Tuesday, December 30, 2008

Killed By the NHS

Remember under the NHS you are a cost, not a customer.

Thursday, December 25, 2008

Merry Christmas!

I'm wishing for
Gordo is no longer PM,
We get an LVT,
Income Tax & VAT & NI is abolished.

What would you like to find under the xmas tree?

Tuesday, December 16, 2008

It took 90 minutes for Daily News to 'steal' the Empire State Building

Market Geonomics would make this unprofitable to do, as you'd need to fork over the money.

Tuesday, December 09, 2008

Saturday, December 06, 2008

Minister of Transport talks sense.

Can the Government bailout every industry?


Clarkson doesn't believe in state intervention, so he'd hopefully agree that the government shouldn't "bail out" ANY industry.

Project Cyclos

Gordo wants to kill U.K. Sterling.

Replacement currency might be our only hope.

Wednesday, December 03, 2008

Joke of the week

An Israeli doctor said, 'Medicine in my country is so advanced, we can take a kidney out of one person, put it in another, and have him looking for work in six weeks.'

A German doctor said, 'That's nothing! In Germany , we can take a lung out of one person, put it in another, and have him looking for work in four weeks.'

A Russian doctor said, 'In my country medicine is so advanced, we can take half a heart from one person, put it in another, and have them both looking for work in two weeks.'

The English doctor, not to be outdone, said 'Hah!. We can take an arsehole out of Scotland , put him in 10 Downing Street and have half the country looking for work within twenty-four hours.......

Friday, November 28, 2008

A "tribute" to Marxism

nine principles of stasi-ing by Sir Ian Blair

The nine principles by Sir Ian Blair[1]

1. The basic mission for which the police exist is to prevent Labour losing elections.

2. The ability of the police to perform their duties is dependent upon ministerial approval of police actions.

3. Police must secure the subservience of the public in observance of Labour party needs to be able to secure and maintain the respect for the Leader.

4. The necessity of the threat and use of physical force ensures the compliance of the public.

5. Police seek and preserve party favour by catering to ministers and constantly demonstrating absolute service to the party.

6. Police use physical force to the maximum extent necessary to secure observance of the law or to restore order.

7. Police, at all times, should maintain a relationship with the public that gives reality to the historic tradition that the police are the Labour party and the Labour party are the police; the police being only members of the party who are paid to give full-time attention to party duties which are incumbent on every citizen in the interests of common purpose.

8. Police should always direct their action strictly towards improve their powers over the proles.

9. The test of police efficiency is the high support in polls for Labour.

Thursday, November 27, 2008

Panic of 1857, not great depression.

The recession ended a period of prosperity and speculation that had followed the Mexican-American War and the discovery of gold in California in the late 1840s. Gold pouring into the American economy played its part by helping inflate the currency. Changes in worldwide economic trade, caused by the Crimean War between Britain and Russia, had pushed American firms into a precarious worldwide market. (McPherson, p. 189) The immediate event that touched off the panic was the failure on August 24 of the New York City branch of the Ohio Life Insurance and Trust Co., a major financial force that collapsed following widespread embezzlement. In the wake of this event, a series of other setbacks shook the public's confidence, including:

* The decision of British investors to remove funds from U.S. banks, which raised questions about overall U.S. economic soundness
* The fall of grain prices, which spread economic misery into rural areas, because of the end of the Crimean War and Russian re-entry into global markets
* The collapse of land speculation programs that depended on new rail routes, ruining thousands of investors

These triggers lowered the value of stocks and bonds held by American banks, further reducing their investment assets.

Sound familiar???

Tuesday, November 18, 2008

Volcker issues dire warning on slump

Paul Volcker, the former chairman of the US Federal Reserve, has warned that the economic slump has begun to metastasise after a shocking collapse in output over the past two months, threatening to overwhelm the incoming Obama administration as it struggles to restore confidence.

Here's the interesting bit.

Even so, he said the arch-culprit was the bonus system that allowed bankers to draw forward "tremendous rewards" before the disastrous consequences of their actions became clear, as well as the new means of credit alchemy that let them slice and dice mortgage debt into packages that disguised risk.

I actually agree that allowing bankers to take bonuses before there are profits is silly.

Rents Fall As Houses Fail To Sell

See this old post for CityUnslicker getting it wrong


Thursday, November 13, 2008

CapitalgOne: What's in your Bailout? Apply Now!

I hope if you're American(, or maybe even if you're not) you'll take the opportunity to apply for a loan of just a few Billion at base rates to help with your finances during these troubled times.

Maybe your investments in a big car, massive plasma TV and McMansion have been affected by the markets current irrational pricing.

Have no fears the US treasury should be there to BAIL YOU OUT, even if you are not currently a Golf partner of the Hank Paulson!

Don't delay, Click the title link to apply NOW!

Thursday, November 06, 2008

Friday, October 31, 2008

Blog Comment of the Year

Rob Lyman,

The more expensive housing is, the more politicians can buy votes by offering to make it more affordable (via cheap credit, lower down payment requirements, etc.); same with education. Notice a pattern? Government distortions increase costs of living, and politicians run for government on promises not to remove those distortions, but to add new distortions that will supposedly ameliorate those high costs.

