Rates cuts are coming! It's June 25, 2003

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The worst part of thiis situation is that we can no longer make fun of our neighbors to the north and their canadian pesos. The USD is now pretty much equivalent to the CAD. By this time next year the canucks will be making american peso jokes.

The worst part of thiis situation is that we can no longer make fun of our neighbors to the north and their canadian pesos. The USD is now pretty much equivalent to the CAD. By this time next year the canucks will be making american peso jokes.

The dollar is under pressure on the f/x markets.
And it has been under pressure for a long time before the liquidity crisis.

The trade deficit and the budget deficit, along with Bush/Greeenspans policy of deliberately depreciating the dollar, have resulted in the present f/x rate.

I believe Greenspan, in his new book, criticises Bush for not vetoing huge budget expenditures for the period 2000-2006, when Congress was under Republican control.

What is of real concern is that even with a depreciating dollar - there has been no improvement in trade deficit.
You'd assume that with a cheaper dollar that goods/services, American products would be in demand.

I can tell you that if the dollar was stronger, more people in this part of the world would be screaming blue murder, given the current price of oil.

IMO Barings didn't have cross-the-board losses. It had one huge Nick Leeson drawer full of unpaid margin calls on the Nikkei.



The Barings analogy is slightly different in that the balance sheet of Barings
had a gaping hole in it.
NR's situation is different in that it's situation is as a result of difficulties accessing liquidity from a wholesale market that is refusing to lend money.

Of course the BoE could have propped up Barings - but Barings were making losses.
NR's situation isn't the same as Barings.

What is of real concern is that even with a depreciating dollar - there has been no improvement in trade deficit.
You'd assume that with a cheaper dollar that goods/services, American products would be in demand.Check the late 80's out. Weak dollar, growing trade deficit (and fiscal deficit). Bush and Cheney think Reagan was almost the second-coming of Jesus. And that everything he did was good. I still can't believe Cheney's remark to Paul O'Neill that "Reagan proved that budget deficits and high national debt don't matter".

Unfortunately the Bush crowd think that a depreciating dollar is good for US business. When foreigners start buying all those businesses they might see the folly in their logic.

I can tell you that if the dollar was stronger, more people in this part of the world would be screaming blue murder, given the current price of oil.The price of oil is affected by the movements of the dollar. If the dollar strengthened, oil would go down against it, all else being equal, but not against Sterling or Euros.

IMO Barings didn't have cross-the-board losses. It had one huge Nick Leeson draw full of unpaid margin calls on the Nikkei.


.........and Barings operated in a completely different banking sector to mortgage lending.
Leeson was gambling on futures value contracts on the Asian market.

.........and Barings operated in a completely different banking sector to mortgage lending.
Leeson was gambling on futures value contracts on the Asian market.Good point....but the only redeeming quality of Barings situation was that the size of the loss (ultimate risk) was known. Not necessarily the case with mortgages because they are constantly affected by the fluctuating property market and default picture.

Good point....but the only redeeming quality of Barings situation was that the size of the loss (ultimate risk) was known. Not necessarily the case with mortgages because they are constantly affected by the fluctuating property market and default picture.

Re Barings : I read a couple of books about it's collapse.
When the losses were discovered at Barings .....Barings went to the BoE looking for finance.
BoE reviewed Barings and the cause of the losses, and decided that what had happened was self inflicted.
On that basis, BoE chairman Eddie George said they wouldn't assist Barings.

NR situation is different : NR cannot access funds from the wholesale market because banks are refusing to lend money to other banks.
BoE know that NR require access to money as the wholesale market has always funded NR's activities.
BOE decided to loan money to NR at the LIBOR rate (which is higher than the retail interest rate) in order to fund NR's activities.
Repayment of this loan by NR to BoE, is at LIBOR rate.
BoE wouldn't have extended credit to NR if NR was vulnerable (a la Barings).

One could say that NR are culpable in all of this - but given that their business has always been premised upon the fact that they utilised funds from the wholesale money market to carry out business - it a moot point as to whether or not NR should be denied funding (given that the entire wholesale lending market froze).

Yes..I see now how you're differentiating the two cases. Whilst at Barings there was a lone wolf fraudster, they (the wider company) were certainly not blameless with poor auditing and internal checks. However there are more people at stake in a Barings collapse than negligent upper management and partners. Fortunately most were saved in the Ing buyout. And one can argue, as you say, the negligence of management in NR's situation.

