economonkey

Mervy King has revealed, for the first time, that last autumn the Bank of England provided up to £62 billion in short term loans to RBS and HBOS in almost complete secrecy. This just goes to show how dire the situation was, and certainly reinforces the argument for a radical shake-up of banking regulations. If [...]

This BBC article does a good job of explaining what the government is planning to do with all the banks that it bought huge shares in with taxpayer money over the past year or so. The long and short of it seems to be that the existing big-name high street banks are to be broken [...]

So, that was it. The worst recession in living memory is, if you believe the latest government think tank reports, now over. The recession that Alistair Darling said would be the worst for 60 years (and he recently revised that estimate upwards to 100 years) has passed with nary a whimper in real terms.
True, if [...]

This is an article that I could have written a few months ago, when the Bank of England stated its intention to begin ‘queasing’. But it has become rather more relevant now that one of the pronouncements of the G20 summit is that the International Monetary Fund (IMF) will itself begin to ‘print’ additional SDRs (Special Drawing Rights, effectively the IMF’s own currency) which its contributor countries can draw down in the shape of dollars, euros, etc.

Note my use of the word ‘print’ in the above paragraph. The days when first world countries used the printing press to increase the volume of money in circulation have long gone, assigned to eras such as Weimar Germany. Paper and ink are still heavily in use in Zimbabwe, of course, but for countries like the UK, where the notes and coins in circulation account for only about three percent of the total ‘money’ in the system, we’re really talking about digits on a computer screen.

Even so, while the phrase ‘quantitative easing’ sounds nice and strategic, in reality it has a similar effect to printing addition bank notes and throwing them out of the Bank of England’s window into the street.

To take a step back for a moment, let’s look at the main blunt instrument used by policy-makers to control the velocity of money and the rate of growth of an economy: interest rates. Set the base rate low, goes the received wisdom, and people will ‘invest’ their money rather than leaving it idle in a bank account earning nothing (or, depending on the level of true inflation, less than nothing). If the economy starts to run away from itself and bubbles form in a particular investment market, interest rates can be raised, increasing the appeal of saving and reducing the relative gains to be made by investing in speculative markets.

Another week, another huge pile of your cash put on the line to support a failing industry – this week, £2.3 billion of taxpayer money will be used to guarantee loans to the British car industry. This raises a couple of questions:
1) Britain still has a car industry? Really?
2) Where is all this money coming [...]

Remember that £50 billion taxpayer bailout the government threw at the banking industry a few months ago to help dig it out of the horrible disastrous mess caused almost entirely by its own greed and stupidity? Turns out it wasn’t anywhere near enough to fix the problem (in case you’d failed to notice the torrent [...]

Gordon Brown’s rescue plan for the banking industry seems to have been used as a blueprint for similar bailouts across Europe and even in the US, and for now it seems like the stock markets are responding positively with record gains on most of the major markets. So everything’s peachy and happy days are here [...]

It looks like Gordon Brown has convinced the rest of Europe to follow his master plan of bailing out the banks with massive capital injections (i.e. buying shares in the banks with taxpayer money) and measures to improve liquidity (i.e. guaranteeing the banks’ loans to each other with, you guessed it, taxpayer money). Given that [...]

So, after the US government slashed interest rates to 2% and gave Wall Street a $500 billion taxpayer bailout, only to see all this achieve precisely jack shit as the American and international stock markets paused for a moment’s reflection before getting on with the business of falling off a cliff, guess what the UK [...]

Henry Paulson is now arguably the most powerful man in the world – or will be if Congress passes his and Federal Reserve Chairman Ben Bernanke’s new bill. If you read through the text of the planned $700bn bailout of the US financial system (which will take all the banks’ bad debts off their hands [...]