Bank of England says British banks need fresh capital

Graham_Devon

HAMISH_MCTAVISH wrote: »

Fixed that for you.

And you now just look silly, as household outgoings and household wealth which is inaccesible until sale are two very different things.

vax2002

We should return capitalism !
If a bank can not trade solvent they should go bust.
What they dont tell us the shocking losses they have made by gambling in debt bonds hoping for greedy returns.
When it goes wrong the want the tax payer to indemnify the losses, yet when it pays off they pocket millions in bonuses and blow cigar smoke at us.
If they go bust, tough !

Emy1501

I suspect that banks have to recapitalise to remain credible in the market so i suspect the BOE opinion on this isn't going to make much difference.

I also suspect that Lenders have been spooked by the credit crunch I suspect its unlikely we will see any lax lending again for at least a generation if not longer.

We have affordability calculators now and whilst we may see 95% mortgages going forward I suspect lending criteria will remain pretty much the same going forwards with little tweaks here and there.

HAMISH_MCTAVISH

Graham_Devon wrote: »

And you now just look silly, as household outgoings and household wealth which is inaccesible until sale are two very different things.

After all these years Graham, you still haven't grasped the concept of "the wealth effect", have you?

"The wealth effect is an economic term, referring to an increase in spending that accompanies an increase in perceived wealth

The effect would cause changes in the amounts and distribution of consumer consumption caused by changes in consumer wealth. People should spend more when one of two things is true: when people actually are richer, objectively, or when people perceive themselves to be richer—for example, the assessed value of their home increases, or a stock they own goes up in price."

So an increase in household asset value (wealth) causes an increase in consumer spending, and thus economic growth.

There will be no significant and sustainable recovery in the UK economy until there is a significant recovery in UK house prices.

Emy1501

HAMISH_MCTAVISH wrote: »

After all these years Graham, you still haven't grasped the concept of "the wealth effect", have you?

"The wealth effect is an economic term, referring to an increase in spending that accompanies an increase in perceived wealth

The effect would cause changes in the amounts and distribution of consumer consumption caused by changes in consumer wealth. People should spend more when one of two things is true: when people actually are richer, objectively, or when people perceive themselves to be richer—for example, the assessed value of their home increases, or a stock they own goes up in price."

So an increase in household asset value (wealth) causes an increase in consumer spending, and thus economic growth.

There will be no significant and sustainable recovery in the UK economy until there is a significant recovery in UK house prices.

In years gone by it probably did. I remember the days when lenders would write to you offering a re mortgage to go on holiday buy a new car etc. These days are long gone.

Many people are now coming to terms with the fact that unlocking this wealth is alot harder than they thought and that in reality it not really wealth at all and it only becomes wealth when the property is sold.

A higher turnover in the number of houses being sold will help the economy recover but I suspect that a rise in prices will do little to help

ChiefGrasscutter

vax2002 wrote: »

If they go bust, tough !

I suspect you probably would not like it if one really did go bust.... and remember only personal and the smaller business accounts have any form of FSCS compensation safety net.

Supposing one of the big four supermarkets had their accounts with the bust bank. That would mean no food or petrol being supplied to the said supermarket and the shelves being stripped within hours..and no more petrol. The supermaket in question would go bust within hours, as would any medium sized company having accounts with the bank as, with no realistic hope of getting much money back, they would probably all be insolvant instantly. Then there are all the sub-suppliers owed money who ain;t going to get it.....

In short a total failure of a major UK bank that was allowed quite literaly to go bust and close its doors totally would rapidly send the UK economy back to a pre-industrial age of barter - along with no functioning police force.

shortchanged_2

HAMISH_MCTAVISH wrote: »

"The wealth effect is an economic term, referring to an increase in spending that accompanies an increase in perceived wealth

This is the statement that sums up all the problems we have had in the past.

'Perceived wealth'. i.e figures on a piece of paper that can and do change.

Graham_Devon

HAMISH_MCTAVISH wrote: »

After all these years Graham, you still haven't grasped the concept of "the wealth effect", have you?

"The wealth effect is an economic term, referring to an increase in spending that accompanies an increase in perceived wealth

The effect would cause changes in the amounts and distribution of consumer consumption caused by changes in consumer wealth. People should spend more when one of two things is true: when people actually are richer, objectively, or when people perceive themselves to be richer—for example, the assessed value of their home increases, or a stock they own goes up in price."

So an increase in household asset value (wealth) causes an increase in consumer spending, and thus economic growth.

There will be no significant and sustainable recovery in the UK economy until there is a significant recovery in UK house prices.

Only 2 days ago you were insinuating I thought economies were static and that I hadn't grasped economies were fluid. A lot of your arguments rely on insinuating people don't grasp stuff.

Things change. Fluid economy Hamish.

And I would like you to explain to me how if the value of your house rises 20% in a year, but your wages are static and inflation 5%, how on earth you think households will feel better off.

What you suggest may have worked when everything was increasing. But not so much now.

HAMISH_MCTAVISH

Graham_Devon wrote: »

And I would like you to explain to me how if the value of your house rises 20% in a year, but your wages are static and inflation 5%, how on earth you think households will feel better off.

And there you go again with assuming things are static.

Increasing asset values enable confidence, people save less and spend more, companies see increased revenue, then they invest, hire more people, expand and grow, then wages pick up as the labour market tightens, so people have more money, and spend more, and the circle repeats....

That's what you get with rising house prices.

Whereas with falling house prices you get the opposite. As we have seen.

Asset values fall. People get nervous. They spend less. Companies see revenue decline. They cut costs. They lay off people. People get more nervous. They spend less and save more. Companies see revenue decline further. The economy contracts. Wages fall in real terms. People get more nervous. They spend less. Companies see revenue fall further. They lay off more people. The circle repeats.

The policies you are calling for will lead to economic contraction and a depression Graham.

And all because you want cheaper houses.

Madness.

Graham_Devon

HAMISH_MCTAVISH wrote: »

And there you go again with assuming things are static.

Increasing asset values enable confidence, people save less and spend more, companies see increased revenue, then they invest, hire more people, expand and grow, then wages pick up as the labour market tightens, so people have more money, and spend more, and the circle repeats....

All based on the value of a house, the value of which is inaccesible!?

LOL Hamish, you're loosing it old chap.