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Metro Bank - It's like 2008 all over again

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16 minutes ago, Si1 said:

Low rates are a central bank response to S24 etc. They are deliberate in order to soften the blow.

That seems a leap too far. There are far bigger things impacting on interest rates than s24. Globally interest rates seem to have peaked for now and we have the added factor of Brexit which could easily push our rates down to near zero for the next 10 years.  

That said hopefully s24 will soon start having a real impact. I am missing all the p118 sob stories.  

Edited by Confusion of VIs

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7 hours ago, Confusion of VIs said:

That seems a leap too far. 

Oh goodness I exaggerated a bit didn't I. I meant it was one factor.

At the same time inflation is another factor. IRs are kept so low also because inflation permits it.

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13 hours ago, dugsbody said:

I don't think real rates will reach those levels again. We are producing excess and therefore inflation is low, therefore the risk free rate is low.

For clarity, my 4-5% figure is Base Rate, so nominal, not real.

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3 hours ago, scottbeard said:

For clarity, my 4-5% figure is Base Rate, so nominal, not real.

I'd not even expect nominal rates at those. The reason being they're converging.

To be clear, I'm talking global indexed. It's clear that individual countries can have sovereign debt crisis and have their hands forced.

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12 hours ago, Confusion of VIs said:

That seems a leap too far. There are far bigger things impacting on interest rates than s24. Globally interest rates seem to have peaked for now and we have the added factor of Brexit which could easily push our rates down to near zero for the next 10 years.  

That said hopefully s24 will soon start having a real impact. I am missing all the p118 sob stories.  

Nope. 

Paused, before continuing up a bit more.

BoE is waaaay behind.

UK base rates need to be 2.5%

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46 minutes ago, spyguy said:

Nope. 

Paused, before continuing up a bit more.

BoE is waaaay behind.

UK base rates need to be 2.5%

spyguy, all good to hear UK base rates need to be 2.5%, BTL IO should be commercial loan at 3% per month. Given its not happening at a pace a sane person can wait out. What else one can do other than not taking out huge debt.

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2 hours ago, Gush said:

spyguy, all good to hear UK base rates need to be 2.5%, BTL IO should be commercial loan at 3% per month. Given its not happening at a pace a sane person can wait out. What else one can do other than not taking out huge debt.

Buy or rent a much smaller house in a cheaper area than you would otherwise have done, and maximise your tax efficient investments elsewhere.

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1 hour ago, Si1 said:

Buy or rent a much smaller house in a cheaper area than you would otherwise have done, and maximise your tax efficient investments elsewhere.

Bingo.;)

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On 15/05/2019 at 13:57, Sour Mash said:

They absolutely would have to print money to cover the likely liabilities of couple of banks going under, even just one big one.   There's only a small amount in the FSCS pot.   Although if one big UK bank actually went bankrupt, it would likely cause the entire UK banking system to implode as almost happened in 2008 (apparently we were hours away).

Far more likely is the printing of enough money to give to the bank such that the bank can stay solvent - converting 'bank credit' (ie. the bank's liabilities) to 'base money' would be massively inflationary.   Bank credit is not money, it's just fungible with it under 'normal' circumstances.

If they literally did have to print money to directly cover deposits, by the time the customers actually received said money in a spendable form it likely would purchase a whole lot less than it did before the bank went bust.

You are correct that if a major bank went bust and it went to the FSCS then the authorities would print the money- the BOE would create it and lend it. 

It is unlikely that a bank today would go bankrupt in the traditional sense because of the bail-in regime. Bond holders would have to pick up the losses and be converted to equity. As such, it is also unlikely that there would be a financial apocalypse of the type that would have occurred had RBS not been bailed out (I know some do not agree with this but they are simply wrong). 

The bank would not close and even if the FSCS was called upon, those with less than £85k in their accounts would not notice anything- the bank would stay open. 

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6 hours ago, Si1 said:

Buy or rent a much smaller house in a cheaper area than you would otherwise have done, and maximise your tax efficient investments elsewhere.

