Tuesday, July 5, 2016

Are UK House Owners About To Be Punished For Voting Brexit

Consumers warned on high debt levels as bank regulations eased

The change in rhetoric coming from the B of E almost makes it sound as if they are going to let us go into recession and then blame it on the Brexit vote!

Posted by wdbeast @ 10:10 AM (6616 views)
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9 thoughts on “Are UK House Owners About To Be Punished For Voting Brexit

  • “Given that banks leverage their lending, the FPC said the buffer reduction would allow banks to increase credit supply to households and businesses by £150bn.” But do they want to if the debtors are unlikely to be able to repay. ?

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  • bidin'matime says:

    Bank of England Governor – Handy Guide to the Job:

    Low interest rates => people borrow more
    Things go well=> keep rates low to let people borrow more to enjoy the good life.
    Things go badly => keep rates low to let people borrow more to get by.
    UK interest rates too low to attract enough funds from overseas => no problem – just print what you need.

    Retire with Knighthood

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  • TM (Tuesday, July 5, 2016 01:04PM) the Bank has a cunning plan in that they recommend part of the extra borrowing by consumers is placed with Christian at perfect stock thus giving a guaranteed repayment plan !

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  • techie @1 – and how much of that extra credit/debt would go into industrial investment? The ‘can’t pay’ problem doesn’t seem to bother those lending to Greece, but maybe that’s because Greece has islands, ports, airports, power suppliers and lotteries to pay off its ‘creditors’ (aka speculators/banksters who bought the debt cheaply).

    The BoE is worried about both ‘the high level of UK household indebtedness’ and downward pressure on house prices. In other words they’re worried that the BoE Ponzi bubble could burst.

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  • bidin’matime, not true, BOE does not control interest rates. He said before the referendum that rates would go up on mortgages. They expected folk to dump Gilts, but they were in fact bought, plunging their rates, which is what will force BOE to cut interest rates, because BOE competes with and does not control the market. It is but another player.

    icarus, with the pound low, and the possibility of new export markets, it is possible some of this finds its way to industry. Indeed, that will be inevitable if orders rise due to a falling pound. In other words, we won the currency war.

    As Zero Hedge stated, Brexit is the most bullish thing in town. We have QE, likely interest rate cut and bank buffers cut to zero! Yes, there will be market gyrations as portfolios are adjusted, the pound will fall lower, but there is no sign that Europe is in better state, with Italy having to bail out its banks vs us allowing buffers to be reduced, and now Poland has a vote on freedom of movement whilst Switzerland has already agreed to end it.

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  • libertas @5, 2nd para.

    Intensifying export competition is usually associated with a stagnant/shrinking world trade pie. In the 1930s currencies were devalued by fiat to try to gain advantage in a zero-sum game. Since 2008 a similar competition has arisen, with competitive devaluation via central bank liquidity injections and ‘internal devaluation’ by ”labour market restructuring’ (lower wages and benefits).

    The major problem is financial asset investment instead of real asset investment, but what does go into real asset investment tends more and more to go into this zero-sum competitive export game (China and emerging market economies grew their exports, and thus their domestic economies, at the expense of Europe and Japan (2010-2012); Japan responded with QE and other monetary measures to drive down its currency to try to gain a temporary export advantage (2013-14); Europe then injected liquidity via QE and other measures in response in pursuit of the same (2015); China eventually responded with measures to lower its currency (2015-16); Europe and Japan followed with still more QE programs).

    The problem with focusing what’s left of investment (after financial investments) on exports rather than growing the domestic economy is that the former neglects infrastructure, the development of new industries and the groundwork for future industrial production, and concentrates instead on export investment which is sporadic, volatile and short-lived as other countries respond to the competition. Meanwhile the labour market restructuring that drives down wages and export prices also drives down demand.

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  • icarus, we have Europe’s largest engineering projects such as Crossrail. This government is prioritising infrastructure.

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  • Let’s not get carried away with projects that inflate house prices in Enfield. Read any report on the gap between world infrastructure requirements and the money available or being spent on infrastructure. Public finances for infrastructure are straitened (apart from China’s) and banks (apart from the Japanese ones) are lending less for infrastructure – they’re repairing their balance sheets, and Basel 3 steers banks away from long-term projects. Institutional cash, endowments and sovereign wealth funds are putting less than 1% of their assets into infrastructure (though this may grow). So look at the big picture rather than simply at paper wealth from your asset.

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  • bidin'matime says:

    @Libertas 5:

    I used to believe the same, but Carney made it clear that he would print money to keep rates down; and I used to believe that such a strategy would crash the Pound, but as Icarus points out, we live in an age of competitive devaluation, so the others follow suit. The key word being ‘competitive’: if Carney didn’t print money, then the ECB et al wouldn’t need to print money to keep up (or is that down?) with the UK.

    If the entire world simply doubles its money supply, then little changes in the medium term, except for the shift of wealth from savers to borrowers. But in a ‘race to the bottom’: the full longer term effects – principally collapsing productivity resulting from too much focus on financial assets and not enough on actually generating wealth – will not be felt by the likes of Carney, but by future generations.

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