Sunday, August 19, 2007

Mr Smith – the financial establishment – at his hustling best.

Swallows in the air

David Smith understands the rules of the game.
The finance establishment can lend themselves into a frenzy, then when it all goes t*** up, they can rely on their pals in the central banks to bail them out.
Count "Economists" as part of the establishment.
Message is clear. Only mugs (like us) work normal jobs earning money. The smart guys (finance industry) hustle for it.

Posted by voiceofreason @ 08:43 PM (1109 views)
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4 thoughts on “Mr Smith – the financial establishment – at his hustling best.

  • “Pay growth is so subdued as to be almost surreal.” – hmmm… interesting choice of words when talking about an inflation figure:surreal.

    Of course bear in mind it has been easier to treat the house as an ATM for a while than get the boss to give you a pay rise and we are only just coming off the back of this.

    So, when you turn up at the bank and ask to borrow yet more against your house and they say no – you will be grasping for money where you can get it. A higher salary is a start.

    Most people in this country only care about the base rate because of its impact on their mortgage rate. This will now become disconnected (it has a little already).

    You can’t lend money with such lax terms and such low rates for so long. The bank set the limit and then competition drove the idiot bankers to stumble over each other to lend at these rates, or only a little bit above them.

    One senior UK financier in the last two weeks was seemingly let go for allowing that institutions share of the mortgage market to drop off. He probably saved the firm in the long run. Who knows.

    Start moving your focus to currencies ahead of time. This is where the final game will be played out. Maybe inflation will go a little higher when GBP goes a little lower? Maybe furniture prices could be cut because they are all Chinese imports and GBP went higher for a while? Didn’t take long to fall from around 2.04 to 1.9650 did it? (little higher now)

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  • It seems that there is a great deal of uncertainty around now. Central banks cutting rates in a reactionary fashion against a background of sharply falling stock values smacks of fear and panic. What would have happened last week without the cut? What will happen this week? However, as mentioned above, for homeowners using a house as a cash machine looks set to get a whole lot more difficult with presumably a knock on effect in consumer spending. Add in the step changes in borrowing costs when the 3 and 4 year old 3.5% – 4% fixed rate mortgage deals end and the situation looks even more precarious. With public finances also in a mess the pack of cards is looking very vulnerable indeed.

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  • Central bank intervention does not come without cost – either as deferred inflation, a burden on the taxpayer, or both. You can arrange a short term fix to deal with an immediate crisis, but the pain comes later…

    The BOE’s lack of action is very significant – their mandate would have been compromised if they had followed suit, and they are now the smug guys on the block.

    Don’t think that the central banks can come to the rescue repeatedly – they can’t.

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  • Whadave you god….

    As Austin Tasssletine would say….

    Or more politely, what is he on?

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