Socialism: Bank Of England Shows Us How The Fed & Treasury...

Discussion in 'Wall St. News' started by ByLoSellHi, May 7, 2009.

  1. Will attempt to prop up failed markets with your tax dollars...

    ...for how long they'll be able to do so is anyone's guess.

    The PPT is very real, and has gone global.

    Your new retirement plan is being handled by the Federal Reserve and Treasury, but its benefits are intended to be collective.

    There's no doubt we've gone 100% socialist. I'll debate this point on substance with anyone, anywhere, anytime.

    Bank of England to Expand Asset-Buying Program

    Published: May 7, 2009

    LONDON —
    The Bank of England held its key interest rate steady at 0.5 percent on Thursday and said it would expand its program of purchasing corporate debt and British government bonds by another £50 billion ($75 billion).

    That would raise the total expected expenditures to £125 billion. Such so-called quantitative easing is often viewed as a last-resort tactic to kick-start a moribund economy.

    The bank’s decisions come amid some tentative signs that the British economy might be on course for a recovery from its worst recession since the Great Depression.

    British stocks rallied in April, property prices slowed their steep descend as mortgage approvals increased and consumer confidence gained. The weakness of the pound against major currencies started to help exporters and inflation is slowing. The signs prompted some economists to predict that Britain could emerge from the recession in the fourth quarter.

    Still, unemployment has continued to rise and concern among consumers about the stability of their employment is weighing on their willingness to make major purchases. Britain’s economy contracted 1.9 percent in the first quarter, the most since 1979. The government said earlier it expects GDP to shrink 3.5 percent this year then grow 1.25 percent next year, a prediction many economists criticized as too optimistic.

    “The world economy remains in deep recession. Output has continued to contract and international trade has fallen precipitously,” the bank said in a statement. “The global banking and financial system remains fragile despite further significant intervention by the authorities. ”

    However, it also took note of the positive signals. “In the United Kingdom, GDP fell sharply in the first quarter of 2009,” the bank said. “But surveys at home and abroad show promising signs that the pace of decline has begun to moderate.”

    Later Thursday, the European Central Bank is expected to notch its benchmark interest rate downward, and financial markets are eager to hear whether the bank will adopt a more aggressive strategy to fight the economic downturn.

    Most analysts expect the central bank to lower its key rate, now 1.25 percent, by a quarter of a percentage point, and agreement is also widespread that the sharp contraction in the economy of the 16-nation euro area will keep the bank looking for other ways to ease the pain.

    “In our view, what remains unquestionable is the need to provide additional monetary stimulus to the economy, resorting to unconventional tools,” Jacques Cailloux, chief Europe economist at Royal Bank of Scotland in London, wrote in a research note.

    Though surveys of business and consumer confidence have hinted at a slower pace of contraction in Europe, analysts said the “green shoots” metaphor that has become commonplace in discussions of a possible recovery should not be overestimated.

    “The recovery, however, is still extremely fragile, and it is imperative that policymakers do not relax and lower their guard yet — the green shoots need to be carefully nurtured if they are to take hold,” Marco Annunziata, chief economist at UniCredit in London.

    The boldest option on the table is to begin purchasing private financial assets from banks. Such a program is already under way in the United States, where credit flows primarily via tradable securities.

    But as ECB officials have emphasized, the euro area is not like the United States; traditional bank lending provides roughly 70 percent of funding to the corporate sector in the euro zone, limiting the potential impact of asset purchases.

    The more likely scenario seems to be that the ECB will extend the maturities of its standard refinancing operations.

    In normal times, the ECB controls the supply of credit by lending money to banks each week against good collateral. Since the initial crisis erupted the bank has broadened the range of collateral it accepts and increased the frequency of lending, and loosened the terms of it. The strategy has helped ease strains in financial markets, but has had the ECB assuming the role normally played by private banks among themselves.

    The strategy the bank is considering would extend the maturity of its lending, possibly as long as a year. That would give banks assurance that they would retain access to the cash, and mimic the effect of asset purchases – at least as long as the bank held the collateral.

    “The longer a central bank keeps the collateral, pledged by banks against cash, on its balance sheet the closer the operations resembles a proper asset purchase,” Mr. Cailloux of Royal Bank of Scotland wrote.

    Werdigier reported from London and Dougherty from Frankfurt.