So in Britain, there is not a source of government funds provided above the interbank rate like here in the US with the discount rate? Does the BoE treat each request for funds outside of normal interbank lending as an ad hoc loan/bailout? The Fed does audit discount rate loan requests here - but its not usually public and its not usually considered a "bailout".

Not being sarcastic here, I'm just ignorant on this. If that is the case, there would be a lot more "bailouts" classified in the US as banks sporadically go to the Fed for their float needs AFAIK. I think the Fed likes to keep it under wraps, unless its an LTCM type situation.

Re Barings : I read a couple of books about it's collapse.
When the losses were discovered at Barings .....Barings went to the BoE looking for finance.
BoE reviewed Barings and the cause of the losses, and decided that what had happened was self inflicted.
On that basis, BoE chairman Eddie George said they wouldn't assist Barings.

NR situation is different : NR cannot access funds from the wholesale market because banks are refusing to lend money to other banks.
BoE know that NR require access to money as the wholesale market has always funded NR's activities.
BOE decided to loan money to NR at the LIBOR rate (which is higher than the retail interest rate) in order to fund NR's activities.
Repayment of this loan by NR to BoE, is at LIBOR rate.
BoE wouldn't have extended credit to NR if NR was vulnerable (a la Barings).

One could say that NR are culpable in all of this - but given that their business has always been premised upon the fact that they utilised funds from the wholesale money market to carry out business - it a moot point as to whether or not NR should be denied funding (given that the entire wholesale lending market froze).

On that basis, BoE chairman Eddie George said they wouldn't assist Barings.My spider-sense tells me that there was maybe more to that decision than meets the eye. Perhaps a little payback.

It wasn't like the BoE were giving them the money - Barings still had to pay it back. Seems like someone wanted to see someone suffer greater consequences. But, of course, I might be completely wrong.

I wouldn't mind betting that Peter Norris had hit a booming drive into Eddie George's group at Wentworth Golf Club or spilled his drink on him in the MCC section at Lords Cricket Ground or something similar.

OECD Chief Angel Gurria sets the tone for ECB rates cuts. --and more junk paper redemptions too.
As Hein correctly advised you:
http://www.ttc.org/200709201219.l8kcjtr12482.htm

Global financil crisis = lower rates and debased currencies for all.

Central bankers act as one.Big Deal
Not going to affect me or anyone in the slightest.

And you got your currency lesson from yours truly. So do you think I want it back from my students???

BTW Get as much posting in now as you can. Opportunity doesn't last forever:D

To re-iterate the point : no change (yet again) in ECB interest rates.


4th october 2007 :

The European Central Bank kept its benchmark interest rate at 4 per cent for the fourth month running today, as expected.

Economists had predicted rates would remain unchanged due to investors' nervousness and evidence that turmoil on financial markets is curbing economic growth.

The euro has also hit record highs against the dollar and a basket of major trading currencies. This has further clouded the growth outlook but helped to keep a lid on the soaring cost of crude oil, which is priced in the US currency.

The focus is now on a news conference by ECB President Jean-Claude Trichet in Vienna later this afternoon, where the Governing Council held one of its two meetings a year outside the bank's Frankfurt headquarters.

Economists hope to learn more then about the ECB's view of how the US subprime mortgage crisis is affecting Europe's economy and money markets, and whether downside risks to growth have increased.

Early indicators show the market turmoil has hit both economic activity and confidence. Growth in the manufacturing and services sectors slid to its lowest in two years in September and economic sentiment is the weakest in more than a year.

But at the same time, inflation rose above the ECB's 2 per cent ceiling in September and is expected to accelerate further in the next few months due to the soaring food and oil prices. Crude costs have hit record highs above $80 per barrel.

The ECB also left its marginal lending rate unchanged at 5 per cent and its deposit facility rate unchanged at 3 per cent.

.........and the Bank of England too, has keep interest rates unchanged after their monthly meeting today.

Nice!




http://www.ireland.com/newspaper/breaking/2007/1004/breaking58.htm



Last Updated: 04/10/2007 12:54
No change for UK interest rates

The Bank of England kept official interest rates steady for a third month running today, but many people expect it will cut them later this year as a credit crunch in global markets starts hitting the wider economy.

