Does the UK economy need 54Bn pound injection

#1
Im not a tin foil hat wearer but..............I have a financial news ticker on my screen 24/7, some interesting news broke, which has now been removed. I am currently searching the Intraweb to try and find whether this was a local decision or whether it is gone completely.

The Gist is as follows.

54 Billion pounds is to be made available, by four international central banks, as loans to both the UK and US in order to aid, flagging economies as a result of the credit crunch.

Gordon Brown has allegedly welcomed this and stated that this is the sort of international cooperation we require in a modern economy.

Like i say it has just been removed along with a couple of other stories which i never got the chance to read, but i am searching the net to find a link.

edited to add : this is the closest similar report i can find http://www.ft.com/cms/s/0/d9e03c62-a8bb-11dc-ad9e-0000779fd2ac.html
 
#5
rjv1 said:
It's on the front page of the Times today (paper, don't know about online).
ok tin foil hat now off.

This will clearly assist in the short term, no doubt softening the blow by creating a false ceiling, but effectively we are selling off corporate debt, by proxy, through the bank of England, so what will be the impact over the long term?

We as a nation have only just paid off the national debt acquired to promote the social bill of the 1950's, which caused the UK to be labelled Americas puppet.

Who are we becoming beholding to now?

edited for spelling
 

Biped

LE
Book Reviewer
#6
I'll simplify things for you: It's called Public Sector Borrowing. This happens when cnuts like Broon spend more money than they make in taxes (though I haven't a clue how, with all the taxes that t0sser is raking in).

So, four big banks, rather than the World Bank or the US gobment is bailing out the UK and US gobments. Does this make it any less ridiculous?

Who's getting this money, and who's paying it back?
 
#7
Biped said:
I'll simplify things for you: It's called Public Sector Borrowing. This happens when cnuts like Broon spend more money than they make in taxes (though I haven't a clue how, with all the taxes that t0sser is raking in).

So, four big banks, rather than the World Bank or the US gobment is bailing out the UK and US gobments. Does this make it any less ridiculous?

Who's getting this money, and who's paying it back?
I agree precisely why I compared it to the 1950's cash injection to support that Labour government.

If the last major cash injection is anything to go by, the majority of the loans will be squandered before anything constructive could be done.

Sounds to me like a socialist vicious circle.
 

Alsacien

MIA
Moderator
#8
Biped said:
I'll simplify things for you: It's called Public Sector Borrowing. This happens when cnuts like Broon spend more money than they make in taxes (though I haven't a clue how, with all the taxes that t0sser is raking in).

So, four big banks, rather than the World Bank or the US gobment is bailing out the UK and US gobments. Does this make it any less ridiculous?

Who's getting this money, and who's paying it back?
Its just market liquidity management - nothing to do with borrowing and spending in the normally understood sense.
 

Biped

LE
Book Reviewer
#9
Alsacien said:
Biped said:
I'll simplify things for you: It's called Public Sector Borrowing. This happens when cnuts like Broon spend more money than they make in taxes (though I haven't a clue how, with all the taxes that t0sser is raking in).

So, four big banks, rather than the World Bank or the US gobment is bailing out the UK and US gobments. Does this make it any less ridiculous?

Who's getting this money, and who's paying it back?
Its just market liquidity management - nothing to do with borrowing and spending in the normally understood sense.
So what you are saying is that this isn't gobment borrowing, but a big four lending to banks that won't lend to each other becuase they are at risk of 'doing a Northern Rock'?
 
#10
Alsacien said:
Biped said:
I'll simplify things for you: It's called Public Sector Borrowing. This happens when cnuts like Broon spend more money than they make in taxes (though I haven't a clue how, with all the taxes that t0sser is raking in).

So, four big banks, rather than the World Bank or the US gobment is bailing out the UK and US gobments. Does this make it any less ridiculous?

Who's getting this money, and who's paying it back?
Its just market liquidity management - nothing to do with borrowing and spending in the normally understood sense.
That is how it is described, by all parties.

But you can not create liquidity in a global market place, by removing liquidity from elsewhere.

A good analogy: removing tons of water from the Atlantic, to provide liquidity to the North Sea.

Unfortunately both the cash and the water will level out on a global level.
We will feel the benefit over the short term, but over the long term we will still be in the same position.
 

Alsacien

MIA
Moderator
#11
For those who wish to understand:

http://193.178.140.209/BCEV1/epressed.nsf/vENVOYEES/D41878D0D52149F7C12573B00018512E/$FILE/20071213V7002.pdf
 
#12
Public sector borrowing- read more civil servants,quangos,pen-pushers and other vote-buying initiaves in Liarbore-held areas.

