How Not To Restore Credibility..... "BOE´s Adam Posen Edition"

The fact that he is also an American economist & has co-written a book on inflation targeting with Fed Chairman Ben S. Bernanke might explain at least in part his quote...... ;-)

Man muss zu seiner "Verteidigung" erwähnen das er laut Wikipedia ebenfalls ein amerikanischer Ökonom ist. Da verwundert es wenig das er zusammen mit Bernanke Co-Autor eines Werkes zum Thema Inflation ist.... Dies relativiert zumindest ein wenig den fast satirisch anmutenden Charakter seines Zitates....;-)

"CPI, excluding currency, commodities and VAT impact, is low"

The quote came in response after CPI once more "slightly" missed the 2 percent target....... Sometimes it´s better to stay just silent.....

Diese Aussage kam nachdem im Dezember die Konumentenpreisinflation in UK mal wieder "knapp" das angestrebte Ziel von 2% verfehlt hat........ Ähnlich wie bei etlichen "Offiziellen" scheint das Sprichwort "Reden ist Silber, Schweigen ist Gold" nicht sonderlich viele Anhänger zu haben....

Record-breaking, forecast-busting UK inflation FT Alphaville

Highest yy rate for CPI food and non-alcoholic beverages since May 2009
Highest yy rate for CPI housing, utilities component since Aug 2009
Highest yy rate for CPI goods component since April 2010
Highest yy rate for CPI services component since Aug 2010 -
Highest yy rate for CPI fuels and lubricants component since July 2010

Posen is almost as funny as ECB´s Smaghi with his "joke" "€ More Stable Than Deutsche Mark" ..... But in comparison with Bernanke & Greenspan even they seem "reasonable".... ;-)

Finde trotzdem das im Fach "Realsatire" die EZB dank Bini Smaghi mit der Behauptung das der "€ stabiler als die DM ist" noch immer knapp den zweiten Platz hinter den unangefochtenen Spitzenreitern Bernanke & Greenspan einnimmt.....

Now take a look at real rates ( base rates minus CPI ) in the UK......

Der nachfolgende Chart zeigt den "realen Zinssatz" in UK verglichen mit dem Letzins und ich empfehle jedem drigend den treffenden Kommentar (!) der FT Deutschland zu diesem Thema zu lesen.....

UPDATE: The Real 10-Year Rates Chart confirms the "vigilance" of the the BOE ....

UPDATE: Der Chart der realen 10 Jahresrenditen bestätigt welch "Sonderstellung" die BOE einnimmt....

This in combination with the next chart showing the printing that the BOE has done so far & the remarks from the end of September doesn´t make Posen´s quote less "cynical".......

Das im Zusammenhang mit dem nächsten Chart, der zeigt das selbst die Fed in Relation zur BOE "zurückhaltend" agiert, sowie den Aussagen Ende September lassen das Zitat nicht gerade weniger "zynisch" erscheinen.....

H/ T RBS via FT Alphaville

Posen Makes BOE ‘Prosecution’ Case for More Stimulus September 29, Bloomberg

Bank of England policy maker Adam Posen made the strongest call yet for the bank to restart its asset-purchase program.

“Additional monetary stimulus at this point should begin in the form of additional QE as the Bank of England pursued by purchasing gilts in 2009-2010,” he said. “In case such QE were to prove insufficiently effective,” Posen said he would “still want preparation ahead of a Plan B of large-scale non-gilt asset purchases” in close coordination with the Treasury.

Posen, 43, an American citizen, joined the central bank from the Washington-based Peterson Institute for International Economics. A co-writer of a book on inflation targeting with Fed Chairman Ben S. Bernanke, he also published a study of the Japanese financial crisis and was a researcher at the Bundesbank and European Central Bank.

Wouldn´t surprise me if down the road even politicians will be more popular than members of the BOE & when the term "central banksters" will gain more and more traction....

Ich persönlich wäre nicht überrascht wenn zumindest in UK die Notenbänker in absehbarer Zeit noch unbeliebter als Politiker unterwegs sind.....

UPDATE:

Searching for BoE credibility on inflation FT Alphaville

From Deutsche Bank, the number of news stories that match three topical words:

SCHADENFREUDE........ ;-)

A Crisis of Faith in Britain’s Central Banker NYT

A central banker need not be loved, but at the least he should command respect — and in Britain these days Mervyn King cannot count on either.

The pre-emptive UK rate hike FT Akphaville

…over the last 6 years (ie 2005Q1 to 2010 Q4), real GDP growth has undershot the MPC’s forecast made a year earlier in 22 quarters and overshot in just 2 quarters. Conversely, inflation has overshot the MPC’s forecast in 20 quarters and undershot in just 4 quarters.

When Monetizing 12% Percent Of GDP Isn´t Enough.......

Not quite an "Exit Strategy"....... This Cartoon on "Green Shoots" is spot on..... :-) As long as the pound & gilts are not crashing this will continue.....I´m pretty sure Bernanke is watching the market reaction very closely UPDATE: Fed’s Kohn on Lessons From Buying Government Bonds… in Britain .... Especially with the Fed running low on ammo..... Read A 300-year-old example of quantitative easing.... John Law, Alan Greenspan, Ben Bernanke... via The Mess That Greenspan Made as a reminder what can happen.......

Das ist wohl das Gegenteil der dank der tagtäglichen "Green Shoots Visionen" diskutierten Exitstrategie der Notenbanken......Die Lage muß wirklich KLASSE sein......Dieser Cartoon trifft den Nagel auf den Kopf...... Aber solange das Pfund & Gilts nicht crashen wird dieses in der Vergangenheit mehrmals massiv fehlgeschlagenes "Experiment" ( siehe A 300-year-old example of quantitative easing...... John Law, Alan Greenspan, Ben Bernanke... ) weitergehen...... Bernanke dürfte die Marktreaktion sehr genau verfolgen UPDATE: Fed’s Kohn on Lessons From Buying Government Bonds… in Britain ..... Das gilt umso mehr als die Programme der Fed auf "Reserve" ( siehe Running low on ammo via R.Winkler ) laufen......

The governor’s insatiable appetite for QE FT Alphaville

The Governor invited the Committee to vote on the proposition that:

Bank Rate should be maintained at 0.5%;

The Bank of England should finance a further £50 billion of asset purchases by the creation of central bank reserves, implying a total quantity of £175 billion of such asset purchases. The Bank should seek to complete the additional purchases within the next three months.

Six members of the Committee (Charles Bean, Paul Tucker, Kate Barker, Spencer Dale, Paul Fisher and Andrew Sentance) voted in favour of the proposition. Three members of the Committee (the Governor, Tim Besley and David Miles) voted against, preferring to increase the size of the asset purchase programme by £75 billion to a total of £200 billion.

Yep, Mervyn King, together with Besley and Miles wanted the rate of monetary stimulus increasing, not just extending at the current rate of £50bn-a-quarter. That was good for half a cent off sterling versus the dollar and a third of a cent v the euro on Wednesday morning. Gilts, of course, spiked higher.

Somebody stop me Alice Cook from the great blog UK Bubble

The extraordinary thing about UK monetary policy today is how close it is shadowing fiscal policy. This year, the Bank of England printing presses will produce roughly the same amount of new money as this year's fiscal deficit. Or to put it more bluntly, the private sector have, on a net basis, stopped lending money to the government.

The Casey Report

> The estimated issuance is based on this "optimitic" forecast.... Especially compared to the IMF, OECD, Bloomberg etc..... No surprise to see the BOE also out of touch....... Good to know that at least this leads to a "review" of the AAA rating.... Hallelujah! :-) After watching this & this chart it should be clear to anybody not working at an rating agency that an AAA is more or less history.....

