Defeat From The Jaws Of Victory ? ? ?

[narco]

This is disputable:

The strangest 1930s intervention I've heard of was the buying-up and destruction of farm produce (to support prices). Hardly the thing to be doing while people are going hungry...

LOL. So much easier to just mail out stimulus cheques these days.

[narco]

Could someone please point to the statement that the BOE have bought and not lent? I can't find it.

Since when did loan = monetize?

Dooes the BOE make statements about this? I thought it was all done in stealth these days?

[BoomBoom]

LOL. So much easier to just mail out stimulus cheques these days.

Yep, pity everyone didn't use it as spending money on a foreign holiday.

[nmarks]

This meeting reminded me of the news report of that robbery carried out by a bloke in a burka and his mates in balaclavas.

[narco]

Yep, pity everyone didn't use it as spending money on a foreign holiday.

I hear people are paying off their taxes with their tax rebates.

[dstars]

You've missed your vocation Basil.

Not saying your wrong obviously printing money uncontrollably to buy yourself out of the problem will result in what you say. I just dont see the alternative to providing liquidity. Bringing the Banking system down would be catastrophic. And guess what - The perpetrators are flame proof. Distasteful but true. The way forward in my view is to make credit available in return for a wide range of assets put up as collateral with the central banks, with a proviso that the money is not hoarded and used to kick start lending. This, I believe, is what the BoE is proposing.

BTW - what ever happened to - Time to Raise the Rents. Some of you old timers may remember him.

This is the party line. This is the line we'll hear for a while at least. FP got it spot on recently when he recommended banking stocks. I have no idea what the profit point or uncle points will be but they will surely go up for a bit before tumbling down again.

Why would the whole system have to fall? It wouldn't. This is just the line we get spun.

We need banks to fall.

This is a regulatory failure. We need to see banks fall before we can call them banks again. The whole system does not have to fall just because some fall.

There simply has to be a difference between incompetence/corruption and prudence/good practice.

I was a journalist In Mexico City in the aftermath of the peso crisis. The people from the middle to the bottom suffered greatly whilst the bankers made out like bankers.

Until banks fall nothing will be solved.

I believe Bernanke spent too much time studying the Great Depression and the idea that Keynesian blasts might work, if given a chance.

Bernake is getting it wildly wrong. The people who caused this; the people who did not see this coming, are now our saviours?

I don't think so. Buy banks, but tie a string to it. For they will blow up when the next 'crisis' hits. The world economy now has no skin left, anything and everything will be perceived as a lifeboat or a monster.

Edited March 23, 2008 by dstars

[dances with sheeple]

Woman at work tonight, who also told me a bizzare story about a FA, related on another thread, told me that her grandfather died with £25,000 under the bed because he did not trust the banks. If the sheeple all would wake up simultanously and take all their money out of the banks, the banks would have to give us total transparecy and total honesty to gain our trust. All we need for society to function is that payroll is made to the people who really keep us ticking over and most business accounts are allowed to be lubricated? All the rest of the massive froth is going to be blown off? The majority of people have a less than desirable dwelling and a TV to keep them sane, the idea that they have anything of great value invested in the "system" is a VI myth perpetuated by the VI`s that benefit the most from the "system". Whatever the central banks do now to monetize debt is not going to be enough to save this crazy consumption system in it`s present form? The circus is over, I am positive about what can come out of the ashes.

[piece of paper]

I would have had no problem with Merv buying the banks' mortgages - SO LONG AS IT WAS AT A DISCOUNT OF 95% WITH A PROHIBITION ON THEM REPURCHASING THEM.

p-o-p

[dude wheres my house]

bump

[Optobear]

Nobody actually knows what will happen. But the model for no intervention led to the 30's depression.

Ben at the Fed has researched this all his life and believes this is the only/best way. I recon you have to try.

So far the fed has been much more decisive in these matters than the BoE.

Ultimately, no one knows what will happen - even people on here!

If it does - WGAF about house prices.

THe model for no intervention led to the 30's depression? I think it was the exuberant and irrational activity of the 20's that led to the depression. The alternative view to Bernanke's of the 30's depression is that the government dickered around for years, propping up useless institutions and generally prolonging the misery. Only when they stopped interfering, did the economy turn the corner.

