Obama has to deliver real changes to reverse years of budget deficits. The changes will be direct at the US economy not global. Like here people need to save more and reduce personal debt. My forecast for the US$ at the close of 2009 is $1.70-$1.75 (around 20% increase from where it is now). So I wouldn't want to see my mortgage increase on foreign exchange movement.