Friday’s first report of the Financial Policy Committee of the Bank of England was an important event. This is the new body charged with regulating the banks and main financial institutions. To the tabloids, it is the Bank’s committee to prevent another Credit Crunch. It will absorb and take over many of the duties of the Financial Services Authority and the Bank’s remit to manage systemic risk.
As you would expect the Committee produced a heavyweight document. It had plenty of analysis and factual information. It correctly identified sovereign debt risk as the biggest immediate threat to the whole system of global banks. It pulled no punches about the severity of the Euro crisis.
The worry I had reading it was a simple one. Did these clever and well informed people make a sensible judgement about what they should do – if anything – to manage the risks they rightly perceived? A systemic regulator has to go beyond coming to well informed academic conclusions about the state of the world to deciding if it can and should make an intervention which will reduce the risks being run in a helpful way.
Their prime recommendation to tackle the sovereign debt dangers was to “advise the FSA to ensure improved disclosure of sovereign and banking sector exposures by major UK banks…” I support more disclosure of these positions. Better knowledge allows the market to make more sensible judgements about risks in banks. It also might make bank executives more worried about owning too many government bonds which could go wrong.
However, it does not help solve the sovereign debt problem. Nor does it help the banks in the short term. It will enable market participants to apply discounts to the holdings of government debt by banks to reflect risk of default in the worst cases, and risk of loss owing to rising interest rates in all cases. Meanwhile the regulators continue to score government debt in each country of issue as risk free. The Regulators need to ask themselves tougher questions about how in the medium term they will reflect in their calculations the interest rate risk and credit risk in sovereign bonds. A sharp move to too much caution now would not be helpful, but the longer term position is not sustainable, as these bonds in some cases have been imprudently evaluated and counted.
The second main recommendation of the FPC sees them wrestling with the central conundrum for the UK economy. Is the priority to build up more and more bank capital to prevent another 2008-9, or is it to secure more bank lending to allow faster economic growth?
They say “The Committee advises UK banks that, during the transition to the new Basel III capital requirements, they should take the opportunity of periods of strong earnings to build capital so that credit availability is not constrained in periods of stress.”
This goes to the heart of the current dilemma. The government and public want a more vigorous recovery. That requires more bank credit to pay for more private sector demand and more business expansion. The Regulators want to buttress cash and capital at banks to much higher levels, so they can relax about the impact of any future crisis on banks. You cannot easily do both at the same time.
The crucial advice to banks is unclear. Is now a time of “strong earnings” so they should be putting away more profit for a rainy day? How can you make more money available at times of stress, if a time of stress is defined as a time when little money is available? Isn’ t the danger of all this that the regulators are in effect encouraging the banks to be super prudent at a time of little growth?
The FPC needs to discuss the idea of counter cyclical regulation. Many now genuflect to this idea. It states simply that when economies are running hot and banks are expanding rapidly, the regulators should lean to demanding banks hold more cash and capital to cool things down a bit. When economies are running slowly and banks are not expanding their balance sheets much, the Regulator should relax the advice on cash and capital sensibly, whislt keeping acceptable minimum standards. China, for the last year, has been calling for much higher special deposits, raising interest rates and taking other monetary action to slow her economy because of the inflation and fast growth. She did the opposite in 2008-9 to offset the deflationary effects of the western Credit Crunch.
The FPC needs to have a view of the cycle, and to express this in its cash and capital advice. Of course there should always be acceptable minimum levels. All the main UK banks are well above those today, following a huge squeeze on the RBS balance sheet and appropriate action elsewhere.
I would have liked the FPC to say this:
“The UK economy, in common with several other western economies, is operating below the peak levels of 2007-8, and has been growing slowly since the recession bottom. We judge the current need is to accelerate the growth rate somewhat. We regard an 8% Tier One Capital Ratio as the necessary minimum (compared to 5% hit by some in 2008). We advise banks to exapnd their balance sheets sensibly, offering more Uk lending. We will only be requesting higher levels of cash and capital in the event of sustained resumption of growth above trend for more than a year”
June 26, 2011
“following a huge squeeze on the RBS balance sheet” indeed the government owned RBS Natwest is one bank anti-growth job destruction scheme.
