Ex Bank of England Gov. tells the truth

[outtamojo]

“The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession, the former Bank Governor Eddie George admitted yesterday. ”

http://news.independent.co.uk/business/news/article2377729.ece

And some say there are no conspiracies….

[(former)FormerSanDiegan]

And some say there are no conspiracies….

Let’s see, the MPC adds liquidity to the system when eyeing a slowdown in order to stave off recession in the near term. You call that a conspiracy ?
I believe it’s called monetary policy.

Granted they added too much fuel to the fire this time, but I don’t think what this guy admits to could be considered a conspiracy.

[outtamojo]

ok, how about a bunch of old fogies getting together and setting policy so that their wealthy business friends don’t have to endure a recession and selling out the younger generation in order to do this?

“He said he was “very conscious” that stimulating consumer demand could give rise to problems in the future. “My legacy to the MPC, if you like, has been ‘sort that out’,” he said. Under Lord George’s governorship, rates were slashed from 6 per cent in 2001 to 3.5 per cent in 2003, pushing house price inflation above 25 per cent and high street spending growth to its highest since the late-Eighties boom.”

[ucodegen]

ok, how about a bunch of old fogies getting together and setting policy so that their wealthy business friends don’t have to endure a recession and selling out the younger generation in order to do this?

Actually, wealthy old fogies can handle a recession fine. All they have to do is put money in assets that would not deflate during a recession and then transfer them back in when it bottoms. It is the people with few liquid assets that get burned during the recession (generally middle class). The wealthy have access to hedge funds, particularly those that specialize in profiting from downturns and recessions (min deposit $100k or more). The statement you made is inaccurate and misleading.

It might have been instead to avoid being ‘voted’ out of office. Recessions are not popular with the general populace.

[capeman]

Hmmm… all of this happening around the same time UK politicians align with our noble president (yes, I don’t feel it deserves a capital P anymore!) to strike up illegitimate wars for power. If our housing bubble had never happened, then we would have been leading the largest global recession in history at the beginning of bush’s first term. Tough to get illegitimate wars approved when the people are pissed off and worried about how they are going to pay for their accustomed lifestyles. The only difference between the UK situation and the eerily similar one in our economy is that nobody involved in perpetuating it here (i.e. Greenspan) will ever admit to it.

[PerryChase]

I believe that, in England, the majority of mortgages are adjustable rate mortgages. Let’s see how long the price appreciation lasts.

Gordon Brown who will soon become Prime Minister will have to deal with the clean up of the mess he helped create as Chancellor of the Exchequer (he just submitted his new budget to Parliament).

[outtamojo]

” All they have to do is put money in assets that would not deflate during a recession and then transfer them back in when it bottoms.”

Yes, please ring a bell (on time preferably, unlike the last time) when recession starts and bottoms.

“The wealthy have access to hedge funds, particularly those that specialize in profiting from downturns and recessions (min deposit $100k or more)”

Are you saying that hedge funds are guranteed money after the usual 21+ percent management fee? Who needs ’em.Plenty of bear funds, precious metal funds, ETF’s, etc for turmoil in markets.

And yes the wealthy do ok in recession, but they do obscenely better when the world is flooded with money. Look at what’s happened- corporate profits, thru the roof. Executive compensation, likewise. Bonuses for Goldman ,16 Billion.Wages for the average Joe- stagnant.

[Diego Mamani]

Had the Bank of England done nothing, there would have been a recession. A recession means job loss. Had that happened, conspiracy theorists would have accused the BoE of keeping interest rates too high so that rich old fogies could profit at the expense of the jobless working class.

So, BoE lowers interest rates: conspiracy. Or, BoE does not lower rates: conspiracy too!

See, if you believe in conspiracies, invisible helicopters, or horoscopes, there’s nothing that can’t be interpreted in your favor, no matter the outcome.

[outtamojo]

“Had that happened, conspiracy theorists would have accused the BoE of keeping interest rates too high so that rich old fogies could profit at the expense of the jobless working class.”

Not me.

