Wednesday, Sep 12, 2007
"Market players" get offended by not being given free money
Reuters: King says moral hazard an issue for central banks
LONDON (Reuters) - The latest market turmoil has been caused by a mispricing of risk and central banks need to balance moral hazard against a possible shock to the financial system, Bank of England Governor Mervyn King said on Wednesday,"If risk continues to be underpriced the next period of turmoil will be on an even bigger scale," King said. The BoE has come under fire from some market players for not following the Federal Reserve and the European Central Bank in flooding the financial system with cash.
Posted by sovietuk @ 11:31 AM (622 views) Add Comment
7 Comments
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1. dohousescrashinthewoods said...
In defence of currency?
2. Alan said...
If the Fed cut rates heavily, then we will need to reduce our IR too. Anyone care to speculate the Fed reduction?
Watch the dollar exchange rates for clues.
3. confused76 said...
yes, defence of currency, and also avoid rampant inflation
the BoE is doing the right thing
it is madness by newspapers and the David-like people who think that a high asset price inflation is a good thing
4. Mark said...
BOE are fools... if they had had the foresight to raise IR at a faster rate from an earlier point the UK would be in better shape... house prices would have dropped... tooo late fools...this is the start of a bigger thing.... not sure what the thing is till it hits us, but it wont be pretty
5. paul said...
A classic case of "It wasn't ME, it was THEM", because the latest turmoil has been created by mispricing of credit.
And who is responsible for pricing credit?
Central banks like the BofE of course. In fact Eddie George admitted that the effect of suppressing interest rates would be a speculative asset bubble.
6. Alan said...
It's unfair to call the BoE fools. The MPC has been pretty successful in attaining the target it has been told to aim for - if you thing that the target is flawed it is not their fault - and Mervyn King is pointing out that the central bank's job should not be bailing out people/organisations who have made terrible decisions. This is despite the pressure that they are under from various quarters to do so. (Did anyone see the US journalist (I guess) rant and rage about the Fed when the markets first went south over this credit crunch).
They are doing a good job under the tight parameters that they operate under.
7. Alan said...
The main headline for this piece is the point, not really the BoE: the people who talk about market forces and who regulation is not needed are first to ask for a hand out when they need it.
ps this Alan and the one just above is different from the one in number 2.