Oh and no doubt more handouts for immigrant housing,aid for Africa and the next 60% pay rise for our hard working MPs and ministers.
 

Alsacien

MIA
Moderator
#13
Le_addeur_noir said:
Public sector borrowing- read more civil servants,quangos,pen-pushers and other vote-buying initiaves in Liarbore-held areas.

Oh and no doubt more handouts for immigrant housing,aid for Africa and the next 60% pay rise for our hard working MPs and ministers.
l'additionneur noir :roll:
 
#14
Alsacien said:
For those who wish to understand:

http://193.178.140.209/BCEV1/epressed.nsf/vENVOYEES/D41878D0D52149F7C12573B00018512E/$FILE/20071213V7002.pdf
I do understand however

The cash is primarily being loaned to (us or them or whoever) and held against fixed assets. (what fixed assets?, as our reserves were systematically sold off by Brown, as chancellor so is it held against schools, police stations the Army?)

The cash is being loaned for the purpose of releasing funds to lending Banks (to be held against fixed assets, the same fixed assets which were over inflated in value and subsequently caused the first credit crunch Property)

The lending Banks then have cash to release to maintain buoyancy in the housing market (the same housing market whose previous buoyancy created a pay/cost gap which was unaffordable in most areas, which resulted in the first Credit crunch)

so by adding buoyancy a problem (pay/cost gap) will be exacerbated as the supply and demand mechanism gets underway again, therefore creating further problems down the line.

The government is not in a position to assist as Government borrowing is already extremely high as a result of out of proportion public spending, therefore paying public sector employees with debt monies, who then use their debt monies to raise further debt. Problem magnified.

So a loan in itself is not the answer a loan and immediate resolution to cut lending (but then that dampens the markets), Cuts in the public sector (which again dampens the markets) and long term productivity can be reconstructed.

I fear the economy is not in a great position.
 

Alsacien

MIA
Moderator
#15
T.F.R said:
Alsacien said:
For those who wish to understand:

http://193.178.140.209/BCEV1/epressed.nsf/vENVOYEES/D41878D0D52149F7C12573B00018512E/$FILE/20071213V7002.pdf
I do understand however

The cash is primarily being loaned to (us or them or whoever) and held against fixed assets. (what fixed assets?, as our reserves were systematically sold off by Brown, as chancellor so is it held against schools, police stations the Army?)

The cash is being loaned for the purpose of releasing funds to lending Banks (to be held against fixed assets, the same fixed assets which were over inflated in value and subsequently caused the first credit crunch Property)

The lending Banks then have cash to release to maintain buoyancy in the housing market (the same housing market whose previous buoyancy created a pay/cost gap which was unaffordable in most areas, which resulted in the first Credit crunch)

so by adding buoyancy a problem (pay/cost gap) will be exacerbated as the supply and demand mechanism gets underway again, therefore creating further problems down the line.

The government is not in a position to assist as Government borrowing is already extremely high as a result of out of proportion public spending, therefore paying public sector employees with debt monies, who then use their debt monies to raise further debt. Problem magnified.

So a loan in itself is not the answer a loan and immediate resolution to cut lending (but then that dampens the markets), Cuts in the public sector (which again dampens the markets) and long term productivity can be reconstructed.

I fear the economy is not in a great position.
I would not say the UK economy is in bad shape - but it is vulnerable to the markets more than the Fed or ECB areas.
This is the teaser on monetary union/economic stability/controlled growth - the flexibility comes with more exposure.
 

Biped

LE
Book Reviewer
#16
Alsacien said:
T.F.R said:
Alsacien said:
For those who wish to understand:

http://193.178.140.209/BCEV1/epressed.nsf/vENVOYEES/D41878D0D52149F7C12573B00018512E/$FILE/20071213V7002.pdf
I do understand however

The cash is primarily being loaned to (us or them or whoever) and held against fixed assets. (what fixed assets?, as our reserves were systematically sold off by Brown, as chancellor so is it held against schools, police stations the Army?)

The cash is being loaned for the purpose of releasing funds to lending Banks (to be held against fixed assets, the same fixed assets which were over inflated in value and subsequently caused the first credit crunch Property)

The lending Banks then have cash to release to maintain buoyancy in the housing market (the same housing market whose previous buoyancy created a pay/cost gap which was unaffordable in most areas, which resulted in the first Credit crunch)

so by adding buoyancy a problem (pay/cost gap) will be exacerbated as the supply and demand mechanism gets underway again, therefore creating further problems down the line.

The government is not in a position to assist as Government borrowing is already extremely high as a result of out of proportion public spending, therefore paying public sector employees with debt monies, who then use their debt monies to raise further debt. Problem magnified.