I'm no libertarian, but I'd think libertarians would be on to this by now.

Posted by DaveinHackensack | October 30, 2008 3:24 PM

Thursday, October 30, 2008

Gordon's Epic Fail

6th May 1997

"So we must break from the short termism of the past - the economic instability that has characterised the British economy not just in recent years but for most of the century. That is why I want British economic success to be built on the solid rock of prudent and consistent economic management, not the shifting sands of boom and bust."

"The ultimate judgement of the success of this measure will not come next week , or indeed in the next year but in the long- term. I am convinced that this radical reform, together with measures we will announce to equip our economy for the challenges ahead, creates the platform of stability upon which Britain can build."

Saturday, October 25, 2008

Delivery failures plague Treasury market

Delivery failures plague Treasury market

The credit crisis is causing a growing number of delivery failures with Treasury securities.

The latest data from the Federal Reserve Bank of New York showed that cumulative failures hit a record $2.29 trillion as of Oct. 1. The federal settlement period is T+1 (trade date plus one day).

The outstanding U.S. public debt is $10.3 trillion.

"Current [fail] levels are at historic levels," said Rob Toomey, managing director of the Securities Industry and Financial Markets Association's funding and government and agency securities divisions. "There's been significant flight to quality" with the market turmoil, he said.

With the strong demand for Treasury securities, "some of the entities that bought Treasuries are not making them available in the [repurchase] market, which is the traditional way to get them," Mr. Toomey said.

Unlike some past bouts with high failure rates that involved particular bond issues, the current high fails involve all types of maturities, he said.

Tuesday, September 30, 2008

Interesting thread

Fed Pumps Further $630 Billion Into Financial System

"Basically the huge currency swaps are portrayed as "world wide demand for dollars" when actually the US needs the foreign currency." Ablebonus @ 2008-09-30 02:38:39

US, Europe, Japan planned dollar rescue: Nikkei

TOKYO - The United States, Europe and Japan planned joint intervention to rescue the dollar when it was plunging in March at the time US investment bank Bear Stearns collapsed, the Nikkei business newspaper reported.

Officials from the US Treasury Department, Japan's Finance Ministry and the European Central Bank reportedly drew up a currency contingency plan over the weekend of March 15-16, the Nikkei said, citing sources familiar with the situation.


The officials did not specify levels for initiating the dollar rescue plan, but in the event of a free-fall they agreed to coordinate aggressive buying of the greenback and sell yen JPY and euros EUR, the newspaper said.

‘If downside risks to the dollar emerge from here on, the market will keep in mind the possibility of similar action by authorities,’ said Takahide Nagasaki, chief foreign exchange strategist for Daiwa Securities SMBC.


Even as the dollar slid after the flare-up of the credit market turmoil last August, there had been a perception among market players that US authorities were willing to tolerate falls in the dollar in a policy of ‘benign neglect’, to help support US exports as the economy faltered.

But market players detected a shift in US officials' stance towards the dollar in June when Federal Reserve Chairman Ben Bernanke issued a rare warning on the inflation risk posed by a weak dollar, and Treasury Secretary Henry Paulson declined to rule out intervening in currency markets.

Under the intervention framework, Japan was to supply yen through currency swaps. The plan also called for using a previously established swap mechanism between the United States and Europe.



"That's quite a statement leraconteur.

However, that would explain why LEH and AIG blewup is the fed was unable to lend to keep them afloat. It would explain why the investment banks were trying to latch onto depositors funds. It would explain the type of scenario that could be explained to congress and leave them silenced and mouth agape. It would explain why this bill has the support it does in the face of 300 to 1 constituents support. It would explain why many (Bush, McCaine, Obama, democrats) keep saying "it will pass". It would explain the need for congressional martial law in the house. It would explain the large swaps that are increasing in size and frequency." 127001 @ 2008-09-30 06:51:54

Banking crash hits Europe as ECB loses traction

"The ECB is no longer able to inject liquidity because the money is just coming back to them again. This is extremely serious. If monetary policy is no longer working, there is a risk that the whole system will blow up in days," he said.

Currency Swap

Friday, September 26, 2008

Monday, September 15, 2008

FACTBOX-Lehman's 30 largest unsecured creditors' claims

FACTBOX-Lehman's 30 largest unsecured creditors' claims

Sept 15 (Reuters) - The following is a list of the 30 largest unsecured claims by creditors of Lehman Brothers, as listed in its Chapter 11 bankruptcy filing.