One might argue that the 30's depression led to decades of sensible and prudent economic activity, and we have to thank that for our current levels of wealth. The people running the banks and politics have no experience of economic depression, and allowed it to happen precisely because they hadn't personally experienced living through it.

My bet would be that the short and sharp correction would be least painful route for all of us. Can't see the UK taking that though. Any politician advocating that route would need to build political capital during years of ineffectual dickering about. Hence Thatcher in 1979 had the failed years of the 70's in the UK economy to point to, when things got tough. We probably are doomed to 5-8 years of economic misery, boughts of inflation, repossessions, government bail-outs, before someone gets enough support to just turn-off the intervention and let the market sort out the mess.

Optobear

[Optobear]

I was a journalist In Mexico City in the aftermath of the peso crisis. The people from the middle to the bottom suffered greatly whilst the bankers made out like bankers.

Until banks fall nothing will be solved.

I believe Bernanke spent too much time studying the Great Depression and the idea that Keynesian blasts might work, if given a chance.

Good post dstar.

interested to read that you used to be a journalist in Mexico (explains your strong writing style, as well as, no doubt, making you one of the few posters on here to have actually seen the effects of a serious inflationary episode).

I'm just posting to say that on Bloomberg TV (I think it was early last week), there was an analyst saying they are upbeat about the peso, with Mexico enjoying lower inflation than the US. He said the Mexican CB was staffed with ex-Chicago school (monetarist) economists.

[agb41]

THe model for no intervention led to the 30's depression? I think it was the exuberant and irrational activity of the 20's that led to the depression. The alternative view to Bernanke's of the 30's depression is that the government dickered around for years, propping up useless institutions and generally prolonging the misery. Only when they stopped interfering, did the economy turn the corner.

One might argue that the 30's depression led to decades of sensible and prudent economic activity, and we have to thank that for our current levels of wealth. The people running the banks and politics have no experience of economic depression, and allowed it to happen precisely because they hadn't personally experienced living through it.

My bet would be that the short and sharp correction would be least painful route for all of us. Can't see the UK taking that though. Any politician advocating that route would need to build political capital during years of ineffectual dickering about. Hence Thatcher in 1979 had the failed years of the 70's in the UK economy to point to, when things got tough. We probably are doomed to 5-8 years of economic misery, boughts of inflation, repossessions, government bail-outs, before someone gets enough support to just turn-off the intervention and let the market sort out the mess.

Optobear

I think he meant "the model of no intervention led to the deflation seen in the depression". The Fed did intervene, but in exactly the way the market didn't want, raising interest rates (later on...). I completely agree that the short sharp route would likely be best - even obliterating the savings of thousands due to bank collapse may be better than what we will see. Still, it's not my choice, is it....

On the monetization - the money is given as loans and not as cash, but if it is indefinitely rolled over then it is still cash. All the December loans have been rolled over. Interest is still payable, but more loans will be available to those who can't make interest payments. At the eventual collapse, the bank will be nationalised - even if allowed to go bankrupt, the cash has already been spent, the debt already monetized.

Edited March 24, 2008 by agb41

[DEATH]

We don't have a choice but to bail them out, otherwise we'd all go down with them.

So how do we prevent this happening again in future?

Banks are in a unique position in the economy, so how about we put a maximum salary on bankers and

also force the bankers to take bonuses in shares that cannot be cashed in for say 15 years. That would

force them to take a more long term view and keep the system stable.

We could also start taxing the banks more when things settle down to get some of our money back!

Do we really need a private banking system anyway? How about if there was just a fixed amount a money

per person in society, having the money supply increase along the lines of population increase.... We could

keep the building societies. Weren't house prices more stable when the banks couldn't give out mortgages?

Maybe we are doomed the whole boom and bust thing. The greedy people suck up all the money, the poor

people get to the point that they cannot afford to eat then they cut the greedy people's heads off and it all

starts again.

[smiffy1967]

Eventually yes.

When 100 ounces of gold buys the average house.

I would have thought 100 0z of gold would buy you several houses, at least thats what im hoping for since i dont have nowhere near 100 ounces

[AC2]

I would have thought 100 0z of gold would buy you several houses, at least thats what im hoping for since i dont have nowhere near 100 ounces

Several houses for (at current spot price) £46,500? That seems a bit optimistic!

