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Realistbear

Japan's Premier Newspaper The Japan Times On I R

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http://search.japantimes.co.jp/cgi-bin/nb20060318a8.html

Megabank to lift rates on deposits

Bank of Tokyo-Mitsubishi UFJ said Friday it will offer interest rates of double or more what it currently pays on time deposits of one-year and longer, starting Monday.
The rate increase by the major commercial bank will be its first since April 2001 and
follows the Bank of Japan's recent move away from its ultraloose "quantitative easing" monetary policy,
which has pushed up market interest rates.
Other large banks are expected to match Tokyo-Mistubishi UFJ's rate increase.
The interest rate on 10-year deposits of 10 million yen or more, the highest among time deposit rates offered by the bank, will rise to 0.55 percent from the current 0.25 percent.
The Japan Times: March 18, 2006

If they are starting to pay investors double they are starting to charge borrowers more? The prequel to the B o J's move no doubt and part of the much feared "quantitative easing" which is bankspeak for: TTRTRates.

The ripple begins Monday folks! And just when the B o E thought it was safe to keep rates stagnant.

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wow, is this as big as it looks, or just a 'shot across the bows' of the global economy? What are the immediate responses in the UK likely to be? I'd be grateful if someone with relevant technical expertise could comment please...

Realistbear, thanks for digging out all these articles, it's fascinating following these recent changes to the Japanese carry trade and their impact on global markets together with the evident expertise of many people on this forum in interpretation. Some of the straight factual market information here, that's either not reported in the UK press, or hidden away in an inch of column space makes you feel like the scales have fallen from your eyes....

TLM

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I believe it is just a shot accross the bows. Japan wants to tighten gently but tighten it will whether the US and EU like it or not. They have several trillion $ floating out there that has been spent on HPI and MEW and its payback time!

Just think, all those houses that are "worth" hundreds of thousands will now have to be paid for. There has never been something for nothing or any free lunch. Someone has to pay and its those who borrowed and borrowed.

The MEWers and BTLers will have to meet their benefactor down at the crossroads soon. :o

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Actually 0.55 doesn't sound like a lot to me. When the average interest rate is 5% the banks are still pulling something like 9-1 in borrowings returns to interest costs. Someone who knows something (!) please comment.

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RB,

I've said it before and I'll say it again, your contributions are priceless. I hope this latest development does finally start to have some sort of impact on these illusions of grandeur we have had to cope with in the last five years.

Thanks

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Actually 0.55 doesn't sound like a lot to me. When the average interest rate is 5% the banks are still pulling something like 9-1 in borrowings returns to interest costs. Someone who knows something (!) please comment.

I think it is the start point that makes the impact greater.... It effectively doubles the rate....

Given a 'snowball' effect, how would this project to the UK banks in real terms ????

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Actually 0.55 doesn't sound like a lot to me. When the average interest rate is 5% the banks are still pulling something like 9-1 in borrowings returns to interest costs. Someone who knows something (!) please comment.

I think it may go through the "ripple effect." Bank A in Japan lends to regional bank B in Europe for 2%. Bank B lends to High Street Banks Banks C, D & E for 4%. Banks C, D & E lend money to brokers for 6% and Brokers lend to sheeple for 8%. As IR rise in Japan it will ripple through the economy in ever increasing proportionate amounts.

As things stand the origin of so much borrowed money, Bank of Japan, has zero interest rate. When they move from zero to .25% the ripple effect will begin with the Japanese domestic banks out into the world banking system. A seemingly small hike from .25% to .50% is a 100% increase in IR that will ebentually ripple through the system in a very large wave with end users such as mortgagors paying double what they are paying now, or more.

I am far from an expert in the banking system but I think the general idea is correct. Anyone have any thoughts?

The mass unemployment trigger. So FTB today= no house, tomorrow = no house + no job. Still laughing?

This is probably going to be true, sadly. Its the recession we should have had before Al Greenspan flooded the system with cheap credit. All he did was put off the day of reckoning. The bubble he created is bigger than it would have been if he had left the economic cycle alone and let values return to equilibrium. The net result is that he has allowed pressures to build that, when unleashed, will bring values down far more steeply than would have been the case without overly accomodative lending.

IMHO, it comes down to one simple fact: added value without proportional production is inflationary.