More growth is certainly needed but regulations on UK business and employment are very unfriendly and the government clearly very anti business and heading the wrong direction. The banks might well be more sensible to lend outside the UK/EU where the competition has no such Cameron handicaps.
Do you actually expect “sustained resumption of growth above trend for more than a year”
with these big state, regulate to death, anti business, expensive energy and anti bank lending policies in place?
And labour as the only real alternative in 2015. What is needed is a proper vision and sense of direction basically a vision the direct opposite of the typical arty, lefty, big state, pro EU, pro “renewable” BBC think which has caused so much damage.
June 26, 2011
In case the whole thing passed you by. The current recession was caused by a banking crash of their own making and they where bailed out by the taxpayer as their was little alternative. Not left arty farty EU thinking. Probably the most pro business package ever given to private companies for a mess of their own making. Allowing companies to do want they like is in fact part of the problem.
June 26, 2011
Nonsense it was government failure to regulate banks properly and set sensible risk reward structures and incompetent regulation of the deposit protection scheme and bank licencing. Also poor accounting rules the absurd EU structures and an over large parasitic sector mainly the state sector (but also some areas of the private sector over protected by bad regulation).
Over/bad regulation of business just pushes it abroad or out of business – benefiting no one or over protects it so it can rip people off – Hip packs, banks, the water industry and much of the legal profession as examples.
Good but little regulation is what is needed.
June 27, 2011
So the banks are to be allowed to do what they like under regulation? Lets face any regulation of the banks would have had you screaming blue murder. about stifling enterprise, business knows best, self levelling etc. To say you support regulation is to mean you support regulation of regulators not private industries leaders to do what they like. You believe the church to be infallible and all the undeserving peasants will find their wealth in another life.
The irony is that the private sector has in fact turned out to be the real parasite and blaming the public sector for this is an old Tory trick and I think they will be surprised at the extent of the backlash against this. Information is more freely available and people are more clued up against apologists and fantasists. The banks ripped off people and business for years. Where do you think their oversize profits come from? Profits that have now been privatised with the losses socialised. Is this country to be ran for the benefit of the many or the few and if a companies presence is not to the benefit of the country, then why are they allowed to be here?
Reply: I was the one MP to speak out against nationalising the losses.
June 28, 2011
Good simply regulation, accounting rules that recognised that a piece of paper (even one rated A1 by a fee receiving rating agency) was only a piece of paper and proper setting and control of premiums for the deposit protection scheme and more power to shareholders interest over directors was all that was needed.
To the reply: The rescue was indeed very poorly executed by save the world Brown I agree but what did you expect (etc-ed).
How on earth did Cameron fail to win against him?
June 26, 2011
The current recession was caused by a banking crash of their own making and they where bailed out by the taxpayer as their was little alternative.
Get real.
Cost of government bailout 25 billion with an expected future loss of 25 billion on the guarantees.
Government debts 6,800 billion and rising.
Don’t confuse government borrowing means the same as government debt. They do owe you a state pension.
June 27, 2011
They owe me dole money in the more immediate future.
June 27, 2011
Yup
I agree with almost every word, if not the tone.
June 26, 2011
“The Regulators want to buttress cash and capital at banks to much higher levels, so they can relax about the impact of any future crisis on banks. You cannot easily do both at the same time.”
You can if you keep it simple and honest. Decide on a sensible level of equity against the yardstick of the bailout costs in 2007-2008. Assist “private” debt, via banks, credit card operations and carefully mortgage managed rebates to the tax payer, as one off payments. We did it for the banks and this also reduces their exposure to customer default and improves their equity base. Now lend prudently at circa 5% interest, whilst offering 3% plus to average savers. keep it UK based and sit back to monitor and observe. Don’t print more IOUs in the form of devalued bank notes.
