mmmm, smells fishy........
mmmm, smells fishy........
TheBramble
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I agree. I would have to be fairly 'riveted' to go from zero to £10bn myself.
It's not even as if £10bn is going to make much difference to 'long term market stability'. Or even short term for that matter.
257p. Lord.
Government 'guarantee' or not, just what process do those who have left their money in the bank think will be adopted if NR draw stumps and stopped trading tomorrow (or even tonight)? Cash in the hand is a LOT smarter right now. The process of repatriating funds with their rightful owners should closure occur will not be anything like as quick as going into the branch or transferring it out over the internet and I don't think HMG/BoE/FSA will be paying interest the while....
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JTrader
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You should watch the film/documentary "The Money Masters" at google videos. Its 3 hours long, but well worth the watch.
In it they propose a currency solution to the fractional reserve banking system like what exists in The Channel Islands. They introduced their own currency system at some point and it is owned (the currency) by the people, and was introduced on this basis.
This solution worked well from the start, and in the film they say why such a change to a new monetary system would only take a short while to work effectively - within months. This is far from a doomsday scenario of what would happen if fiat currencies were scrapped. Watch the film, its very educational.
http://video.google.co.uk/videoplay...588&start=0&num=10&so=0&type=search&plindex=3
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Atilla
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The function of government and BoE is to provide economic stabilty to facilitate economic activity.
I'm not sure why more is made of it. Pure and simple. Mervyn got it wrong earlier on and now that error has been put right. BoE should have joined the Fed and ECB in releasing monies to the banking system and NR could have been dealt with a little bit more subtlety.
Good man who sees his mistake and makes amends.
I don't deny excess liquidity in the system but it has to be dealt the right way and making an example of NR and destabilising and tarnishing reputation of FSA and the city is not the way.
At this time this governments function is to ensure they win the next election, its as simple as that. I doubt the compensation scheme would have been adjusted otherwise.
As has already been stated pensions were raped, endowlment policies were raped, why not bank depositors.
Cheers
Nut
i 've only read a bit about the famous 10 billion. i want to read a bit more before i give my opinion. so will be back later. i need to put my child to bed.
at first glance , the only thing i can say is that the policy makers have sent wrong signals all over the place, and actually, the signals could be terrible.
they are lucky the fed lowered rates, otherwise, you know where sterling would be
at first glance , the only thing i can say is that the policy makers have sent wrong signals all over the place, and actually, the signals could be terrible.
they are lucky the fed lowered rates, otherwise, you know where sterling would be
Atilla
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i 've only read a bit about the famous 10 billion. i want to read a bit more before i give my opinion. so will be back later. i need to put my child to bed.
at first glance , the only thing i can say is that the policy makers have sent wrong signals all over the place, and actually, the signals could be terrible.
they are lucky the fed lowered rates, otherwise, you know where sterling would be
Whilst they may have postponed the day of reckoning and tightening up of rules I think to bring the crises under control needs recognition.
We are certainly in a much better position than before. Now we also have joint action. Any speculator taking on the FED, ECB and BoE would have to have very deep pockets.
Look at the facts on the ground. Tomorrow is another day. I'm pleased with responses as it was just about the only response.
Watch this space and taxes will follow soon. Blah Blah Blah...
timsk
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A serious thread with intelligent debate from informed members deteriorates into complete cynicism with with one single, acerbic post.
Sadly. I suspect it's also 100% bang on the mark. Atilla's subsequent comment that "they may have postponed the day of reckoning" is equally apposite. You can almost feel the collective sigh of relief from the BoE, the government, investors and depositors alike. "It's all O.K. folks, no need to panic, everything's back to normal now". Yeah, right. Doubtless, this view is echoed across the globe. But, if we're all drowning in a mountain of debt, surely the day of reckoning must be just around the corner - mustn't it? But, in this self serving me me me culture, the only question most peeps will bother asking is 'who will be left standing when the music stops?' Gordon and his cabinet hope it's not them. Northern Rock along and their depositors hope it's not them. Stock investors pray it's not them. (Hold on, they deserve a break as they always get the short straw). And sure as hell we all hope it's not the BoE, otherwise we're all up poo creek in a barbed wire boat. Place your bets now please ladies and gents . . .
Tim.
Atilla
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This problem can be resolved. In the past the BoE independance is based on controlling inflation. That is their sole objective. This thing about economic growth or Feds view is a lot of bull.