Gordons' "Miracle Economy" is nothing more than an illusion as it depends on borrowing rather than production. A shabby semi-detached house in North London may be priced at 300k but its true value is probably one half of that amount as the amount of production that underpins its present valuation is lacking. In other words, Mervyn King was right when he said that "valuations" are just opinion whereas debt is real. Debt is real because it is related to production. Sadly , the UK has not been producing enough to warrant the highest house prices in the world.

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I think the general idea of value/equilibrium has been picked up:

http://www.iii.co.uk/news/?type=afxnews&ar...&action=article

FRANKFURT (AFX) - Bank for International Settlements general manager Malcolm Knight said the long period of low long-term interest rates, strong monetary growth and rising asset prices may be creating financial imbalances which will be costly in the future.
He told an ECB monetary policy conference that the extraordinarily long period of unusually low real interest rates and the equally long expansion of money and credit and asset price booms in many countries have so far not triggered a significant acceleration in consumer price inflation.
"This seems like a pretty benign scenario but it's a configuration of developments that's not very comfortable, in my view," he said.
"
Have we... unwittingly been allowing financial imbalances to build up that one day might come back to haunt us?" he added
.
He said central banks have achieved a lot in maintaining price stability, but they need to look closely at possible future risks. "Sometimes the toughest challenges to policymaking can arise precisely when you think the battle is won and success is at hand," he said.

I think they are saying that the HPI/MEW will have to be paid for and that there is some financial pain in the pipeline and its coming from our benefactor, Japan.

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The mass unemployment trigger. So FTB today= no house, tomorrow = no house + no job. Still laughing?

I laugh everytime I read your classic quote in my sig. :lol:

if you carry a sense of humour, this site is a funny place to be thanks to some great posters.

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The affect that a rise in Japanese interest rates is likely to have on other (e.g. UK) economies, described by many posters on HPC, seems very credible to people like me who don't know a great deal about economics (but I'm learning!). In addition, all the other fundamentals (affordability, unemployment, oil, Iran, etc.) seem to reinforce the doomsday scenarios painted.

So why isn't everyone panicking and battening down the hatches?

I can understand that the 'sheeple' are insulated from the awful truth by the VIs, but surely there are plenty of intelligent, well informed people in places like the Bank of England, the BBC (Humphries, Paxman, et al, not the property reporting clowns) or even seemingly trustworthy, famous people like Richard Branson who see what's going to happen. Is it credible that these potentially loud voices are silent on the issue? Tony Blair is getting savaged from all angles now in his lame duck phase - he can't have enough control over the media to stop voices being heard on this topic.

I can't help feeling that people like me (generally Bearish in attitude but a bit too cynical to believe much of anything these days) won't really believe in HPC in our hearts until we hear these voices speaking up?

Take for example the dollar. A few days ago some HPC posters were shouting about the exchange rate approaching 1.70 and this being the clearest sign yet of an impending HPC with more falls to come at an accelerated pace (somebody even spoke of parity with the pound). Now a few days later it's going back up.

I'm finding it harder to believe in the imminent HPC with all these false dawns being trumpetted so loudly. It's like a Manchester City fan at the start of every season - this is our year...... then it all goes the way of the pear.

I know we need to look long term and ignore day to day trends, but if things like the BoJ IR rises and Iran Oil Bourse are so critical, then we should see some real reaction in the mainstream media. Am I being naiive here?

LL

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Realistbear, thanks for digging out all these articles, it's fascinating following these recent changes to the Japanese carry trade and their impact on global markets together with the evident expertise of many people on this forum in interpretation. Some of the straight factual market information here, that's either not reported in the UK press, or hidden away in an inch of column space makes you feel like the scales have fallen from your eyes....

TLM

Indeed.

But apparantly, 'the average quality of posting on the MAIN board has declined over the past few weeks', so says he who is using these forums to promote his own website.

Divide and rule Doc.

An ancient strategy.

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Take for example the dollar. A few days ago some HPC posters were shouting about the exchange rate approaching 1.70 and this being the clearest sign yet of an impending HPC with more falls to come at an accelerated pace (somebody even spoke of parity with the pound). Now a few days later it's going back up.

I'm finding it harder to believe in the imminent HPC with all these false dawns being trumpetted so loudly.

I agree with your sentiments. To get significant nominal drops in UK house prices will take something very big to break the spell that sheeple people are under.

