Monday, May 19, 2008
"if the government were expecting housing market salvation to come from the Old Lady of Threadneedle Street they were backing the wrong horse"
BBC: Will Bank of England's rescue plan work?
When the Bank of England launched its Special Liquidity Scheme, the Bank and the government had rather different ideas about what would count as a success. Four weeks on, the Bank thinks the £50bn-plus official bank lending scheme has done what it was asked to do, though it is still early days. The government is less enthused. I'm told that Number Ten advisors have been calling in City experts to explain why the programme has not had more impact. (Stephanie FlandersEconomics editor, BBC News)
Posted by jack c @ 10:46 AM (772 views) Add Comment
16 Comments
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1. icarus said...
So there was never any clear idea of what this scheme was meant to achieve. Incredible - or maybe it isn't.
2. Tipping Point said...
'Number Ten advisors have been calling in City experts to explain why the programme has not had more impact'
Number Ten numpties more like. Are they really this thick? People are not getting mortgages because there is far too high a chance the banks will not get their money bank. Why can't these people realise that it is commercial suicide to lend a 90% loan to someone in order that they can buy a house that is only worth 70% of the loan amount. It's not the banks that are to blame. It's the continuing high level of house asking prices.
3. whiteknight said...
Not in the least suprising.
4. dbnazz1 said...
Its simple.
The banks have seen thas as an opportunity to reinforce their balance sheets for the benfit of the economic health of the banks themselves The government viewed this as funds to be applied to the mortgage markets.
There is a big mismatch in thoughts.
5. Still Renting said...
Amazing that the government still think the SLS is about lowering mortgage rates, despite the BOE saying over and over again that it isn't supposed to.
6. shipbuilder said...
The level of cluelessness is incredible - the question is, now that the scheme has failed to ease the crunch, what will this desperate bunch of idiots resort to next? More pathetic 'demands' from Our Glorious Leader? 'Pretty please lower the rates?'
7. dbnazz1 said...
It doesn't really matter anyway.
It seems that recently, after some initial back slapping that the worst was behind, a couple of major instituations were able to secure rates that enabled them to offer better mortgage rates. However reality is now back in focus with markets taking into account inflation (they temporarily took there eye off inflation). As bank lending rates are now starting to reflect again the longer term inflation picture, with the result that mortgage rates will remain at existing high levels or go higher. Personally i feel mortgage rates are going to go higher because of the inflation situation.
The markets have pretty much recently been basing there actions on two factors-credit crunch and inflation. I feel the credit crunch to some degree will come and go, but the inflation problem won't go away. People have borrowed huge amounts at very low rates. Such low rates were only applicable while inflation was low. Inflation was only low due to importing of cheap goods manufactured from abroad, etc. Now that the countries that we imported from are experincing inflation (due to there people coming out of poverty and demanding higher wages) our inflation will incraese and therefore so will our interest rates. The other major inflation issue is that a large percentage of the global population are now being lifted out of poverty and are increasingly placing a demand on raw materials and food. An increase in demand with relatively constant supply equals price inflation. The supply is fairly constant (unless we look over the long run) because no planning has taken place globally to allow for increases in agriculture, processing of commodities, etc to cater for the increase in demand.
We are an economy built on borrowing. When people decided how much they could afford to borrow, they stretched themselves to the very limits at a time when inflation, and therefore ineterest rates were at low points that were never sustainable. the coming incraeses in inflation and interest rates will be the real killer.
8. icarus said...
dbnazz - only Broon & Badger thought it was to free up mortgage markets. Swervyn knew it was to reinforce bank balance sheets but his mistake was to think that this in turn would help the economy.
9. titaniccaptain said...
Can someone tell me what good giving 50 billion to the banks actaully did for Joe Public? other than cost Joe Public 50 billion. The impact on ramping up the housing market has been what????? Lenders increasing lending rates. And the fact that this government wants to keep house prices high is yet again a crime against its people who are locked into mortgages that are so impossible to pay back that their quality of life is pathetic. How can this government talk about lifting people out of poverty when you have families with 2 4x4s in the drive and a 4 bed Wimpey Box with decking and half a tin of beans in the fridge to eat and spiralling debt. So as I have said on previouse blogs (And will keep Blogging) we are up in arms about the 6 billion shortfall in the cost of caring for the elderly over the next 6 years yet we can just give 50 billion to the banks. I think this stands against all that is decent in this country and yes I will keep blogging this message till I am blue in the face. Sorry if I am repeating myself but ive got a point of view here and I aint budging
10. icarus said...
titaniccapt - It's more like 90 billion - so far. I don't think an upper limit has been set. What's to stop the banks continually saying "nearly there, another 10 or 20 billion may do it".
11. gone-to-colombia said...
This is not a matter of not knowing, not understanding the situation, the government is not that stupid. This is all about making sure that banks have just enough so they don't crash. This is about trying to show the public that the government is doing something. The government must know that there will be a HPC, the public has yet to accept that. Therefore, what the gov does has to be in step with a rather ill informed and stupid general public.
12. cornishman said...
@ gone-to-columbia
"the government is not that stupid"
I wouldn't be so sure. There are precious few ministers nowadays who have had any experience of real workplaces and real business and how real people operate in the real economy - good bad and devious.
I think that the government is probably just plain naive.
13. renting2 said...
Two people drowning in the water, the banks and their customers. One lifebelt thrown in ............ guess the result
14. plato said...
titaniccaptain @ 8
Well Done !!!
Keep making this point and you keep putting things into proportion. Not only are the figures shocking. The very act is nothing less than disgusting.-------- Not worthy of any real politician.
I have said this before : A Civilized Society Looks after the Young and the Old --------- This will attain the highest Production and Progress within that Society. The reasoning is obvious.
15. jonb said...
Titaniccaptain
It is £50bn, or possibly £90bn of our money on the Special Liquidity Scheme, somewhere between £25bn and £100bn on bailing out Northern Rock, a few million to Richard Branson and JC Flowers for their failed takeover attempts.
There is also a few billion to bail out some other bank, rumoured to be either HBOS, Bradford and Bingley, Alliance & Leicester or Barclays.
16. titaniccaptain said...
@ everyone....
Good to have your support on this guys as I said I may rerpeat myself on every blogg about this but the problem with the truth is that its the truth and that doesnt change so when I see Headlines about the governtment throwing money away that was payed for over the years by the elderly who payed their stamp (Ok not every elderly person but a generation that treated the system with far more respect than we do). Then the government complains that the elderly who are living longer (How vindictive of them) are costing too much.........Ludicrouse