Aozora Bank, Bank loan $463 million

Mizuho, Bank loan $289 million

Citibank (Hong Kong branch), Bank loan $275 million

BNP Paribas, Bank loan $250 million

Shinsei Bank, Bank loan $231 million

UFJ Bank Ltd, Bank loan $185 million

Sumitomo Mitsubishi Banking Corp, Bank loan $177 million

Svenska Handelsbanken, Letter of credit $140.6 million

KBC Bank, Letter of credit $100 million

Mizuho Corporate Bank Ltd, Bank loan $93 million

Shinkin Central Bank, Bank loan $93 million

The Bank of Nova Scotia, Bank loan $93 million

Chuo Mitsui Trust, Bank loan $93 million

LLoyds Bank, Letter of credit $75.4 million

Hua Nan Commercial Bank, Bank loan $59 million

Bank of China (New York branch), Bank loan $50 million

Nippon Life Insurance Co., Bank loan $46 million

ANZ Banking Group, Bank loan $44 million

Standard Chartered Bank, Bank loan $41 million

Standard Chartered Bank, Letter of credit $36.1 million

First Commercial Bank Co., Bank loan $25 million

Bank of Taiwan, Bank loan $25 million

DnB NOR Bank ASA, Bank loan $25 million

Australia and New Zealand Banking Group, Bank loan $25 million

Australia National Bank, Letter of credit $12.6 million

National Australia Bank, Letter of credit $10.3 million

Taipei Fubon Bank New York Agency, Bank loan $10 million

In addition, the following three entries show positions by banks acting as indenture trustees, who administer the bonds but have no exposure to them.

Citigroup Bond debt ca. $138 bln

and the Bank of New York Mellon Corporation (with respect for the Euro Medium Term Notes only) as indenture trustee, under the Lehman Brothers Holdings Inc. Senior Notes.

Bank of New York Bond debt ca. $12 bln

Mellon Corporation as indenture trustee under the Lehman Brothers Holdings Inc. subordinated debt

Bank of New York Bond debt ca. $5 bln
Mellon Corporation as indenture trustee under the Lehman Brothers Holdings Inc. junior subordinated debt

(Compiled by EMEA Financial Services team in London, editing by Will Waterman)

other editing by AC1 :)

Saturday, September 06, 2008

I'm wishing Mark well, hope you can too!

Repossession is a tragedy but also a zero sum game

Published: August 12 2008 03:00 | Last updated: August 12 2008 03:00

From Dr Peter Harvey.

Sir, Chris Giles's amusing suggestion of "government sponsored arson" to increase demand beautifully illustrates the perverse logic of all these hair-brained proposals to support the housing market ("One way to heat up house prices", August 8). Nevertheless, desperate scenes of families losing their homes will mean that the chancellor will have little option politically other than to spend more of our money on being seen to try to address the problem.

Nonsensical economics aside, however, forcing those who choose not to overstretch themselves to subsidise (through tax or inflation) those who do is an unedifying prospect. Making non-homeowners, in particular, poorer in order to keep prices too high for them to afford is simply cruel. They should not be made to pay off mortgages on other people's houses, to prop up the unearned equity of Middle England, to underwrite the profiteering of speculators or to lock in the "earnings" of buy-to-let landlords - or be encouraged with this or that scheme to enter a market yet to fall to sustainable levels.

Repossession, while a tragedy for those involved, is also a zero sum game: for every family forced to relinquish a property they cannot afford, another has the chance of buying at a price they can. No amount of market manipulation can increase the proportion of people who are comfortably housed; this can be done only by changing the number of houses or changing the number of people.

Peter Harvey
Mathon, Worcestershire WR13 5NZ, UK

Via HawkEye, my eagle-eyed helper!

Thursday, September 04, 2008

Leanne Donaldson, 28, an administrator, and her partner Paul Langford, 25, an IT worker, are in danger of losing their home in Cheshire.

They are struggling to keep up with the cost of living and fear negative equity if they sell their two-bedroom house.

The first-time buyers, who earn a combined total of £30,000, purchased their home in September 2007 for £116,500, opting for a five-year mortgage deal with Northern Rock, at a fixed rate of 5%. They borrowed £122,500. Repayments cost them £800 per month.

"We can't afford to live," says Leanne. "Food prices have gone up and so has the cost of gas. We don't have any spare money. We have to shop around for bargains, we can't afford new clothes and we can't afford to go on holiday.

"We're worried about the house being repossessed. We've already missed a couple of payments - one last Christmas for presents and one because the car broke down and we had to use the mortgage money to fix it. If we miss any more they'll start to threaten us.

Good to see they have their priorities right. They've borrowed well over 100% of the purchase price of a house at 4 times their COMBINED earnings in SEPTEMBER 2007. Jeezus. It might be a struggle to pay the debts and they might fear repossession, but can't miss Xmas presents!!!


Sunday, August 31, 2008

Profit is a synonym of Productivity.

Socialism seeks to remove profits, socialism only succeeds in removing productivity.

Monday, August 25, 2008

2 + 1 Rules (please discuss).

1. Money Represents the economy, inflation and deflation represent the gap between money and the economy.
2. The government cannot raise the rate of economic growth, only lower it own hindrance.

3. The government is solely a transfer agency. It does not create.

Friday, August 22, 2008

Bank borrowing from ECB is out of control

By Ambrose Evans-Pritchard
Last Updated: 3:06pm BST 21/08/2008

The European Central Bank has issued the clearest warning to date that it cannot serve as a perpetual crutch for lenders caught off-guard by the severity of the credit crunch.