> Die o.g. Emission der Gilts basierd auf der unten aufgeführten "wenig konservativen" BSP Prognose...... Vergleicht diese mal mit denen von IMF, OECD, Bloomberg..... Überflüssig zu erwähnen das die BOE ebenfalls jenseits aller Realität prognostiziert..... Immerhin wird "gedroht" das AAA Rating einer ernsthaften Prüfung zu unterziehen..... Was wären wir nur ohne die Ratingagenturen....... Spätestens nachdem man sich diesen & diesen Chart vor Augen führt dürfte jedem der nicht gerade für eine Ratingagentur arbeitet klar sein das ein AAA wohl auf Jahre hinaus nicht mehr als ein feuchter Traum von Brown & Co sein wird.....

FT Alphaville

The Chancellor has forecast that the economy will contract by 3.5% in 2009, followed by GDP growth of 1.25% in 2010 and 3.5% in 2011. He sees long-term trend growth at 2.75%

> While i´m still in the deflation camp for some time to come but i´m pretty sure down the road the central banks will once more cause massive inflation ( read Inflation: What the heck is it? from Mish). If you want to know the details why i think this will happen i would like to refer to the podcast with Chris Martenson. Couldn´t have said it better.....H/T Pension Pulse.... One of many reason why i´m a "Goldbug" ( regardless of the timing - H/T Zero Hedge). The best "insurance"( relatively speaking ) you can buy to protect yourself from the "wisdom" of King, Bernanke & Co.. :-)

> Obwohl ich die nächsten Jahre noch dem Deflationscamp zuzuordnen bin steht zu befürchten das die Notenbänker Ihr Ziel einer stark "erhöhten" Inflation nicht verfehlen wird. Wichtig zu wissen das ich mit der Definition von Mish ( siehe Inflation: What the heck is it?.) übereinstimme die mit den Veränderungen der Konsumentenpreisen nur sehr indirekt etwas zu tun haben. Für alle die die Logik hinter dieser Einschätzung erfahren möchten die verweise ich gerne auf den erstklassigen Podcast mit Chris Martenson. Kann es beser nicht formulieren..... Dank an Pension Pulse..... Einer von vielen Gründen warum ich ein Freund des Goldes bin ( und das unabhängig vom timing / Dank an Zero Hedge ) Auf Dauer gesehen die zumindest relativ beste Absicherung gegen die "Weisheit" von Bernanke, King & Co .....

Pounding The Pound

The Queen is probably "not amused" .........

Sterling continued its slide on currency markets on Tuesday, dropping 2.7% on a trade-weighted basis amid uncertainty about the terms of the government insurance for toxic assets held by banks and fears of creeping nationalisation of the sector. Analysts said sterling had been trading with strong correlation with UK bank stocks, which suffered fresh falls. The likelihood that the Bank of England would soon create money to buy assets has intensified speculation that sterling’s value will be progressively eroded. This week, it has fallen 4.5% against the euro, 5.8% against the yen and 6.1% against the dollar, retreating about 34% against the dollar from highs in November 2007

> The following chart is a little bit outdated but gives a good impression what is going during the past 6 month..... See the FT link to take yesterdays action into account.....

> Der nachfolgende Chart beiinhalted noch nicht die Bewegugen siet Beginn der Woche......Verweise auf den FT Link für die aktuellen Absicherungspreise....

CDS report: Sovereigns rattle markets

The cost of buying five-year credit protection on the UK gapped wider to 133bp on Tuesday, compared to Monday’s close at 124.9bp. Ireland was out at 281bp from 275.2bp yesterday, Spain was at 156.3bp, compared to 142.5bp, Austria climbed to 157.5bp from 146bp and Germany edged wider to 55.8bp from 55bp on Monday, according to CMA.

The UK has nothing left to sell, official

To quote Jim Rogers (he who broke the Bank of England with George Soros on Black Wednesday in 1992): “It’s simple, the UK has nothing to sell.”

Ambrose Evans-Pritchard is SERIOUSLY ALARMED

For the first time since this crisis began eighteen months ago, I am seriously worried that British government is losing control.

If the Government is forced to nationalise RBS and perhaps Barclays with their vast exposure in dollars, euros, and yen, it risks being submerged. It is one thing for a sovereign state to let its national debt jump in a crisis — or a war — perhaps even to 100pc of GDP. It is another to take on foreign debts on such a scale with no reserves. Yes, the banks have foreign assets as well to match the debts. But how much are these assets really worth?

We cannot even do what Iceland did to save its skin. Reykjavik refused to honour the foreign debts of its buccaneering banks. It let them default, parking the losses in Resolution Committees. Small islands can do that. Iceland has fish instead, and lots of metals

England has not defaulted since the Middle Ages. There is a real risk it may do so now.

RBS et mon droit: HM deficits

Did you know that by assets, RBS is the world’s largest company?

Naturally, the UK government is rather keen RBS does not fail. And indeed, it has gone all out. Just about every conceivable measure has now been thrown down to stave off disaster for the UK banking system: recapitalisation, asset guarantees, commercial paper guarantees, liquidity backstops, quantitative and qualitative easing and subversion of Basel II risk weightings.

The hope is that they will work. Clearly RBS’s shareholders don’t believe so. It would seem that they are discounting for the effect of the one policy option remaining: Nationalisation.

Nearly matching RBS’ £1.9 trillion of assets, RBS has £1.8 trillion of liabilities.

To put that into perspective with regard to the (small) risk of nationalisation: inclusive of the Northern Rock nationalisation, the UK public debt, defined by the ONS, is currently only £650bn. Nationalising RBS would increase UK public debt 369 per cent.

A couple of other pieces of info for UK Plc: the world’s third largest organisation by assets is Barclays. And the fourth is HSBC.

UPDATE Bloomberg Barclays Falls Seventh Day on Nationalization Fears

> After looking at the next graph it not surprising that the BOE is now ready to use "unconventional measures"....

> Nachdem man einen Blick auf die nächste Grafik geworfen hat ist es nicht weiter verwunderlich das die BOE demnächst die Notenpresse anschmeissen wird........


Bank of England to Start Quantitative Easing Naked Capitalism

In his first speech of the year, Mr King outlined radical plans for the Bank to buy up an initial £50bn of illiquid assets in the market to increase the flow of credit, with the option of ex-tending the scheme to boost the money supply by effectively creating new money.

> Probably no surprise Gold in Pound is at a historic high & that the the flight to "the real money" around the globe continues .....

> Sicher kein Zufall das ausgerechnet in diesen Zeiten Gold in Pfund gerechnet neue historische Hochs erklimmt & die Flucht in "wahre Werte" weltweit anhält .......

Thanks to Tim from The Mess That Greenspan Made

Just in time to "celebrate" Gordon Brown´s wisdom ( see Gordon Brown's 415 tonnes Gold Sale Blunder, 10 Years On ) & Times

Da paßt es gut das der jetzige Premierminister Gordon Brown vor ziemlich genau 10 Jahren 50% aller britischen Reserven zum absoluten Tief verscherbelt hat ( Times )

Brown offloaded the gold at a 20-year low in the market — now nicknamed the “Brown Bottom” by dealers. The 17 auctions achieved prices for the gold of between $256 and $296 an ounce, with an average of $275.

Couldn´t resist......... Konnte einfach nicht widerstehen.........

> Needless to say that the UK has still a AAA rating...... I wouldn´t be surprised to see "The Sex Pistols" with their "Anarchy In The UK" to get quite popular again..... :-)

> Überflüssig zu erwähnen das UK immer noch ein AAA Rating hat....... Ich persönlich würde mich nicht wundern wenn wir zukünftig die Sex Pistols mit "Anarchy In The UK" demnächst wieder öfter zu hören bekommen...... :-)

Not Only Homeowners Are Having Refinancing Problems.......

It is really no wonder that investors are demanding a much higher risk premium for bank debt.... It will be interesting to see how the central bank balance sheets will look like in 2009/2010....

