Boe Getting Reading For Its Own Helicopter Drop

[AvidFan]

The trick is to get a hotel on Park Lane and Mayfair, and wipe your opponents out in single hit. Pick one up in the forthcoming crash:

http://www.thisismoney.co.uk/investing-and...e_id=3&ct=5

Bank on alert to shore up market

Dan Atkinson, Mail on Sunday

12 August 2007, 9:17am

Alistair Darling was heading home from holiday today to take charge of the UK's response to the global financial crisis.

Must be serious if he's cutting his holiday short...

In what is his first major test as Chancellor, Darling is already in close contact with Mervyn King, Governor of the Bank of England, and Hector Sants, chief executive of the Financial Services Authority.

It is understood the Bank is ready to offer unlimited loans to markets to stave off a further collapse in confidence. The Bank's last high-profile intervention came six years ago after September 11 when it spent £2.5 billion in the money markets.

We're joining the party and no-one's really screamed with pain in the UK yet. This doesn't look good...

[AvidFan]

I like their reference to the "page 1" story - which I'm looking for. Get this:

Jeremy Batstone of stockbroker Charles Stanley said the real danger was from bad debts and fears over where such loans might turn up in the system.

'We do not know how much toxic waste is out there and who is holding it,' he said. 'And what if the problems in the US are signs of worse times ahead and precursor to a depression, the likes of which we have not seen since 1980?'

What if indeed.

[Fudge]

I wondered when the BoE would join the party.

But I thought Mervyn said the other day that they were'nt going to bail out lenders.

Am I just too skeptical, with but is the taxpayer going to end up bailing these lenders out?

[bubbleturbo]

It is very important to understand that the Central Banks are providing LOANS to the market.

They are not simply giving money away. All they are trying to do is buy time at the moment.

[Slumpmonkey Returns]

Am I just too skeptical, with but is the taxpayer going to end up bailing these lenders out?

Er....in a word - Yes!

[AvidFan]

It is very important to understand that the Central Banks are providing LOANS to the market.

They are not simply giving money away. All they are trying to do is buy time at the moment.

It is important to remember this, yes. These are repurchase agreements that must be paid back within a short amount of time. But for that to happen, the banks have to find money from somewhere else.

This still spells meltdown to me.

If all we're looking for is a 30% correction in the capital markets then yes, ultimately, this thing may be containable.

But what if the derivatives market starts to collapse?

What happens if the Fed starts coupon and bill passes to permanently inject more and more money into the market?

Not least of all for the $1 trillion in US liabilities owned by China. They have to honour that debt, or default. It's been denied by the White House in the last week, which means it's more likely to happen.

And then all China needs to do is to start to spend the $1.3 trillion in reserves it has amassed.

Maybe America will get lucky and China will wait until the stock market is undervalued before snapping up $1 trillion in "bargains". A little like they did with Rover, perhaps? At least then all the money won't hit the floor at the same time.

Edited August 12, 2007 by AvidFan

[dinsdale]

It is very important to understand that the Central Banks are providing LOANS to the market.

They are not simply giving money away. All they are trying to do is buy time at the moment.

Yes, but if the loans are 'unlimited' can't they simply keep providing them and buy an unlimited amount of time?

[stormymonday_2011]

I wondered when the BoE would join the party.

But I thought Mervyn said the other day that they were'nt going to bail out lenders.

Am I just too skeptical, with but is the taxpayer going to end up bailing these lenders out?

The credit derivatives market is worth trillions of dollars. The potential scale of the problem is so huge that it may be impossible for taxpayers or anyone else to cover all the bets. We are talking damage limitation at this stage rather than bail outs. Those in the City and elsewhere who think the Central Banks and the government are going to pick up all the tabs are deluding themselves.

[loafer]

Actually, provision of longer term liquidity against sub-prime ABS/CDOs wouldn't be the end of the world for anyone.

What would happen is that liquidity would be redirected at the rest of the banking system, ensuring lesser economic repecussions, whilst the muppets who had done the poor deals in the first place could be charged a suitably high cost of credit to ensure they don't do it again.

This has been the BoE approach so far. They offered liquidity already, but at 100bps over base, and that is expensive, so no-one took them up and found the cash elsewhere (down the back of the executive office sofa, presumably). By contrast the ECB offered liquidity at c.50bps below market cost, so it's not a great surprise it was a popular offer!

[bubbleturbo]

The loans are not unlimited. The current batch were 48 - 72 hours IIRC.

To me, this looks like the start of a deflationary collapse not an inflationary save the day by the central banks. Obviously, the central banks will try and "provide liquidity" in the form of loans and perhaps other instruments, but at the end of the day there is not a lot they can do.

Sentiment has turned in the financial markets and debt is bad now.

[notthereyet]

I wondered when the BoE would join the party.

But I thought Mervyn said the other day that they were'nt going to bail out lenders.

Am I just too skeptical, with but is the taxpayer going to end up bailing these lenders out?