June 26, 2011
John
The banks have been working to inflated margins (difference betwen savers rates and borrowers rates) which have shown a near 300% increase over and above what used to be the norm some years ago in order to shore up their reserve capital.
Having been able to maintain this excessive margin for nearly 3 years, do you really think that they, the banks, will be prepared to give this up easily, and go back to what was considered more normal margins of decades past.
My concern is that increased bank margins are here to stay, and both our savings and businesses are going to pay the price for both depositing and borrowing from banks for a very long time.
The result will be misery for all, when the base rate eventually increases, and inflation continues.
The government may want businesses to borrow more money, but at the rates banks want to charge, many businesses I know are still intent on reducing their exposure to the banks, and trying to consolidate their business to work on lower borrowings. In the future this will hamper expansion, but leave them less exposed to the whims of the banks, who in many cases put draconion modified repayment terms on them a couple of years ago.
Remember, a simple overdraft can be requested to be paid back in full on demand, or a facility withdrawn on a phone call.
June 26, 2011
Quite! The UK has closed for business.
June 26, 2011
Did the FPC say anything about the extremely high level of gross external debt the UK has? Reading around, we appear to have such debt at three to four times higher than the US or any of the PIIGS. If the markets decided to have a go at us, selling off our foreign and domestic assets to pay the lenders, could be a bit of a fire sale; and, a loss of income streams from those assets. All as a result of the Labour debt fuelled phony boom. Should we worry JR?
All the small business people I know, are not looking at growth; they are looking at survival. They don’t want to borrow for expansion or employ full timers because the rules and regulations will bury them if they have less than a sure fire project that will quickly generate loads of cash. Those with cash in the business are hanging on to it, in case of another credit shut down that hits monthly working capital. And then; there is the uncertainty of the government changing the rules and regulations again and again for the worse.
June 26, 2011
Thank you for this.
It is definitely a step forward, though, giving back to the Bank of England some of its traditional authority.
I liked the positive comment at the end too.
It is good to see someone who can discuss the highest and most difficult economic affairs so very lucidly. Well done!
June 26, 2011
It does seem amazing that with the loan-view of money creation that the optimum forms of countercyclical policy at this level have not yet been found. Alongside the requirements for dynamic reserve requirements I would like to see dynamic loan to values for residential property. I do though appreciate that banks may attempt to find ways around these, and it would require care.
As well as a cooling device, I think dynamic loan to value is aligned with the British culture of a house as a savings device. In boom times any new mortgage or modified mortgage LTV would be low, so cooling, restricting mortgage equity withdrawal and reducing the chance of future negative liquidity. In times of bust LTV would be high (even above 100%), so heating, allowing mortgage equity withdrawal (the ‘house’ as savings) and suppporting relocation.
(Aside: On “to go beyond coming to well informed academic conclusions about the state of the world” – this is the same problem as the MPC, though perhaps some indications of, at this stage, being better informed. Advising & recommending is very different to deciding & acting. Put them together and you liable to experience inertia and cognitive biases -analysis paralysis)
June 26, 2011
Very well said. Perhaps those with only academic and no executive skills should stay in academia and not in the executive. Perhaps more likely Sir Humphry has diluted their recommendations on behalf of his old friend in the bank.
At the very least I would have expected sovereign debt tests – in terms of bonds, credit swaps and other soverign bond based derivatives to be included in the banks stress tests. It’s not very difficult to regulate bond based products because there are only a hand full of bonds and tenures to consider. Though I expect the regulators know exactly what the stress test results are and simply won’t publish them because there will be a run on some banks if the public find out.
**Banking is a very rocky boat at the moment**
June 26, 2011
The only test we need is the market. Stop these phoney stress tests by incompetent regulators. Throw the junk on the market, if the market gives it a zero value, then write it off. All this hand wringing by technocrats wearing green eye shades is not working. It is a cover up.