Wenig verwunderlich das die Investoren zukünftig eine ansprechende Risikoverzinsung verlangen..... Bin gespannt wie die Bilanzen der Zentralbanken im Jahre 2009/2010 aussehen werden.....

New Credit Hurdle Looms for Banks WSJ
U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes -- securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That's forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

The crunch will begin next month, when some $95 billion in floating-rate notes mature. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That's about 43% more than they had to redeem in the previous 16 months.

The problem highlights how the pain of the credit crunch, now entering its second year, won't end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of "problem" banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures.

The rates they'll have to pay if they want to issue new debt will be much higher than they were back in 2006. In July 2007, the interest rates on banks' floating-rate notes were only about 0.02 percentage point above the London interbank offered rate, or Libor, a benchmark meant to reflect the rates at which banks lend to one another. Today, that "spread" is at least two full percentage points for some banks.

via Bloomberg U.S. Says Banks on `Problem List' Rose 30% in Quarter

The U.S. Federal Deposit Insurance Corp. said its ``problem list'' of banks increased [to] 117 ``problem'' banks as of June 30, up from 90 in the first quarter and the highest since mid 2003 ... FDIC-insured lenders reported net income of $4.96 billion, down from $36.8 billion in the ame quarter a year ago.

> It seems to me that even the spread of 200 basispoints for lots of banks is not quite "rich"...... Especially when you add the lousy quality of their balance sheets..... Just take a look the another main sector besides residential is showing some kind of "stress"...... Hat Tip EconompicData

> Wenn man sich diese Meldung ansieht können einige Banken noch froh sein das die Spreads nur 200 Basispunkte betragen.... Ganz zu schweigen von der ansonsten oft sehr dürftigen Bilanzqualität...... Man muß sich nur einen zweiten Eckpfeiler neben dem privaten Immobiliensektor ansehen um zu erahnen das die Luft "dünner" wird..... Dank an EconompicData

As many banks compete for funds to pay off their borrowings, or sell assets to raise cash, their actions could exacerbate strains in financial markets. Banks that turn to shorter-term loans will have to renew their borrowings more frequently, increasing the risk that they won't be able to get money when they need it.

via Bloomberg Merrill, Wachovia Hit With Record Refinancing Bill

The increase in yields may cost them as much as $23 billion more in annual interest versus a year ago based on Merrill Lynch index data.

Standard & Poor's said last week that it had a ``negative'' outlook on almost half of the 50 highest-rated financial institutions in the U.S. as of June 30, the highest proportion in 15 years.

The difficulties with the floating-rate loans can be traced to the onset of the credit crunch last year. At the time, bank-affiliated funds known as structured investment vehicles, or SIVs, were among the first to suffer. Those funds had been buyers of the banks' floating-rate notes. But when SIVs were unable to find investors for their own short-term debt, the SIV market largely collapsed, taking a big chunk out of demand for new bank floating-rate notes.

The crunch comes as problems in the markets on which banks rely to borrow money are showing no sign of abating. In one gauge of jitters about banks' financial health, the three-month dollar Libor remains well above expected central-bank target rates for the same period.

Even at the higher interest rates, banks are having a hard time getting cash. The securitization markets that had allowed banks to repackage loans and sell them to investors remain all but shut. Banks today rarely make loans to one another for periods of more than a week, and even some so-called "repo" loans -- in which the borrower puts up securities as collateral -- are becoming more expensive.

At the same time, the pressures on limited resources of banks and investment banks are growing. Companies have been actively tapping bank credit lines set up before the credit crisis began, forcing banks to increase their lending at a time when they're trying to reduce risk. A number of big financial firms, including Citigroup Inc., Merrill Lynch, UBS AG, Morgan Stanley, J.P. Morgan, and Wachovia, have agreed to buy back some $42 billion of so-called auction-rate securities amid allegations that they misinformed retail investors about the securities' risks.

Central Banks' Role
All the strains have made financial institutions increasingly dependent on central banks in the U.S., the U.K. and Europe for loans to make ends meet. Many banks have been packaging mortgages into securities to use as collateral for financing from the European Central Bank and the U.S. Federal Reserve. Questions are cropping up about how long central bankers should prop up financial markets, and whether banks in Europe are taking undue advantage of the central bank's lending facilities.

On this topic..... Buy Freddie Paper With Fed Leverage via Dealbraker Hat Tip FT Alphaville

We don't know who bought the Freddie notes today. But buyers of Freddie notes who have access to borrowing from the Federal Reserve would have found the ecision to bid relatively easy. That's because the ability to exchange the Freddie debt for Fed cash means banks can buy Freddie debt with a huge amount of leverage, dramatically increasing the return on their capital.

Here's how it works. A bank that bought the six month notes from Freddie this morning could also bid to borrow from the Fed's Term Facility, which held an $75 billion auction today. As collateral for the borrowing, the bank could offer the newly purchased Freddie notes, for which the Fed would give them credit for 97% of their market value. Recently, the TAF pricing topped out at 2.35 percent for 28-day borrowing. So a bank buying $100 million of Freddie paper yielding 2.858% could flip it to the Fed, borrowing $97 million at around 2.4% (assuming the pricing will be slightly higher this time around).

At the end of the day, a credit desk could buy $100 million of Freddie debt for just $3 million down. On that $3 million, the desk would receive a 17.7% annualized return, or 8.8% over six months, for paper that is thisclose to being explicitly backed by the Treasury Department. Not a bad deal at all.

via Real Time Economics

But there is growing concern banks have become over-reliant on ECB funding, or may be abusing the situation. The ECB says it is monitoring developments and will, if necessary, adjust funding rules. Some financial institutions may have started to treat the ECB’s financing window as a substitute for a well-functioning structured finance market that has been largely shut since last August.

The share of asset-backed securities — or notes backed by repayments on debt such as mortgages or credit card loans — in the total collateral held with the national central banks in the 15-nation euro zone has risen to around 20%, from around 4% in 2004. At the same time, the share of government bonds has fallen sharply.

> Here the Fed´s balance sheet..... Hardly AAA.....

> Hier das grausige Bild der Fed Bilanzkomposition..........Sieht mir nicht mehr nach AAA aus.....

Mish has also something to say and is offering this must see chart Factors Adding to Reserves and Off Balance Sheet Securities Lending Program via Cumberland Advisors. Scary.....

Mish trifft mit seiner Aussage den Nagel mal wieder auf den Kopf und liefert gleichzeitig einen Blick auf die detaillierte Ansicht der Fed Bilanz. Nicht verpassen! Factors Adding to Reserves and Off Balance Sheet Securities Lending Program via Cumberland Advisors. Fuchteinflösend.....

"A the current pace, the Fed runs out of treasuries about a year from now. Things are about to get very interesting."

via Telepgraph Bank borrowing from ECB is out of control

One ECB source told The Daily Telegraph that over-reliance on the ECB funds has become an increasingly bitter issue at the bank because the policy amounts to a covert bail-out of lenders in southern Europe.

"Nobody dares pinpoint the country involved because as soon as we do it will cause a market reaction and lead to a meltdown for the banks," said the source.

This "soft bail-out" is largely underwritten by German and North European taxpayers, though it is occurring in a surreptitious way. It has become a neuralgic issue for the increasingly tense politics of EMU.

The latest data from the Bank of Spain shows that the country's banks have increased their ECB borrowing to a record €49.6bn (£39bn). A number have been issuing mortgage securities for the sole purpose of drawing funds from Frankfurt.

Got gold......?

William Poole : "The Fed Wants To Create Inflation"

Isn´t is amazing that just a few days after leaving the Fed Bill Poole is speaking out what the real agenda of the Fed is...... The interview in the FAZ ( one of the most respected German newspapers ) covers lots of others topics like the $, China, commodities, real estate etc but the following quote stands out. The quote is even more true when you agree with my definition of inflation ( see this piece from Mish Inflation: What the heck is it? ) .

