Independent
"Households are saving more and trying to pay off debt at the fastest pace in years, raising concerns that the Bank of England's policy of quantitative easing – directly injecting some £175bn into the economy – is not yet having as dramatic an impact on spending and credit growth as some might have hoped. .....Colin Ellis, economist at Daiwa Securities, commented: "We think the case has been made for the monetary policy committee to increase its QE programme – although probably not before November. Whether the Monetary Policy Committee agrees remains to be seen. If anything, the recent signals from the bank, such as Governor Mervyn King's remarks at the Treasury Committee, suggest that the Bank is rather more optimistic than us about the impact of QE."That could mean it ends up doing too little (or moving too late), further lengthening the recovery and costing more jobs. The MPC already made several errors coming into the recession – and it needs to be careful now not to make further mistakes as the economy is showing signs of life."
Wednesday, 30 September 2009
UK recovery 'at risk' from £180bn shortfall
The Times
"In its bi-annual Global Financial Stability Report, the IMF concluded that the damage done to banks by the financial crisis was not as great as it had first feared, but also singled out the British economy as being most at risk of restricted funding.The report said: “In terms of regional vulnerability, the United Kingdom appears most susceptible to credit constraints under our stylized scenario, given its significant reliance on the banking channel and the projected sharp decline in domestic bank balance sheets, as well as substantial public financing needs."
"In its bi-annual Global Financial Stability Report, the IMF concluded that the damage done to banks by the financial crisis was not as great as it had first feared, but also singled out the British economy as being most at risk of restricted funding.The report said: “In terms of regional vulnerability, the United Kingdom appears most susceptible to credit constraints under our stylized scenario, given its significant reliance on the banking channel and the projected sharp decline in domestic bank balance sheets, as well as substantial public financing needs."
Hello Exeter! Let's hear it for QE!
Telegraph
"In a drive to bring dry economic theory to the masses, MPC committee members have been stepping up their public appearances on regional visits with an estimated 50 scheduled this year. .....But the most dedicated promoter of Quantitative Easing (QE) has been Charlie Bean, the deputy governor. In July, he embarked on a week-long UK tour to talk about the policy in Leeds, Newcastle, Bristol, Edinburgh, and 10 other UK towns and cities."
"In a drive to bring dry economic theory to the masses, MPC committee members have been stepping up their public appearances on regional visits with an estimated 50 scheduled this year. .....But the most dedicated promoter of Quantitative Easing (QE) has been Charlie Bean, the deputy governor. In July, he embarked on a week-long UK tour to talk about the policy in Leeds, Newcastle, Bristol, Edinburgh, and 10 other UK towns and cities."
IMF: UK faces credit rationing or higher interest rates unless Bank prints more money
Guardian
"Britain will face credit rationing or higher interest rates unless the Bank of England continues its emergency money creation programme to support growth, the International Monetary Fund warned today.Highlighting the risk of a £180bn funding gap in 2010, the IMF said there was a "significant tension" between the supply of finance from a weakened banking sector and rising demands for funds, primarily caused by the soaring government deficit."
"Britain will face credit rationing or higher interest rates unless the Bank of England continues its emergency money creation programme to support growth, the International Monetary Fund warned today.Highlighting the risk of a £180bn funding gap in 2010, the IMF said there was a "significant tension" between the supply of finance from a weakened banking sector and rising demands for funds, primarily caused by the soaring government deficit."
Tuesday, 29 September 2009
Whats the point of Quantitative Easing ?
John Redwood
"Apparently the Bank and government do not have enough economists of their own – being down to their last thousand or so. Today to make up for the shortage they are inviting in more for a meeting to give them a hand with QE.
....Summary:
QE has been great for a government wishing to hog all the available cash in a pre election year without driving up its own borrowing rate too much. When we stop QE we will find out the true cost of government borrowing. It has done nothing to ease credit for the cash starved private sector. Banks offer very different deposit and loan rates for the private sector, divorced from the artificial money and government bond market rates. QE has helped push up share and bond prices which helps confidence in assets amongst investors.
QE is helping drive down the pound, which might in due course assist in correcting the balance of payments deficit. The absence of action to tackle the government deficit, coupled with the amount of money being created is bad for overall confidence and bad for the value of the currency."
"Apparently the Bank and government do not have enough economists of their own – being down to their last thousand or so. Today to make up for the shortage they are inviting in more for a meeting to give them a hand with QE.
....Summary:
QE has been great for a government wishing to hog all the available cash in a pre election year without driving up its own borrowing rate too much. When we stop QE we will find out the true cost of government borrowing. It has done nothing to ease credit for the cash starved private sector. Banks offer very different deposit and loan rates for the private sector, divorced from the artificial money and government bond market rates. QE has helped push up share and bond prices which helps confidence in assets amongst investors.
QE is helping drive down the pound, which might in due course assist in correcting the balance of payments deficit. The absence of action to tackle the government deficit, coupled with the amount of money being created is bad for overall confidence and bad for the value of the currency."
