P.K. Posted January 14, 2009 Share Posted January 14, 2009 Just been listening to Mandy on R4. He's back in gov because he's sharp. No doubt about it. He didn't mention this though. His new toady right hand man (sorry) to get the banks lending us OUR money. Link to comment Share on other sites More sharing options...
Slim Posted January 14, 2009 Share Posted January 14, 2009 He didn't mention this though. His new toady right hand man (sorry) to get the banks lending us OUR money. Actually, the banks are being given YOUR money. We're not in your country, remember? Link to comment Share on other sites More sharing options...
P.K. Posted January 14, 2009 Share Posted January 14, 2009 Actually, the banks are being given YOUR money. We're not in your country, remember? Very true But by the same token the KSF wedge is over here as well Link to comment Share on other sites More sharing options...
Chinahand Posted January 14, 2009 Share Posted January 14, 2009 He didn't mention this though. His new toady right hand man (sorry) to get the banks lending us OUR money. Actually, the banks are being given YOUR money. We're not in your country, remember? Erm - actually Banks pretty much create money through a multiplier effect based on their (and the regulator's) estimates of required reserves. You give the bank £10 quid and they will lend out somewhere between £50 and £100 [warning these figures may be at a nitpicking level wrong, but the point I am making is still valid] - calling that "YOUR" money is a bit disengenuous. A few years ago banks started pushing up the limits - ie creating closer to £100 of loans for every £10 of deposits. Now they are pulling back and are only creating lets say £50. What is odd is that the politicians are now jumping up and down and screaming from one side of their faces how could the banks have been so reckless, while from the other side of their mouths emerges a demand that banks continue lending at past levels. Talk about wanting their cake and eating it. This crisis was created by reckless lending - what is the government doing to get us out of it - by mandating lending and borrowing to fund it. It just don't make a lot of sense to me. Link to comment Share on other sites More sharing options...
P.K. Posted January 14, 2009 Share Posted January 14, 2009 But the gov want "responsible" lending without the levels of risk that led to the huge bonuses current collapse. Link to comment Share on other sites More sharing options...
Chinahand Posted January 14, 2009 Share Posted January 14, 2009 Erm P.K. I don't think just the government wants that - everyone does - the question is HOW! Nobody knows what the responsible level of lending is - markets can hunt for it empirically, or bureaucrats can mandate it by fiat. But to definitely say that the levels are right is very very difficult. That is exactly the problem the world is facing! Link to comment Share on other sites More sharing options...
P.K. Posted January 14, 2009 Share Posted January 14, 2009 That's basically what Mandy was saying on R4 this morning. It seems they are going to "re-visit" the t&c's they gave the banks. Plus the appointment of another Mervyn is supposed to bring some banking "insights" into gov that they might have missed. One thing's for sure - you can't afford de-regulation! So there has to be some form of regulation surely... Link to comment Share on other sites More sharing options...
Tempus Fugit Posted January 14, 2009 Share Posted January 14, 2009 how much of the financial panic is being caused or exacerbated by the media ? all the daily scare stories depressing the country, disuading people from carrying on their normal life and usual shopping, putting off buying a new car, not booking a holiday etc. With shops closing, but demand for certain goods being still there, will there be an opening for new businesses to open up selling the stuff which is not available elsewhere (if the manufacturers of the goods are still in business, that is) like the loss of kids clothing available from Woollies and Evans. With horrendous rents for Strand St will there be expansions elsewhere where rents are cheaper ? (all the empty shops in the Villa arcade ?) there are things which it is just impractical to shop on-line for, like shoes which you really do have to try the fit before you buy. Link to comment Share on other sites More sharing options...
Sebrof Posted January 14, 2009 Share Posted January 14, 2009 It is vital to try to understand why and just dismissing the bubble as something only the brainless could have missed is as useless as saying there was nothing policy makers could have done to stop the imbalances building up. Vince Cable, Kenneth Clarke, Moulton of Alchemy Partners, Housepricecrash.com, all saw it coming. I saw it coming because, having lost my shirt in 1989, I was more alert to a repeat than some other people. If you know anything of bubbles; if you look at graphs of the house price cycle; if you know that there is a strong, long-term correlation between house prices and incomes; and if you have an ounce of nous, then it is impossible to see the way things are going and not realise that it's all going to end nastily. Sorry, but I can't understand how so many apparently sensible people DIDN'T see it. It was the same in the dot.com boom. People were going round saying: "it's a new paradigm - profits don't matter." Complete nonsense, of course. But too many people are afraid to hold a contrary opinion. S Link to comment Share on other sites More sharing options...