Denke hier hat die FAZ in Ihrem Interview einen echten Coup gelandet. Keinen Monat nachdem Poole aus der Fed ausgeschieden ist wird hier endlich mal Klartext über die eigentliche Agenda der Fed ( und leider auch anderen Notenbanken ) gesprochen. Empfehle zudem den restlichen Teil des Interviews zu lesen ( $, China, Rohstoffe, Immobilienmarkt usw. ). Das nachfolgende Zitat fast im Prinzip alles zusammen was man über die Arbeit der Notenbanken und ganz besonders der Fed wissen muß. Das gilt umso mehr wenn man die gleiche Definition von Inflation wie ich habe ( siehe Inflation: What the heck is it? von Mish ).

"Historically inflation is one tool to take pressure away from borrowers. The Fed´s policy is to create inflation to relieve the stress. The Fed was and will be "easy" as long as the economic situation and the health of the financial institutions have stabilized/improved "

"Historisch betrachtet ist Inflation ein Mittel, um den Stress zu erleichtern, den Schuldner fühlen. Die Politik der amerikanischen Zentralbank ist darauf angelegt, Inflation zu kreieren, um diesen Stress zu lindern. Sie war, ist und wird so lange geldpolitisch „locker“ bleiben, bis sich die wirtschaftliche und die der Finanzunternehmen verbessert hat"

> "Easy as long...." LOL! They are trying always to be easy and keep the ponzi game going. I urge you to read How The Bubble Bursts from Mr. Practical via Minyanville for a nice summary how this will end and why Bernanke & Co will fail this time.

> "So lange geldpolitisch locker bleiben wie nötig...." Das ich nicht lache..... Die geldpolitische Ausrichtung wird immer darauf ausgerichtet sein die Inflation zu erhöhen. Für eine wirklich gelungene Zusammenfassung des gängigen Zyklus empfehle ich How The Bubble Bursts von Mr. Practical via Minyanville zu lesen um zu verstehen warum Bernanke & Co diesesmal erhebliche Schwierigkeiten haben werden Ihr Schneeballsystem weiter am laufen zu halten.

On top of this i have found one of the better rants i´ve seen during the past quarter. This comes from Aaron Krowne and fits perfectly to the topic. Debate Over: It's Hyperinflation (and US Economic Collapse) .It´s also gives a different viewpoint on the inflation/deflation debate.

Habe zudem noch eine nette "Tirade" von Aaaron Krowne passend zu dem Postingthema gefunden.Debate Over: It's Hyperinflation (and US Economic Collapse). Gerade weil ich nicht mit allem übereinstimme kann ein Blick nicht schaden. Genau die richtige "Unterhaltung" für ein verregnetes Wochenende.....

GOT GOLD....? ( Within five tonnes of a new record at the GLD gold ETF )

"33 Great Ways To Save Money" .... UK Yellow Press On CPI / Credit Crunch

No Kidding! The piece from the SUN ( yellow press ) in the UK is no satire ! Things must be really ugly ....... I´m not sure if this is qualifying for a contrary indicator / cover story indicator ( like this one ) regarding the inflation debate but when you read the follwoing advice in relation with mayonnaise i assume we are nearer the CPI top than most peolple think.... On the other hand i´m very very confident that the same is not true for the credit crunch in the UK !

Kein Witz! Diese Geschichte in der SUN ( britische Gegenstück zur Bildzeitung ) ist in keiner Weise satirisch oder ironisch gemeint. Scheint momentan nicht nur wegen der verpaßten EM ziemlich ungemütlich zu sein.... :-) Ich bin mir nicht sicher ob diese Berichterstattung bereits ausreicht um als Kontraindikator ( siehe dieses Beispiel herzuhalten. Bei Betrachtung des nachfolgenden Vorschlages könnte man alledrings zu dem Schluß kommen das die Konsumentenpreisinflation demnächst Ihren Höhepunkt gesehen hat...... Für den gerade erst angefangegen Credit Crunch in UK gilt das allerdings auf keinen Fall. Hier hat der Spaß sicher gerade erst begonnen......

21. Mayonnaise is a fine hair conditioner, adding shine.

Give hairdressers the brush off if you want blonde highlights — just brush lemon juice into your barnet and let it dry in the sun.

I think it´s difficult for the BOE & other central banks to claim that are still in control over "inflation expectations" ( see Real Cost of Living Index (RCLI) is rising at 9.5 per cent. via Barry Ritholtz ) ........Disclosure : I´m with Mish´s definition on Inflation ( see Inflation: What the heck is it? )

Der ständige Hinweis das die Notenbänker immer noch Kontrolle über die Inflationserwartungen haben klingt allerding von Tat zu tag lächerlicher ( siehe auch Real Cost of Living Index (RCLI) is rising at 9.5 per cent. via Barry Ritholtz ) ..... Hinweis : Bekanntermaßen sehe ich die Definition von Inflation wie Mish ( siehe Inflation: What the heck is it? )

The SUN THE credit crunch is biting but you can ease the squeeze if you take a few simple steps.

Here Sun cheapskate TIM SPANTON shares his expertise, with 33 great ways to save money now that prices are rising at 3.3 per cent, the highest rate for more than ten years.

But be warned – there are some tips here even miserly Ebenezer Scrooge might be ashamed of taking up.

Remember, if you’re feeling the pinch, laughter is the best medicine – and it’s FREE.

1. Use banana skins to clean your shoes. The inside of the skins contains potassium, a key ingredient in commercial polishes.

Finish off with a soft cloth. Oils in the banana will even enrich the leather in your shoes and help them last longer.

2. Collect old slivers of soap and squeeze them together to make a new bar.

3. Never buy the first round in a pub. If you go drinking once a week and always get to the bar first you will end up buying dozens more rounds more a year than a person who always buys the fourth round.

This is because drinking sessions often end after an odd number of rounds. .....

8. Buy postage stamps in bulk, before the prices go up, which we all know they will. .....

14. Mix milk with equal amounts of water to go on your breakfast cereal. You will soon get used to it. The slight difference in taste is very small and soon won’t be detected at all.

15. Watch telly in bed in the dark. You’ll save on heating and lighting costs and if there’s a sexy show on, you might even get a bonus cuddle from your partner.

18. Get off a stop early if you commute by bus or Tube to save cash. ....

24. Buy Christmas presents in the sales after the holidays and keep for a year.

27. Shower instead of bathing. To save even more, shower with a friend.

>If you don´t believe me that this is not an ironic piece from the SUNn click the link and read the entire link... There are lots of suggestions that do make sense and are less "exotic".

> Wer mir nicht glaubt das dieser "Ratgeber" ernst gemeint ist sollte zur Kontrolle den kompletten Link lesen .... Dort finden sich in der Tat etliche Hinweise die hilfreich und weniger "skuril" sind.

Details BOE £50bn Special Liquidity Scheme / "Market Maker Of Last Resort" / Bailout

Another attempt to keep the credit flowing again. Here is the BOE "Bailout" Release . For more insights see Bank of England Swaps Bonds to Revive Bank Lending / Bloomberg & Helpful but…the SLS verdict FT Alphaville. More updates at the end of the post.

Ein neuerlicher Versuch das Unvermeindliche zu vehindern. Hier der offizielle Text BOE "Bailout" Release . Mehr von Bloomberg Bank of England Swaps Bonds to Revive Bank Lending sowie FT Alphaville Helpful but…the SLS verdict. Weitere Updates am Ende des Postings

Funny how they are claiming that they won´t accept no US mortgages ("It will not accept securities backed by US mortgages") and in the next sentence they are willing to take the smallest haircuts on Freddie Mac,Fannie Mae and Federal Home Loans..... But overall i have to admit that the haircuts seem to give the taxpayer some cushion.... But (and this is a big but) comparing the haircut with the following chart......

