Tag Archives: Bank of England

Too much liquidity, by Alasdair Macleod

It’s as simple as supply and demand. American and British monetary authorities have created far more dollars and pounds than the world demands, so the value of those currencies can only go down against other currencies and against real assets. From Alasdair Macleod at goldmoney.com:

Yesterday, the FOMC released its June statement which only served to remind us that its members are powerless in the face of inflationary conditions. They refuse to accept the price consequences of monetary inflation, still clinging on to an increasingly untenable hope that price rises are “transitory”.

The fact of the matter is that the world is now awash with excess money, the two greatest inflationists being the Fed and the Bank of England. In the US, the Fed’s $120bn monthly QE continues to goose financial asset values, while the US Government has spent a further trillion into circulation from its general account at the Fed. This tidal wave of money threatened money market funds totalling over $4 trillion with negative rates, thereby “breaking the buck”, which is why the Fed has increased its outstanding reverse repos to $721bn.

Interest rates will have to increase far earlier than the Fed admits to stop foreigners dumping dollars, not just for commodities which have nearly doubled since March 2020, but for other currencies as well.

Welcome to the everything bubble, whipped up by American and British neo-Keynesian policy makers who are now increasingly cornered by their own monetary fallacies.

Introduction

Courtesy of the central banks, the world is enmeshed in an everything bubble. We used to be most aware of the Bank of Japan’s extraordinary money printing to corner the Japanese ETF market —but that is no longer a topic of conversation. The Bank of Japan now owns about ¥48 trillion invested in ETFs ($447bn), the most aggressive money-printing stock ramp in the style of John Law and his Mississippi bubble relative to the size of the market in modern times. But today’s monetary planners have dismissed empirical evidence of any dangers as pre-Keynesian, and therefore irrelevant.

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BOE and Fed Continue to Advance Digital Currency Agenda, by Steve Guinness

Anything the Bank of England and the Federal Reserve like should make the rest of us quite wary. From Steve Guinness at steveguinness2.wordpress.com:

Over the past three years a popular narrative has sprung up in the independent media, which says that the UK’s decision to leave the EU and Donald Trump’s rise to U.S. President is somehow evidence of globalists (and by extension central banks) ‘losing control‘. From what I’ve observed this belief is cultivated in large part by those who are ideologically disposed in favour of Brexit and/or Trump, rather than it being indicative of reality.

The suggestion that central banks in particular have ‘backed themselves into a corner‘ on monetary policy is often where attention is focused. But there is a great deal more to central banks than just their stance on interest rates and stimulus measures.

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Libor: Bank of England implicated in secret recording, by Andy Verity

There have been rumors and allegations of central bank machinations in and manipulations of various financial markets for years, but try getting the actual goods on the central banksters. Now, that may be the case, as reported by no less than the BBC. From Andy Verity at BBC.com:

A secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama.

The 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down.

Libor is the rate at which banks lend to each other, setting a benchmark for mortgages and loans for ordinary customers.

The Bank of England said Libor was not regulated in the UK at the time.

The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England.

http://www.bbc.com/news/business-39548313/embed

‘Serious pressure’

Libor, the London Interbank Offered Rate, tracks how much it costs banks to borrow money from each other. As such it is a big influence on the cost of mortgages and other loans.

Banks setting artificially low Libor rates is called lowballing.

In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.

He tells him: “The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.”

Mr Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash.

Mr Johnson says: “So I’ll push them below a realistic level of where I think I can get money?”

His boss Mr Dearlove replies: “The fact of the matter is we’ve got the Bank of England, all sorts of people involved in the whole thing… I am as reluctant as you are… these guys have just turned around and said just do it.”

Mr Dearlove declined to answer questions from BBC Panorama.

To continue reading: Libor: Bank of England implicated in secret recording

Bank of England QE and the Imaginary “Brexit Shock,” by Pater Tenebrarum

Brexit passed and the sky hasn’t fallen in Great Britain yet. From Pater Tenebrarum at acting-man.com:

Mark Carney, Wrecking Ball

For reasons we cannot even begin to fathom, Mark Carney is considered a “superstar” among central bankers. Presumably this was one of the reasons why the British government helped him to execute a well-timed exit from the Bank of Canada by hiring him to head the Bank of England (well-timed because he disappeared from Canada with its bubble economy seemingly still intact, leaving his successor to take the blame).

This is how Mark Carney is seen by the press. A few decades ago no-one would have thought that the drab bureaucrats inhabiting central banks would ever get this much attention, and yet, here we are. It’s like living in a really bad B-movie.

Cartoon via theguardian.com

The adulation he receives is really a major head-scratcher. What has he ever done aside from operating the “Ctrl. Prnt.” buttons? As far as we are aware, nothing. As we have discussed previously, his main legacy is that he has left Canada with one of the greatest and scariest real estate and consumer credit bubbles extant in the world today. Some accomplishment!

With respect to his economic analysis, it seems not the least bit different from the neo-Keynesian/ semi-monetarist mumbo jumbo we get to hear from central bankers everywhere. This is by the way no surprise: they’re an incestuous bunch and have largely received their education at the same institutions.

Most of them seem genuinely convinced that central planning not only works, but is necessary to improve on the alleged drawbacks of an “unfettered market” (i.e., the mythical unhampered free market economy no-one alive today has ever experienced). If one looks closely at what they are actually doing, it soon becomes clear that it is in principle not much different from what John Law did in France in the early 18th century (the difference is one of degree only).

BoE Adopts Loosest Monetary Policy in History

The much-dreaded “Brexit” has now given Mr. Carney the opportunity to do what he does best, namely open the monetary spigots wide. One might as well try to improve one’s health by playing a few rounds of Russian roulette every morning before breakfast. Here is a summary of the measures the Bank of England announced last week (via Reuters):

The Bank of England cut interest rates to next to nothing on Thursday and unleashed billions of pounds of stimulus to cushion the economic shock from Britain’s vote to leave the European Union. Acting on its chief economist’s wish to use “a sledgehammer to crack a nut”, the BoE reduced interest rates by 25 basis points to a record-low 0.25 percent.

This first cut since 2009 was accompanied by a pledge to buy 60 billion pounds ($79 billion) of government bonds with newly created money over the next six months, and two new stimulus schemes. One will buy 10 billion pounds of high-grade corporate debt, the other – potentially worth up to 100 billion pounds – is to ensure banks pass on the full rate cut to borrowers. The Bank said most BoE policymakers expected to cut the main interest rate to even closer to zero later this year, and sharply downgraded its outlook for growth next year.

“By acting early and comprehensively, the (Bank) can reduce uncertainty, bolster confidence, blunt the slowdown and support the necessary adjustments in the UK economy,” BoE Governor Mark Carney told a news conference.

Sterling fell as much as 1.6 percent against the dollar following the announcement, while British government bond yields hit record lows and the main share index rose by 1.6 percent.

Carney said he had unveiled an “exceptional package of measures” because the economic outlook had changed markedly following the Brexit vote. The Bank expects the economy to stagnate for the rest of 2016 and suffer weak growth next year. By cutting rates to the lowest in its 322-year history, the BoE joins the Bank of Japan and the Reserve Bank of Australia, which both undertook unprecedented stimulus in the past week.

Finance minister Philip Hammond welcomed the rate cut and said he and Carney had “the tools we need to support the economy as we begin this new chapter and address the challenges ahead”.

To continue reading: Bank of England QE and the Imaginary “Brexit Shock”