Analysts had predicted the BoE's Monetary Policy Committee would keep borrowing costs at 5.75 per cent. Policy makers have said they need time to see what effect recent market turmoil has on economic growth and inflation.
The BoE offered no statement to accompany its widely expected decision but sterling rose and interest rate futures fell as there had been some nervousness the BoE could make a surprise cut.

A few months ago many economists had predicted a further rate rise this year following five since August 2006. But this was before the global cash crunch which prompted a run on British mortgage bank Northern Rock last month.

There are worries that this will soon spill over into tighter lending conditions on companies and consumers, slowing the economy as a result.
There are already signs that Britain's housing market is cooling. Mortgage lender Halifax said house prices fell 0.6 per cent last month, the first decline since December.

The BoE has said it will watch credit conditions closely and many economists believe rates have now peaked and could come down as soon as November. But the economy is still firing on all cylinders and price pressures have not abated

tru, the us dollar has become so devalued rappers are wearing diamond encrusted pesos round their necks...



The worst part of thiis situation is that we can no longer make fun of our neighbors to the north and their canadian pesos. The USD is now pretty much equivalent to the CAD. By this time next year the canucks will be making american peso jokes.

Tracking in the ECB rates movements since Nov 2001 :


November 8 2001 3.25%
December 5 2002 2.75%
March 6 2003 2.50%
June 5 2003 2.0%
December 1 2005 2.25%
March 2 2006 2.5%
June 8 2006 2.75%
August 3 2006 3.0%
October 5 2006 3.25%
December 7 2006 3.5%
March 8 2007 3.75%
June 6 2007 4.0%

Fed is expected to cut the US rate this week :


Beeb showed a very interesting programme last night on the sub-prime debacle in the USA.
The programme covered what is going on in Cleveland, Ohio.
The number of repossessions there has increased from 12 per week to over 90
per week.
The programme followed the sheriffs dept as it carried out eviction orders for
people who had foreclosed on their mortgages (sheriffs dept were very considerate of the people concerned, let me add).
The programme featured several local politicians who said that not only were loans sold to people who could not afford them, that coupled with the fact that Cleveland has lost a lot of employment, the situation in that region was "now critical".

Terrible to see people being evicted.

Terrible to see people being evicted.
Yes, but if you buy with no down payment and 100% financing then what have you lost? You were not doing anything different than renting anyway--no matter how much you deluded yourself that you were a home owner.

Yes, but if you buy with no down payment and 100% financing then what have you lost? You were not doing anything different than renting anyway--no matter how much you deluded yourself that you were a home owner.

Objectively, you're correct.

However, having watched the programme and seeing people being physically removed from their homes, it is hard not to feel sympathetic.

The programme was very good.
It described how home ownership in the USA in the 1950's was held out as being the achievement of the American dream.
If you owned your own home - then you were made up.
In itself, there is nothing wrong with this objective.
However.
The programme described how this objective has permeated the American psyche and using that objective, people who could never afford a mortgage, were persuaded by finance companies to take out loans to buy their own home or to "realise the American dream".

However, having watched the programme and seeing people being physically removed from their homes, it is hard not to feel sympathetic.

The programme was very good.
It described how home ownership in the USA in the 1950's was held out as being the achievement of the American dream.
If you owned your own home - then you were made up.
In itself, there is nothing wrong with this objective.
However.
The programme described how this objective has permeated the American psyche and using that objective, people who could never afford a mortgage, were persuaded by finance companies to take out loans to buy their own home or to "realise the American dream".
I hear you. For some reason Colorado has been heavily hit with foreclosures. For those losing their homes, it is certainly traumatic for them and their families. Perversely, the others involved in the deals made fat profits at the expense of the doomed "home owners," and the take is a whopping 6% in the states. I seem to recall reading that in the U.K. the transaction cost is 1 or 2%, I forget which.

The American dream of home ownership has been corrupted by insane consumerism. I don't know if the term is in common use in the U.K. but in America we have the term "house poor," meaning someone who buys a house so expensive relative to his income that there is little money left over for anything else. Thus you have people living "large" in their new McMansions , but they cannot afford to properly heat the whole house in winter or cool it in summer. A friend of mine had lawn furniture (and little else) inside their house for a couple of years; they wore sweaters or vests inside during winter.

I hear you. For some reason Colorado has been heavily hit with foreclosures. For those losing their homes, it is certainly traumatic for them and their families. Perversely, the others involved in the deals made fat profits at the expense of the doomed "home owners," and the take is a whopping 6% in the states. I seem to recall reading that in the U.K. the transaction cost is 1 or 2%, I forget which.