Schon belustigend wie in einem Satz behauptet wird das keine US Hypotheken als Papiere zugelassen sind und im nächsten Satz die Papiere von Freddie Mac,Fannie Mae and Federal Home Loans zu den mit den geringsten Sicherheitsabschlägen gehören. ...... Immerhin sieht es so aus als wenn die Sicherheitsabschläge dem Steuerzahler einen gewissen Sicherheitspuffer zu geben scheinen......Sobald man aber die Sicherheitsabschläge mit dem nachfolgenden Chart ins Verhältnis setzt erscheinen die angeblich so großen Risikoabschläge in einem anderen Licht...........

I had expected more generous terms from the BOE. It´s somewhat scary to see that despite the poor performance from the rating agencies they still dominate all kinds of models. This makes Moody´s probably a good buy....Sarcasm off....To keep this move into perspective one has to admit that they are only playing catch up with other central banks. Here are more charts & reports from UK

Ich persönlich hatte eine bankenfreundliche Regelung von der BOE erwartet. Es hätte also schlimmer kommen können und unterm Strich bleibt festzuhalten das die BOE sich im Grundsatz nur die Politik anderer Notenbanken aneignet. Hier gibt es mehr "beindruckenden" Charts & News zur Bubblehochburg UK. Befremdlich bleibt trotz alledem das trotz der unterirdischen Leistungen der Ratingagenturen anscheinend immer noch auf deren Wertungen vertraut wird. Evtl. ist Moody´s ja doch ein Kauf.... :-)

I suggest to read the entire paper / Empfehle den kompletten Link zu lesen SPECIAL LIQUIDITY SCHEME / BOE (Full of details!)

Banks will be required to pay a fee to borrow the Treasury Bills. The fee charged will be the spread between the 3-month London Interbank interest rate (Libor) and the 3-month interest rate for borrowing against the security of government bonds, subject to a floor of 20 basis points.

The Bank of England will decide the margin between the value of the Treasury bills borrowed and the value of the assets banks are required to provide as security. For example, if a bank were to provide £100 of AAA-rated UK residential mortgage-backed securities, it would, depending on the specific characteristics of the assets, receive somewhere between £70 and £90 of Treasury Bills.

Each participant may deliver as collateral only eligible securities held on balance sheet as at 31 December 2007....

Eligible securities will be valued by the Bank using observed market prices that are independent and routinely publicly available. The Bank reserves the right to use its own calculated prices. If an independent market price is unavailable, the Bank will use its own calculated price and apply a higher haircut. The Bank’s valuation is binding.

ELIGIBLE SECURITIES ( Highlights or Lowlights...)

AAA-rated tranches of UK, US and EEA Asset-Backed Securities (ABS) backed by credit cards ....

Conventional debt issued by the US Government Sponsored Enterprises (Freddie Mac, Fannie Mae and Federal Home Loans), rated AAA.

HAIRCUTS

Additional notes:
An additional 3pp will be added to haircuts to allow for currency risk when securities are nonsterling.

An additional 5pp will be applied to own-name eligible covered bonds, RMBS and credit card ABS.

An additional 5pp will be applied to securities for which no market price is observable.

Banks to Pay Steep Cost in BOE Plan WSJ - The new plan also hopes to tackle the stigma that dogged some of the central bank's other lending. Like most central banks, the Bank of England runs a facility through which commercial banks can borrow overnight funds anonymously. But the central bank had to publicize when the overnight window was tapped, which "led to the great bank hunt," Mr. King said, to learn the identity of banks seeking funds.

To avoid that hunt, the central bank won't disclose the amounts being swapped by banks through its new program until the borrowing window closes in six months.

The BoE’s £50bn ‘baby’ comes not before time, Buiter FT Alphaville - With this move, says Buiter, the Bank is now “wholeheartedly committed” to acting as market marker of last resort for systemically important securities for which the markets have become illiquid, not to say defunct, since the start of the crisis in August 2007.

The market maker of last resort “provides market liquidity in the transactions-based model of financial capitalism the same way the lender of last resort provides funding liquidity to banks in the relationships-based model of financial capitalism,” he adds.

UK : Egg/Citigroup Clamps Down On Riskier Credit Card Customers

Probably no coincidence that Citigroup is forced to make the move first and one of the largest US pawnbroker & payday lender is entering the market at the same time..... Once again their risk modeling wasn´t quite perferct...... How can you buy a UK credit card company close to a top in the UK housing market...... But i think it is very safe to say that others will have to follow ( not only in the UK ) Citi in this kind of tightening.....I suggest to read this Total UK personal debt statistic February 2008 from Credit Action to understand the magnitude of the mess especially in UK .

Sicher kein Zufall das ausgerechnet Citigroup den ersten Schritt machen muß und gleichzeitig das größte US Pfandleihaus & einer der größen "Kredithaie" in den UK Markt eintritt..... Es sieht so aus als wenn die mal wieder genau zum Top eine riskante Investition getätigt hätten.... In diesem Fall bin ich mir sicher das Citi mit diesem Schritt nicht lange alleine bleiben wird. Andere Anbieter ( auch länderübergreifend ) werden sich dieser Art der Kreditverknappung anschließen müssen.... Um einen Überblick über das Ausmaß gerade in UK zu bekommen empfehle ich einen Blick auf diese Übersicht Total UK personal debt statistic February 2008 von Credit Action zu werfen.

This quote sume it up / Dieses Zitat spricht Bände

"We can certainly understand the concerns, but even if people are up-to-date with repayments, they are people we decided we no longer wish to lend money to regardless of their status." Egg spokesman

Egg customer anger at credit move BBC
Angry customers of internet bank Egg have hit out at its decision to cancel their credit cards.

Egg says 161,000 cards belonging to people whose credit profiles have deteriorated since they signed up will stop working in 35 days' time.

But people who insist they have good records have been contacting the BBC to say they are on the list.

A spokesman for the bank said those affected were customers it no longer wanted to lend to "regardless of their current status".

Credit cards are being withdrawn from 7% of Egg's customers who it deems to pose an unacceptably "high risk".

This could include those who have missed repayments or exceeded their credit limit.

'Arbitrary action'
Cardholders will be able to continue making minimum monthly repayments on their balances but will not be able to spend any more after the deadline.

The move follows a "one-off" review after Egg was bought by US-based Citigroup for £575m last year.

The bank is not demanding immediate repayment of balances or making any changes to customers' terms and conditions or their interest rates. ....

Gillian Cox, of Farnham, Surrey, said she was "absolutely furious" to learn her credit card had been cancelled in what she described as an "unbelievable arbitrary action".

Mrs Cox said she and her husband are "retired, no mortgage, no debts" and "always paid the balance off in full each month".

She added that she had contacted credit reference agency Experian who said she was marked as having an excellent credit rating, "thus totally negating Egg's claim that this measure is about credit risk".

'Stop spending'
A spokesman for Egg said: "We are sorry some customers are upset after receiving notification we are ending their credit card arrangement, but they are people we do not feel it is appropriate to lend any money to."

He added: "The decision was taken after an extensive one-off review of our credit card book following acquisition by Citigroup."

Der Spiegel London - Die Internetbank Egg greift durch. Die britische Citigroup -Tochter will rund sieben Prozent ihrer zwei Millionen Kunden die Kreditkarte sperren. Offenbar haben es Egg und Mutterkonzern Citi mit der Angst zu tun bekommen - sie fürchten, die Risikokunden könnten sich übernehmen und ihre Darlehen nicht zurückzahlen können. Offiziell heißt es: Das Kreditrisiko der "riskanten" Kunden sei zu hoch.

Egg teilte zwar mit, der Schritt habe nichts mit der weltweiten Kreditkrise zu tun. Es handele sich bloß um eine "Neubewertung der Risiken", nachdem Egg im vergangenen Jahr von der Citigroup gekauft worden war. Die Maßnahme zeigt aber, dass Banken weltweit konservativer bei der Darlehensvergabe werden und hart gegen Risikokunden durchgreifen.