[34f3f3f]

There are fixed rate mortgages in the UK, which have been around since the 1300’s, and US mortgage law is based on UK common law. ARM’s are no doubt a prominant feature in the UK mortgage landscape now, as real estate prices are silly-stupid.

In the 1990’s endowment mortgages were the buzz word whereby payments were apportioned to equity that was predicted to pay off the lump sum at the end of the term. Lenders soon found themselves in court for “misselling”, fending off disgruntled borrowers whose endowments were falling well short. Poor regulation was blamed then as it is now. Many got their fingers burnt both sides of the fence.

Rates in the UK and parts of Europe are as low as 3.5% to 4%. Bear in mind disposable income is lower than the US but property prices are very high, London being the second most expensive city in the world. To add insult to injury, many properties in the inner London area are lease-hold, so even when you have paid off your mortgage you still don’t own your home. To give you an idea, a small one bedroom lease-hold apartment in a fairly nice area of central London will set you back US$900,000.

Second home ownership has spiralled, and with most of the obvious markets (Spain, Portugal, France etc) having been exploited, the up-and-coming and new members (Croatia, Bulgaria, Romania) of the EU present opportunities for investment. The effect on all these places is to put pressure on prices, often forcing the local populace out, which understandably leaves a bitter taste. However, it is often the locals who are selling at these high prices.

The French, Italians, and even Germans have traditionally been renters, but many have now realised the potential of real estate. French farmers laugh at how much the English are willing to pay for a run down stone barn. But then, when they see that is has been beautifully restored and flipped for a huge gain, the proverbial Ooh La La! is followed by thoughtful head scrathing.

I agree that tinkering with interest rates to stimulate the economy is not really a conspiracy, but short-termism seems to be a by-product of democratic economic planning.

[ucodegen]

Yes, please ring a bell (on time preferably, unlike the last time) when recession starts and bottoms.

It already rang. It was ringing when I was posting questions about who was picking up securitized loans (mortgage backed securities). The pre-bell was when people were warning about the excessive exotic mortgages and house prices being way out of line with rents. There have been several discussions on this board of potential ways of the Federal reserve handling the problem.. and why just lowering the interest rate may not be possible. Out of recession bell TBD in a few years.

Are you saying that hedge funds are guranteed money after the usual 21+ percent management fee? Who needs ’em.Plenty of bear funds, precious metal funds, ETF’s, etc for turmoil in markets.

You don’t understand the management fee. There is a fixed management fee + a percentage of the profits. No profits, you get hit with just the fixed fee. Your statement on bear funds is correct (though many of these have high management fees). There are alternatives for people with liquid assets(also investing in other countries is an option). My statement about the middle getting screwed has to do with those who have most of their money tied up in non-liquid assets (most of the middle class). Poorer people rent, richer often own outright, but not all of their money is tied up in a non-liquid asset.

Look at what’s happened- corporate profits, thru the roof. Executive compensation, likewise. Bonuses for Goldman ,16 Billion.Wages for the average Joe- stagnant.

Only certain specific industries have had profits through the roof. You are obsessed with the dollar amount, not the value being bought. If I receive 50 billion dollars and it is enough for me to buy a city block, or if I receive 50 million dollars and I can buy an entire city (same size, effectively same location).. which would entail greater value gain? Tumultuous situations is where the real wealthy and the smart investor makes their money. It is when the market is at its least efficient.

[outtamojo]

“It already rang”

Uh, I don’t recall Bernanke ringing a recession warning. All I hear from him is Goldilocks – PLEASE LINK TEXT IF I AM WRONG AND HE DID SAY WE ARE IN RECESSION. Paulson says things are fine, Cramer too. Larry “Greatest Story Never Told” Kudlow says we don’t know a good thing when we see it. Maria is only worried about being outted as a hedge fund stooge- recession is the last thing on her mind. If our illustrious leadership don’t say we are in recession and you do, who am I to believe? Are they all keeping secrets from me?

“You don’t understand the management fee.”

Uh, you sidestepped the question- you were touting access to hedge funds as if it were the greatest thing in the world
and my question was, are hedge funds a surefire way to make money other than for hedge fund operators.

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