Bingo.

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Quote
Published on 17 May 2019

The Prudential Regulation Authority welcomes the steps taken today by Metro Bank. Metro Bank is profitable and continues to have adequate capital and liquidity to serve its current customer base. It has raised additional capital in order to fund future growth.

https://www.bankofengland.co.uk/news/2019/may/statement-on-metro-bank?utm_source=Bank+of+England+updates&utm_campaign=cc492b99a3-EMAIL_CAMPAIGN_2019_05_17_05_27&utm_medium=email&utm_term=0_556dbefcdc-cc492b99a3-113448013

Nothing like a press release to sooth concerns.

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On 15/05/2019 at 21:41, Confusion of VIs said:

I don't know anyone looking to get into BTL now but I do know lots who got into it 10 years ago. Many of my colleagues seem to have at least 1 BTL and being able to get a 2% mortgage fixed for 5yrs puts off the day of reckoning for at least that long.

For me the fact that these rates are still on offer indicates that the banks are not expecting any rise in interest rates for many years so even many of the Mewing muppets will be able to hang on.

I looks like we will have to rely on s24 to start the ball rolling and hopefully frighten the banks out of the BTL market.

In my “little oasis” in Yorkshire I am still seeing some investment but much more ‘cash’ based. 

Typical examples are someone with £500k is still buying a terrace for £160k (rents for £700 pcm) and the rest in cash and equities. If I suggest a crash, they are happy that the asset, whatever it’s value, is tangible and rentable. Whereas equities are perceived all promises of past performance and little assets underneath, particularly with directors and shareholders pulling out the profits each year and the shops selling and leasing back their properties.  

I guess also when available savings rates are so poor....then the £8400 rent (less the costs many LLs forget) seems too tempting to forgo. 

I know little of London but imagine the high prices make it impossible for this to play out there

Dont get me wrong...prices are wobbling in this North town and I believe they will fall. S24 looks to have had its desired effect...typical BTL (borrow to let) seems to have gone. 

An aside, in this affluent Yorkshire town any existing home painted in Farrow & Ball at least £80k over base price....AND THOSE ARE STILL SELLING. Surely those can’t all be naive new buyers and real cash investors would run a mile...so still trying to find out who bought a modest 3 bed semi for £345k recently when next door was in for £200k. Same footprint...but had posh kitchen, grey tiled bathroom, blinds and bling chandeliers the only difference.

And those new builds are a disaster waiting to happen and a genuine bank risk. What is bewildering is that a new build semi will be £350k, 4 bed detached matchbox £500k. They also can’t be investors surely...I guess owner occupiers? We viewed a few yesterday (we are decorating our house so it was ideas weekend)...streets yet to be tarmac were full of new cars. Houses seem to have 37 to 45 year olds with young (ish) children. Not sure why anyone (banks and buyers) can’t see the future lost value and waste of money.

I also know in the North East some areas which have struggled for 10 years, with prices halving in that time. I guess they are already in a different place....and no investors there at the moment. 

So a bit of a geographical mix at the moment

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On 5/16/2019 at 12:15 PM, spyguy said:

Nope. 

Paused, before continuing up a bit more.

BoE is waaaay behind.

UK base rates need to be 2.5%

will the next Bo E gov be a hawk ? Powell at least tried to be a hawk to Yellen's dove.....a new broom doesnt want to be a parody of the old one....Carney likely knows events will blow up in their faces....i was surprised he extended his stay so i figure he saw it was safe to do so...but no longer.....the fact hes going means a storm is coming

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On 5/14/2019 at 12:36 PM, scottbeard said:

In my opinion, that was true from about 2008 to about 2012.

But now, all these years later, I don't think that's true any more.  I think the big banks are in a vastly more secure position than 2007, not least because now 2008 is within living memory of those working in them, whereas back in 2007 the Great Depression was not.  Now people KNOW that these things can still happen, instead of pretending that they've been consigned to history, they act differently.

