Infinite Unknown

“No, you can’t”. These are unfashionable words at the moment - and nowhere more so than in the banking industry.

While politicians were hoping for an outbreak of economic optimism after Thursday’s reduction in interest rates, our High Street bank managers were having none of it.

Nearly 24 hours after the Bank of England slashed the official price of money by a record-breaking 1.5 percentage points, only three of the 88 major lenders had said they would pass it on to their borrowers. In fact, only 30 of them had got around to sharing the proceeds of last month’s half-point rate cut. The fact they were much quicker to cut interest rates for many savers only served to rub in the message: No, you can’t have a cheaper mortgage. No, you can’t get a fairer rate on your savings. No, you can’t expect us to go without large profits and bonuses. Change is for wimps.

Well, let’s see about that. In scenes that would have been unthinkable only two months ago, the Chancellor of the Exchequer summoned the industry’s leaders to Downing Street on Friday and promptly pistol-whipped them into submission. Treasury officials were said to have waved press cuttings in their faces, pointing out that the word “banker” had become a popular term of abuse - and not just in rhyming slang. Out they meekly trotted, finally ready to cut their standard variable rate on most mortgages by the same 1.5 percentage points suggested by the Bank of England.

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Tags: Bank of England, Banks, Economy, financial crisis, Government, mortgage crisis, Mortgages, Politics, Treasury, U.K.

HOW WOULD YOU FEEL, RUNNING A MODEST business, if the money fairy came along and promised you would never, ever go bust? How much of a spring would it put in your step if the nice imp then said she had cast a spell guaranteeing all your lending, all your borrowing, and 98% of your customers’ cash? “Yes,” you might just say, clapping your sticky little hands, “I do believe in fairies!”

This hard-to-swallow tale has more than one happy ending. While your godmother hopes you will become a good little banker one day, she doesn’t want to be too stern. It’s not her place. So if she sprinkles some of her magic dust and shrinks the cost of money, she won’t force you to share your good luck with anyone. She’ll “urge” you instead. But only a very naughty banker would ignore that, surely?

After all, you owe the good fairy something. In fact, you owe her billions of things. They are the reasons why you are still able to frolic as a happy little banker. They also explain why you are still looking forward to big Christmas presents and the chance, some time very soon, to tell fairy godmother where to stick her advice and all those tiresome homilies on the need to be nice to poor folk.

Whatever Alistair Darling was waving at the bankers during a breakfast meeting on Friday morning, it was not a magic wand. He can urge to his heart’s content, but they intend to go on treating the Bank of England, its base rate and its monetary policy committee (MPC) as fictions only children would believe. Most may have buckled, belatedly, under an avalanche of bad publicity, but the chancellor doesn’t frighten them.

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Tags: Alistair Darling, Bank of England, Banks, Economy, Government, Politics

The perilous state of the UK economy was exposed as the Bank of England’s Monetary Policy Committee made an unprecedented 1.5 percentage point cut in interest rates.

Winston Churchill meets the Queen in 1955. Photo: PA

The shock vote brought interest rates down to 3pc for the first time since January 1955, when Winston Churchill was prime minister. Economists forecast that the cut could pave the way for further reductions - with some claiming that rates could hit a historic low of 1pc.

Thursday’s move was interpreted as a desperate attempt to protect the UK economy from a severe recession.

“There has been a very marked deterioration in the outlook for economic activity at home and abroad,” said the MPC in an explanatory statement, adding that the threat of inflation was now receding.

It warned that after the most serious crisis in the global banking sector for almost a century, households and businesses were likely to find it difficult to obtain credit “for some time.” The MPC counted falling share prices, a sharp reduction in UK output, and a squeeze on household budgets among a nasty cocktail of circumstances that have combined to hit both businesses and consumers hard.

The MPC’s decision came amid a raft of gloomy news and data emerged. Figures from Halifax, the UK’s biggest mortgage lender, showed that house prices have fallen by 15pc over the past 12 months.

