Sunday, 3 August 2008

More money, more inflation, and more failed banks

More bank writedowns?

Moodys thinks so.

It is the money supply stupid

In the times, Tim Congden explains why inflation is rising rapidly; the BoE allowed the money supply to rise rapidly. "But by mid-2006 the Bank of England ought to have realised that something was wrong. It ought to have known that underlying money growth had accelerated to a double-digit rate and posed an inflationary threat."

Today, the money supply continues to grow rapidly, with much of this additional money being held by households and the financial sector. At the same time, liquidity is being cut off to the corporate sector and potential homebuyers. In short, a simultaneous credit crunch and a huge overhang of money due to the housing bubble. It adds up to a nasty mix of inflation and recession.

A shock interest rate hike this week?

The UK inflation numbers are not getting any better. The so called MPC "balancing act" has only served to weaken the BoE's anti-inflation credibility. Will the bank surprise us with a rate hike?

Saudi inflation hits a 30-year high

Back to the 1970s.

Spain: inflated home valued helped bond sales

Now that the Spanish bubble is collapsing, crashing home values debases Spanish mortgage backed securities. What a mess; how could regulators let banks get away with this kind of behaviour?

Another one bits the dust

"..and another one gone, another one bits the dust". Another US bank is no more, this time in Florida. It is the eighth one this year.

Private equity firms to the rescue

The US banking system is dying, but can private equity firms come flying in like the cavalry to save the day. Private equity firms say they are ready to invest huge amounts in ailing banks — provided the Fed eases up on the regulations that would otherwise apply to such large investments. The New York Times think it is a bad idea.

In case you haven't seen this..

Sit back, relax and watch


peterthepainter said...

My readin o the Tim Condon article is - yes it was the money supply and THE BANK wot don it. But now it's over! cos the money suppy is shrinkin!

"Infation in the rear view mirror"....mish

Anonymous said...

More good news:

Property Values Fall 40 Percent in China

For more information please go to:

Have fun!!!


peterthepainter said...

cop a load o this -

UK businesses face biggest cash flow crisis in two decades

VADO said...

....which obviously explains why inflation is still picking up.....

powerman said...

Inflation is picking up because the people pulling their money out of the stock market are investing it in commodities. When commodities go down in value too (this is the last bubble in the game of musical chairs) the credit will simply be destroyed.

Anonymous said...

I don't like Condon's point about the 1983 election - yes, in a crisis, the 75% who still have jobs and are afraid of losing them will always out-vote the 25% who have already lost them. The argument 'Labour Isn't Working" worked in 1979 but was conveniently forgotten by 1983. The win only shows Thatcher knew voters were pretty selfish and mean-spirited beasts, and couold capitalise on the emotionalism of a war victory.

In 1981 the conservatives squeezed harder than was necessary - inflation was already going down - and a great number of decent businesses went to the wall unnecessarily, to the permanent detriment of the UK economy.

In the universities, the eighties squeeze on public finance did not push out the idlers who got their posts in the late sixties and seventies, most of whom have only recently been pushed out - it just meant new posts dried up, and more than a few years' worth of excellent scientists and scholars were lost to things like TEFL.

B. in C.

Anonymous said...

On today's (5.viii) figures for declining services and manufacture from the bbc:

"The Office for National Statistics (ONS) said the figures would take 0.06 percentage points off the estimate for UK economic growth in the second quarter of 2008, which was initially predicted at 0.2%."

Surprise surprise - maybe the recession started in the second quarter after all...

B. in C.

citycity said...

This has been the game throughout the history and what is wondering me is that we haven't learned any lessons and still making the same mistakes.