Die Egg-Mutter Citi hatte sich bei riskanten Kreditgeschäften so sehr verhoben, dass an den Finanzmärkten sogar zeitweise Insolvenzgerüchte zirkulierten. Citi hat im Zuge der Kreditkrise mehr als 18 Milliarden Dollar abschreiben müssen und damit einen Verlust im vierten Quartal von rund zehn Milliarden Dollar verbucht. Mit der Wahrheit über das Ausmaß der Krise rückte Citi nur scheibchenweise heraus. Egg will die Karten innerhalb von 35 Tagen sperren, die Kunden wurden bereits angeschrieben.

Fed, ECB, Central Banks Coordinate to Add Liquidity

Another attempt to unwind the liquidity issue. They will have a problem if this won´t work......When i look at the collateral that they are accepting i can smell a rat......

Ein neuer und koordinierter Ansatz um die Liquiditätskrise zu lösen. Sicherlich die bisher mit Abstand vielversprechenste Idee. Sollte selbst diese Herangehensweise nicht helfen haben die Zentralbanken wohl ein Problem.......Wenn ich mir die neuen Kriterien für die zu hinterlegenden Papiere angucke kann man schon auf den Gedanken kommen das hier alle guten Vorsätze über Bord geworfen worden sind.......

Fear at the Fed from Floyd Norris NYT (hat tip to Calculated Risk)
...The Fed will lend money to banks based on almost any asset they own, even ones that are not liquid at all. That will include some of the more exotic loans and securities out there.

How much will the Fed lend against illiquid assets? It has a public list, already in use in discount window lending. You will note that it allows the lending of up to 85 percent of the face value of AAA-rated collateralized mortgage obligations, if there is no observable market value. There are some C.M.O.’s out there that have not yet been downgraded but that might not bring that much in a sale.

I’d love to see which assets are pledged, and how much the Fed lends against them. But the Fed won’t disclose those facts. Nor will it let us know which banks borrow using the new facility.

The Fed's New Auction System Minyanville´s Mr. Practical via Mish

So the Fed is considering a “new auction system”. Essentially, what the Fed is doing is taking the stigma away from the discount window--the Fed will lend directly to banks and the banks don’t have to tell anybody. Theoretically, the Fed could make these quiet loans for indefinite periods, thus giving banks more permanent capital (it’s really credit, but banks call it capital).

Waldman

...this is a bailout,. Nearly all government bailouts take the form of subsidized loans, extending credit at low rates to counterparties or against collateral for which the market would have demanded a high premium. That is precisely what the TAF will do. The Fed's press release claims, of course, that loans will only be available to "sound" banks, and that they will be "fully collateralized". But no one who can get the same deal from private markets will use this facility. The need for the program arises because private markets are skeptical about the soundness of counterparties and the quality of the assets they have to offer as collateral. The Fed hints at this when it mentions the "wide variety of collateral" that can be used to secure loans. You can bet that whatever it is private lenders are eschewing will be pledged as collateral to the Fed under TAF. The Fed is going to bear private risk that the market refuses to. That is a bailout.

Felix Salmon

to give you an idea of what the Fed will lend, consider a AAA-rated subprime-backed CDO – the kind of thing which is causing billions of dollars in losses all over the financial system. If the CDO has a market price, the Fed will lend up to 98% of that price if it's a short-term CDO, up to 96% if it's medium-term, and up to 93% if it's long-term.

But what if the CDO is completely illiquid, and you can't find a price for it at all? No worries, the Fed will still accept it as collateral, and lend up to 85% of par value. (There's an interesting thought experiment here: what happens if a long-term CDO has a market value of, say, 90 cents on the dollar? In that case, an illiquid version of that CDO would actually be worth more to the Fed than the liquid version.)

Do keep on looking down that list, though: it turns out that banks can even put up as collateral subprime credit-card receivables – they don't even need a AAA rating.

Yves from Naked Capitalism Maybe the Real Reason for the Central Bank (Especially the Fed's) Actions Wednesday has also a very good summary

Yyes von Naked Capitalism hat mit Maybe the Real Reason for the Central Bank (Especially the Fed's) Actions Wednesday ein weitere erstklassige Zusammenfassung an den Start gebracht

Now the roundtrip to the official press releases.

Nun zu den offiziellen Presseerklärungen

BOE
The total size of reserves offered in the operations on 18 December and on 15 January will be raised from £2.85 billion to £11.35 billion, of which £10bn will be offered at the 3-month maturity.

The Bank will accept a wider range of high quality securities as collateral against funds advanced at the 3-month maturity. The additional categories of eligible collateral are:

• Bonds issued by sovereigns rated Aa3/AA- or above (in addition to those currently eligible), subject to settlement constraints.
  
• Bonds issued by G10 government agencies guaranteed by national governments, rated AAA.
  
• Conventional debt security issues of the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Corporation and the Federal Home Loan Banking system, rated AAA.
  
• AAA-rated tranches of UK, US and EEA asset-backed securities (ABS) backed by credit cards; and AAA-rated tranches of UK and EEA prime residential mortgage-backed securities (RMBS).
  
• Covered bonds rated AAA.

BOC Part 1 & BOC
Expansion of List of Securities Eligible as Collateral for Use Under Bank of Canada Standing Liquidity Facility

Under its Standing Liquidity Facility (SLF), the Bank of Canada is prepared to provide liquidity on a daily basis to financial institutions that participate directly in the payments systems operated by the Canadian Payments Association. Loans made by the Bank of Canada must be fully collateralized.

In the context of the ongoing review of the Bank of Canada's collateral policy, begun in the spring of 2007, the Bank has decided to broaden the range of securities acceptable as collateral for use under the SLF to include (i) certain types of asset-backed commercial paper (ABCP) sponsored by banks and (ii) U.S. Treasuries.

By the end of March 2008, the Bank will expand the list of eligible securities to include certain types of Canadian dollar-denominated ABCP that meet the following general criteria: are bank-sponsored, are covered by a liquidity provision that meets global standards, and are backed by traditional assets of an acceptable credit quality. In addition, higher standards of disclosure and additional credit ratings will be required. Asset-backed commercial paper backed by collateralized debt obligations and other highly-structured assets will not be considered at this time.

Over the next two months, the Bank will consult with financial institutions and other interested parties on the terms and conditions that will apply to ABCP as collateral. By the end of March 2008, the Bank will announce the terms and conditions regarding the use of ABCP as collateral, including the margins that will be applied. The arrangements for accepting U.S. Treasuries as collateral are expected to be completed by mid-2008.

Fed

Under the Term Auction Facility (TAF) program, the Federal Reserve will auction term funds to depository institutions against the wide variety of collateral that can be used to secure loans at the discount window. All depository institutions that are judged to be in generally sound financial condition by their local Reserve Bank and that are eligible to borrow under the primary credit discount window program will be eligible to participate in TAF auctions. All advances must be fully collateralized. By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress.

Alternative Instruments for Open Marketand Discount Window Operations / Fed Page 43

Acceptable discount window collateral generally can best be described as any asset that can confidently be liquidated within a reasonable period of time at the value at which it is accepted.As a general rule, the greater the level of risk associated with a certain type of underlying collateral, the lower the (lendable) valuation assigned to the collateral. Accurately measured, the margins or haircuts used in the valuation process should reflect the true relative risks of the various asset types, and they should contribute to relative asset price neutrality across the broad spectrum of assets deemed eligible for collateral.

