Banking

Readers of the Spectator will know George Trefgarne’s work, and today he delivered an important report on the dangers of Quantitative Easing. I urge Coffee Housers to read the speech. It provides an interesting and relevant insight into historical precedents for the policy and how to manage it, and gives a balanced analysis of the current policy’s pros and cons. Trefgarne concurs with Mark Bathgate’s critique. There is little evidence that QE has stimulated money supply, as banks are using the cash to re-balance their lop-sided books. QE is funding the government’s debt habit. The IMF estimates that QE has reduced the benchmark 10-year interest rate on government debt by

With another £40bn disappearing down the black hole known as the British Banking sector, the financial cost of the economic and banking collapse is now only rivaled by the two World Wars in it’s cost to the UK taxpayer. Rather than going to support credit to business or households, the further £25bn of “newly printed money” announced today is likely to go to help prop up the Government debt mountain.   The above chart shows how the Bank of England has been using quantative easing since March. 98.8 per cent has been used to purchase Gilts. As fast as the Debt Management Office “sells” Gilts to the “market”, the Bank

As another £30 billion of taxpayers’ money is handed over to banks, the role of banking sector in the continuing UK recession cannot be understated. 1990s Japan taught the world that developed economies with zombie banking systems don’t grow.  Crippled by bad debts, lending margins on solvent borrowers increase, credit availability declines and ongoing bailouts are needed. This hampers growth in the rest of the economy. The more indebted the private sector, the greater the damage a bust banking system inflicts. The above chart shows how margins on UK mortgages – the gap between borrowing from the Bank of England and what is then leant to mortgage holders – have

Two years after Northern Rock became the first bank failure of this crisis, another £30 billion of taxpayers’ money needs to be thrown at the banking system. Behind all the noise about improving competition and the European Commission lies one core fact: the UK banks have lost an astonishing sum of money. The above chart shows bank losses as a percentage share of GDP, and illustrates the scale of the crisis that has overwhelmed the banking system and the taxpayer. The IMF estimates that losses could be as high as 25% of UK GDP.   UK banks went on an orgy of lending around the world, becoming the biggest source

A friend has just pointed out this extraordinary quote from The Times article on Fred Goodwin (I have stripped him of his knighthood as the government should). “The handout means that RBS will have received more than £45 billion in public funds, equivalent to a penny on income taxes for more than a decade” I had to read this several times and then kick myself, rub my eyes and then kick myself again. Can we please ensure that Fred Goodwin walks away with no pension as a starting point?