Global financial system implosion begins

[Idaho]

I keep expecting to see this thread pop up in New Posts... Maybe it's truly a sign of doom that we've all just accepted it.

There is talk of the "risk" of stagflation - when my pension has dropped 10% in £ value, while the £ has itself dropped 10% in real value. I'd say we are already stagflating.

 

[kabbes]

The weird thing about this particular incident of the boom and bust cycle is that it has been precipitated by an energy surge arising from an unexpected war, which arrived right at the most delicate point of the tightening of the money supply. So nobody really knows if it is merely the start of an ongoing issue or if it presages a long-lasting inflation problem. It wouldn’t surprise me if the inflation bulge works its way through the system and returns to 1% in 18 months. It also wouldn’t surprise me if it becomes a nasty inflationary spiral. Basically, who knows?

(The other thing is that this thread is about the global financial system, so what’s happening in £ isn’t really a big feature).

 

[platinumsage]

What also differentiates the current imminent possibility of inflation + recession is the extremely tight labour market. High unemployment seems miles away from here.

 

[Cat Fan]

Stagflation is a fairly global issue at the moment, although it varies between countries.

There's too much money floating around in the system chasing too few goods so inflation is the natural way for the global economy to fix itself.

We just had it really good in the last 10 years and this is the (probably overdue) correction.

 

[Idaho]

so what’s happening in £ isn’t really a big feature).

It is to me!

 

[Idaho]

It wouldn’t surprise me if the inflation bulge works its way through the system and returns to 1% in 18 months. It also wouldn’t surprise me if it becomes a nasty inflationary spiral. Basically, who knows?

Normalcy bias versus the great unknown eh?

 

[Flavour]

We just had it really good in the last 10 years and this is the (probably overdue) correction.

We really didn't

 

[Cat Fan]

We really didn't

Not everyone, no. Part of the global problem is that inequality has just grown and grown.

But in terms of plentiful employment, cheap food, cheap energy and other essentials we really did have it good for ten years (at least here in the UK) mostly thanks to globalisation and exploitation of poorly paid workers in the 3rd world.

Prices of scarce assets like houses, oil paintings and stocks and shares have stayed high but historically people have always spent much more of their income on things like food and transport than in recent years.

 

[NoXion]

I really hope this inflation shite fucks off sharpish. It's really infuriating the way it turns pay rises into pay cuts.

 

[kabbes]

Normalcy bias versus the great unknown eh?

The great thing about predicting that anything could happen is that you are rarely wrong.

 

[CH1]

From Quora - that doom-laden scientific site about money-saving electric plugs, and other things
https://www.quora.com/If-Russia-nuk...-England-possibly-do-to-Russia-in-retaliation
If Russia nukes London first like they promised today, what could England possibly do to Russia in retaliation?
England could do very little, seeing as it hasn’t existed as an independent nation for over 300 years.
Britain however could do a thing or two hundred.

Vanguard-class submarine
In exchange for the thermonuclear destruction of London, Britain might opt to take out Russian nuclear facilities so that Russia can’t build any more nuclear weapons, take out their remaining nuclear weapons also and take out the rail yards and power stations of all cities surrounding Moscow. The result is that whole area would have to be evacuated, because if you don’t they’ll be resorting to cannibalism within a few weeks.
It then invokes Article 5 of the North Atlantic charter to finish the job.
In Civilization terms, we might need a few settler units at that point.

 

[CH1]

Dunno about Global - but an interesting warning here from the FT.

 

[Cat Fan]

If that's referring to the "can you survive interest rates going up by 3%" test, it's arguably less relevant now. Banks are still constrained by their own risk appetite and by maximum loan to earnings ratios.

So I don't think we will see a huge surge in the amount people can borrow just from this one change, but I could be wrong.

 

[Idaho]

Eventually the jolly wheeze of quick profits from high risk loans will come back into fashion, but not in the next year or three.

 

[yield]

Eventually the jolly wheeze of quick profits from high risk loans will come back into fashion, but not in the next year or three.

Effective borrowing rate for the big banks is still less than zero. Official rate minus inflation.

Has to be the uncertain pass_the_parcel before the credit market seizes up.

Auto loans & cryptocurrencies are a problem but tiny compared to the sub-prime housing scandal of 2007

 

[Raheem]

Dunno about Global - but an interesting warning here from the FT.

That's up to the Bank of England? Jesus fucking Christ.

 

[yield]

That's up to the Bank of England? Jesus fucking Christ.

The independent Bank of England. Not that access to credit is bad thing.

 

[Humberto]

Taking the lord's name in vain.

 

[Raheem]

The independent Bank of England. Not that access to credit is bad thing.