[smiffy1967]

Several houses for (at current spot price) £46,500? That seems a bit optimistic!

ANY GUESS ON HOW MUCH AN OUNCE OF GOLD WILL BE 2 3 TO 4 YEARS FROM NOW? COULD BE 3K OR 10K AND OUNCE

[AC2]

ANY GUESS ON HOW MUCH AN OUNCE OF GOLD WILL BE 2 3 TO 4 YEARS FROM NOW? COULD BE 3K OR 10K AND OUNCE

Or £200 (and I have some).

[nohpc]

or a crash of the financial system, mass unemployment, crime rife, total breakdown of society, Hooverville in Manchester.

Shite choice really but I'd rather the fomer.

It does my head in when people over dramatise things. Look.. no matter what the bank of england does it will not really affect britain that much. British life will go on much the way that it always has done. People will have to cut back on useless luxuries they have lavashed upon themselves for the last few years but even that may not happen.

[Guest tenant super]

Does anyone know why we cannot simply set up a load of new banks and cast the old ones into the abyss.

Edited March 24, 2008 by tenant super

[nohpc]

ANY GUESS ON HOW MUCH AN OUNCE OF GOLD WILL BE 2 3 TO 4 YEARS FROM NOW? COULD BE 3K OR 10K AND OUNCE

oh dear somebody is going to be very very disappointed.

[Dr House]

Mervyn/ BoE publicly and specifically refuted this in today's papers. They said they had been misreported and did not intend to use taxpayer money to bail out banks.

[dstars]

We don't have a choice but to bail them out, otherwise we'd all go down with them.

We are all going down. The only ones not going down are 'them': the ones that caused this.

Indeed, if we were given a choice (which we were/are not) we do not have to bail anyone out. I think you would find, after an initial period of banker hysteria, that they would turn on each other, and start to differentiate themselves. Soon we might find bankers trying to act in a manner that benefited us all. But they first have to see that such a thing is profitable. If we do not make such behaviour profitable they will not act in that way. It is not complicated. If we tell them; suck up as much money as you can in any way you can; take any risks you wish; you are immune from failure; they will act accordingly.

This is not really the fault of the banks; they are simply acting according to their nature as defined by our rules. Lenders were encouraged to encourage fraud. Ultimately this was caused by our central banks, politicians, ratings agencies and regulatory bodies; not the banks themselves; who were tacitly encouraged to engage in behaviour that had to lead to an economic meltdown of sorts. But still, Bernanke is trying to solve a problem of outsized expansion by expanding: It will not work (unless 'work' means more pork for the thieves).

If Bernanke had learned anything from all of his studies he would have seen this coming a long time ago and and tried to introduce measures to offset this insanity; but he did not. (Again, such measures are not rocket science.)

He did not see it coming and now he is playing with the world economy as if it were a boy's chemistry set; trying to replay the faults of the 30s. He thinks he knows what he is doing: he does not.

This is not the thirties. It is not the same. This was entirely avoidable.

I believe, strongly, that he is getting it wrong and in turn our (UK) poodle central bankers are following his lead.

Let the banks fall. We will survive as will many banks. The sector needs to be slashed and burned. It is too fat.

What Bernanke is doing is beyond madness but 'experts' (not a single one of whom saw this from afar) all reckon this is the only option.

It is not. And not only is the not the only option; it is by far the worst option.

Of course, it will look like it is working for a little while, but only a little while.

Our financial systems are run by thieves and incompetents and now we are sending them the message that they cannot fail. All they have to do is more of the same and they will be saved forever and forever.

[AC2]

We are all going down. The only ones not going down are 'them': the ones that caused this.

Quite. I loved this, from the Times article:

One senior banker said: “The governor doesn’t realise that bank profitability and stability of the system go hand in hand."

Translation: "You scum have to keep our bonuses coming, otherwise we'll destroy you."

Nice to see it in black and white.

So... you moved to Switzerland. Was that because you believe the Swiss banking system to be safe® - and considering it's where the BIS and others are located, you're arguably in the heart of the beast - or because it's handy for nuclear fall-out shelters, or because you like mountains?

