Article courtesy of Nadeem Walayat
The Bank of England kept UK interests on hold at 0.5% last week as it continues its policy of IGNORING HIGH UK inflation that continues to stand above the Bank of England's 3% upper limit for the purpose of the BoE continuing to funnel tax payer cash onto the balance sheet of bailed out bankrupt banks as illustrated by the most recent banking sector profit announcements, most of which are fictitious as in actual fact the banks are not generating any profits because they continue to only partially write down bad debts.
The only reason why bankrupt banks are announcing profits is so as to allow them to pay their chief officers huge bonuses as a reward for succeeding in conning the tax payers by means of threats of financial armageddon as inept regulators with themselves having one hand in the cookie jar watch on as they intend to return to commercial banking themselves so as to have their turn at getting a piece of the tax payer funded bailout pie.
The ways and means by which these fictitious profits are being achieved are many, such as The Bank of England loaning the banks at 0.5% which they then run along and invest at zero risk in longer dated UK government stock at 3.5% and thus make a 3% risk free profit with the tax payers money, meanwhile the ordinary tax payers who have been saving hard all their working lives are seeing the value of their savings being stolen by means of the stealth inflation tax as banks drunk on central bank cash pay a pittance of less than 2% in interest whilst even the official doctored CPI inflation rages at 3.2%, well above the BOE target of 2%. And not to forget the government adding insult to injury by TAXING the pittance of interest received at 20% for basic rate and 40% for higher rate tax payers.
Similarly borrowers are not receiving anywhere near 0.5% for loans and mortgages as most mortgage borrowers will be lucky to see any rate below 4% with many on rates of as high as 6% which is resulting in huge profit margins for the banks that continue to penalise their customers for their own mistakes.
Where savers and borrowers are concerned Britain would be far better off with a nationalised banking sector that exists purely to service the loans and savings market rather than the bankster elite maximising the amount of money that can be stolen from tax payers, savers and borrowers by means of an officially sanctioned artificial banking system.
Tuesday, 10 August 2010
Wednesday, 21 July 2010
Safer Means Double Dip - Bring Back Reckless Lending
As the Bank of England (BoE) published data showing yet another month when more loans had been repaid than had been granted, Vince Cable admitted the level of anxiety in the government about the flow of funds to smaller companies. He said: "The green paper will acknowledge the scale of the problem and how the recovery could be aborted if we don't get on top of this.
"There is a fundamental policy conflict between efforts to make the banks safer and our wish to get them lending more freely to promote growth," Cable said.
He has been presented with research from the banks – which have given the work by PricewaterhouseCoopers the name "Project Oak" – showing that tougher capital rules and the end of emergency liquidity injections from the BoE could drain the banking system by £1 trillion in the coming years.
Cable believes there is a "very frustrating standoff" between the banks and small businesses: banks argue there is no demand, while businesses say they are not applying for loans because they expect to be rejected or the cost is too high.
"We have to acknowledge there is an issue," said Cable. Even so, he does not appear to be ready to alter the current lending targets for Royal Bank of Scotland and Lloyds Banking Group, which run until next March.
Since the 2008 banking crisis, lending figures from the banks compiled by the BoE have been positive in only three months. The Liberal Democrats calculated that £46bn of loans had been withdrawn in the past year alone.
Howard Archer, economist at IHS Global Insight, agreed with Cable that the BoE data showed "several worrying traits". Archer said: "The survey very much maintains concern that tight credit conditions could hold back the recovery. This is even allowing for the fact that ongoing muted bank lending to companies is being influenced significantly by low demand for credit in addition to restricted supply.
"Lack of access to credit for smaller businesses is still a serious problem despite some reports that it has risen slightly in recent months," said Archer.
The low level of activity in the mortgage market – where June's 48,000 approvals were the lowest since May 2009 – also prompted Archer to forecast that house prices would fall by 3% to 5% over the second half of the year
"There is a fundamental policy conflict between efforts to make the banks safer and our wish to get them lending more freely to promote growth," Cable said.
He has been presented with research from the banks – which have given the work by PricewaterhouseCoopers the name "Project Oak" – showing that tougher capital rules and the end of emergency liquidity injections from the BoE could drain the banking system by £1 trillion in the coming years.
Cable believes there is a "very frustrating standoff" between the banks and small businesses: banks argue there is no demand, while businesses say they are not applying for loans because they expect to be rejected or the cost is too high.
"We have to acknowledge there is an issue," said Cable. Even so, he does not appear to be ready to alter the current lending targets for Royal Bank of Scotland and Lloyds Banking Group, which run until next March.
Since the 2008 banking crisis, lending figures from the banks compiled by the BoE have been positive in only three months. The Liberal Democrats calculated that £46bn of loans had been withdrawn in the past year alone.
Howard Archer, economist at IHS Global Insight, agreed with Cable that the BoE data showed "several worrying traits". Archer said: "The survey very much maintains concern that tight credit conditions could hold back the recovery. This is even allowing for the fact that ongoing muted bank lending to companies is being influenced significantly by low demand for credit in addition to restricted supply.
"Lack of access to credit for smaller businesses is still a serious problem despite some reports that it has risen slightly in recent months," said Archer.
The low level of activity in the mortgage market – where June's 48,000 approvals were the lowest since May 2009 – also prompted Archer to forecast that house prices would fall by 3% to 5% over the second half of the year
Tuesday, 13 July 2010
Bank Lending for Businesses Very Difficult to Get
Access to finance for businesses remains difficult, says IoD survey
Dated: 13 July 2010
New data released today by the Institute of Directors (IoD) reveals that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates.