It was the sharpest drop since the survey began in 1983 and brought the average house price down to £168,176 in October, compared with almost £200,000 in the same month last year.

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Tags: Bank of England, Credit Crisis, credit crunch, ECB, Economy, financial crisis, housing market, IMF, Politics, Rate Cut, Recession, U.K.

Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.

Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders - including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey - to implement rate cuts immediately.

Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.

Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.

However, the figure remains almost 1.5 per cent higher than the official interest rate.

The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period - a key measure in the wholesale money market - is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.

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Tags: Alistair Darling, Bank of England, Banks, Barclays, Economy, Government, HBoS, HSBC, Lloyds TSB, mortgage crisis, Mortgages, Politics, Rate Cut, RBS, taxpayers, U.K.

Stock markets across the world cracked yesterday, forcing Wall Street to suspend trading on a key futures contract to stem panic-selling while Moscow shut for business altogether.

Sharp losses in New York, London, Europe and the Far East raised the spectre that governments may be forced to impose emergency holidays to avert a meltdown across world stock markets.

Before Wall Street opened yesterday, American regulators suspended all trading of Dow Jones futures contracts, which had plunged. Such contracts allow traders to bet on the future direction of the Dow Jones index. The plunge had triggered an automatic circuit breaker, which halts trading to prevent a market sliding into freefall.

Nouriel Roubini, Professor of Economics at New York University, said that his prediction earlier this week that markets would have to be shut down is already coming true.

He said: “This morning, even before the markets in the US opened, the S&P futures fell by more than their daily limit. What I said yesterday has already started.”

A forced closure of stock markets in America would respresent the first time that Washington would have shut Wall Street since the terrorist attacks of September 2001. It would also have echoes of the 1930s, when President Franklin D. Roosevelt shut American banks during an enforced holiday.

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Tags: Bank of England, Barclays, ecomomy, financial crisis, Goldman Sachs, Gordon Brown, HSBC, Morgan Stanley, Nouriel Roubini, Russia, Stock Market, Treasury, U.K., U.S., Wall Street

House prices will fall a record-breaking 35 per cent by next autumn, a leading firm of economists warned yesterday.

The collapse will be the biggest fall ever seen in this country.

The claim, from the consultancy Capital Economics, will horrify homeowners who face being plunged into negative equity.

Not needed: Estate agent boards piled up in a yard in Hull

According to the forecast, around £65,000 will be wiped off the value of the average home. At the height of the property boom last year the average home was worth £186,000. By next autumn it will be worth around £120,000.

Capital Economics had originally expected house prices to drop 35 per cent by the end of 2010.

But yesterday it amended this forecast in the light of recent economic turmoil. The consultancy still expects the same fall, but squeezed into a much shorter period.

Prices are then predicted to stagnate for 18 months before a tentative recovery begins in 2011.

Ed Stansfield, property economist at Capital Economics, said: ‘The sheer speed of adjustment is causing alarm.’

The housing market has been affected by the credit crunch that has frozen the world’s financial markets

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Tags: Bank of England, Economy, financial crisis, housing market, Standard & Poor's, U.K.

Added: Oct. 18, 2008
Source: YouTube

The federal reserve caused the 700 billion dollar bailout.

The Rothschilds and the Bank of England, and the London banking houses which ultimately control the Federal Reserve Banks through their stockholdings of bank stock and their subsidiary firms in New York.

The two principal Rothschild representatives in New York, J. P. Morgan Co., and Kuhn,Loeb & Co. were the firms which set up the Jekyll Island Conference The Federal Reserve was created with no constitutional authority in 1913, the Fed prints money out of thin air and loans it to the U.S. treasury at interest.

This can only lead to one outcome: debt. Currently, the Federal Reserve is printing billions of dollars to bail out Wall Street while destroying the middle class and the dollar with inflation.

If our country wants a sound and transparent monetary system, we need to abolish the Federal Reserve.