It's only rises in Interest Rates that will do it, IMHO. People on this board are looking for the Bank of England's hand to be forced in some way, which is understandable. In the BoE's regular meetings no-one on the MPC has voted for a rise for a long while.

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The mass unemployment trigger. So FTB today= no house, tomorrow = no house + no job. Still laughing?

Too right, pull the trigger, loads of miniumum wage jobs going now and will be going then. :lol:

Kids have no future, regarding well paid jobs, and an affordable houses. Pull the trigger, get a recession out of the way, then lets get some kind of normality. ;)

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The affect that a rise in Japanese interest rates is likely to have on other (e.g. UK) economies, described by many posters on HPC, seems very credible to people like me who don't know a great deal about economics (but I'm learning!). In addition, all the other fundamentals (affordability, unemployment, oil, Iran, etc.) seem to reinforce the doomsday scenarios painted.

So why isn't everyone panicking and battening down the hatches?

I can understand that the 'sheeple' are insulated from the awful truth by the VIs, but surely there are plenty of intelligent, well informed people in places like the Bank of England, the BBC (Humphries, Paxman, et al, not the property reporting clowns) or even seemingly trustworthy, famous people like Richard Branson who see what's going to happen. Is it credible that these potentially loud voices are silent on the issue? Tony Blair is getting savaged from all angles now in his lame duck phase - he can't have enough control over the media to stop voices being heard on this topic.

I can't help feeling that people like me (generally Bearish in attitude but a bit too cynical to believe much of anything these days) won't really believe in HPC in our hearts until we hear these voices speaking up?

Take for example the dollar. A few days ago some HPC posters were shouting about the exchange rate approaching 1.70 and this being the clearest sign yet of an impending HPC with more falls to come at an accelerated pace (somebody even spoke of parity with the pound). Now a few days later it's going back up.

I'm finding it harder to believe in the imminent HPC with all these false dawns being trumpetted so loudly. It's like a Manchester City fan at the start of every season - this is our year...... then it all goes the way of the pear.

I know we need to look long term and ignore day to day trends, but if things like the BoJ IR rises and Iran Oil Bourse are so critical, then we should see some real reaction in the mainstream media. Am I being naiive here?

LL

You're right. Do you think that the banks would still be granting mortgages on this scale and at these fixed rates if they "knew" what realist bear "knows"? :lol: Don't you think successful business leaders would be acting differently? Is RB some kind of financial guru, and no-one else can see the impending doom?

Edited by Casual Observer

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Guest Bart of Darkness

You're right. Do you that the banks would still be granting mortgages on this scale and at these fixed rates if they "knew" what realist bear "knows"? :lol: Don't you think successful business leaders would be acting differently? Is RB some kind of financial guru, and no-one else can see the impending doom?

If the 1929 Wall Street Crash (or the .dot com bust for that matter) had never taken place your point would be a whole lot more convincing. I no longer believe in a "they" who are all-wise, all-knowing.

So why isn't everyone panicking and battening down the hatches?

If one the Japanese bankers had been on X-Factor or was having an affair with Jordan, people might be reading about it now. Even those in the finance sector don't always come across as the most "with it" types (remember how many EAs and mortgage advisors failed to spot that SIPPs had been dropped?).

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If the 1929 Wall Street Crash (or the .dot com bust for that matter) had never taken place your point would be a whole lot more convincing. I no longer believe in a "they" who are all-wise, all-knowing.

Neither do I, which is why I don't automatically believe every snippet that's put forward on this forum as incontravertable evidence of a recession/depression/house price crash. I have seen so many predictions come to nothing on this forum, and yet at the time, they were put forward with such confidence that I genuinely thought that some posters could see things that I couldn't. They are often posted with that smug little winking emoticon! ;)

Edited by Casual Observer

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Neither do I, which is why I don't automatically believe every snippet that's put forward on this forum as incontravertable evidence of a recession/depression/house price crash.

I agree with this as well. I love to see "more grist to the mill" so to the speak, but if like me you've spent over a year at this forum and seen a lot written, then you do start to get a tad immune to it.

Occasionally though you get posts which are of sheer brilliance and word things in ways which put arguments so magnificiently. Reading them kind of gives you a shot in the arm.

That's one of the main reasons I stay here.

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  • 302 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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