Spain tips into depression
Telegraph
"Spain is sliding into a full-blown economic depression with unemployment approaching levels not seen since the Second Republic of the 1930s and little chance of recovery until well into the next decade.....The root cause of Spain's trouble is that it joined monetary union before its economy was ready. EMU halved Spanish interest rates almost overnight. Real rates were minus 2pc for much of this decade. Combined private and corporate debt reached 230pc of GDP, funded by French and German savings."
"Spain is sliding into a full-blown economic depression with unemployment approaching levels not seen since the Second Republic of the 1930s and little chance of recovery until well into the next decade.....The root cause of Spain's trouble is that it joined monetary union before its economy was ready. EMU halved Spanish interest rates almost overnight. Real rates were minus 2pc for much of this decade. Combined private and corporate debt reached 230pc of GDP, funded by French and German savings."
Bank of England has no plans to lower rate on reserves
Telegraph
"At a rare briefing at the Bank, Charles Bean, deputy governor, Spencer Dale, chief economist, and Paul Fisher, executive director for markets, clarified the Bank's position after heightened expectation that it was about to follow Sweden's lead by effectively imposing a charge on a proportion of cash that UK banks keep in its vaults."
"At a rare briefing at the Bank, Charles Bean, deputy governor, Spencer Dale, chief economist, and Paul Fisher, executive director for markets, clarified the Bank's position after heightened expectation that it was about to follow Sweden's lead by effectively imposing a charge on a proportion of cash that UK banks keep in its vaults."
Mervyn King's Swedish visit rattles pound over policy fears
Telegraph
"The pound dropped further on Monday as it emerged that Mervyn King had just visited Sweden, where the central bank has imposed a radical negative interest rate policy on its banking system."
"The pound dropped further on Monday as it emerged that Mervyn King had just visited Sweden, where the central bank has imposed a radical negative interest rate policy on its banking system."
What has Gordon Brown got to show for 12 years in power?
Daily Mail
"NOW: This year Britain will borrow £225billion, and Labour plans to increase the national debt to £1.4trillion by 2013. It has yet to set out proposals for cutting spending."
"NOW: This year Britain will borrow £225billion, and Labour plans to increase the national debt to £1.4trillion by 2013. It has yet to set out proposals for cutting spending."
Gordon Brown is finished. And the Labour Party might be too
The Times
"I always enjoy a good funeral,” a Labour MP said as he wandered along the seafront in Brighton. If the polls are to be believed, Gordon Brown is dead and the Government is on the verge of being buried — but is the Labour Party itself also heading for the grave?
......In this country Labour is wobbling as it becomes increasingly financially dependent on the trade unions and its support base shrinks to a core vote. After more than a decade in power, the coalition of working and middle-class voters that swept it to victory in 1997 is fracturing."
"I always enjoy a good funeral,” a Labour MP said as he wandered along the seafront in Brighton. If the polls are to be believed, Gordon Brown is dead and the Government is on the verge of being buried — but is the Labour Party itself also heading for the grave?
......In this country Labour is wobbling as it becomes increasingly financially dependent on the trade unions and its support base shrinks to a core vote. After more than a decade in power, the coalition of working and middle-class voters that swept it to victory in 1997 is fracturing."
What’s the point of the Labour party?
FT
"Britain must close an abyssal 12 per cent fiscal deficit. So the next time that they visit the polling booth, UK electors will be asked to make a choice about which functions the state ought to stop performing as the government struggles to balance the books. This is an epic challenge to which Britain’s trivia-obsessed political class has yet to rise."
"Britain must close an abyssal 12 per cent fiscal deficit. So the next time that they visit the polling booth, UK electors will be asked to make a choice about which functions the state ought to stop performing as the government struggles to balance the books. This is an epic challenge to which Britain’s trivia-obsessed political class has yet to rise."
Monday, 28 September 2009
Another day,another Gordon fightback
John Redwood
"“It’s the economy, stupid.” After twelve years in power the UK is lurching towards bankruptcy. After twelve years to abolish boom and bust we are at the bottom of the biggest bust since the 1930s. After twelve years to “invest” in the public services huge sums of money are being wasted on anything but better schools and hospitals. We have been sold out in the EU, demeaned in our relationship with the USA, and made to fight Middle Eastern wars without the proper military commitment and without credible war aims. More people are out of work and on low benefit based incomes. Yet many in Labour seem to think hiring a few more spin doctors and claiming the Tories want to wreck the place will see them through."
"“It’s the economy, stupid.” After twelve years in power the UK is lurching towards bankruptcy. After twelve years to abolish boom and bust we are at the bottom of the biggest bust since the 1930s. After twelve years to “invest” in the public services huge sums of money are being wasted on anything but better schools and hospitals. We have been sold out in the EU, demeaned in our relationship with the USA, and made to fight Middle Eastern wars without the proper military commitment and without credible war aims. More people are out of work and on low benefit based incomes. Yet many in Labour seem to think hiring a few more spin doctors and claiming the Tories want to wreck the place will see them through."
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