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The Masked Tulip

Julian Hodge Institute Releases Quarterly Economic Bulletin

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Julian Hodge is dead now but he is the banker who, back in the late 90s, told all his staff not to touch any derivatives because he forecast that they would oneday collapse the global banking system.

They are arguing that the IRs now need to rise.

Professor Minford argues that interest rates will have to rise this year, claiming the inter- bank rate has “died of irrelevance”.

“Currently the Bank Rate at 0.5% is essentially disconnected from the money creation process,” he said. “The commercial banks are not obtaining funds from the Bank or the inter-bank market to which Bank Rate is connected. Rather they are getting funds from deposits in the wholesale and retail markets by offering considerably higher interest rates. It is as if the inter-bank market has died of irrelevance.

“This is an unhealthy situation since the Bank has lost its power to influence market rates except via its own quantitative easing, QE, in which it goes into the open market for bonds and buys bonds with the money it prints. Traditionally it has used Bank Rate to set market rates indirectly due to its effect on inter-bank rates, but this mechanism no longer works.”

Professor Minford suggests that the solution to this problem is to raise the Bank Rate in modest steps until it “bites” again and begins to have an impact on wider interest rates.

Read More http://www.walesonline.co.uk/business-in-wales/business-news/2011/01/11/julian-hodge-institute-releases-quarterly-economic-bulletin-91466-27962394/#ixzz1Aii4xfJq

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Julian Hodge is dead now but he is the banker who, back in the late 90s, told all his staff not to touch any derivatives because he forecast that they would oneday collapse the global banking system.

They are arguing that the IRs now need to rise.

Read More http://www.walesonline.co.uk/business-in-wales/business-news/2011/01/11/julian-hodge-institute-releases-quarterly-economic-bulletin-91466-27962394/#ixzz1Aii4xfJq

Yes, the base rate is an irrelevance. The market rate is clearly different.

The Bank of England can though, raise interest rates if it chooses. Simply put the base rate above the market rate, and it will be deluged with overnight deposits. It cant really bring rates down though, good thing too.

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Julian Hodge is dead now but he is the banker who, back in the late 90s, told all his staff not to touch any derivatives because he forecast that they would oneday collapse the global banking system.

They are arguing that the IRs now need to rise.

Read More http://www.walesonline.co.uk/business-in-wales/business-news/2011/01/11/julian-hodge-institute-releases-quarterly-economic-bulletin-91466-27962394/#ixzz1Aii4xfJq

That's a good point. I get the feeling the BOE have litterally snapped the control stick and they're going to have to line it back up with reality to get any control back.

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Julian Hodge is dead now but he is the banker who, back in the late 90s, told all his staff not to touch any derivatives because he forecast that they would oneday collapse the global banking system.

They are arguing that the IRs now need to rise.

Hodge was also the err, banker back in the early 1970s in charge of a very suspect Secondary or Fringe bank: which specialised in stoking up house debt by selling punitive second mortgages.

His "Bank" became part of Standard Chartered: whose Chairman was Lord Barber: AKA Anthony Barber: Heath's Chancellor who created the first real Boom-Bust economy predicated on insane property speculation, share manipulation and loose monetary policy.

Shortly after the take over I was meeting a Board Director of Standard Chartered, acquaintance on a charity matter and asked him what Lord Barber thought not only of the acquisition but as part of the terms, Julian Hodge being a full Board Member of Standard Chartered.

He thought for a few seconds, looked at me rather wryly and said, "Lord Barber says it's rather like having a whore in the Boardroom!"

:lol:

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Hodge was also the err, banker back in the early 1970s in charge of a very suspect Secondary or Fringe bank: which specialised in stoking up house debt by selling punitive second mortgages.

His "Bank" became part of Standard Chartered: whose Chairman was Lord Barber: AKA Anthony Barber: Heath's Chancellor who created the first real Boom-Bust economy predicated on insane property speculation, share manipulation and loose monetary policy.

Shortly after the take over I was meeting a Board Director of Standard Chartered, acquaintance on a charity matter and asked him what Lord Barber thought not only of the acquisition but as part of the terms, Julian Hodge being a full Board Member of Standard Chartered.

He thought for a few seconds, looked at me rather wryly and said, "Lord Barber says it's rather like having a whore in the Boardroom!"

:lol:

:lol:

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Yes, the base rate is an irrelevance. The market rate is clearly different.

When I used to follow such things, I noticed that the base rate used to lag the 3-month interbank rate rather than lead it, with a larger lag when going up than down. It led me to believe that either the market would get a 2-3 month tip off or more likely that the base rate setters just copied the libor rate and enjoyed their tea and biscuits once a month.

The only relevance of the base rate is that many mortgage are linked to it, including mine.

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The only relevance of the base rate is that many mortgage are linked to it, including mine.

More importantly, it affects the rate at which banks can borrow off the central bank.

Hence the central bank can provide money at low cost which the commercial banks can then lend on, leveraged, at a massive profit (no surprise that banks are making big profits). Of course the central bank loans are short term but as long as the CB will keep extending more liquidity, that's not an issue.

Essentially, for the big boys of banking the need to raise funds in the market has been largely circumvented. Except for meeting minimum regulatory requirements they aren't the least worried about attracting in savings as they have practically endless amounts of near 'free' loans from the CB to speculate with.

There's next to no link between money and the 'production' that it is supposed to represent. Anyone who believes that this is going to end in anything other than all-out currency debasement is nuts.

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More importantly, it affects the rate at which banks can borrow off the central bank.

Hence the central bank can provide money at low cost which the commercial banks can then lend on, leveraged, at a massive profit (no surprise that banks are making big profits). Of course the central bank loans are short term but as long as the CB will keep extending more liquidity, that's not an issue.

Essentially, for the big boys of banking the need to raise funds in the market has been largely circumvented. Except for meeting minimum regulatory requirements they aren't the least worried about attracting in savings as they have practically endless amounts of near 'free' loans from the CB to speculate with.

There's next to no link between money and the 'production' that it is supposed to represent. Anyone who believes that this is going to end in anything other than all-out currency debasement is nuts.

The B of E is only (As any Central Bank) the "Lender of Last Resort".

Main ongoing liquidity comes from the interbank market: which base Bid and Offer prices around market sentiment: from which comes LIBOR.

To suggest that banks simply indent to the B of E for skads of cheap money and turn it at commercial ruling rates is erroneous.

The facility is exceptional: and short-term.

Liquidity cover used to come from the Discount Market: then Thatcher enacted her so-called Big Bang: but failed to set up (As the Federal Reserve) a Base Rate and a Discount Rate mechanism: which would have made much sense.

Monkeys in charge of a rocket.

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The B of E is only (As any Central Bank) the "Lender of Last Resort".

Main ongoing liquidity comes from the interbank market: which base Bid and Offer prices around market sentiment: from which comes LIBOR.

To suggest that banks simply indent to the B of E for skads of cheap money and turn it at commercial ruling rates is erroneous.

The facility is exceptional: and short-term.

It's supposed to be 'exceptional', supposed to be 'short term' ...

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  • 284 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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