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Alice Cook

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  1. The current debt crisis has occured now because of the deteriorating demographic structure in Europe. Western European countries could survive with debt ratios of over 100 percent, but only if there was a reasonable prospect of the debt being paid off over the medium term. With rapidly ageing populations, Europe can't pay down their debt. Investors are waking up to that fact, and that creates the basis for the current crisis.
  2. Thank you Tinker for the kind words. Yes, I am back. The blog is back up. The old address is still working.. Visit my site I am also trying to engineer a move to a new address. I am handling this quite incompetently. I am not quite sure how to do it. My new site - Clouded Outlook
  3. Yes, exactly. Turn the question around; how would QE help raise demand if it wasn't through rising housing values? Alice Visit My Website
  4. Look more closely at what Sentance said: I am confident that these policies will help to support economic recovery – through their effect on asset prices, financial conditions and ultimately spending by households and firms.†QE is the instrument, the desired outcome is an effect on asset prices, which he hopes will boost spending by households. Before the crash, the BoE used to say that they didn't target asset prices. Their only concern was the CPI. This statement says they care about aggregate demand and see rising asset prices (which is mostly housing), as the transmission mechanism. Alice Visit My Website
  5. The bulk of UK household wealth is property. I did a post on the composition of UK assets about a year ago, and I vaguely remember that around 3/4 of total UK private sector wealth was residential homes. So when the BoE talks about affecting demand through assets, they can only mean housing. The transmission mechanism is straightforward. Rising property values allows home-owners to withdraw mortgage equity via secured loans. They spend this cash, increase demand and the economy grows. Mr. Sentance was very transparent on this point and I am surprised that anyone could be confused by what he meant when he talks of asset prices. Alice Cook UK Bubble
  6. Quantitative easing is just not working. Yields on long term UK government debt are now as high as they were when the BoE started to print money. It is the same story in the US. Long term rates are rising there, too. In both cases, the higher rates reflect increasing inflationary expectations. Alice UK Bubble
  7. A press release from the Fed today. They are extending the types of acceptable collateral.... http://www.federalreserve.gov/newsevents/p...y/20090501a.htm For release at 2:00 p.m. EDT The Federal Reserve Board on Friday announced that, starting in June, commercial mortgage-backed securities (CMBS) and securities backed by insurance premium finance loans will be eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF). The CMBS market came to a standstill in mid-2008. The inclusion of CMBS as eligible collateral for TALF loans will help prevent defaults on economically viable commercial properties, increase the capacity of current holders of maturing mortgages to make additional loans, and facilitate the sale of distressed properties. CMBS accounted for almost half of new commercial mortgage originations in 2007. More than 1.5 million insurance premium finance loans are extended to small businesses each year so they can obtain property and casualty insurance. The loans are often funded through the asset-backed securities (ABS) market and have become more expensive and more difficult to obtain since the shutdown of that market last fall. The inclusion of insurance premium ABS as TALF-eligible collateral will facilitate the flow of credit to small businesses. The Board also authorized TALF loans with maturities of five years. Currently, all TALF loans have maturities of three years. TALF loans with five-year maturities will be available for the June funding to finance purchases of CMBS, ABS backed by student loans, and ABS backed by loans guaranteed by the Small Business Administration. The Board indicated that up to $100 billion of TALF loans could have five-year maturities; it will continue to evaluate that limit. Some of the interest on collateral financed with a five-year loan may be diverted toward an accelerated repayment of the loan, especially in the fourth and fifth years. The Board authorized the TALF on November 24, 2008, under section 13(3) of the Federal Reserve Act. Under the TALF, the Federal Reserve Bank of New York extends loans secured by AAA-rated ABS backed by newly and recently originated loans. On February 10, 2009, the Board announced that it is prepared to undertake a significant expansion of the TALF. Friday's announcement marks another step along that expansion. A new term sheet and a frequently-asked-questions document, specific to the CMBS collateral expansion, are attached. Also attached is a revised frequently-asked-questions document for the TALF program, including a description of the premium finance ABS collateral expansion as well as other changes. Alice Cook Visit My Website