Key Findings
From a survey of 899 company directors carried out at the beginning of June 2010 the IoD can reveal the following data:
Applications and decline rates for finance
Security requested against loans
Commenting on the survey results, Miles Templeman, Director-General of the Institute of Directors, said:
“Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers.”
New data released today by the Institute of Directors (IoD) reveals that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates.
Key Findings
- 1 in 3 firms that applied for finance in the time period 1 January 2010 – June 2010 were declined by their bank.
- There is evidence that lending criteria have become more restrictive with regard to the amount of security requested by banks.
From a survey of 899 company directors carried out at the beginning of June 2010 the IoD can reveal the following data:
Applications and decline rates for finance
- 39% of IoD members’ firms applied for finance with a bank (applications include requests for renewals/extensions/new requests for overdrafts and loans) in the time period 1 January 2010 – June 2010.
- Of the 39% of IoD members’ firms which applied for finance in the time period 1 January 2010 – June 2010, 33% had an application for finance declined by a bank.
Security requested against loans
- 37% of IoD members stated that in the period 1 January 2010 – June 2010 they had noticed an increase in the amount of security being requested against any lending that their organisation sought.
Commenting on the survey results, Miles Templeman, Director-General of the Institute of Directors, said:
“Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers.”
Tuesday, 20 April 2010
The UK is Bankrupt with Nowhere to Go
With thanks to Brendan on the Telegraph Comment today
"I disagree that Greece and Ireland are more extreme cases than ours.
The official balance sheet debt of the UK does not include the state and public sector pension liabilities, nor PFI. Those three are respectively £1.4 trillion, £800bn and £250bn, so around £2.4 trillion in aggregate. And no, it’s not a typo, it really is trillion.
Added to the on-balance sheet debt, the UK taxpayer is now on the hook for liabilities amounting to more than 200% of GDP.
That would not be such a problem but for the fact that UK economy has just shrunk by 6% and does not have an obvious means of generating rapid and sustained economic growth over the next decade or so. Most commentators have overlooked the fact that the two other major countries that had significant financial centres – the US and Japan – are well diversified economies with strong manufacturing and export sectors.
What makes the UK so uniquely vulnerable is that beyond the City of London there isn’t really any world beating commercial base of any scale. Yes we are world leaders in Scotch whisky and cheddar cheese but this isn’t going to make a difference to a £2 trillion debt. Under Labour we have lost 1 million manufacturing jobs and added around 1 million public sector jobs, a straight swap of productive, wealth-generating employment for non-productive wealth-draining employment.
There is no easy route out of this. We do not have raw materials like Australia or Russia, cheap labour like China, specialist agriculture like Brazil or technology skills like India. We have over 5 million unemployed adults of working age and not really any prospect of putting them to work. Paying for their benefits, healthcare, education and pensions has brought the country to its knees.
It isn’t society that is broken, it’s the business model of UK plc.
So while France, Germany, the US and Japan can see a way out, we can’t. It’s remotely plausible, I suppose, that the City will spark back to life and save us, that private equity and hedge funds will ramp up again and borrowing will explode as before but I can’t see that happening in the current bank-bashing climate. Besides most of them will relocate to Switzerland to avoid the punitive taxes.
The UK is holed below the water line and it is in fact necessary now for there to be a major shock to allow the downsizing of our prosperity to occur without civil unrest. Ireland gives some encouragement that the population can be persuaded to accept much lower living standards without burning cars and throwing rocks at the police, let’s hope the same will be true here."
"I disagree that Greece and Ireland are more extreme cases than ours.
The official balance sheet debt of the UK does not include the state and public sector pension liabilities, nor PFI. Those three are respectively £1.4 trillion, £800bn and £250bn, so around £2.4 trillion in aggregate. And no, it’s not a typo, it really is trillion.
Added to the on-balance sheet debt, the UK taxpayer is now on the hook for liabilities amounting to more than 200% of GDP.
That would not be such a problem but for the fact that UK economy has just shrunk by 6% and does not have an obvious means of generating rapid and sustained economic growth over the next decade or so. Most commentators have overlooked the fact that the two other major countries that had significant financial centres – the US and Japan – are well diversified economies with strong manufacturing and export sectors.
What makes the UK so uniquely vulnerable is that beyond the City of London there isn’t really any world beating commercial base of any scale. Yes we are world leaders in Scotch whisky and cheddar cheese but this isn’t going to make a difference to a £2 trillion debt. Under Labour we have lost 1 million manufacturing jobs and added around 1 million public sector jobs, a straight swap of productive, wealth-generating employment for non-productive wealth-draining employment.
There is no easy route out of this. We do not have raw materials like Australia or Russia, cheap labour like China, specialist agriculture like Brazil or technology skills like India. We have over 5 million unemployed adults of working age and not really any prospect of putting them to work. Paying for their benefits, healthcare, education and pensions has brought the country to its knees.
It isn’t society that is broken, it’s the business model of UK plc.
So while France, Germany, the US and Japan can see a way out, we can’t. It’s remotely plausible, I suppose, that the City will spark back to life and save us, that private equity and hedge funds will ramp up again and borrowing will explode as before but I can’t see that happening in the current bank-bashing climate. Besides most of them will relocate to Switzerland to avoid the punitive taxes.
The UK is holed below the water line and it is in fact necessary now for there to be a major shock to allow the downsizing of our prosperity to occur without civil unrest. Ireland gives some encouragement that the population can be persuaded to accept much lower living standards without burning cars and throwing rocks at the police, let’s hope the same will be true here."
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