The whole problem with stop go policies of the past is that Governments used to have conflicting objectives which were totally unrealistic.
You can't have full employment, economic growth, balance of payments surplus, high investment and low inflation and strong pound. All pretty nice objectives but collectively total bull.
So whilst this restpite is available, governments in Europe and US must curb demand by taxing. Sooner or later no doubt about it. This monetary interest policy is a blunt tool to fix our problems of retarded economies with inflationary pressures and a shocking oil price.
I am Mr Doom and Gloom most of the time but I have high expectations from the City of London. The best financial brains are here and our systems are better than most. Shame Mervyn didn't take advice from the FSA and released some funding but we all make mistakes. Glad the government nudged him in the rear some what.
The reputation and integrity of the City rests on it.
Also, if the Government's and politicians interests are intricately linked with the City then I see no harm in them working to further the interests of the City - even if they have to bend some rules.
My friend Barry flies balloons in his past time. Went up one over Essex country absolutely wonderful. Strongly recommend anybody not gone up one to try it. Cool sensation.
You know you don't have landings in a balloon. You only have crash landings.
The beauty of it is the basket made of wicker beaded together is so strong and flexible that it can stand many crash landings. Strong enough to take the knocks.
Moral of the story is what goes up must come down. Bump or a crash need not be the end of it all.
Steady as she goes...
i have mentioned above several times that this would be a game of signals. well, signals have been played, and a deeper set of issues have arisen in my eyes. they are making the picture rather complicated actually (although i must say, that probably there is a "cultural difference" at play here.....kind of reminds me of my my relationship with my wife ..)
anyway, the whole story has something missing, and it is the deterioration of asset quality. and this is where i smell the potential of something bad cooking. otherwise, the reactions of each policy making body dont make sense. it is just not rational.....unless someone is covering their behind and which comes back to my suspicion of "finger fiddling".
1) BOE have been against bailouts.
2) BOE extends loan to NR (first bad signal)
3) FSA is absent all along....yeah, right, they warn people, but that is rubbish, they didnt do their job.
4) Treasury says NR deposits will be covered in full. Bad signal
5) Treasury says deposits of all banks to be covered in full should it be required. This is the equivalent of writing a put option on the banks assets, and at no cost!!!!!!! Worse signal
6) Consequently, BOE loan to NR starts looking like a capitalisation. until the hard data, this cannot be confirmed, yet, by giving full liability insurance (need confirmation it is full liability, and not only deposits from branch customers....i.e. not bonds) then BOE has effectively put its "claim" on assets at the end of the list, just before shareholders. err......not a good signal.
7) Today there is the 10 billion facility. even a worse signal, because this wont solve a liquidity problem if it is systemic, and will only give incentives of NOT using the facility to independent insitutions that are in trouble.
so, all in all, my takings are the following:
a) BOE has been bullied by the Treasury into something they dont believe in. this is the really awful signal. is the BOE independent or not. this is one of the finer issues at hand
b) BOE clearly does not want to put money into the system due to moral hazzard and lending. This is signalling that there is the risk of "asset quality problems". the questions here really is: is somebody aware of asset quality and this is not public? i am really wondering now.
think this chapter isnt over. i think somebody is covering there derriere, and i think the BOE has been bullied, putting its independence in question.
and finally, also think that if there isnt an "asset quality" issue, then policy makers should be sacked for being incompetent, and by covering their derriere, making things worse.
these are my first thoughts, and they are based on reading the news. i dont have inside information, but have sufficient experience in bank crisis management to have a say.
..)anyway, the whole story has something missing, and it is the deterioration of asset quality. and this is where i smell the potential of something bad cooking. otherwise, the reactions of each policy making body dont make sense. it is just not rational.....unless someone is covering their behind
and which comes back to my suspicion of "finger fiddling".1) BOE have been against bailouts.
2) BOE extends loan to NR (first bad signal)
3) FSA is absent all along....yeah, right, they warn people, but that is rubbish, they didnt do their job.
4) Treasury says NR deposits will be covered in full. Bad signal
5) Treasury says deposits of all banks to be covered in full should it be required. This is the equivalent of writing a put option on the banks assets, and at no cost!!!!!!! Worse signal
6) Consequently, BOE loan to NR starts looking like a capitalisation. until the hard data, this cannot be confirmed, yet, by giving full liability insurance (need confirmation it is full liability, and not only deposits from branch customers....i.e. not bonds) then BOE has effectively put its "claim" on assets at the end of the list, just before shareholders. err......not a good signal.