Chinahand Posted January 16, 2009 Share Posted January 16, 2009 That's basically what Mandy was saying on R4 this morning. It seems they are going to "re-visit" the t&c's they gave the banks. Plus the appointment of another Mervyn is supposed to bring some banking "insights" into gov that they might have missed. One thing's for sure - you can't afford de-regulation! So there has to be some form of regulation surely... When people call for more regulations you have got to ask what the regulations and regulators did last time and whether they are going to do things any better next time round - this paper attempts to look at what went wrong - he blames governments! What caused the financial crisis? What prolonged it? Why did it worsen so dramatically more than a year after it began? Rarely in economics is there a single answer to such questions, but the empirical research I present in this paper strongly suggests that specific government actions and interventions should be first on the list of answers to all three. I focus on the period from the start of the crisis through October 2008 when market conditions deteriorated precipitously and rapidly. I draw on research papers, speeches at central banks, and congressional testimony I have given on the crisis during the past two years. In this paper I provide empirical evidence that government actions and interventions caused, prolonged, and worsened the financial crisis. They caused it by deviating from historical precedents and principles for setting interest rates, which had worked well for 20 years. They prolonged it by misdiagnosing the problems in the bank credit markets and thereby responding inappropriately by focusing on liquidity rather than risk. They made it worse by providing support for certain financial institutions and their creditors but not others in an ad hoc way without a clear and understandable framework. While other factors were certainly at play, these government actions should be first on the list of answers to the question of what went wrong. HT to Carpe Diem which adds some data on Federal Regulations showing that regulation etc has increased massively over the last generation or so and hence asks: So here are my questions: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal? What kind of assumptions do politicians and news media make about the intelligence of Americans to expect us to buy the idea that our current mess results from deregulation and free markets? I do not find that assumption flattering. I agree with you P.K. we do need some form of oversight and regulation, but if these people are right and by massively overpriming the pump central bankers, egged on by politicians and governments started this mess then you've got to be very careful handing them more responsibility. I fully admit the bankers when handed these trillions of dollars did murky and unexcusable things with them, but I'm not convinced that the politicians are moving us in the right direction at the moment and they are the ones who wrote and are rewriting the rules the "free-market" bankers worked in! Link to comment Share on other sites More sharing options...
Slim Posted January 16, 2009 Share Posted January 16, 2009 I've no doubt the governments via central banks created the problem, by making credit far too cheap post 9/11 to kick start the economy. Everything else comes from that as far as I can tell. Link to comment Share on other sites More sharing options...
manshimajin Posted January 16, 2009 Share Posted January 16, 2009 I've no doubt the governments via central banks created the problem, by making credit far too cheap post 9/11 to kick start the economy. Everything else comes from that as far as I can tell. ...exacerbated by the surge in oil and other commodity prices which stoked inflation and led to an increase in interest rates that people could not afford as they had borrowed too much at lower rates which then turned these loans 'toxic'. What puzzles me is that whilst businesses and individuals seem to have been affected by the 'credit crunch' governments seem to have access to almost unlimited credit - hopefully there are different rules for governments...if I was to borrow more to pay off my debts and then borrow more to pay off the borrowings it would end in tears. Link to comment Share on other sites More sharing options...
Sebrof Posted January 16, 2009 Share Posted January 16, 2009 I've no doubt the governments via central banks created the problem, by making credit far too cheap post 9/11 to kick start the economy. Everything else comes from that as far as I can tell. Did the UK government instruct NR to offer 125% mortgages? Did they instruct NR to lend on a six times salary multiple? The government is culpable for failing to regulate, but the crisis was caused by the banks, not by the government. Time you got that into your head. S Link to comment Share on other sites More sharing options...
Sebrof Posted January 16, 2009 Share Posted January 16, 2009 What puzzles me is that whilst businesses and individuals seem to have been affected by the 'credit crunch' governments seem to have access to almost unlimited credit - hopefully there are different rules for governments...if I was to borrow more to pay off my debts and then borrow more to pay off the borrowings it would end in tears. House-buyers borrow several times their annual incomes. Even now the UK will not be borrowing 100% of GDP. S Link to comment Share on other sites More sharing options...
Cambon Posted January 19, 2009 Share Posted January 19, 2009 I've no doubt the governments via central banks created the problem, by making credit far too cheap post 9/11 to kick start the economy. Everything else comes from that as far as I can tell. Did the UK government instruct NR to offer 125% mortgages? Did they instruct NR to lend on a six times salary multiple? The government is culpable for failing to regulate, but the crisis was caused by the banks, not by the government. Time you got that into your head. S Actually, in the US the Government regulated that a percentage of all mortgage lending had to be to the sub-prime market offering home ownership to everyone. UK banks simply followed suit. Link to comment Share on other sites More sharing options...
Recommended Posts
Archived
This topic is now archived and is closed to further replies.