Not Wellink, the Dutch central bank chief and a major figure on the ECB council, said that banks were becoming addicted to the liquidity window in Frankfurt and were putting the authorities in an invidious position.

"There is a limit how long you can do this. There is a point where you take over the market," he told Het Finacieele Dagblad, the Dutch financial daily.

"If we see banks becoming very dependent on central banks, then we must push them to tap other sources of funding," he said.

While he did not name the chief culprits, there are growing concerns about the scale of ECB borrowing by small Spanish lenders and 'cajas' with heavy exposed to the country's property crash. Dutch banks have also been hungry clients at the ECB window.

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.

These banks are heavily reliant on short-term and medium funding from the capital markets. This spigot of credit is now almost entirely closed, making it very hard to roll over loans as they expire.

The ECB has accepted a very wide range of mortgage collateral from the start of the credit crunch. This is a key reason why the eurozone has so far avoided a major crisis along the lines of Bear Stearns or Northern Rock.

While this policy buys time, it leaves the ECB holding large amounts of questionable debt and may be storing up problems for later.

The practice is also skirts legality and risks setting off a political storm. The Maastricht treaty prohibits long-term taxpayer support of this kind for the EMU banking system.

Few officials thought this problem would arise. It was widely presumed that the capital markets would recover quickly, allowing distressed lenders to return to normal sources of funding. Instead, the credit crunch has worsened in Europe.

Not to miss out, Nationwide recently announced that it was setting up operations in Ireland, partly in order to be able to take advantage of ECB liquidity if necessary. Any bank can tap ECB funds if they have a registered branch in the eurozone, although collateral must be denominated in euros.

Jean-Pierre Roth, head of the Swiss National Bank, complained this week that lenders were getting into the habit of shopping for funds from those authorities that offer the best terms. The practice is playing havoc monetary policy.

"What we should avoid is some kind of arbitrage by banks, which say they are going to go to central bank X, instead of central bank Y, because conditions are more attractive," he said.

UK homes for rent exceed demand

By Sharlene Goff

Published: August 18 2008 20:44 | Last updated: August 18 2008 20:44

Supply of rental accommodation rose at its quickest pace on record in the three months to July, outstripping the increase in demand from tenants, according to the latest data from the Royal Institution of Chartered Surveyors.

Rics’ latest lettings survey showed that many potential homebuyers had been forced into rental accommodation because they were unable to obtain a mortgage. Meanwhile, record numbers of homeowners were unable to sell their properties and were having to let them out.

“The wider housing market stagnation has compelled increasing numbers of would-be housebuyers and sellers to seek refuge in the rental market,” Rics said. “As a result, activity in the residential lettings market is booming.”

The increase in rental accommodation had not yet tempered growth in rental prices. Rics said rents had continued to rise at the same rapid pace as in the previous quarter.

But oversupply was expected to have an impact on rents in coming months. Rics’ survey showed that a smaller proportion of surveyors expected rents to keep rising over the next quarter.

“Established investors have been reaping the benefits of the housing downturn for some time and will continue to do so in the short term,” said James Scott-Lee, a Rics spokesman. “However, ever-increasing supply could have an impact on rental growth as tenant options increase.”

The survey showed that 37 per cent more surveyors reported a rise in new tenant lettings than a fall in the three months to July, compared with 30 per cent in the previous quarter. Meanwhile, 43 per cent more surveyors reported a rise in the number of new lettings instructions than a fall, also up from 30 per cent in April.

Rics said rents in London had flattened out, while around the country they were still rising. Only 3 per cent more surveyors in London reported a rise in rents than a fall in the three months to July.

Estate agents in London and the south-east have already started to see rents come under pressure as competition between new landlords becomes fierce.

Agents such as Savills and Knight Frank have reported sharp price falls for some rental accommodation, particularly in prime areas of London.

“We feel rents have come down as supply has come through from the sales market,” said Jane Ingram, head of lettings at Savills. “It has been much more of a tenants’ market.”

She said the reduction in rents – which had been as much as 10 per cent in some areas of London and the south-east – had meant landlords were not obtaining the high yields they might have been hoping for.

“Yields have edged up a bit but not as dramatically as people had expected,” she added.

Rics said that rising rents coupled with falling house prices had driven up gross rental yields for landlords in the three months to July, and meant that fewer than ever had opted to sell their properties in the three-month period.

Only 2.1 per cent of landlords sold their properties at the expiry of the tenant lease, the lowest on record.

Copyright The Financial Times Limited 2008

Tuesday, August 19, 2008

I wonder what the increased supply of properties to rent will do to rental yields?

Isnt price = Demand/Supply?

The number of properties up for rent has jumped as people who cannot sell their homes decide to let them instead.

More Deflation news...

Sharp money supply contraction points to Wall Street crunch ahead

By Ambrose Evans-Pritchard
Last Updated: 12:09am BST 19/08/2008

The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months.

Data compiled by Lombard Street Research shows that the M3 ''broad money" aggregates fell by almost $50bn (£26.8bn) in July, the biggest one-month fall since modern records began in 1959.