I think you will find they will shore up industry,and the financial sector.

[loafer]

The loans are not unlimited. The current batch were 48 - 72 hours IIRC.

To me, this looks like the start of a deflationary collapse not an inflationary save the day by the central banks. Obviously, the central banks will try and "provide liquidity" in the form of loans and perhaps other instruments, but at the end of the day there is not a lot they can do.

Sentiment has turned in the financial markets and debt is bad now.

I agree.

What is interesting, particularly to those worried about the credit derivative sector, is that corporates have rarely been as healthy as they are now, so it is very hard to see a massive unwinding of the CDS market.

As I have said a few times, it's the PE houses, hedge funds and other highly leveraged investors who are toast, rather than the wider economy (although this will inevitably hurt the financial services sector, and therefore the economy).

People do not need to buy beans and dig bunkers, just watch and enjoy as the imprudent get their just desserts.

[marym]

I think you will find they will shore up industry,and the financial sector.

Since I began waiting for a HPC I have dreaded the thought that I (who didn't get into vast debt) might end up having to bail the muppets out in some way (tax, letting them sleep in my bath etc).

Anyway I can not work out why in America they are planning on dropping interest rates whereas here they are resisting further rises but not planning to cut them. I thought that the major bee in Merv's bonnet is to keep inflation below 2 per cent. so surely rates should be rising!

[DoctorJ]

did everyone read the post from Tuffers yesterday explaining the central bank intervention?

http://www.housepricecrash.co.uk/forum/ind...mp;#entry727049

Edited August 12, 2007 by DoctorJ

[bubbleturbo]

Since I began waiting for a HPC I have dreaded the thought that I (who didn't get into vast debt) might end up having to bail the muppets out in some way (tax, letting them sleep in my bath etc).

Anyway I can not work out why in America they are planning on dropping interest rates whereas here they are resisting further rises but not planning to cut them. I thought that the major bee in Merv's bonnet is to keep inflation below 2 per cent. so surely rates should be rising!

Nobody has said anything about interest rates dropping in the US except Jim Cramer. One thing is certain, if Greenspan was still at the Fed, they would likely have dropped them last week.

[loafer]

I'm not sure - I read a very good one, but could you post a link just to be sure, please.

[bubbleturbo]

did everyone read the post from Tuffers yesterday explaining the central bank intervention?

http://www.housepricecrash.co.uk/forum/ind...mp;#entry727049

linky linky . . .

[Fudge]

Since I began waiting for a HPC I have dreaded the thought that I (who didn't get into vast debt) might end up having to bail the muppets out in some way (tax, letting them sleep in my bath etc).

Anyway I can not work out why in America they are planning on dropping interest rates whereas here they are resisting further rises but not planning to cut them. I thought that the major bee in Merv's bonnet is to keep inflation below 2 per cent. so surely rates should be rising!

As far as I understand the reason for the mass injection of money is so that banks can still use interest rates

to tackle inflation. Only if this measure doesnt work will they start cutting interest rates.

[loafer]

Thanks - I hadn't seen that.

How refreshing to read something sensible, not written by someone with the smell of fresh bunker concrete and the results of overeating beans in their nostrils...

[oracle]

The trick is to get a hotel on Park Lane and Mayfair, and wipe your opponents out in single hit. Pick one up in the forthcoming crash:

You obviously don't play monopoly that well!!

..the trick is to buy all the property you can from pall mall to piccadilly .That way any poor unfortunate sod that ends up going to jail has to pass by ALL your property,so if they don't get charged rent,they end up going to jail again....and if they are lucky enough to throw a double and get out,you can punish them again and again.

[DoctorJ]

I'm not sure - I read a very good one, but could you post a link just to be sure, please.

sorry I edited in the link afterwards.

Interesting article. The money had to be paid back on monday by the looks of things- Should be an interesting day tomorrow, maybe?

[Dames]

They offered liquidity already, but at 100bps over base,

Yes I read that on another site somewhere and if this is the case the BoE would be the lender of last resort? This inturn would maybe point out those who can't raise money else where?

Not sure if this is correct , but seems logical to me.

D

[loafer]

Yes I read that on another site somewhere and if this is the case the BoE would be the lender of last resort? This inturn would maybe point out those who can't raise money else where?

Not sure if this is correct , but seems logical to me.

D

And to me.

The ECB can't tell who, if any, out of the 49 or 62 who called for cash is really in trouble and who just wanted some cheap cash, whereas at least the BoE will know who has really got problems...

[dinsdale]

sorry I edited in the link afterwards.

Interesting article. The money had to be paid back on monday by the looks of things- Should be an interesting day tomorrow, maybe?

What happens if they can't pay the loan back though? What do the central banks do to the defaulters?

[eightiesgirly]

What happens if they can't pay the loan back though? What do the central banks do to the defaulters?

I'm no expert on this so you can just junk this if you think it's tosh, but isn't that why the stock market's up and down like an infants dummy, having to sell off the good stuff at bargain prices to cover the debt.