The American dream of home ownership has been corrupted by insane consumerism. I don't know if the term is in common use in the U.K. but in America we have the term "house poor," meaning someone who buys a house so expensive relative to his income that there is little money left over for anything else. Thus you have people living "large" in their new McMansions , but they cannot afford to properly heat the whole house in winter or cool it in summer. A friend of mine had lawn furniture (and little else) inside their house for a couple of years; they wore sweaters or vests inside during winter.

We have the same situation here.
Property prices in this great little nation of ours has increased expotentially by over 600% in some cases, in little less than a decade.
For example, I purchased a house in 1992, for investment purposes, in a nice residential area in Dublin.
Three bedroom-semi : 1,200 sq foot.
Value £50,000 (or €63k).
I let the house out for rent.

The same house, would now sell today for between €450-€500k.
The mortgage on that house is paid off - and I would nett between somewhere between € 350-€400k after capital gains tax, if I decided to sell it.
I could have sold it two years ago, at € 550k.
I haven't sold the house, nor do I intend to sell the house.
My point is that it is crazy that a house like that could appreciate by over 700% in 14 years.

We have young couples in this country mortgaging themselves for 30/40 yrs, just to get on the property ladder.
That particualr house that I own would be considered, traditionally, as a starter home.
No young couple could, or should, be expected to have to fork out to buy a starter home at those price levels.
Throw in the fact that young couples expect their homes to have all the latest TV sets, expensive furnishings etc, I don't know how people survive.
In fact, I know that many are not surviving - they're barely keeping their heads above water.

Consumerism is a disease, I think and everything has to be possessed now.
The idea of "saving up" to buy the pushbike/car/deposit for the house is no longer the norm.

I was brought up in a time when economically this country was on it's knees.
We didn't have playstations as kids - we had a football and, if you were really lucky, you had a pushbike to play with.

Kids today have to have the latest gizmos - they have to have the latest fashion, they have to have MP3 players, mobile phones etc.
On wonders how we all survived childhood.

Rant over.

The world went to hell with the debut of the Barbie doll.If needed,I can explain my theory.

We have young couples in this country mortgaging themselves for 30/40 yrs, just to get on the property ladder.
That particualr house that I own would be considered, traditionally, as a starter home.
No young couple could, or should, be expected to have to fork out to buy a starter home at those price levels.
Throw in the fact that young couples expect their homes to have all the latest TV sets, expensive furnishings etc, I don't know how people survive.
In fact, I know that many are not surviving - they're barely keeping their heads above water.

Consumerism is a disease, I think and everything has to be possessed now.
The idea of "saving up" to buy the pushbike/car/deposit for the house is no longer the norm.

I was brought up in a time when economically this country was on it's knees.
We didn't have playstations as kids - we had a football and, if you were really lucky, you had a pushbike to play with.

Kids today have to have the latest gizmos - they have to have the latest fashion, they have to have MP3 players, mobile phones etc.
On wonders how we all survived childhood.

Rant over.
I have been fortunate to have paid off my mortgage early (with a lot of hard effort) and it is considered a starter home in my local market, but I am grateful not to have had the mindset of those around me as you have described. I have visited a number of those homes in the nicer neighborhoods near me and when we drive up the landscaping looks to be professionally kept, two brand new SUV's (probably leased) and impressive sized homes, but once we enter the door there is minimal furntiture and even at that it looks like something out of a college dorm room. It reminds me of the Hollywood cowboy sets of a western town. On film it looks like an authentic western town, but if you looked behind the walls you would see it is all fake and only the front looks to be real. Many of these couples try to create this false front that when you drive up it looks really impressive, but we you find out about them you realize they really have nothing. What they own is kitchen utensils, clothes and a scant amount of college dorm room furniture. Some of them have nice furniture, but usually that is on some kind of payment plan as well. When I was working hard to become debt free I was predicting a day when all these people would have a great fall and now the day is here. Not that I hoped that would happen for them, but it was easy to predict if the economy turned down a little.

But here is the bad thing. They have not only hurt themselves, but they have hurt the rest of us as well. I am debt free and though I am grateful I am at risk as well now because it is impacting our economy in a general manner. Luckily with being debt free my stress levels are still low, but I am watching with concern.