7) Today there is the 10 billion facility. even a worse signal, because this wont solve a liquidity problem if it is systemic, and will only give incentives of NOT using the facility to independent insitutions that are in trouble.
so, all in all, my takings are the following:
a) BOE has been bullied by the Treasury into something they dont believe in. this is the really awful signal. is the BOE independent or not. this is one of the finer issues at hand
b) BOE clearly does not want to put money into the system due to moral hazzard and lending. This is signalling that there is the risk of "asset quality problems". the questions here really is: is somebody aware of asset quality and this is not public? i am really wondering now.
think this chapter isnt over. i think somebody is covering there derriere, and i think the BOE has been bullied, putting its independence in question.
and finally, also think that if there isnt an "asset quality" issue, then policy makers should be sacked for being incompetent, and by covering their derriere, making things worse.
these are my first thoughts, and they are based on reading the news. i dont have inside information, but have sufficient experience in bank crisis management to have a say.
funny, i'm not the only one thinking along these lines
http://www.ft.com/cms/s/0/5812ed6c-66d8-11dc-a218-0000779fd2ac.html
and guess who's royal derriere sits in a # 10 downing street with initials GB and it aint George Bush :cheesy:
http://www.ft.com/cms/s/0/5812ed6c-66d8-11dc-a218-0000779fd2ac.html
and guess who's royal derriere sits in a # 10 downing street with initials GB and it aint George Bush :cheesy:
A couple of days ago, on the BBC, Darling said that deposits on other banks, not just NRK, would also be guaranteed by the government. Under the circumstances, I can't see how he could say anything different. However, on Yahoo's home page this morning, the Treasury does not say that and I quote:-
"The Treasury said on Thursday guarantee arrangements for existing deposits in Northern Rock Plc would cover all accounts existing at midnight on Wednesday, September 19 and reopened accounts.
(Advertisement)
"Since it would otherwise be unfair to other banks and building societies, the arrangements would not cover any new accounts set up after September 19, other than re-opened accounts," the Treasury said in a statement."
This, to me, suggests that people could transfer to NRK because they were nervous about their own bank not being protected, otherwise there would be no need to do it. If the guarantee does stretch to all other British banks it , also, suggests to me that those changing to NRK after Sept 19 would lose protection.
I think that this should be clarified.
Split
"The Treasury said on Thursday guarantee arrangements for existing deposits in Northern Rock Plc would cover all accounts existing at midnight on Wednesday, September 19 and reopened accounts.
(Advertisement)
"Since it would otherwise be unfair to other banks and building societies, the arrangements would not cover any new accounts set up after September 19, other than re-opened accounts," the Treasury said in a statement."
This, to me, suggests that people could transfer to NRK because they were nervous about their own bank not being protected, otherwise there would be no need to do it. If the guarantee does stretch to all other British banks it , also, suggests to me that those changing to NRK after Sept 19 would lose protection.
I think that this should be clarified.
Split
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spreader_legger
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Split,
I read an editorial that say's all the govt actually did was to direct people's attention to the fact there is already a scheme run to protect depositors and nothing more than that.
Frankly,trying to understand what any of these bodies actually mean is like trying to grab 'scotch mist' , a waste of time. Whether this is because they are contradicting themselves ,or because reporting is duff ,or both ,who knows. Most of my liquidity isn't even here anymore so frankly I really don't care that much .
Spread.
The problem for them now as an ongoing business is probably one of confidence. For the shareholders and employees of the company the best way to rectify that is probably to be merged into another vehicle not 'tainted'.That of course would not help the top management ,but 'the piper' must be paid in that respect. I don't know about the figures ,but they are usually based on the assumption that the existing business model continues to function close to it's recent historic perfromance. A very large assumption under the circumstances given that NR have already stated they have imposed a 50% cap on their lending suggesting a large contraction in their operations.
Looking at the movement in price again on the open ..supply still a real issue ...this is a classic chart example of 'trying to catch a falling knife' ..you just have no idea where a stop should be on any real risk reward basis.
IMO...when I consider the co-ordinated central bank activity this appears to me to be nothing more overall than manouvering to ensure that the overall misallocation of investment get's spread thinner rather than being concentrated in an handful of institutions. It buys them time to let them offload and reduce their current risk level ,BUT I would say it has little to do with the underlying fundamentals of whether will be growth ,or not ,because at this point that is already setdown by the change in psychology on how money will be supplied and demanded. In other words it will be a thinner market anyway and that would be far more dangerous were institutions to go into that with the same level of risk.