But I guess we shall see.  The next recession will be a good test of it, I guess.  But having not had a banking crisis essentially from 1929 to 2008 I don't think we'll be seeing another in the next 30-40 years.  Not until the banks are run by people too young to have been working in 2008.

well they now have bail ins on the statute books....you're a creditor....your deposit is not your money.....

Also the BTL or OO with a stonking big loan is their debt slave with a FULL RECOURSE MORTGAGE......so in effect they are the new Bond Servants and dont even know it until its too late

 

The mortage holder is in effect the asset of the lender and they have a claim on your worth and earnings almost in perpetuity....unless you go bankrupt...not good choices either way

Edited by Spindler

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On 15/05/2019 at 21:34, dugsbody said:

Well, the nice thing about this is we only have to wait to see. I know which way I've bet.

There's a chapter in a Chang Ha-Joon book (23 Things) that argues the productivity growth from the development of the telegraph or washing machine bested anything that has come from the development of the Internet. 

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Agree the 85k guarantee won't be honoured if it came to it: at best the government would sponge it out of taxpayers over a decade, and that won't help you if you're also one of the taxpayers being soaked by the same amount to pay for it. 

As for 2008 feeling, given that banking is international, a crisis in usa banks would destabilise us too. Could start anywhere.

And it's not hard to imagine a bank crisis in usa being caused as collateral effect of this trade war.

I heard that if inflation rises in usa, us banks are toast. Chinese dumping us dollars could do that, for example. 

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3 hours ago, Millaise said:

There's a chapter in a Chang Ha-Joon book (23 Things) that argues the productivity growth from the development of the telegraph or washing machine bested anything that has come from the development of the Internet. 

Lol. That reminds me of a person on here who claimed the invention of the PC hasn't changed the working environment much in the past 40 years.

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6 hours ago, 24gray24 said:

Agree the 85k guarantee won't be honoured if it came to it: at best the government would sponge it out of taxpayers over a decade, and that won't help you if you're also one of the taxpayers being soaked by the same amount to pay for it.

No.  When the Icelandic banks went under the government tried that then realised the London riots would be a tea party compared to the rage it would unleash.  Metro bank might be smaller in terms of deposits, but the precedent otherwise is too dangerous.

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14 hours ago, msi said:

When the Icelandic banks went under the government tried that then realised the London riots would be a tea party compared to the rage it would unleash. 

There's some chronological confusion in that analogy me thinks...

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18 hours ago, msi said:

No.  When the Icelandic banks went under the government tried that then realised the London riots would be a tea party compared to the rage it would unleash.  Metro bank might be smaller in terms of deposits, but the precedent otherwise is too dangerous.

questionable  assumption :  trashing the currency to pay for the debts of the ( privately owned) banks will cause less rioting. 

Personally I don't believe the government can pay if the banks go under. Isn't that the real problem?

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29 minutes ago, 24gray24 said:

questionable  assumption :  trashing the currency to pay for the debts of the ( privately owned) banks will cause less rioting. 

Personally I don't believe the government can pay if the banks go under. Isn't that the real problem?

Course it can.

The BoE can print as much sterling as it wants.

 

 

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On 19/05/2019 at 10:13, Millaise said:

There's a chapter in a Chang Ha-Joon book (23 Things) that argues the productivity growth from the development of the telegraph or washing machine bested anything that has come from the development of the Internet. 

Depends on how you measure productivity.

Also: would be pretty silly to think that washing machines aren't a whole got a whole lot better a whole lot faster than they would have done had the internet not been there to support the industry. And cooking, and food delivery (to stores and more lately to homes), and materials/textiles, and healthcare, and cement, and cars, and paper, and every other form of communications and much much more.

The productivity benefits of the "invention" of the internet - which, when you know anything about these things has been several sequenced re-inventions for decades now - is the enhancement of nearly every thing in our lives. And, yes, many will remind us of the challenges it has faced and introduced ... but the (technological and process) abuse of the internet (the mechanics of most of the foul-ups of the connected age) are being weeded out.