"Monthly data for July show that the broad money growth has almost collapsed," said Gabriel Stein, the group's leading monetary economist.

On a three-month basis, the M3 growth rate has fallen from almost 19pc earlier this year to just 2.1pc (annualised) for the period from May to July. This is below the rate of inflation, implying a shrinkage in real terms.

The growth in bank loans has turned negative to a halt since March.

"It's obviously worrying. People either can't borrow, or don't want to borrow even if they can," said Mr Stein.

Monetarists say it is the sharpness of the drop that is most disturbing, rather than the absolute level. Moves of this speed are extremely rare.

The overall debt burden in the US economy is currently at record levels, raising concerns that a recession - if it occurs - could set off a sharp downward spiral.

US Broad Money Percentage change

Household income is now 131pc of disposable income, compared with 93pc at the top the dotcom bubble, 79pc in the property boom of the late-1980s, and 62pc at the end of the 1970s.

The M3 data measures both cash and a wide range of bank instruments. It tends to provide an early warning signal of major shifts in the economy, although the US Federal Reserve took the controversial decision to stop reporting the statistics in 2005 on the grounds that the modern financial system had rendered the data obsolete.

Monetarists insist that shifts in M3 are a lead indicator of asset prices moves, typically six months or so ahead. If so, the latest collapse points to a grim autumn for Wall Street and for the American property market. As a rule of thumb, the data gives a one-year advance signal on economic growth, and a two-year signal on future inflation.

"There are always short-term blips but over the long run M3 has repeatedly shown itself good leading indicator," said Mr Stein.

He cautioned that the three-month shifts in M3 can be highly volatile.

M3 surged after the onset of the credit crunch, but this was chiefly a distortion caused by the near total paralysis in parts of the American commercial paper market. Borrowers were forced to take out bank loans instead. The commercial paper market has yet to recover.

The University of Michigan's index of consumer sentiment has fallen to the lowest level since the 1980s recession.

The US economy is without doubt facing severe headwinds going into the autumn.

Richard Fisher, the ultra-hawkish head of the Dallas Federal Reserve, warned over the weekend that growth would be near "zero" in the second half of the year.

Tuesday, August 12, 2008

Strong sign of deflation.

Dramatic cut seen in mortgage lending

By Norma Cohen and Jane Croft

Published: August 11 2008 03:00 | Last updated: August 11 2008 03:00

Building societies have so dramatically slashed their mortgage lending that repayments outstripped new loans by almost £700m in June, according to the latest data from the Building Societies Association.

The June data follow a more modest net outflow of £110m in May on a seasonally adjusted basis and offer a bird's eye view of the credit crunch caused by a drought of available cash.

According to data from the Bank of England, the net withdrawal of mortgage lending by building societies is unprecedented; not even in the darkest days of the last property recession did net lending become negative.

Adrian Coles, director-general of the BSA, said the net withdrawal of capital reflected extreme conservatism on the part of societies. "They are keen to make sure they are only lending to those who are able to repay their mortgage," he said.

But the spectre of Northern Rock has hung over the sector and there is a sense among lenders that they would rather bolster their own cash reserves than make new home loans.

"Of the money coming in from retail savers, more of that is going into liquidity rather than into new mortgages," Mr Coles said. He said that the Financial Services Authority, which regulates the sector, is placing informal pressure on societies to increase reserves above 20 per cent of liabilities, which historically has been the long-term average ratio in the sector.

Although there were no new rules, "it is more nudges and winks from the FSA", he said.

Stephen Kingsley, head of the financial services practice at consultants LECG, said there was no question that a combination of regulatory pressure and common sense by management were forcing societies to pare back lending. "The drop is not surprising," he said. "They are conserving cash."

In the aftermath of the run on deposits at Northern Rock, regulators and lenders have been taking a hard look at liquidity, that is cash on hand to meet a sudden demand for cash withdrawals. Because building societies do not have shareholders from whom they can raise capital, they require a different regulator approach.

In May, Hector Sants, chief executive of the Financial Services Authority, gave a speech to the BSA underscoring its concerns about adequate liquidity and noted that some instruments that might once have been used to meet liquidity requirements might no longer be considered liquid themselves because the market for them had dried up.

He also warned that the FSA was considering liquidity policies that would not only allow societies to meet a sudden round of cash withdrawals but also longer-term policies that would "show inflows against worst case outflows".

But Mr Coles noted that building society lending was also constrained by the very high cost of fierce competition for retail deposits.

With wholesale lending markets in chaos, banks and others have strayed into territory where building societies have traditionally been strong. The rise in mortgage interest rates has made home loans more profitable than they were a year ago but not enough to offset the cost of competing fiercely for retail customers.

"Many societies will conclude that the increase in [mortgage] margins is nevertheless being wiped out by the cost of deposits," Mr Coles said.

Indeed, the June BSA data show that net receipts - new deposits minus withdrawals - in June were just £446m, less than half the level of May and less than a quarter of that in April. But even with that shrinkage, interest credited to depositors rose.