Each TAF auction will be for a fixed amount, with the rate determined by the auction process (subject to a minimum bid rate). The first TAF auction of $20 billion is scheduled for Monday, December 17, with settlement on Thursday, December 20; this auction will provide 28-day term funds, maturing Thursday, January 17, 2008. The second auction of up to $20 billion is scheduled for Thursday, December 20, with settlement on Thursday, December 27; this auction will provide 35-day funds, maturing Thursday, January 31, 2008. The third and fourth auctions will be held on January 14 and 28, with settlement on the following Thursdays. The amounts of those auctions will be determined in January. The Federal Reserve may conduct additional auctions in subsequent months, depending in part on evolving market conditions.

ECB

The Eurosystem shall conduct two US dollar liquidity-providing operations, in connection with the US dollar Term Auction Facility, against ECB-eligible collateral for a maturity of 28 and 35 days ECB Eligibility Criteria Collateral The submission of bids will take place on 17 and 20 December 2007 for settlement on 20 and 27 December 2007, respectively. The operational details can be obtained from the ECB’s website (www.ecb.europa.eu). The US dollars will be provided by the Federal Reserve to the ECB, up to $20 billion, by means of a temporary reciprocal currency arrangement (swap line).

SNB $ 4 billion

UK Update & BOE Spin

Mid September Mervyn King, the governor of the Bank of England said this ...

Mitte September Tagen hatte Mervyn King, the governor of the Bank of England folgendes zu sagen .....

In an unusual public display of discord, the British central bank criticized other central banks yesterday for injecting cash into the financial system to help stabilize credit markets, saying that such a policy amounted to a bailout of investors who made bad decisions.

The main thrust of his written testimony to Parliament, however, was a sharp warning about “moral hazard” — a term used to describe the downside of policies that effectively rescue investors when their bets turn out wrong.

“The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior,” Mr. King wrote. “That encourages excessive risk-taking and sows the seeds of a future crisis.”

Too bad that everything he has said has been proven dead wrong ( in the case of Northern Rock he flip flopped within 48 hours) and he often did the exact opposite of what he was proposing. Welcome to the world of "respectable" central bankers.......Now move on to todays headlines......

Zu dumm nur das er bereist wenige Wochen um im Fall von Northern Rock nach wenigen Tagen in allen Bereichen eingeknickt ist und das oftmals das genaue Gegenteil praktiziert hat. Willkommen im Club der "ehrenwerten" Zentralbänker............ Hier ein weiteres Beispiel Wolfgang Münchau: Entzauberung einer Zentralbank

Is Britain's economy heading for the perfect storm?

UK's Northern Rock could be nationalized: report

U.K. House Prices Fall the Most Since December 2006, HBOS Says

U.K. Consumer Confidence Falls Most Since 2004

Lenders 'must prepare for worst'

UK House Prices Largest Decline since 1995

Crunch, crunch, pop, pop........ No wonder the Bank of England Extends Lending to Relieve `Tight' Money Market . The numbers of loans approved for house purchase are also showing signs of "strss".....For more insight visit the label or the excellent blog from Alice The UK Housing Bubble .

Crunch, crunch, pop pop......Kein Wunder das die Bank of England ernuet "creativ" werden muß Die Anzahl der genehmighten Hypotheken befindet sich wenig überraschend im freien Fall Für mehr zum Thema UK bitte das Label durchforsten oder dem wunderbaren Blog von Alice The UK Housing Bubble einen Besuch abstatten

FT More dismal news for UK homeowners. House prices fell 0.8 per cent in November, according to Nationwide - reining in the annual rate of growth to 6.9 per cent.

That drop is the first since February 2006 - and is the largest decline logged since the summer of 1995.

The figures reverse the unexpectedly strong performance in October - when prices rose 1.1 per cent - but which was widely seen as an aberration in what is a markedly weakening trend for house price data. That’s born out in the three-monthly growth numbers that in the latest period fell back to 1.5 per cent, from 1.8 per cent the month before.

The figures come on the back of dark predictions made through the medium of new derivatives contracts, through which the City is betting on house prices falling 7 per cent next year. The deterioration in outlook reflected in derivs trading, which showed expectations shifting from a 2 per cent fall to a 7 per cent decline in the space of one month, demonstrates how quickly sentiment can shift.

Northern Rock faces years of debt

And some still call it not a bailout....... Here is more on Northern Rock

Und einige behaupten immer noch das es sich hier nicht um einen Bailout handelt...... Hier gibt es mehr zu Northern Rock

Northern Rock faces years of debt / FT
Northern Rock could still owe the Bank of England billions of pounds in three years’ time, according to a confidential sales memo circulated to would-be buyers of the stricken lender.

The memorandum, obtained by the Financial Times’ Alphaville website, is now the subject of a court injunction after Northern Rock sought to prevent publication of its details. The High Court granted a limited injunction preventing further reporting of material, but it rejected a much more sweeping prohibition sought by the bank after much of the FT’s report was followed up in other media.

The document suggests that even if the company was bought outright, the Bank may have to provide support to Northern Rock until 2010 when the stricken lender could still be drawing down £6bn.

The memorandum discloses that Northern Rock expects to have borrowed an estimated £24bn from the Bank of England by January 1 2008. Northern Rock is thought to have borrowed about £20bn from the Bank so far. Last night, Treasury insiders voiced surprise at the suggestion that the government, which has underwritten the Bank loan, would still be waiting to be repaid in 2010.

The memo talks about the loan being refinanced – though it is not explicit about whether such a refinancing would continue to involve government support. However, people involved in the sale process doubt whether any bidder would be able to raise the necessary financing to repay the Bank in the near future.

This could leave the government facing the political embarrassment of having agreed to a long-term guarantee that it could be forced to justify to the European Commission under rules governing state aid.

According to the sales memo, even in 2010 Northern Rock will need to be in receipt of £6bn from what it calls a replacement facility from the Bank of England.

The information memorandum has been sent to about 50 potential bidders and sets out three options for a sale of Northern Rock. As well as a sale of the whole business, the other scenarios envisage splitting up Northern Rock.

One option would see a sale of the basic infrastructure of the business – such as the branches, IT and call centre that might or might not include Northern Rock’s £13.5bn of retail deposits and matching assets.

The other option would be a sale of the infrastructure plus securitised mortgages, leaving behind some assets and liabilities for an orderly run-off. Both these scenarios would leave Northern Rock as a listed entity with assets that could be used to repay the Bank of England.

The memorandum assumes Northern Rock’s profits will plunge to £143m in 2008 but will recover to reach £643m by 2010. This would be an impressive recovery as it is more than the bank made in 2006. .....

> What a farce. One look at the state of the UK housing market and everybody knows that is downhill from now on for years to come.....

> Was für Witz. Ein Blick auf den UK Immobilienmarkt sollte geügen um zu erkennen das es von nun ab nur noch abwärts geht.....

Most of the bidders for Northern Rock are thought to have concluded that the shares are worth next to nothing. However, several hedge funds have built substantial stakes in the bank and would be expected to resist any proposal that would undermine the value of their shares.

On Tuesday it emerged that SRM Global, the hedge fund run by Jon Wood, a former UBS trader, had increased its stake in the bank from 4 per cent to 6.17 per cent. Shares in Northern Rock closed down 1.55 per cent at 152p.

Northern Rock has borrowed $ 42 Billion from the BOE

I don´t care if someone still argues that this isn´t a bailout. What started with a speech from the head of the BOE Marvin King dissing the ECB and the Fed for providing liquidity has morphed into a disaster for the credibility of the BOE. They have rescued one of the most aggressive lender in the UK . I don´t care if the collateral from Northern Rock for the $ 42 billion is "first class". You just have to look at the UK housing market and combine this with the fact that Northern Rock was active in creative financing and the action from the BOE sends a clear message..... No wonder that the Bank of England set to win power for covert rescues .....