June 27, 2011
You mean have another fire sale? Like in Autumn 2008? LOL
June 27, 2011
Yes.
“Pretend(that the stuff has value) and extend(the terms) and attempt to solve a debt problem with more debt and pray that some miracle arrives”, is working ?! Stupid, is doing the same things and expecting different outcomes. Read Rothbard’s Great Depression to see that Hoover tried all this to attempt to arrest a 1929 collapse of nearly 50% in the market and ended up compounding the problem and by 1932 the markets had lost about 80%. This should be required reading by all politicians.
http://mises.org/rothbard/agd.pdf
We will get 2008 x 10 if we carry on with this road. The colloquialism is “kicking the can down the road”
June 27, 2011
Hoover, who had taking control of finances in 1929, said in a speech in 1932(from Rothbard’s book) :
” Many undertakings have been organized and forwarded
during the past year to meet the new and changing
emergencies which have constantly confronted us . . . to
cushion the violence of liquidation in industry and com-
merce, thus giving time for orderly readjustment of
costs, inventories, and credits without panic and wide-
spread bankruptcies.”
ie he had failed up until then to stop the the rot. Now, Hoover urged more drastic action, and he presented the following program:
(1) Establish a Reconstruction Finance Corporation, which
would use Treasury funds to lend to banks, industries, agri-
cultural credit agencies, and local governments;
(2) Broaden the eligibility requirement for discounting at the
Fed;
(3) Create a Home Loan Bank discount system to revive con-
struction and employment measures which had been
warmly endorsed by a National Housing Conference recently convened by Hoover for that purpose;
(4) Expand government aid to Federal Land Banks;
(5) Set up a Public Works Administration to coordinate and
expand Federal public works;
(6) Legalize Hoover’s order restricting immigration;
(7) Do something to weaken “destructive competition” (i.e.,
competition) in natural resource use;
(8) Grant direct loans of $300 million to States for relief;
(9) Reform the bankruptcy laws (i.e., weaken protection for the creditor).
And it achieved nothing. Any of this look familiar ? The stock market regained its 1929 level in 1953. For 24 years there was no return on investment. In terms of the level of debt, this one is much larger.
June 26, 2011
I am afraid I am out of my depth.
However, my impression is that the FPC is worried that a given bank will not increase its capital in (undefined) good times because it will worry that its competitors will not do the same thing at the same time.
Therefore the FSA or perhaps the BoE will somehow do the rounds with each bank individually giving them comfort that their competitors are indeed playing the game.
I thought we already had set rules on how much capital should be held. Are the regulators planning to generically flex this threshold according to the ebb and flow of the economy or will someone shuffle around the banks offering winks and hints?
I am sorry if I have got this wrong as this is beyond me, but all I see is normal competitive practice being replaced by a cozy club with the regulator being a go-between and this sounds counter-intuitive when it comes to healthy competition.
Please help me as I am confused!
June 26, 2011
I would also add I think the 1774 Life Assurance Act needs to be applied correctly. I believe Governments only permit CDSwaps because they lower their borrowing costs by shifting risk costs to optional CDSwaps – but at the cost of destabilising the entirebanking sector. I think history will show that Governments accepted the risks of instruments of mass destruction so politicians could spend more on the public to improve their chances at the polls.
If you read the text of the act, which is in force, you will see clearly that a CDSwap without an insurable interest is illegal. I see this as clear. Does anybody else not see this?
http://www.legislation.gov.uk/apgb/Geo3/14/48
“From and after the passing of this Act no insurance shall be made by any person or persons, bodies politick or corporate, on the life or lives of any person, or persons, or on any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering; and every assurance made contrary to the true intent and meaning hereof shall be null and void to all intents and purposes whatsoever.
“
June 26, 2011
“”I think history
will show that Governments accepted
the risks of instruments of mass
destruction so politicians could spend
more on the public to improve their
chances at the polls.”
