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Governor Calls For 'simple' Rules


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http://news.bbc.co.uk/1/hi/business/7949483.stm

The Governor of the Bank of England Mervyn King has called for simpler and more robust regulation of financial institutions.

Mr King told bankers in London that an "inability to perceive the true nature of the risks involved" had been at the heart of the financial crisis.

He said that international governments must commit now to long-term reforms, while the political will exists.

Mr King added that stabilising the banking system remained the priority.

In a speech to the Worshipful Company of International Bankers, Mr King said all forms of regulation - whether light or heavy touch - had "failed to some degree to prevent the accumulation of risks".

He said in future, regulators should maintain a clear focus on liquidity and leverage - the issues that matter most when problems arise.

Authorities must keep a check on the inter-connection of banks' activity, which had increased the risks of collapse, Mr King said.

"We need to build into the system some simple and robust impediments to excessive risk-taking," he told the audience at the Mansion House.

He warned against using monetary policy as a means of controlling the financial sector's growth, saying it could increase unemployment and cause falling inflation.

"If we want to slow the growth of the financial sector balance sheet…we can surely do better than raising the Bank rate to a level that undermines the real economy,” he said.

Instead, Mr King said, the authorities needed additional "counter-cyclical policy instruments" to control excessive expansion of the financial sector.

The main priorities for leaders at the forthcoming G20 summit should be restoring confidence, restructuring and recapitalising banks, he said.

There must then also be an "exit strategy" to allow governments to withdraw from their involvement in the sector to help the system return to stability.

But he warned: "A lesson of history is that few generations have been able to avoid a repetition of earlier banking crises.

"The essential problem is that we can no more bind our successors than our predecessors were able to bind us."

He said central banks must play a key role in helping institutions to retain a "collective memory" to prevent further crises.

We haven't learned from history because we have idiots in charge of the system.

Anyway none of this is his fault as Mystic Merv is blameless.

Didn't have the authority you see.

Edited by interestrateripoff
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Anyway none of this is his fault as Mystic Merv is blameless.

Mervyn gave plenty of warning and was always hawkish.. the problem was that the person who had the ability to do something serious about it couldn't hear him over the sound of how awesome he thought he was :rolleyes:

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Mervyn gave plenty of warning and was always hawkish.. the problem was that the person who had the ability to do something serious about it couldn't hear him over the sound of how awesome he thought he was :rolleyes:

I used to like him, but his comments about not being at fault, nobody able to predict it and the constant

failing of the their own inflation predictions has turned me off him.

The attitude is too relaxed, like a man advising the house is on fire but probably nobody is home so it's

not a big deal. Plus the constant " lessons learned" which he was doing back in 2005,06,07,08,09 , there

is a limit to referring to your own mistakes while offering at the same time a calm vision of the future.

Still he does give it 20 years until the next peak.

Indeed,

just before the financial turmoil broke out in the summer of 2007, there was a debate in New

York about the need to follow London’s example of unfettered markets if they were not to

lose ground

..........

After another twenty years or so, memories of the Panic of

2008 will have faded, and the regulations put in place in its wake will no doubt be seen as

old-fashioned, inhibiting of the potential of the City, and as ripe to be swept away as was the

Glass-Steagall separation of commercial and investment banking in the United States a few

years ago.

http://www.bankofengland.co.uk/publication...peaker.htm#king

Perhaps he is just making the same mistake he's made before, overplaying the stability and

glossing over the collapse of the UK.

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I used to like him, but his comments about not being at fault, nobody able to predict it and the constant

failing of the their own inflation predictions has turned me off him.

Indeed,

just before the financial turmoil broke out in the summer of 2007, there was a debate in New

York about the need to follow London’s example of unfettered markets if they were not to

lose ground

..........

After another twenty years or so, memories of the Panic of

2008 will have faded, and the regulations put in place in its wake will no doubt be seen as

old-fashioned, inhibiting of the potential of the City, and as ripe to be swept away as was the

Glass-Steagall separation of commercial and investment banking in the United States a few

years ago.