Wer spricht immer noch davon das es sich hier um keinen Bailout handelt....... Was mit einer Rede vom Kopf der BOE Marvin King angefangen hat indem er die anderen Notenbänker für deren großzügigen Liquiditätsspritzen kritisiert hat mutiert zu einem Debakel erster Klasse für ihn und die BOE. Erschwerend kommt hinzu das die Hilfe ausgerechnet dem mit Abstand aggressivsten Akteur auf dem UK Hypothekenmarkt zugeflossen ist. In meinen Augen zieht auch nicht das ja als Sicherheit angeblich das erstklassige Kreditbuch von Northern Rock eingebracht wird. Wenn ich mir den Zustand des UK Immobilienmarktes vor Augen führe und das mit der Tatsache kombiniere das Northern Rock führend im "kreativen" Hypothekensegment gewesen ist braucht man sich nicht wundern wenn dieses als Signal aufgefasst wird das im Zweifel die BOE oder der Steuerzahler schon helfen wird.......Kein Wunder das die BOE jetzt um Ermächtigung sucht verdeckte Rettungsaktionen durchzuführen......

Rock against the clock / FT
Each week the sums get ever more eyewatering. It has now emerged that Northern Rock has borrowed an extra £4.65bn from the Bank of England, taking its total state-sponsored borrowing to £20.6bn.

The facility is due to expire in February and is intended to enable the Newcastle lender to find its own solution to its funding crisis and examine possible bids.

Alistair Darling, the chancellor of exchequer, scotched one worry about the situation on Thursday when he told MPs that the European Commission had raised no objections to the facility. That suggests it is not being treated as state aid under European rules. So in theory there is scope for the facility to be extended. This matters because Northern Rock’s potential suitors – Cerberus, JC Flowers and Virgin Group – will surely want government assistance to be extended after any takeover.

After all, the size of the refinancing required for Northern Rock is the key obstacle to any bidder. A buyer will have to repay £20.6bn of Bank funding and replace £14bn of short- and medium-term loans. For example, Lloyds TSB sought a £30bn loan from the Bank as a condition of buying Northern Rock. A successful bidder would also need extra capital to continue writing a minimum volume of mortgages and drive some inflows of retail savings, because Northern Rock’s securitisation vehicle, Granite, must keep a certain level of mortgages within its securitisation trust to function.

So the government’s involvement in Northern Rock is looking increasingly long-term. The hope in Newcastle must be that the Eurocrat view that this does not fall foul of state-aid rules will be long-term too.

BOE Says Banks Vulnerable to `Shocks' After Credit Collapse

Looks like the BOE ( and other central banks) will have do to some more bailouts like they did with Northern Rock..... Should be no problem in times when their credibilty is no longer vulnerable ( already gone) .... ;-)

Sieht ganz so aus als wenn die BOE ( und andere Notenbanken weltweit ) zukünftig noch weitere Bailouts wie bei Northern Rock befürchten muß.... Nachdem die Glaubwürdigkeit eh schon arg angekratzt und kaum noch vorhanden dürfte das nicht weiter schwierig werden..... ;-)

BOE Says Banks Vulnerable to `Shocks' After Credit Collapse
Oct. 25 (Bloomberg) -- The Bank of England said the global financial system is at risk of further instability because of ``ongoing uncertainties'' about credit-market losses.

The central bank said in its financial stability report today that markets are now more susceptible to a potential slump in global stocks, a slide in the dollar or a crash in U.K. commercial property after the U.S. subprime mortgage collapse. Merrill Lynch & Co. yesterday reported the biggest quarterly loss in its 93-year history after $8.4 billion of writedowns.

> I highly recommend to read The Role of CDOs in Merrill's Losses (Updated and Expanded Version) from Naked Capitalism

> Kann dazu jedem The Role of CDOs in Merrill's Losses (Updated and Expanded Version) von Naked Capitalism ans Herz legen

``Financial systems in advanced economies are vulnerable to further shocks, either in credit markets or from new sources,'' the Bank of England said in its semiannual report.

Investors are assessing the fallout from a credit-market rout that led to a surge in borrowing costs and a run on the deposits of U.K. mortgage lender Northern Rock Plc. Today's report said British banks are still hoarding cash to protect their balance sheets, which may keep credit conditions ``tight'' into next year and make it harder for some borrowers to manage debt.

While the central bank said ``there have been signs of recovery'' in money markets, the interest rate that banks charge each other for three-month loans hasn't returned to the level before credit costs surged on Aug. 9. The London interbank offered rate, which was 6.05 percent at the start of August, was 6.28 percent yesterday. It touched a nine-year high of 6.9 percent on Sept. 11.

Crisis Management
In a worst-case scenario, U.K. banks would have to raise as much as 170 billion pounds ($348 billion) if market conditions prevented them from selling the loans on their balance sheets to other investors, the central bank said.

The Bank of England, which had been criticized for not doing enough to help lenders after markets seized up, also said U.K. authorities need to ``strengthen their crisis management arrangements.'' Lawmakers will question Chancellor of the Exchequer Alistair Darling on the U.K. government's role in the affair at 11 a.m. in London today.

``Some important lessons need to be learned by both financial institutions and authorities,'' Bank of England Deputy Governor said John Gieve in a statement. His handling of the Northern Rock crisis was singled out for criticism by members of Parliament last month.

Highlighting the risks to global financial stability, the Bank of England said a slump in U.S. economic growth may spark a further drop in ``asset prices'' that ``could trigger a sharp decline in the U.S. dollar.''

> They don´t need to point fingers to the US..... It looks like the debt problem is also spreading to UK corporations...... Easy to figure out what will happen when the economy slows and the credit is less plentyful....

> Hier muß man nicht auf die USA zeigen..... Es sieht so aus als wenn die Kreditprobleme in UK so langsam aber sicher auch die angeblich so soliden Firmenbilanzen betreffen.... Unschwer zu erahnen was passieren wird wenn die Konjunktur ernsthaft ins stocken kommt und die Kreditklemme so richtig zum tragen kommt......
Debt Burden
The U.S. currency has declined 8 percent against the pound in the past year and dropped to a 26-year low of $2.0654 on July 24.

The central bank also said a slowdown in world growth may hurt global stocks and that it's concerned about a potential decline in U.K. commercial property prices.

>LOL! I agree that they should worry about commercial property ( see Commercial property "View from the top" / Economist ). But the far bigger problem is the residential market. Just click here and you will see unlike lots of BOE members the white elefant in the room .....I highly recommend to read Oh no, it can't happen here where Alice Cook from The UK Housing Bubble takes on the view of Kate Barker, who sits on the Bank of England's monetary policy committee..... Looks like the BOE members are as smart as the Fed members....

> Schon lustig.... Ich stimme überein das sich der gewerbliche Immobiliensektor zweifelsfrei jenseits von Gut und Böse bewegt (siehe auch Commercial property "View from the top" / Economist) Aber das eigentliche Problem liegt doch eindeutig im privaten genutzten Immobilienmarkt. Um das auf einen Blick zu erkennen braucht man sich nur diese Daten und Fakten vor Augen zu halten. Ich kann jedem raten sich den nachfolgenden Link durchzulesen.Oh no, it can't happen here . Hier betrachtet Alice Cook vom The UK Housing Bubble was Kate Barker, ein Stimmberechtigtes mitglied des Bank of England's monetary policy committee zu diesem Thema zu sagen hat..... Man fragt sich schon welche Voraussetzungen man erfüllen muß um in diesen Ausschuß zu sitzen.....

The burden on British households, which have taken on a record 1.4 trillion pounds of debt, is increasing along with credit costs, the Bank of England said today. First-time buyers of residential property and investors that purchased homes to rent them out to tenants are ``particularly exposed,'' the report said.

Still, U.K. commercial banks' earnings and their capital reserves have helped them cope with the market rout, the bank said. ``Robust'' economic growth ``and the high profitability and capitalization of major U.K. banks provide a strong anchor for the financial system.''

The report also said the market selloff may be welcome because investors were taking too-optimistic a view on the risks facing the global economy.

``A return to earlier conditions would be undesirable as that involved an underpricing of risk,'' the Bank of England said.