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43 minutes ago, Aidan Ap Word said:

Depends on how you measure productivity.

Also: would be pretty silly to think that washing machines aren't a whole got a whole lot better a whole lot faster than they would have done had the internet not been there to support the industry. And cooking, and food delivery (to stores and more lately to homes), and materials/textiles, and healthcare, and cement, and cars, and paper, and every other form of communications and much much more.

The productivity benefits of the "invention" of the internet - which, when you know anything about these things has been several sequenced re-inventions for decades now - is the enhancement of nearly every thing in our lives. And, yes, many will remind us of the challenges it has faced and introduced ... but the (technological and process) abuse of the internet (the mechanics of most of the foul-ups of the connected age) are being weeded out.

Most of the specific benefits of the Internet seem to be in the field of entertainment and leisure.  And consumer convenience of course.

Definitely, Information Technology generally has delivered massive productivity benefits for almost all areas of industry but the Internet is just part of the field of IT.

 

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1 hour ago, Sour Mash said:

Most of the specific benefits of the Internet seem to be in the field of entertainment and leisure.  And consumer convenience of course.

Definitely, Information Technology generally has delivered massive productivity benefits for almost all areas of industry but the Internet is just part of the field of IT.

 

And the internet is not a "single" thing that could be declared as "invented".

When a telegraph is/was sent:

  • privacy is near 0
  • authenticity of sender is impossible
  • speed is glacial
  • delivery is unknown
  • communications were peer to peer only
    • though, ironically, they were peer-to-anyone-who-happened-to-be-listening
  • content and structure are a nightmare (at least: very constrained)
  • riddled with single points of failure
  • I won't even get started on encryption ...

Also: the telegraph was not an invention in itself, it was the standardised application of a series of inventions.

What were the "specific benefits" of the telegraph that society received? Each and every one of those was either enhanced and improved by the natural extension of the telegraph that is the internet.

Quote

Most of the "specific benefits" of the internet seem to be in the field of entertainment and leisure

- really? I don't see that. The most visible benefits of the internet, maybe. And the simplest perhaps.

Consider: the weaknesses of the telegraph - how many of which remained a part of that technology till it's demise?

Consider: the internet is a series (a very long series) of micro-inventions that largely play on the use of standards - all the way through the OSI model. When the "internet" (or to be honest "packet networks" as it first appeared) was first "used" it had most (all?) of the weaknesses the telegraph had ... but none of the physical constraints ...

Medical advances, speed of recovery services, food quality and safety, financial services (as dirty a "word" as that is), scientific discovery (astronomy, particle physics, electronics, chemistry, microbiology, and many more) - the list is practically endless. Even mathematics itself.

Just because these aren't visible to our day-to-day activities doesn't mean they aren't specific benefits.

And I list here things that could not have been achieved without:

  • specific methods of identity
  • specific methods of (pseudo-)anonymity
  • scalability standards and technology
  • isolation (packet, work and systems)
  • the application of speed (required in modelling)
  • redundancy and reliability
  • automation
  • others

These things - all separate little "inventions" themselves - and probably a lot more - make up the "internet" that everyone so glibly dismisses as something the likes of Wozniak, Jobs, Gates, etc "invented".

As far as I know, none of those guys (or the band-mates that the poster-boy "juornos" roll out as "inventors of the internet") "invented" or discovered the mathematics behind encryption ... or even the relatively much simpler - Type 4 GUIDs.

Heck: Barcodes for one thing. That's a "specific benefit" of the internet. And that is before you get even close to QR codes.

Edited by Aidan Ap Word
with->without typo.

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3 hours ago, spyguy said:

Course it can.

The BoE can print as much sterling as it wants.

 

 

 Not in practical terms it can't.  

The government would have to tell it to; and the government doesn't want a rebellion.

There's also the consideration of how to pay for it... in practical terms it may be cheaper to let the banks go bust. 

 

 

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