Yes this is a form of graft. These are the same people appointing “regulators” to prevent financial chaos. We have the fox guarding the henhouse.
June 26, 2011
“Whereas it hath been found by experience that the making insurances on lives or other events wherein the assured shall have no interest hath introduced a mischievous kind of gaming … ”
Fascinating.
If it doesn’t apply in the case of CDS’s it should; no loss, no insurance payout.
June 26, 2011
No Insurance to be made on the lives of persons having no interest
So why should a CDS contract be construed as an insurance contract on a person’s life?
June 27, 2011
The Act says:
“or on any other event or events whatsoever”.
June 27, 2011
You going to take the FSA to a judicial review then? I think you’ll find that the civil service is dominated by policy generalists that tend to interpret legilsation they way that best fits their current policy brief, even if that interpretation is highly dubious.
In large swaithes of Whitehall policy trumps statute. Unless Ministers want to introduce a policy that the civil service is at loggerheads with, in which case they will try to persude them that it is illegal.
Only the courts can strike them down, you got a few hundred grand going spare to take them on???
Reply: No, I am not taking them to review – it is a matter of judgement for debate, not a matter of law
June 27, 2011
But the absence of an effective legal remedy does not imply the absence of illegality.
The same is true for the illegality of the eurozone bailouts: somebody with a few hundred grand to spare could seek judicial review of the actions of government ministers in contravention of the EU treaties and therefore in contravention of the Acts of Parliament which approved those treaties, but the cost would be high – the government, with effectively unlimited resources, would do its best to make it as costly as possible – and the prospects of success would be slight.
This is why it was also absurd for the government to claim that private citizens would always have the opportunity to go to court to challenge the minister’s decision that an EU treaty change did not merit a referendum, as MPs pointed out.
June 27, 2011
Was asking Javelin, who had raised a point of law with regard to insurance/cds contracts. But thanks for the reply.
June 27, 2011
Yep ,
Javelin , it depends whether you categorise the CDS as insurance or a bet .
Also whether the CDS is synthetic or the the party which buys it has a genuine interest .
To my mind there is no doubt , it is not insurance . If you tried to obtain even one insurance policy on something you have no interest in you would expect to be prosecuted , let alone multiple ones .
I’m interested in your explanation for why “Governments accepted the risks of instruments of mass destruction” .
Javelin , could you confirm that taxpayer underwritten and even taxpayer owned banks are writing new CDS business ?
What is not in doubt is that in the insurance world no re-insurer would entertain a claim for CDS losses . It is an absolute disgrace that the banks and the Govt foist them on the taxpayer .
The banks are clearly the problem and the Govt’s priority is transparently to fix the banks , not fix the country .
June 26, 2011
Good article.
Under the current system of money creation by private banks for profit and interest.(We should also consider other options like a Bank of North Dakota to renew productive lending whilst the banks repair themselves. At the same time raise interest rates slowly.)
I still think full legal seperation, smaller banks, more independent newly capitalized banks with solvency risk macro regulation as priority. Potential Director liability over a full economic cycle may help- several years after they leave.
How can we set capital ratios without knowing the full position regarding side bets between banks not via a central exchange? OR without full transparency to a regulator as an absolute minimum this including all risk exposures on/off balance sheet and anywhere else!
The Swiss authorities apparently are calling for higher capital 19% , 10%+9% other for some types banks reported as UBS and CS. Why?
Should we not risk assess individual banks and proceed accordingly, to manage systemic risk and individual risk down.
Lack of transparency by any means or vehicle or non use of an exchange should = much higher requirements,reduced distributions, key person pay-caps with key individual trigger penalty taxation.
How does Mr Osbournes balance sheet tax and would it encourage , transparency,system stability or more loosley trust?
A financial tax on Credit default swaps not on an exchange seems a useful start based on the fact if the risk is with the state it has the right to tax it.