Have to agree with him there.. I think that is exactly what will happen. Future generations knowing better than their fore-fathers is exactly the reason we have these cycles.

I don't think he was perfect, but I don't think there is anybody out there who would have done a better job.. except possibly Peter Schiff :lol:

Edit to add: Look at some of this group that used to petition him.. I am sure this is only one of many.. everyone was demanding low interest rates and more cheap credit. Imagine the amount of political will it would have taken to cause deliberately cause a credit crunch!

http://www.austinmitchell.org/monetary-pol...-king-june-2006

Edited by libspero
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http://news.bbc.co.uk/1/hi/business/7949483.stm

We haven't learned from history because we have idiots in charge of the system.

Anyway none of this is his fault as Mystic Merv is blameless.

Didn't have the authority you see.

Do you honestly believe that an institution as old as the BoE didn't understand what was going on? Give me a break. They are just a bunch of criminals scamming you. That's all they've ever been. The banks are the state.

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I used to like him, but his comments about not being at fault, nobody able to predict it and the constant

failing of the their own inflation predictions has turned me off him.

The attitude is too relaxed, like a man advising the house is on fire but probably nobody is home so it's

not a big deal. Plus the constant " lessons learned" which he was doing back in 2005,06,07,08,09 , there

is a limit to referring to your own mistakes while offering at the same time a calm vision of the future.

Agree 100% he has proved to be a total let down .

Quotes like "House prices are a matter of opinion debt is real" just amounted to nothing more than cheap talk .

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His advice to banks applies equally to households :

He said in future, regulators should maintain a clear focus on liquidity and leverage - the issues that matter most when problems arise.

A lot of households are going to struggle as much as banks have for the very same reasons : excessive leverage and inadequate liquidity in a difficult environment.

Now that we have begun the downward spiral known as the debt deflation trap, the warnings about leverage and liquidity are going to resonate even more loudly in many households.

House prices will remain under pressure until households have finished their deleveraging and reliquification processes. This will take 5 to 10 years unles we get some severe inflation.

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His advice to banks applies equally to households :

A lot of households are going to struggle as much as banks have for the very same reasons : excessive leverage and inadequate liquidity in a difficult environment.

Now that we have begun the downward spiral known as the debt deflation trap, the warnings about leverage and liquidity are going to resonate even more loudly in many households.

Anyone who isn't trying to repay there debt down is an idiot.

Most people don't get that paying money of your mortgage has a exponential effect over the life of the mortgage as more of your fixed repayment goes towards paying down the debt rather than servicing.

Just paying of £10 a month can save you several thousand pounds over the life of your mortgage.

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Do you honestly believe that an institution as old as the BoE didn't understand what was going on? Give me a break. They are just a bunch of criminals scamming you. That's all they've ever been. The banks are the state.

they did, they were part of it everyday. Gordon gave the job of regulating and controlling it to a useless FSA and guidance of a light touch from the Treasury.

the Governor raised his eyebrow at banks shenanigans, the FSA thought it was time for a few high powered breakfast meetings and trips to the Opera, the Treasury saw a revenue opportunity.

The banks saw nothing and were encouraged as the breakfast meetings were very nice and the treasury boys were delighted.

Edited by Bloo Loo
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Anyone who isn't trying to repay there debt down is an idiot.

Most people don't get that paying money of your mortgage has a exponential effect over the life of the mortgage as more of your fixed repayment goes towards paying down the debt rather than servicing.

Just paying of £10 a month can save you several thousand pounds over the life of your mortgage.

Agreed.

Unfortunately a lot of idiots have done well in the short term (the last decade) and are in the process of finding out that there is no such thing as money for nothing in the long run.

I know that some might quibble about defining a decade as the short run but I take a multi-generational approach to a family's well being.

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  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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