In its 2007-08 annual report, Nationwide, the UK's largest building society, made little secret of its intention to shrink its loan book. It said a "prudent approach" had led to a "controlled reduction" in lending to £6.7bn the year before.

Building societies were once the mainstay of the home mortgage market. And while banks and specialist lenders have taken significant market share, the societies remain active providers of housing finance.

By law, they must make at least 50 per cent of their loans to owner-occupiers and take at least 50 per cent of their funding from depositors, not the wholesale markets.

Gary Styles, chief economist at Hometrack, a residential property research company, noted that specialist lenders, many of whom rely on the wholesale markets for funding, had also had a sharp reduction in net lending.

Ironically, societies are likely to have an edge in keeping customers who have come to the end of a fixed-rate period because they are able to offer a default rate - known as the standard variable rate - which is lower than that of banks. For example, the SVR of Nationwide, is 6.75 per cent against 7-7.25 per cent at HBOS.

In the longer term, Mr Styles said, there were worrying implications for homeowners because the societies had provided rigorous competition to banks and helped to keep rates down. "It can only be that [societies] are losing market share to the banks," he said.

Monday, August 11, 2008

Scariest Article I've read in weeks.


Asset-Backed Sales May Drop to 10-Year Low in Europe (Update1)

By Neil Unmack

Aug. 11 (Bloomberg) -- Sales of asset-backed bonds, which finance everything from home loans to offices, water companies and pubs, may fall 83 percent in Europe this year to 65 billion euros ($98 billion), the lowest since 1998, Deutsche Bank AG said.

A year after the start of the credit crisis, the asset- backed debt market remains stagnant as investors stung by subprime losses demand record-high yields, damping sales. The European Central Bank took the unprecedented step Aug. 9 last year of offering banks unlimited cash to ease a liquidity squeeze and lenders are increasingly using asset-backed bonds as collateral to borrow.

Banks created about 253 billion euros of asset-backed bonds so far this year, compared with 378 billion in all of last year and a peak of 470 billion euros in 2006, according to Deutsche Bank data. Of the securities issued in 2008, less than 30 billion euros were sold to investors, Deutsche Bank said.

``The overwhelming bulk of securitizations have been designed solely for the purposes of accessing central bank liquidity,'' analysts led by London-based Ganesh Rajendra wrote in a report published on Aug. 8. Creating and keeping bonds to borrow from central banks ``has become a de facto substitute for capital market funding for many banks,'' the analysts wrote.

Subprime Losses

Mounting losses resulting from the collapse of the U.S. subprime-mortgage market have caused money-market funds to stop buying asset-backed commercial paper and forced funds such as structured investment vehicles to unwind holdings, driving up yields. The U.S. market for commercial paper, or short-term IOUs, backed by assets such as mortgages shrunk 40 percent from its peak in July 2007. A basis point is 0.01 percentage point.

Investors demand about 163 basis points more than benchmark rates to buy the highest-rated bonds backed by U.K. mortgages, according to Lehman Brothers Holdings Inc., more than 10 times the spread of a year ago.

This year should mark ``the very trough'' of asset-backed bond sales, the Deutsche Bank analysts wrote. About 45 billion euros of the securities were sold in 1998, the report said.

Tuesday, July 15, 2008

Another problem that would be alleviated by a Land Value Tax.

"So I work for the enemy. :) A couple quick observations from what I'm seeing: 1. My company will avoid selling a foreclosed home we have taken at all costs. Many times we are choosing not even to foreclose because it is a waste of money. We just sit on it and twiddle our thumbs waiting for what I don't know. So we have a ton of bad debt but it doesn't "look" that way because we are avoiding that bad debt from hitting the books. If we do actually have a foreclosure we just play games with realtors, investors and homebuyers, we take their offers, and they wait 60 days, then counter offer, then maybe look at another offer...wait another 60 days, then counter offer. We are just blowing smoke so the big hit won't go on the books yet. It seems would would rather just be ok with not accepting payments anymore than having to take a home. 2. Another interesting observation. Do banks get any kind of federal money or assitance if they loaned $$ to people who are considered in "disaster areas"? The reason I ask is my company has had a bunch of loans where people aren't paying, and when I say not paying I mean not 1 cent in 15 months on 500k mortgages and we have done NOTHING. Just recently, some of these accounts have been placed under a "disaster relief" program due to the wild fires raging here in California. The catch is, when I am reviewing these accounts none of the addresses are even close to being in a fire areas. Yes, they may be in the same COUNTY where a fire is currently burning .....but 60 miles from actual flames. So now these loans maybe can be put back on the books as up to date because they are in a 'disater relief loans' and not "bad debt" anymore. Boy the banks never seem to halt with the tricks up their sleeves. I was wondering if anybody else has seen this. FYI the property locations are in Salinas, Seaside, Gonzales, Greenfield, Soledad, and King City. The fire is burning in Big Sur! Same county but no fire risk."

An LVT would make banks be far more honest about the real value of foreclosed properties. It would be too expensive for them to "hold and hope".

