Search the Community

http://www.bbc.co.uk/programmes/b09pl66b The actual documentary is called 'Shaking the Magic Money Tree'. Since the financial crisis, no less than £435billion of new money has been created through the policy of "quantitative easing", equivalent to a fifth of Britain's annual GDP. In this programme, financial journalist Michael Robinson finds out what happened to this staggering sum of money, and evaluates its effect on the lives of us all. With the help of expert testimony, Robinson explains how this controversial policy works, effectively creating money at the push of a button. But as he also finds out, the new funds are only indirectly injected into the wider economy, typically through big institutional investors lending to companies. Few of these transactions, it turns out, have involved the kind of 'real world' investment that might be expected to stimulate the productive economy and generate growth. Indeed, almost all of them have been within the financial sector itself, and many people argue that the returns on QE have been astonishingly small. Moreover, the influx of cash has inflated the price of assets, and led to a relative widening of the gap between rich and poor, which now threatens to upset our economic and political order. Even QE's deliberate objective to lower interest rates has also served to make homes and shares more expensive, while those already holding such assets have seen the greatest benefit. Britain's own 'Magic Money Tree' might have saved the economy from meltdown almost a decade ago, but it seems its many side-effects might have been far less beneficial.

In 2014 the Bank of England stopped reporting data that had been required since 1844, due to concerns that it might reveal Bank Operations and reduce the ability of the Old Lady to intervene to save the markets. That the decision to recommend that was made by three ex-BoE employees, is irrelevant. Anyway The BoE reports this now http://www.bankofengland.co.uk/publications/Documents/weeklyreport/2016/2610.pdf The new weekly report. It has a thing called "Loan to Asset Purchase Facility" That seems to increase by something like £2bn to £2.5bn each week. Or at least that is what is has done over recent weeks. Now since £2.6bn represents £41 per person per week in UK, or £2,166 per year per person. I wonder what it is? For my family of 5 that represents the BoE increasing its Loan to Asset Purchase by a rate equivalent to about £12k/annum. That sounds a disturbingly huge amount? Does anyone know what this is?

Conversations about the so called soft-cap keeping turning up in threads where they really have no place, so I figure we can keep that debate focussed by keeping it in one place. This is the kind of view that I see expressed on one side of the debate: Source As best I understand it the argument rests on something about the average LTI in 2014 Source It then appears to run something like this - by introducing a soft cap of no more than 15% of new lending at more than 4.5x the Bank of England was both normalising lending at 4.5x household income and calling for more lending (i.e. hoping to move the average up). First up, Democorruptcy - do I have your argument right? Secondly, can you remind me of the source of the 3.2x figure. I take the view that when the Bank say that they are concerned about excessive lending at high LTIs and cap it and then get stuck into BTL because they figure that BTL is driving owner-occupiers to higher LTIs then what they are trying to achieve is to make sure that owner-occupiers don't run to massive LTIs whilst chasing up house prices, (because they are concerned that an already terrible situation not become even worse).

UK household debt is a key risk to financial stability - http://www.bankofengland.co.uk/publications/Pages/news/2016/301116.aspx We're not seeing the full impact yet. How long can the Bank of England tolerate its current pricing model to absorb those price increases, without raising rates... That depends on individual agendas, egos and overviews of success. My personal perspective is that the current rate cannot be pegged for the next 30 years. The country is in spending frenzy via credit card syndromes. As for house prices, if the internal inhabitants cannot afford, then the country will entice those who can afford e.g. How many premiership football clubs are owned locally? Who are the majority shareholders of the ex-public managed institutions (BT, BG etc...). I'd say unless they rein in the loose monetary policy, junk bond status is our destination.