June 27, 2011
By all means tax CDS but do not allow taxpayer underwritten banks to either sell or buy CDS .
Taxing taxpayer underwritten banks CDS activities legitimises them and reinforces the principle that the taxpayer is on the hook for bailing out losses .
The Govt does not have the expertise to assess the risks .
Unlike insurance , these instruments (synthetic CDS where you don’t even have to prove an interest or exposure) have no socially useful function and are a zero sum game . They do not create wealth .
Even the likes of Warren Buffet and Charles Munger criticise these sorts of derivatives .
June 26, 2011
It is a fact that the politicians in charge speak out of both sides of their mouths – to demand more bank lending to business on the one hand and that the banks build their financial reserves on the other. No doubt the regulator keeps a wary eye on these same politicians, trying to work out which way the wind is blowing.
If I was responsible for lending policy at one of the UK banks, I would be ultra cautious. Lending beyond the capacity of the bank risks a fatal outcome in todays world. Under lending, and being ultra selective reduces that risk. Survival is more important than failure and certain death. There are too many sovereign debt risks to consider beyond the obvious suspects of Greece, Portugal and Ireland. Europe`s political leadership seems incapable of devising a solution for the eurozone. In the UK it is not at all obvious that the coalition government has the stomach or sense to get a effective grip on the problem of reducing the deficit let alone the national debt. Coalition policies are, if anything, anti-business. A lot more businesses are going to go bust, or shrink their more marginal operations to remain solvent.
June 26, 2011
Do you know anyone sensible that wants to borrow any money? I don’t.
June 26, 2011
Yes loads do the problem is – they cannot do so on reasonable terms and the negative Cameron anti business vision for the future means they are not so optimistic to borrow at rip off rates and still make a profit.
June 26, 2011
As with most committees of this nature, they produce a report with many high sounding words covering every possible situation, but at the same time offering little practical advice. They will then be able to say ” we warned about the possibility of that happening”, under virtually all circumstances, thus ensuring that any blame falls elsewhere. Recommending additional regulation is also a good ploy; if they don’t get it and there’s a problem, “Well we did suggest….”, and if they do get it, it helps to safeguard their jobs and enhance their perceived importance!
Personally, I still believe that the failure of our banks was down to poor quality boards which were dominated by one or two people, which produced misleading annual reports which most certainly did not show the true financial position, along with poor quality auditing which endorsed the financial statements. This, in my view is what needs urgent attention if we are not to have future similar crises. I still can’t understand why no-one was prosecuted under the Companies Act for fraud or somer other offence!
June 26, 2011
The BOE/FPC report made the valid suggestion that banks may be overstating their value by not accounting for the forbearance on under performing home and commercial property loans. The 1985 accounting rules allow companies not to acknowledge such losses until they occur at the time of disposal. It is of concern is that in the three years since the recession the banks nor the government have available figures of the total value/risk of such forbearance. Sir Mervyn is right to require that this be rectified.
The UK property market has avoided the correction seen elsewhere in the world as a result of low interest rates and forbearance. The banks holding these loans have no clue as to the size of the potential delinquencies and if they do they have not disclosed them to law makers nor the regulator.
RBS announced £950m in bonuses and paid 100 of its employees bonuses of over £1m. That is despite having made a loss of £1.1 billion. What would the true losses be if underperforming loans were properly accounted for as suggested in the FPC report? It is quite possible to maintain lending to small businesses if the banking sector paid less in bonuses and dividends.
HSBC had to make provisions for tens of $ billions of sub prime delinquencies in the US but now there is another risk brewing in the over heated Asia property market. Since 2009 Hong Kong property prices have risen by 70%. Which UK banks have the most exposure to the Asia property market and what threat does that pose?
June 26, 2011
I’m unclear about who’s now in charge here.
It’s “advice” to the FSA – an organisation which dismally failed to perform one of its assigned task, the prudential supervision of banks – and “advice” to banks, but who is now empowered to “order”?