Wednesday, June 18, 2008

Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve
By Ambrose Evans-Pritchard, International Business Editor

The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe's exchange rate crisis in the 1990s, a team of bankers has warned.

"We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe," said a report by Morgan Stanley's European experts.

Just as then, Washington has slashed rates to bail out the banks and prevent an economic hard-landing, while Frankfurt has stuck to its hawkish line - ignoring angry protests from politicians and squeals of pain from Europe's export industry.

Indeed, the ECB has let the de facto interest rate - Euribor - rise by over 100 basis points since the credit crisis began.

Just as then, the dollar has plummeted far enough to cause worldwide alarm. In August 1992 it fell to 1.35 against the Deutsche Mark: this time it has fallen even further to the equivalent of 1.25. It is potentially worse for Europe this time because the yen and yuan have also fallen to near record lows. So has sterling.

Morgan Stanley doubts that Europe's monetary union will break up under pressure, but it warns that corked pressures will have to find release one way or another.

This will most likely occur through property slumps and banking purges in the vulnerable countries of the Club Med region and the euro-satellite states of Eastern Europe.

"The tensions will not disappear into thin air. They will find fault lines on the periphery of Europe. Painful macro adjustments are likely to take place. Pegs to the euro could be questioned," said the report, written by Eric Chaney, Carlos Caceres, and Pasquale Diana.

The point of maximum stress could occur in coming months if the ECB carries out the threat this month by Jean-Claude Trichet to raise rates. It will be worse yet - for Europe - if the Fed backs away from expected tightening. "This could trigger another 'catastrophic' event," warned Morgan Stanley.

The markets have priced in two US rates rises later this year following a series of "hawkish" comments by Fed chief Ben Bernanke and other US officials, but this may have been a misjudgment.

An article in the Washington Post by veteran columnist Robert Novak suggested that Mr Bernanke is concerned that runaway oil costs will cause a slump in growth, viewing inflation as the lesser threat. He is irked by the ECB's talk of further monetary tightening at such a dangerous juncture.

The contrasting approaches in Washington and Frankfurt make some sense. America's flexible structure allows it to adjust quickly to shocks. Europe's more rigid system leaves it with "sticky" prices that take longer to fall back as growth slows.

Morgan Stanley says the current account deficits of Spain (10.5pc of GDP), Portugal (10.5pc), and Greece (14pc) would never have been able to reach such extreme levels before the launch of the euro.

EMU has shielded them from punishment by the markets, but this has allowed them to store up serious trouble. By contrast, Germany now has a huge surplus of 7.7pc of GDP.

The imbalances appear to be getting worse. The latest food and oil spike has pushed eurozone inflation to a record 3.7pc, with big variations by country. Spanish inflation is rising at 4.7pc even though the country is now in the grip of a full-blown property crash. It is still falling further behind Germany. The squeeze required to claw back lost competitiveness will be "politically unpalatable".

Morgan Stanley said the biggest risk lies in the arc of countries from the Baltics to the Black Sea where credit growth has been roaring at 40pc to 50pc a year. Current account deficits have reached 23pc of GDP in Latvia, and 22pc in Bulgaria. In Hungary and Romania, over 55pc of household debt is in euros or Swiss francs.

Swedish, Austrian, Greek and Italian banks have provided much of the funding for the credit booms. A crunch is looming in 2009 when a wave of maturities fall due. "Could the funding dry up? We think it could," said the bank.
RBS issues global stock and credit crash alert

By Ambrose Evans-Pritchard
Last Updated: 11:44pm BST 17/06/2008

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.
# More on banking

RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.

US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.

The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.

"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.

Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.

"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.

Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.

Sunday, June 01, 2008

News: Bradford & Bingley chief resigns

The boss of Bradford & Bingley has quit "due to a serious cardiovascular condition", the firm has announced.

Chief executive Stephen Crawshaw is leaving the UK mortgage lender with immediate effect, and will be replaced by chairman Rod Kent in the short-term.

Mr Crawshaw's departure comes a day before a trading update and reports say the firm will issue a profit warning.

The firm has been hit hard by the credit crisis and is trying to raise £300m to boost its balance sheet.

I wonder will they be the next Northern Rock?

Tuesday, May 27, 2008

News: Sharp rise in overdue mortgage payments

More than a fifth of UK homebuyers who have a chequered credit history have fallen behind on their mortgage payments and even those with top-quality ratings have seen a statistically significant rise in delinquencies in the first three months of this year.

New data from Standard & Poor’s provides the first glimpse into how mortgages are performing this year. It is based on the behaviour of homebuyers whose loans have been packed into mortgage-backed securities – which accounts for 80 per cent of the £43bn subprime mortgage market.

Of all loans to borrowers with poor or no credit history, total delinquencies – defined as arrears of more than 30 days – made up 21.73 per cent at the end of March while those seriously delinquent by 90 days or more, including some already in foreclosure, edged into double digits at 10.60 per cent.

The figures show that more than £7bn worth of loans are at risk of default unless lenders agree to modify the loan terms. S&P believes that the loans backing the securities it rates are a representative sample of the market as a whole. The rise in subprime arrears threatens further problems not only for the economy but also for those financial institutions that bought securities backed by the loans.