I read an editorial that say's all the govt actually did was to direct people's attention to the fact there is already a scheme run to protect depositors and nothing more than that.
Frankly,trying to understand what any of these bodies actually mean is like trying to grab 'scotch mist' , a waste of time. Whether this is because they are contradicting themselves ,or because reporting is duff ,or both ,who knows. Most of my liquidity isn't even here anymore so frankly I really don't care that much
.Spread.
The problem for them now as an ongoing business is probably one of confidence. For the shareholders and employees of the company the best way to rectify that is probably to be merged into another vehicle not 'tainted'.That of course would not help the top management ,but 'the piper' must be paid in that respect. I don't know about the figures ,but they are usually based on the assumption that the existing business model continues to function close to it's recent historic perfromance. A very large assumption under the circumstances given that NR have already stated they have imposed a 50% cap on their lending suggesting a large contraction in their operations.
Looking at the movement in price again on the open ..supply still a real issue ...this is a classic chart example of 'trying to catch a falling knife' ..you just have no idea where a stop should be on any real risk reward basis.
IMO...when I consider the co-ordinated central bank activity this appears to me to be nothing more overall than manouvering to ensure that the overall misallocation of investment get's spread thinner rather than being concentrated in an handful of institutions. It buys them time to let them offload and reduce their current risk level ,BUT I would say it has little to do with the underlying fundamentals of whether will be growth ,or not ,because at this point that is already setdown by the change in psychology on how money will be supplied and demanded. In other words it will be a thinner market anyway and that would be far more dangerous were institutions to go into that with the same level of risk.
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TheBramble
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From Oriel yesterday just before London close.
that was mentioned way early on the discussion and termed as "treasury management 101"
edit: see post #16, 3rd paragraph. (treasury management 101 mentioned in a subsequent post, yet covered and addressed as source of problem)
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No , it isn't overlooked at all. Indeed it is basic accounting to match type of loan to type of investment in maturity terms. Indeed that is exactly why these institutions are where they are right now. All evidenced in recent times where short term rates were higher than long reflecting their activity rather than the fundamentals of risk reward which says time and money equals risk ...basically sum it up ..they have been flipping money...which is fine just like flipping property ,but it all assumes that the recent price movement continues unabated and therefore that there will still be the same number of buyers and sellers to deal with down the road. Greater fool theory is....
Albert ,we both know the way to get out is to make sure you're gone whilst most people still think there's something in it for them and indeed there is ,but it isn't worth chasing..we know that ,but institutions like NR management do not ,or should I say they might know it ,but they let their need to be always in the market over ride commonsense. Chumps.
LOL...let me repeat for option holders
IMO...when I consider the co-ordinated central bank activity this appears to me to be nothing more overall than manouvering to ensure that the overall misallocation of investment get's spread thinner rather than being concentrated in an handful of institutions. It buys them time to let them offload and reduce their current risk level ,BUT I would say it has little to do with the underlying fundamentals of whether will be growth ,or not ,because at this point that is already setdown by the change in psychology on how money will be supplied and demanded. In other words it will be a thinner market anyway and that would be far more dangerous were institutions to go into that with the same level of risk.
edit...and if it isn't clear yet let me spell it out a little more...rallying out of a 'crisis' into a triple witching in terms of buyng time to spread and reduce risk is not my idea of subtlety.
Albert ,we both know the way to get out is to make sure you're gone whilst most people still think there's something in it for them and indeed there is ,but it isn't worth chasing..we know that ,but institutions like NR management do not ,or should I say they might know it ,but they let their need to be always in the market over ride commonsense. Chumps.
LOL...let me repeat for option holders
IMO...when I consider the co-ordinated central bank activity this appears to me to be nothing more overall than manouvering to ensure that the overall misallocation of investment get's spread thinner rather than being concentrated in an handful of institutions. It buys them time to let them offload and reduce their current risk level ,BUT I would say it has little to do with the underlying fundamentals of whether will be growth ,or not ,because at this point that is already setdown by the change in psychology on how money will be supplied and demanded. In other words it will be a thinner market anyway and that would be far more dangerous were institutions to go into that with the same level of risk.
edit...and if it isn't clear yet let me spell it out a little more...rallying out of a 'crisis' into a triple witching in terms of buyng time to spread and reduce risk is not my idea of subtlety.
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