First post in a long while... But very relevant to how the markets will react and what that will do to the debate. The Government issues debt and a calendar of all the planned issuance dates can be found here http://www.dmo.gov.uk/reportView.aspx?rptCode=D5D&rptName=fa29db60-825e-4dc9-93a1-0ec538b00338||GILT%20MARKET%20(10)&reportpage=Issuance_Calendar It shows the next planned debt issuance by the DMO will be on tuesday 5th July. At that point the market will start to tell the government what it thinks. At the moment HMG is proposing to borrow at 1.5% for 5 years. Whether there will be takers is a key question? Now set aside that they could borrow the money from HSBC more cheaply... Whether Mr Carney will have to use his £250bn to buy them is another question... and before changes to the Bank Return we would have known within a week... now it is hidden from the people. More on that topic here: http://www.housepricecrash.co.uk/forum/index.php?/topic/204683-do-posts-on-hpc-make-a-difference-i-think-so-and-here-is-an-example/?p=1102719084 So we won't know who buys but we will know how easily the government can get the debt away. So look for some nerves in the market (and some brown trouser moments in government) in the days running up to the 5th July. If liquidity becomes a real problem then we might even see the issuance cancelled... (apologies for the scatological metaphor). If the market isn't keen to buy UK Government debt then I think we'll see the pound in all sorts of pressure, we may need that emergency budget that Mr Osborne has gone quiet about, and perhaps, we'll see some mortgage deals withdrawn, and the first signs of winter for anyone with big mortgages. Optobear

Consultation opened today. Have only briefly scanned. Report includes analysis of buy to let market. Anybody in the know over what this will mean for buy to let? http://www.theguardian.com/money/2015/dec/17/bank-of-england-given-powers-rein-buy-to-let-market https://www.gov.uk/government/consultations/consultation-on-financial-policy-committee-powers-of-direction-in-the-buy-to-let-market/financial-policy-committee-powers-of-direction-in-the-buy-to-let-market#the-buy-to-let-market

FreeTrader has already flagged the April 2015 Trends in Lending released today, but I think that the section on buy-to-let could do with a slightly louder shout. As I've flagged on another thread last July Donald Kohn, external member of the Financial Policy Committee, made an odd remark about BTL asserting that it was a safety valve that wasn't entirely safe. I'm going to try to avoid editorialising, but just encourage other posters to dip into Trends in Lending April 2015. The discussion in Trends in Lending is very dry, but one thing that it does go to the trouble of pointing out is that buy-to-let was magicked out of nowhere in about 1996. One interpretation would be that the Bank of England are flagging that the one form of stupid, risky, predatory lending left over from the pre-2008 bubble that is not dead, but is in rude health and growing steadily and quickly. I just think that it is interesting that they went to the trouble of pointing it out.

Many, many years ago, back when Northern Rock was imploding there was a lot of discussion here about what the Bank of England were doing, and it showed up through a historical report that Bank of England had been reporting since 1844 called the Bank Return. When I was looking to update an old thread on the size of the Bank of England (= amount of fictitious money printed), here http://www.housepricecrash.co.uk/forum/index.php?/topic/66763-time-to-celebrate-bank-of-england-got-bigger-again/?p=909399373 I found that the Bank of England have stopped publishing this data because it is viewed as too risky to the financial system: http://www.bankofengland.co.uk/publications/Pages/bankreturn/default.aspx To quote "The 2009 Banking Act removed the legal requirement for the Bank to continue publishing the Bank Return. In 2012, Ian Plenderleith completed a review of the Bank’s provision of Emergency Liquidity Assistance (ELA) to RBS and HBOS in 2008-09. Regarding the future publication of the (non-statutory) Bank Return, the review recommended that the Bank ‘should consider ceasing to do so at an appropriate time, in order to improve its ability to provide covert liquidity assistance in future." It is a bit shocking that the Bank would stop publishing this after 170 years, but maybe is a good example of where posts on site like HPC can have real impact in the financial world. There was little in the media about the "Bank return", so I think that perhaps my posts, and those of others (Freetrader, BLOO LOO and others), might really have made a concrete difference to the actions of the Old Lady of Threadneedle St. I rather hope that any journalists (or MPs) reading this might choose to poke around a bit more, find out who made the recommendation to stop publishing, and maybe raise the question of whether it is really in the public interest for the Bank to have stopped publishing important data that underpins our confidence in our financial system after such a long time? Optobear