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peepobaby

Listed below are comments made by peepobaby between Wednesday, 21st January 2009 and Sunday, 11th October 2009.

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Will the real Paul Mason please stand up 11:06am on 11 Oct 2009 Money supply to businesses is contracting in many advanced nations. At the same time in the developing economies stimulus cash is being put into financial markets rather than into the real economy to boost real demand for goods and services. The picture that this creates is one where aggregate demand falls in the developed world and doesn't grow fast enough in the developing world. Its the start of a depression. That's why gold has started its climb again whereas oil hasn't.
Lloyds: compensating taxpayers 10:57am on 11 Oct 2009 Rather foolishly the chcnellor wanted to force banks to lend to consumers and businesses. With businesses not wanting to borrow and invest at the start of a depression, the banks have been lending out into consumers thereby creating a mini property bubble, the bursting of which will be even greater because money supply to business is contracting far more rapidly than any forecaster expected. What I think we're seeing is a black swan event whereby printing money is, rather than causing salary inflation, pushing us further into a deflationary spiral through asset price inflation that sucks money and aggregate demand out of the real economy. The statistics are horrific.
Barclays: Even the bad times are good 11:21pm on 03 Aug 2009 I am confused by the view that has been taken on Barclays figures. They didn't have to mark their toxic assets to market value. So the profit figures are an illusion created by new accounting rules which would have been fraudulent 12 months ago.
Monday 3 August 2009 11:13pm on 03 Aug 2009 I justed watched the Newsnight piece on banking profits. What astounded me is that everyone seemed to accept that Barclays (and maybe RBS later) made a profit. What is absolutely fundamental and that Newsnight did not mention is that this profit was made under new accounting rules which allow banks to value toxic assets at what they had expected them to be worth before the credit crunch hit. Today, what they thought was worth 90p in the pound is actually worth 40p in the pound and thats not going to change, recovery or no recovery. So the profits are an illusion. Under the old accounting system which we believed and used happily until October 2008, these banks are making horrific losses. This is the fundamental reason why the asset insurance scheme has still not been finalised and may never be.
How to borrow £200bn 00:29am on 23 Apr 2009 Au revoir Great Britain. All my money is now in USD and EURO! hurray
Worthy or wasteful? 09:01am on 21 Apr 2009 Whichever way you spin it, £15 billion of efficiency gains is going to be somewhere around £15 billion of job cuts because the low-hanging efficiency gains have already been identified. At an average employee annual cost of £40k all in, thats more or less 400,000 jobs going in 2010/2011. We should revise 2011 peak unemployment up from 3.2 million to 3.6 million. And in any case, if the government was run as a business the first thing an investor would be asking is why they're not finding ways of cutting costs faster and quicker because if global markets take a turn this year, there'll be nowhere to borrow £150bn+ from.
Bonus buck stops with Brown 10:01am on 06 Feb 2009 There is also the argument that insolvent business should not pay bonuses to staff.
Bonus buck stops with Brown 02:13am on 06 Feb 2009 This will be a true test of the man's continuing honesty. Will he remain consistent to his previous actions and do what he really believes to be right? And will waht he believes to be right chime with the electorate?

There's a very strong argument for him to put his foot down and stamp all the bonuses out. The popularity benefits among middle England voters would be huge and he would be seen again to be a man of action rather than words, someone to get you through a crisis. It would also chime with the unions and with the impending nationalist/jobs for Brits minority views. Bankers wouldn't like it but they're not core voters in the marginal seats.

He might not stamp on it, but then it can't make his position any worse if he doesn't and he might think that a strong fist is too risky. After all, Maggie couldn't get rid of the Iron Lady. Gordon, the Iron Man?
We've lent £185bn to banks 2:21pm on 03 Feb 2009 A clever way of doing Quantitative Easing without saying that you have done it.

If you read the BOE release about the haircut applied to the different types of secuirty that have been exchanged, its clear that these are 3 types of security:

RBMS not in the lender's own name - i.e. American
Credit card debt - not in the lender's own name
US GSEs - Fannie Mae and Freddie Mac debt

The haircut level can only be of the order of 20% when these three types of security make up the bulk of what has been swapped. These are not UK loans and are not as was previously claimed, the highest quality securities. In fact, its largely subprime so expect to see 20% up to 35% by the end of the year.

The BOE won't demand that the difference is paid back by the banks if the haircut rate falls - they'd need to ask for about £40bn back. That would be foolish if you want to encourage lending. For me, this would be a definitive start point for quantitative easing.

But I would argue that the 20% haircut already applied to these securities is wrong, since they can't be swapped on the open market today for that value. They are illiquid and no-one wants to buy them. So what we are looking at here is the first tens of billions of pounds being pumped into the system, by the back door.

More will effectively go in as the US economy falters and US mortgage defaults continue, because the Bank won't ask for the bonds back. The question really is whether and how the bank can get it out of the system before inflation kicks in, since I suspect that inflation will kick in before any economic recovery.
Faith in banks 00:37am on 21 Jan 2009 One thing dawned on me. If the Government aims to be a smart investor in the banks, where is the hedging? What is it using to hedge its bet on toxic debt? If the debt is far worse than expected, what position has it taken to mitigate the risk? And then it came to me, devaluation. We can afford to lose billions and billions of pounds if those pounds are worthless against other currencies. No wonder the currency strategists are calling against sterling. And so am I.

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