Why should I, as a taxpayer, be compelled to pick up the tab for whatever may befall if the FSA and/or the banks choose not to take that “advice”?
June 26, 2011
In the section on forebearance, it states, “19 The FSA had already collected some evidence on the extent of forbearance and associated provisioning practices in the UK residential mortgage market. The results of this initial work had suggested that, in the year to March 2010, the flow of residential mortgages into some kind of forbearance was around four times higher than the stock of mortgages in possession or in arrears of six or more months’ payments.”
It then goes on to say, “21 The Committee agreed to advise the FSA to extend its review of forbearance and associated provisioning practices across UK banks’ household and corporate sector exposures on a global basis.” and, “23 Committee members requested that the FSA report back to the FPC the progress made on this extended exercise, with any initial results, in time for the Committee’s meetings in 2011 Q4.” having previously stated, “18 It was possible, however, that forborne loans were not being consistently identified.
Moreover, the existing accounting approach under IAS39 for incurred losses required objective evidence of impairment and a measurable loss before provisions could be made. Consequently, it was possible that forborne loans were being inadequately provisioned for.”
In other words, we don’t have any up to date information on forebearance and we are not intending to get any until Q4. Furthermore, IAS39 would appear to allow the FPC and the banks to conspire together to ignore the existance of an unquantifed level of toxicity in the banks’ a/cs.
Should not the banks be under a legal obligation to provision for reasonably anticipated losses in respect of their loan book rather than be allowed to hide behind a regiulation that in effect prohibits them from marking to market, whilst allowing the FPC to get away with limp-wristed innuendos so that they could at some time in the future say, “I told you so.”
June 26, 2011
Scrap these useless regulators. Make the bankrupt banks fail, let the sovereigns default. Nothing focuses the corporate mind better than imminent failure and bankruptcy. This politburo mind set of regulation for nirvana is depressing. It has not worked it will not work, but we plough on regardless.
June 26, 2011
Inceed. “Quantative easing” is not a method of promoting real growth it is a way of hiding the fact there is no real growth by pushing a bubble.
June 26, 2011
Am I confusing FPC with MPC ?
Regardless. The overriding function of the BoE appears to be to preserve the British housing market.
Whomsoever oversees the correction in house prices in Britain will preside over the largest downward adjustment in perceived standards of living in history. That will not do.
Sadly it reflects the childish way in which this country operates. An adjustment in house prices would be the best kick up the arse this country could have in motivating it to tackle political issues … or is that why they dare not let it happen ?
June 27, 2011
Have’nt you missed something:
Has’nt the effect of the last Boom & Bust been a huge capital transfer to China? They are sat on $3trn in cash! In theory; Should’nt the banks be following that capital?
Germany/France/ECB: Is’nt the effect of the of the undervalued Euro, and now, Bailouts, resulting in large capital transfers?
Uncertainty; USA $75trn in debt, QE1, QE2, etc … Aaaaaaaaaa! Cloud cockoo land!
Is’nt the UK’s money supply being effected by this?
Suggestion for the FPC; An Academic study is not what I would suggest be relevent; I would focus on a case by case, a Bank by Bank, evaluation and monitoring of each banks solvency and capital base, and let the Banks’ themselves get on with making money!
Is’nt the real problem that we, as a country, are not generating enough wealth (to at least offset the debt bruden), and more importantly, do we have enough banks involved in the wealth generating process? And enough SME’s to effect the “Rebalancing of the Economy”? I believe the BBC recently calculated that we will need to create more than 30,000 new SME’s to effect this rebalancing.
An interesting academic study would be the Business model of the Banks’, asking why they are so focused of the short term. May I suggest that a medium to long term view would require a Relationship with the SME, and more importantly, an understanding of “Project Finance” required to develop Technology. Sorry, but I had to get this in, it is criminal what the Bankers and Politicians are doing to Technology developers and Startups. Elitist Nosense!