Friday, October 17, 2008

We are not being told the truth - it can't be just liquidity between banks

So the Standard Chartered Brown's plan has mortgages out futures. We are all in debt by an extra £20k, to go on top of crashing pension and house asset prices and rising mortgages.

A series of ministers ( but almost never a shadow minister ) have been on our airwaves talking about the strange things they saw for the first time in their lives in their briefing notes a few weeks ago - libor & liquidity. ( I thought the Newsnight on Monday night - whilst having a amateurish feel, was actually very useful in revealing some underlying problems, specifically the woman from the FT who explained how shocked she's been by how little about modern finance was understood in Westminster and Whitehall ).

If you thought about those points you'd see the fault. Apparently - so it is spun to us by the Government/BBC - the problem is banks have stopped lending to each other, so they can lend to us. So it stands to reason that one or two banks are sitting on a great pile of cash that the refuse to share ? ( Mr Humphreys was busy insisting on Radio 4 this morning that all banks have failed - forgetting the inconvenient fact for cheerleaders of the government that HSBC has done quite well. Which implies its not an inevitable failure, and leaves the government with lots of questions to answer. )

But all interbank loans are now guaranteed by , ahem you and me, yet still the loans aren't being made. Despite £500billion being put at risk.

Oddly £625 billion has suddenly been removed from the banking money markets by **Nobody will tell us**. ( £625 billion / £500 billion - same order of magnitude - suspicious ).

Is not the truth that UK plc is now seen as too much of a risk for the owners of the £625 billion to lend us their money ?

We have not been told the truth. And given the amount of our futures and our children's futures Mr Brown has just spent that calls for more than a general election, it calls for the erection of gallows.


Rachel Joyce said...

A bit of an interesting take on things, I do feel things are being covered up to a certain extent, but it is difficult to know with our state-managed media.

wildgoose said...

It's not a liquidity crisis it's a capitalisation crisis. Too many dodgy loans have meant that large numbers of banks no longer meet their legal capitalisation requirements and they are desperately trying to rebuild these ratios before they are caught out.

And in a way, the banks are lending to each other - only they're doing so via the Bank of England acting as an intermediary. They're saving enormous pots of cash at the Bank of England which in turn is lending them all enormous pots of cash. The crucial difference being that they know their money is safe with the Bank of England and that they will be able to get it back. They aren't so sure about each other - hence the "penalty" rates being applied to LIBOR, the inter-bank interest rate.

Oh, and returning to a post I made some months back - I did say that the Oil Price was a bubble. I think recent events have shown thiis to be true.

Man in a Shed said...

Rachel - I almost feel like taking a few months out to write a book trying to figure out whats going on ( if I thought there would be anyone left who could afford to buy it ).

I'm a very long way from being an expert, but don't think the explanation we are given adds up.

Wildgoose - There is still the issue of the missing £625 billion ( and that's without any loses on loans / defaults ).

On Oil, I imagine demand is going off a cliff. Also those with large storage will be selling before the price drops further. ( Which will mean real trouble if a war breaks out with Iran ).

But it looks like a bit of a bubble and its gone pop like a bubble, so it probably is one.