Seriously (and I love Switzerland myself), I assume it's because you expect massive UK tax hikes, social unrest, greater inequality and other general unpleasantness. I'll be leaving here later this year too, although that was all planned well before the current mess exploded (though partly in the expectation that it would, at some point).

Care to spell out what you think the UK will be like in 3-5 years' time?

Edit: ® should be the letter 'r' in parentheses.

Edited March 24, 2008 by AC2

[Sour Mash]

If Bernanke had learned anything from all of his studies he would have seen this coming a long time ago and and tried to introduce measures to offset this insanity; but he did not. (Again, such measures are not rocket science.)

He did not see it coming and now he is playing with the world economy as if it were a boy's chemistry set; trying to replay the faults of the 30s. He thinks he knows what he is doing: he does not.

Absolutely - the idiots who couldn't see this coming are the last people who can be trusted to 'fix' it.

I used to think that the bulls actually knew what was going down and either had some sort of plan/knowledge about how it was going to be sorted but it appears that in fact they really were so clueless that they genuinely couldn't see what was staring them in the face.

Printing up a load of money to bail out the banks is easy to do. Dealing with the consequences of that isn't going to be so simple.

[dstars]

Mervyn/ BoE publicly and specifically refuted this in today's papers. They said they had been misreported and did not intend to use taxpayer money to bail out banks.

What, then, is a nationalization of a bank? What is 'providing emergency funds' but a bail out? Can I have some of those funds please? What qualifies one for such special treatment? Why no other industry gets protection? Is the banking system holding a gun to our heads?

The taxpayer is going to be expected to pay for this. But they are going to find less and less taxpayers to steal from as more of us leave the country. There are far too many people expecting the taxpayer to fork out for them.

Take, for example, the other end of the scale; the local librarian. She's a risk-averse type of gal so as soon as she could buy a house she did just that. But over the years her avoidance of risk was leveraged into great wealth as property was used as the conduit to flood the economy with money.

But our gal, whilst sitting atop a great pile of wealth, also gets a very nice pension when she's had enough of the sweat and toil of the local library. Then she gets to take it easy at the expense of the taxpayer; someone who may have no pension at all. So people without houses or pensions get to support the houses and pensions of others. Then there's her 'bad sheep' little brother who used to be a heroin addict but now he's on Methadone. He has his own staff of social workers and psychologists and other dole workers that the taxpayer gets to pay for. He even gets to buy his filthy hovel at a 90% discount, lob it to an FTB and then start again. Then there's four to five layers of government overseeing this huge mess.

We have imported cheap labour from Eastern Europe to work and our underclass have become rich. And soon we will blame the imports for all of our troubles. Our government has taken part in illegal wars to pump oil prices and now they are acting like National Socialists as they try to steal our DNA and make us strip at airports and drink mother's milk (lest it contains explosives). I was asked recently by a four-pound-thirty-an-hour security guard at an airport to do just that. My head almost blew off the second time it happened as our flight had been cancelled and we were required to do it all over again "Should have got here sooner" said my erstwhile protector. Upon returning to Switzerland I was waved through. (A European passport is not enough not to be treated like a criminal in the UK but it'll do for a foreign country?)

This is the great tectonic shift. The rise of the East and demise of the West. It cannot be avoided as our leaders cannot be but what they are.

There are places that are very livable in the West but the UK is not one of them. If you have any wealth or talent or ambition at all, leave the UK and go somewhere where you are appreciated.

Perhaps, some years down the road, the UK will have laws in place to stop such things happening (or even laws that allow bad businesses to fall).

Gordon Brown said, when he ordered Northern Rock to be saved, "they have a sound business model". A few weeks later he said "they had an unsound business model". Perhaps he thought nobody would notice the difference of one little 'un', which accounts for 100 billion pounds?

The numbers are so crazy that I can hardly believe them. Time was that the world economy could be in danger with a few billion leveraged, now we hear of tens of trillions.

I do not understand it; and my understanding of such things is deeper than Gordon Brown's (the fact that he got voted to parliament notwithstanding).

The UK is doomed, but the people don't have to be.

I understand that the above is an fragmented rant but cogent arguments are no use in the current situation. Our system cannot be solved so we must act accordingly. The message is: Get Out of the UK. Find a way to make their decisions unprofitable (to them).

There is a world out there that values hard work, skills and talent: Find it, before they milk you dry.