Potentially more worrying is the small but notable increase in delinquency rates among prime mortgage-holders.

An Example of the Damage the "welfare" state does to a country.


When the woman entered the UK in March 1998 under an assumed name, she was seriously ill and was admitted to hospital.

So she's been here for 10 years at 25,000 per year. Total 250,000 Pounds.

The high taxes to pay for the NHS discourage decent migrants, and the NHS free treatment encourages the worst immigrants to the U.K.

Saturday, May 24, 2008


Geonomics is a political/economic system that understands that economies run on the exchange of time, and that governments are extremely bad at doing anything other than force.

Governments have diworsified into vast areas of life. Areas that the government runs it runs extremely badly. The ways that government raises money cause huge economic damage, and the ways that government spends the money cause huge social damage. Government should be used only for externalising problems, such as pollution, crime and defence.

A Geonomic government would treat everyone equally. Instead of paying out when people make mistakes (what governments call social-insurance*), geonomics pays every citizen a regular citizens dividend. This is raised by taxing the right to exclude i.e intellectual (patent/copyright) and physical property tax.

With 8 Trillion of Property to tax at 7% per year each UK citizen could get a dividend of over 9 thousand pounds! The average person, should be able to live in the average house.

Market Geonomics:
Market Geonomics allows the owner to set the price of their property, and they are taxed at a percentage of that value. However to make sure the price is not set artificially low anyone can buy the property, with a delay (say 2 years for physical). This would solve a lot of planning permission problems and speed up compulsory purchase etc. and ensure a much more efficient utilisation of land. For intellectual property this would ensure much more sub-licensing of patents in order to make the patent work, instead of using it as an attempt to block competitors.

Any country using geonomics would be able to lower their investment interest rates as the geonomic tax would act like an interest rate. This would mean that houses would be more affordable(Av Wages/Av House Price), and that speculative house price bubbles should be much less likely to form.

Parents would be responsible for paying for the education of their own children. Government would lend parents the money (Government would become a net lender instead of borrower and thus take inflation more seriously), only the interest payments would come out of the parents citizens dividend. As parents would be choosing schools and paying for their child's education, they would tend to take far more interest in the standard of the teaching, rather than using them as a subsidised crèche, this should lead to higher educational attainment, as well as an end to poorer parents being priced out of schools because they cannot afford a near enough house to a good school. By the time each child has left school their accumulated citizens dividends should make a sizeable fund to let them purchase job relevant training or a university education.

Each citizen gets a dividend, this would be topped up depending on the cost of catastrophically insuring a fit person of their age and sex. This would ensure that the moral hazard of the NHS is removed. It would also allow you to decide not to pursue terminal low chance treatments and enjoy your last times. If someone was not watching their health they would hopefully notice the extra payments they have to make to purchase insurance and decide to do something about it.

As there are no taxes on Income, there are no barriers to earning, so more people would work, and more people could be employed. You would keep 100% of the money you earn, and the government would not need to pry into your private financial details. Hopefully more people would find the security of the citizens dividend to setup their own small businesses.

Retirement would mean that you just take the citizens dividend. There would be no ageism with regard to forcing people of a certain age from their work.

*as normal Social-X means the opposite of X.

Friday, May 23, 2008


Most people see economics as about goods. They are wrong, economics is about the use of peoples TIME, specifically when they freely exchange it with others to both parties mutua advantage. Goods are merely the products of that time. Comparative Advantage shows that the more time that is exchanged voluntarily, the more productivity increases and thus living standards are raised. The more the exchange of time is hampered say through income taxes/national insurance/VAT (value is added through work) or through crime (theft & slavery) the more the economy will suffer.

Money is temporal barter it represents the economy it is used within. With barter, people exchange their time , however using money allows them to utilise other peoples time when they actually need it, rather than at the moment of exchange. This is much more productive, and that's why societies that abandon money get out-competed.

Debt and Credit:
Credit is the use of another persons time in the future. Debt is the use of your time in the future. When to borrow? When your utility is increased by borrowing! i.e. At the time in the future when the money is paid back with interest, you have a higher utility than if you didn't borrow. One of the best examples of useful borrowing is for education, however most people wrongly think that subsidising education is better.

There are two types of inflation, Price Inflation and Monetary inflation. Price inflation is caused by Price = Demand/Supply. This system is chaotically stable as changes in price cause lagged changes in supply which bring the equation back into balance. However speculative bubbles can form when the demand correlates with the price(i.e people "invest" because the price has gone up), this can form dangerous runaway cycles, both up and down in price! Monetary Inflation is caused by increasing the amount of monetary units in the economy If this expansion is "Adiabatic" then each monetary unit represents less of the economy, i.e. its value is lessened. However the economy tends to get more productive so a certain growth in monetary unit numbers, means that they tend to have the same utility. A small amount of monetary inflation is useful, because otherwise people could just sit on their monetary units and see it grow in value. This would eventally stop people exchanging their time and the economy would sieve up!