Sunday, Aug 19, 2007
Rate cut didn't help.
BBC: Market turmoil 'set to continue'
What are the consequences of a FED rate cut. More liquidity in the market which leads to inflated prices for all assets.
Posted by deepak @ 01:58 PM (1548 views) Add Comment
15 Comments
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1. deepak said...
Can someone explain me why this free money is being given to only banks.
I can borrow $100 million @ 5.75% from FED and put them in a safe and secure ICICI @ 6.3% or dollar equivalent
Make .55% or $100 million = $550,000
Nice and simple. I think this explains the Japanese carry trade.
2. japanese uncle said...
As I mentioned before, exactly the same logic (if ever there is) was applied to the zero-IR regime that prevailed for the last whole decade in japan, where the banks both domestic (via more than enough spread) and overseas (via carry trade) benefit the greatest. Central banks are not operating in the interest of the public, but that of major financiers.
3. Scott said...
Someone called David who posts in here suggests that because the stock markets are going to the wall, even more people will put money into property. There is a flaw in this argument. If things do get this bad, most investors will not have any more money left to put into anything.
4. waitingfor hpc said...
what about inflation that seems to have gone?????? all they talk about now is cutting rates? seems inflation is now not an issue for the fed?
5. Refusetobuy said...
The safe and secure ICICI @ 6.3% is not safe and secure. It can go bust.
The FED is basically taking on credit risk for free.
(Actually, the FED won't lend directly to you because you are less secure than ICICI. There's no guarantee that you aren't going to spend it all on booze and women)
6. japanese uncle said...
Artificial inflation created by the coordinated oil price hike, is no real threat.
7. Adam said...
a bit off topic but i think houseprices are coming down in dunfermline scotland. a 4bed house in edzell way has been on rightmove for a while at fixed price of £188,000. cant be selling cos his neigbour with identical house has put his on rightmove for fixed price £185,000.
8. denzil said...
Refusetobuy:
>>(Actually, the FED won't lend directly to you because you are less secure than ICICI. There's no guarantee that you aren't going to spend it all on booze and women)
$100 to spend on booze and women. Sounds great. Mick Jagger probably has spent that amount over the years.
9. wiltshire said...
What I find interesting is how quickly the BBC are now happy to report on such matters. For months they've been putting out (essentially) VI propaganda as if there wasn't an elephant in the room. Now they seem to have spotted the elephant and it's all they can talk about.
BBC - "Oh my god, there's an elephant in the room!!!"
HPC.co.uk posters - "What the same elephant that we've been discussing for the past couple of years!!!"
BBC - "Never mind that. There's an elephant. In the room!!!!"
10. bidin'matime said...
Refusetobuy - ICICI UK is covered by UK investment protection, so up to £33k(?) is safe, so long as the government doesnt renege on the protection scheme - if it comes to that, then we're all f*cked.
11. Cheekie Charlie said...
Its intersesting that last week the R word (recession) was mentioned in the media. I think in the coming week if the stockmarket continues to fall then recession and house price crash will be headline news. I think this will be the defining week when the lemmings begin their short march to the white cliffs of Dover.
12. uncle chris said...
For the 'Financial Services Compensation Scheme (FSCS)', the maximum levels of compensation are:
Savings: £31,700 per person. 100% of the first £2,000 and 90% of the next £33,000.
But given how dishonest this government has been, I wouldn't be surprised if they tried to wriggle out of it - look at the Serps opt-out pensions fiasco.
13. dobber said...
Guy's,
The exact wording for the FSCS is;
Most types of investment business are covered for 100% of the first £30,000 and 90% of the next £20,000 so the maximum compensation is £48,000.
14. wiltshire said...
Can I just clarify something with regard to this compensation. Presumably it's not 30k per person, but 30k per bank default. If you were unlucky enough to have 30k in two different banks accounts and they both went under you'd be entitled to compensation from both banks??? Anyone know?
Scary isn't it, that we're discussing likely compensation should a bank go under???
15. Jim Tallis said...
Its 30K per bank default