Tags: Bank of England, Dollar, Economy, Fed, Federal Reserve, Government, Inflation, JPMorgan, Politics, Rothschild, Treasury, U.S., Wall Street

The $54trillion credit derivatives market faces a delicate test as $360bn worth of contracts on now-defaulted derivatives on Lehman Brothers are due to be settled on Tuesday.

Lehman Brothers’ complex network of derivatives will be settled on Tuesday October 22

Due to the opacity of the market, which is one of the most complex, least regulated and least understood in the global financial system, it is still not clear how many contracts have to be settled or which institutions will take the ultimate hits once the billions of dollars worth of contracts have been unravelled.

The collapse of Lehman Brothers, is expected to trigger credit default swap (CDS) protection pay-outs of about $400bn but because the contracts were sold many times through different counterparties it is not yet known who will be liable.

One commentator said: “This will be the greatest illustration of the follies of Wall Street and how unnecessarily complicated the wild off-track betting became in the past few years.”

Five years ago Warren Buffett, the iconic American investor, warned that the chaotic profusion of derivatives used by companies and hedge funds to fund financial growth were “financial weapons of mass destruction.”

Bankers in the City and on Wall Street are bracing for yet another round of turbulence as the contracts are unwound.

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Tags: Bank of England, Banks, Derivatives, Derivatives market, Economy, Fed, Federal Reserve, Lehman Brothers, Stock Market, Wall Street

Fed Releases Flood of Dollars, Market Rates Fall

Oct. 13 (Bloomberg) — The Federal Reserve led an unprecedented push by central banks to flood the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates.

The European Central Bank, the Bank of England and the Swiss National Bank will offer European banks unlimited dollar funds with maturities of seven, 28 and 84 days at fixed interest rates against “appropriate collateral,” the Washington-based Fed said today. The Fed had capped at $380 billion the currency it would swap with the three central banks.

Global economic leaders have redoubled efforts to unfreeze credit markets and avert the worst worldwide recession in thirty years after last week’s 20 percent slide in the MSCI World Index. Policy makers from the Group of Seven nations are committed to taking “all necessary steps” to stem a market panic, and European and U.S. governments today outlined plans to avoid banks failing.

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Tags: Bank of England, central bank, Dollar, ECB, Economy, Fed, Federal Reserve, Government, Henry Paulson, Politics, RBS, Swiss National Bank, Treasury, U.S.

The financial events of recent weeks have filled many of us with shock and panic. Surely no one could have predicted that we would be in this mess? Well, actually, they did. Here are ten people who saw the financial meltdown coming…

1. Vince Cable - deputy leader of the Liberal Democrats

Here is a question Mr Cable’s posed to Gordon Brown, then Chancellor, during Treasury Questions back in November 2003: “The growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level. What action will the Chancellor take on the problem of consumer debt?”

Mr Brown did not answer how he would solve the problem, merely replying that: “We have been right about the prospects for growth in the British economy, and the hon. Gentleman (Mr. Cable) has been wrong.”

2. Christopher Wood - chief strategist of CLSA, a broking firm in the Asia-Pacific Market.

In October 2005 Mr Wood wisely declared: “Investors should sell all exposure to the American mortgage securities market.” In an interview in 2007, he said: “Some institutions have been behaving like leveraged speculators rather than banks… The UK economy is heading for a sharp shock. It just remains to be seen how bad.”

3. Founders of www.stock-market-crash.net - website aimed at investors

The writers of this site claim that predicting crashes is, in fact, easy: “One of the greatest myths of all time is that market crashes are random, unpredictable events. The lead up to a market crash is often years in the making. Certain warning signs exist, which characterize the end of a bull market and the start of a bear market. By learning these common warning signs, you can liquidate your investments and prosper by shorting the market.”

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Tags: Bank of England, Credit Crisis, credit crunch, Economy, Fannie Mae, financial crisis, Freddie Mac, Gordon Brown, Government, mortgage crisis, Mortgages, Nouriel Roubini, Politics, Ron Paul, Stock Market, U.S.