I'd put it as the regulation of the financial sector rather than "access to credit", as if it's a human right.

 

[Raheem]

Taking the lord's name in vain.

Not in vain. I had a clear purpose, of which he would approve, or else he is a cunt.

 

[Humberto]

Not in vain. I had a clear purpose, of which he would approve, or else he is a cunt.

Or maybe you are the cunt and you know not god?

 

[Raheem]

Or maybe you are the cunt and you know not god?

Don't quote the fucking Bible at me!

I'd say praying to him would be taking his name in vain.

 

[Boris Sprinkler]

To even have Jesus around as a meme whilst people pay their mortages and fill their cars with petrol like good little lapdogs is kinda pointless.
Still camel and eye of the needle and all that. Good luck.

 

[CH1]

How did we get from considering the inadequacies of the Governor of the Bank of England to a bidding war in profanity?

Andrew Bailey, the Bank’s sexy turtle, is all at sea​

The Bank of England governor who glories in his reptilian nickname will need a thick shell to withstand growing political attacks that he misjudged inflation​

ILLUSTRATION; RUSSEL HERNEMAN

 

[gosub]

If that's referring to the "can you survive interest rates going up by 3%" test, it's arguably less relevant now. Banks are still constrained by their own risk appetite and by maximum loan to earnings ratios.

So I don't think we will see a huge surge in the amount people can borrow just from this one change, but I could be wrong.

Bit busy at mo.



Bollocks. There's not learning the lessons of 2008 and then there's inviting it to happen again.


Looks like intrest rates are going up again...

 

[CH1]

Bit busy at mo.



Bollocks. There's not learning the lessons of 2008 and then there's inviting it to happen again.


Looks like intrest rates are going up again...

I was going to debate this yesterday. I looked up a graph of mortgage rates for the last 25 years.
Oddly according to the graph current mortgage rate is around 4% - unchanged for about 5 years.
You have to go back to about 1997 to hit 9% plus. As I paid my mortgage off in 1997 I think (I'm 68) I hadn't been tracking rates at all. Is this graph correct?

I had been under the possible delusion that people "switched" and got deals for 1.99% or thereabouts. Presumably that is no longer possible - rather like energy prices.

Can it be that banks have been borrowing from the Bank of England at 0.1% and lending to customers for some years at 4%. Sounds like a good racket to be in. No wonder bonuses are holding up!

 

[Cat Fan]

I was going to debate this yesterday. I looked up a graph of mortgage rates for the last 25 years.
Oddly according to the graph current mortgage rate is around 4% - unchanged for about 5 years.
You have to go back to about 1997 to hit 9% plus. As I paid my mortgage off in 1997 I think (I'm 68) I hadn't been tracking rates at all. Is this graph correct?

I had been under the possible delusion that people "switched" and got deals for 1.99% or thereabouts. Presumably that is no longer possible - rather like energy prices.

Can it be that banks have been borrowing from the Bank of England at 0.1% and lending to customers for some years at 4%. Sounds like a good racket to be in. No wonder bonuses are holding up!
View attachment 333525

My mortgage is fixed at c2%. Chart looks a bit dodgy.

 

[CH1]

My mortgage is fixed at c2%. Chart looks a bit dodgy.

That's what I thought. I see that Inflation linked Gilts were introduced under Thatcher in 1981.
Prior to that governments could inflate their way out of debt.
I found this article which explains how government is acting now they have QE and a tame Bank of England board.

Intrigued to know when or if "the markets" will want a more traditional response to inflation.
The US markets appear to want this - and because Biden is President they are blaming his Covid mega-support for the inflation and the American Federal Reserve is being much more active on interest rates than Britain or Europe - hence the collapse of the pound and the Euro which add to our inflation.

Giving up gilts: how the Bank of England plans to reverse QE

Under pressure to act against surging inflation, the Bank of England looks ready to explain how it will reduce the vast pile of British government bonds it has bought over the last decade in repeated attempts to stimulate the economy.

www.reuters.com

(article is from February 2022 - so presumably the issues are even more acute now)

 

[Cat Fan]

That's a really good point. The markets seem to be demanding a response, but the UK is stuck between a rock and a hard place in terms of if we raise interest rates we will trigger a recession, but if we don't then inflation will spiral further out of control.

The BoE is somewhere between the Fed and ECB in terms of hawkishness.

Our inflation is the worst out of all though because we have both labour supply problems (thanks Brexit) and the war in Ukraine to contend with

 

[kabbes]

The BBA mortgage rate is the one you get after your deal is over. It’s the “reversion” rate. If you’re paying the BBA rate, you either can’t get a new deal or you’re unaware that you can get one.