So a loan in itself is not the answer a loan and immediate resolution to cut lending (but then that dampens the markets), Cuts in the public sector (which again dampens the markets) and long term productivity can be reconstructed.

I fear the economy is not in a great position.
I would not say the UK economy is in bad shape - but it is vulnerable to the markets more than the Fed or ECB areas.

This is the teaser on monetary union/economic stability/controlled growth - the flexibility comes with more exposure.
You wot?!?!? Where have you been for the last 7 years then? It's not just the over-inflated housing market, with the over-eager lending by banks to people who can not afford it, it is also the hugely inflated petrol prices, the hugely over-inflated tax demands, the hugely over-inflated government spending and poor management, and the ever increasing costs of paying utility bills.

Bit of a heads-up for you - the economy is in a shoit state. IT IS LIVING ON BORROWED TIME! This is going to get a lot worse before it gets better.

If the economy was in the shape you suggest, then the big four banks would not be opening the doors nearly half as eagerly. The money men know what is blowing in the wind, and this is a DESPERATE measure to try and stave off the economic crash (not slow-down) that will hit us all in 2008. The petrol prices are not going to go down, the utility bills are not going to go down, bank lending rates will not come down by much more, but one thing is for sure - the housing market is about to take a big dive, if only because people have borrowed up to the hilt, not taking into consideration the factors of fuel, taxes and utility bills.
 
#17
STOP!!!
Make Safe

i think a few people are getting confused here. Its not public sector borrowing.

Wait out...

Ok, this is not a perfect description but hopefully it helps get back on track:

Basically many of the banks in the US and UK, plus a few other western countries have had to declare massive financial losses. This is mainly due to lots of mortage lenders giving bad loans to 'sub prime' borrowers who couldnt really afford it.
They then bundled together lots of these loans and sold them on to other punters. This was supposed to be so that even if a few did default the rest would carry on paying a good rate of return each month and the their would be less risk. All very well so long as house prices kept going up....

However to cut a long story short(ish) this latest injection is because the banks such as Barclays, HSBC, ABN etc..... know that despite all the billions of profits that have already been written off they know somebody is still carrying a can of crap. They dont know who it is and they dont trust each other to lend each other money in case that bank turns out to be the next Northern Rock and they potentially lose the money they lent. Nobody trusts each other at the moment and liquidity for interbank lending has dried up. This effects loans to business's, future morgage rates... etc..

Thus the national central banks have basically said they will auction money off to the private banks so that they can borrow from a trusted source and the idea is then the system of lending will return to (more) normal.

This is obviously a massively simplyfied version, it has been anwered in part already but I thought I'd throw in my 2ps worth to try to expain it. I have no doubt got some details a bit skewed but some people had it wrong about public sector borrowing and all sorts so hopefully this makes a bit more sense. Its banks borrowing for 3 months from the government.

I personally think they are still pissing in the wind and there will be a recession next year. We will see....
 
#19
The banks have made a number of bad moves,which have now come home to roost.The Authorities seemed not to notice.As a result faith in the financial system,is at some risk,with banks not willing to lend to each other(LIBOR),and certainly not to business or the general public,unless they have to.Bank's year ends draw night.They want to keep as much liquidity as they can,on their balance sheets,during this period,to show their financial ''strength''.The UBS recent big right off is only the start.This crisis will run,and the World economy will suffer next year.Batten down the hatches!!!
 
#20
Sven said:
So it is because banks have made bad loans - what has the government got to do with that?
In absolute terms probably none, however poor Government legislation has been a factor. The Bank of England and the FSA are empowered to control and regulate the banking sector but there are faults in the legislation which have resulted in neither party being ultimately responsible.

I think this is a little like what was known as the LMX Spiral which nearly destroyed the Lloyds of London insurance market in the late 80s early 90s.

Previously insurers would accept risk for a certain percentage of the amount and that was that. If a claim came in they paid out their share of the risk. Then they started re-insuring with each other and it became a vicious circle with parts of the same risk passing through the same insurers many times.

That was fine so long as the plates kept spinning, but they didn’t – asbestosis, hurricanes and oil tankers going aground in particular – and the market nearly collapsed with losses of £8bn. Rather a large amount even now.

In this instance mortgagors have sold their risks to others who have then sold them on again etc.

The Bank of England knew about the accident waiting to happen with Lloyds but didn’t intervene - maybe it did not have the powers to do so, I don’t know - however for a long time it has had powers to control and regulate the banking sector as also has the FSA. I have no doubt that both organisations were fully aware of this potential disaster, yet neither has done anything to prevent or mitigate it.
 

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