  8. From Bloomberg: "Nov. 28 (Bloomberg) -- U.K. consumer confidence stayed close to the lowest level in more than three decades in November as gloom about the recession deterred spending, GfK NOP said. An index of sentiment, based on a survey of 2,000 people between Nov. 7 and Nov. 16, rose one point from the previous month to minus 35. A gauge measuring the general economic situation in the past year rose one point to minus 71, still 39 points lower than in the same month last year. Bank of England policy maker Timothy Besley said yesterday that the ``big issue'' for the British economy is to get banks to lend again. The seizure in credit markets and worsening prospects for economic growth has led consumer spending to drop and prompted the central bank to cut the benchmark interest rate this month to 3 percent, the lowest since 1955. ``U.K. consumers are still being battered by news about our poor economy in general and mounting concerns about job losses in particular,'' Rachael Joy, a spokeswoman for GfK, said in a statement. ``The dramatic cut in interest rates this month appears to have done little to improve sentiment so far, as U.K. consumers continue to fret over the impact of a looming recession.'' An index measuring Britons' personal financial situation in the next year rose two points to minus 10, GfK said. Expectations for the general economic situation over the next 12 months rose one point to minus 36. U.K. house prices fell for a 13th month in November as the financial crisis deterred homebuyers and banks rationed mortgages, Nationwide Building Society said yesterday. Besley said that consumers need to pay down debt and save more as the economy rebalances. " Alice Visit My Website
  9. The difference between Northern Rock and the other banks was only a matter of degree. NRK relied a little more than most on wholesale funding, but they were all at it. NRK was simply the leader of the pack. Alice Visit My Website
  10. During today's BoE press conference on the inflation report, an italian journalist asked merv whether he knew that the bank rate had never fallen below 2 percent since 1694. He followed on with a question, asking whether Merv could rule out a historically unprecedented rate of 2 percent or less. Merv refused to rule anything out. No surprises what happened next. Sterling started to slide. Alice Cook Visit My Website
  11. I thought that the Icelandic government had already arranged credit lines with the nordic central banks. They must have already exhausted those credit lines, which means that they are swinging in the wind. Besides, it would be a waste of time for central banks to pump more money inte Iceland. it is too far gone. Alice Visit My Website
  12. I would put Spain top of the list. then Belgium, followed by the UK. One thing is for sure, all bank accounts in Europe will be guaranteed by Friday. Alice Visit My Website
  13. Yes, it is totally bust. It has a couple of banks that are almost certainly insolvent. What happens next; the banks default on their obligations, sending out a wave of losses throughout european financial systems. Given the prevailing mood in Europe, EU taxpapers will probably end up carrying the cost. The country's exchange rate has already collapsed, it might go further. The exchange depreciation will lead to their current account "correcting" which means no more cheap imports. Living standards decline sharply and the economy goes into reverse. Take a look at Thailand and Korea circa 1998 and you will get some idea of what is in store for the Icelanders Alice Visit My Website
  14. What comes next? Well, today, the BBC reported that Paulson advised other countries to follow the US lead and set up their very own state mortgage buy-back fund. Although Darling is reportedly against the idea, when the avalanche of bad mortgage debts threaten to bring the whole banking system down, he will, like a good politician, effortlessly change direction. Thereafter, huge amounts of paper money will flow into the banking system as the government exchanges bad debts for cash. Inflation will follow. Somewhere down the line, there will be a recession, unemployment will rise, and living standards for 99 percent of the population will decline. The real question, however, is this; will there be any backlash against the dogs of finance? Will we see these wretches put on a leash or will we suffer the same catastrophe a few years down the line. My betting is that will all happen again. Alice Visit My Website
  15. Nothing too good for the workers. The cyprus property site is a bit a shocker. Alice Visit My Website
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