All aboard the EU single monetary policy train. Choo Choo!

[Top_gun]

Self-referential argument. Banks stopped lending because they didn't trust the banks? Huh?

There was an excellent Financial Times article in August 2007 that explained why banks stopped lending during July and August. Another great example is Northern Rock, they ran into trouble because they couldn't raise money in the lending markets.

I'm sorry if you don't understand the banking crisis but if you are relying on hand me down history lessons from the Tory party then you'll never understand the crisis ever.

With base rates falling through the floor, threats of regulation, bond rates spiralling, and the whole sub-prime mortgage game having gone pop, the economic trainride of living on borrowed money hit a roadblock and forced us down Austerity Street. Just spending borrowed money is not the same as an economy.

Yes and no. LIBOR rates went up while UK base rates were mainly static. LIBOR rates are used for consumer mortgages and particular for commercial mortgages and commercial loans.

I fully agree that the economy should not rely on borrowed money spending but this is exactly what has happened over the last 30 years. Neo-liberalism doesn't work and has created a more divided society.

[TheAnimus]

If you look at the 1920-24 recession, a much deeper recession than the 2008 one, it recovered within 45 months. Therefore one would expect the 2008 recession to recover much more quickly.

June 5th, 1967, war broke out in the middle east. It ended 6 days later.

Therefore we can expect all wars to last 6 days or less!

Another great example is Northern Rock, they ran into trouble because they couldn't raise money in the lending markets.

They ran into trouble because they had a business model of financing 5+ year fixed price debts with short end of the curve. They suddenly couldn't do that.

Thanks to the visionary Gorden Brown, rules had been changed on when an institute uses the lending of last resort. Before it was quietly disclosed after the affair, but Labour changed that. Thanks to the excellent coverage by the BBC, which painstakingly explained that the two legal entities have different liabilities and that depositors were not in danger, oh wait, no that's not what happened at all. The BBC's Preston revelled in the fact he'd created a run on a bank, which shared a name only, silly little twit.

[Top_gun]

June 5th, 1967, war broke out in the middle east. It ended 6 days later.

Therefore we can expect all wars to last 6 days or less!

What a weird retort.

They ran into trouble because they had a business model of financing 5+ year fixed price debts with short end of the curve. They suddenly couldn't do that.

Here's an excerpt from the Economist:

The business model of Britain's fastest-growing mortgage bank—which funded its loan book mainly from the wholesale markets, rather than from retail deposits—had been prudence itself, they explained, derailed only by sloppy lending in America that caused those markets to seize up in August.

Thanks to the visionary Gorden Brown, rules had been changed on when an institute uses the lending of last resort. Before it was quietly disclosed after the affair, but Labour changed that. Thanks to the excellent coverage by the BBC, which painstakingly explained that the two legal entities have different liabilities and that depositors were not in danger, oh wait, no that's not what happened at all. The BBC's Preston revelled in the fact he'd created a run on a bank, which shared a name only, silly little twit.

Ah, your meaningless drivel on the BBC and Gordon Brown that adds nothing to the debate.

[TheAnimus]

What a weird retort.

I just find it weird you can't (or choose not to!) understand what is meant to economists by the word 'recession'.

The purpose was to illustrate the idea of inferring two desperate points to be some how similar is ludicrous.

Here's an excerpt from the Economist:

I'm guessing you mean this article?
http://www.economist.com/node/9988865

Because that article cites someone saying exactly the same thing as I did, namely:
A former chief risk officer at one of Britain's biggest banks says that Northern Rock's operating model was very risky: “To say that nobody could have envisaged what happened doesn't wash at all.”

Hindsight is 20/20, but the fact they relied on refinancing long term obligations, is a big risk. People like to borrow a mortgage for 20 years often. Most people don't like to lend money for that long. As such when people issue bonds, they expect to pay less for a short duration, than they do for a long duration.

Ah, your meaningless drivel on the BBC and Gordon Brown that adds nothing to the debate.

So you think that the run on the bank OK? That it wasn't the result of irresponsible, ill thought out legislation, with alarmist reporting that does little to educate?

But also what's up for debate! Hindsight makes the analysis of Northern Rock easy. They sold money at decade long repayment intervals, and bought money at shorter durations. Thus they had a vulnerability to the market. They had to turn to the BoE, who following Browns rules had to disclose this fact. That ment that all of a sudden the markets perceived NR (rightly or wrongly!) to be a serious risk. If that hadn't happened, they would have had less issue raising money.

I should also point out, at the time this happened, I worked for an entity which had strategies involving NRs packages and their common stock, so I am very familiar with the prices for things which professionally I can't talk directly about.

[Top_gun]

I just find it weird you can't (or choose not to!) understand what is meant to economists by the word 'recession'.

Actually, I first saw the recession chart through a real Economist called James Meadway a couple of years ago. The same chart is found on the BBC website and the fact that the information I've conveyed is widely reported can safely be treated as facts.

It's true I often ignore your views because you're not Economist and clearly deluded in right wing thinking. Treating information from obscure websites as facts. Anyone who disagree with your views is immediately labelled as 'socialist'. What an incredible stupid simplistic thinking. I didn't know I was a 'Socialist' and don't align myself to any particular political party.

The purpose was to illustrate the idea of inferring two desperate points to be some how similar is ludicrous.
I'm guessing you mean this article?
http://www.economist.com/node/9988865

Because that article cites someone saying exactly the same thing as I did, namely:
A former chief risk officer at one of Britain's biggest banks says that Northern Rock's operating model was very risky: “To say that nobody could have envisaged what happened doesn't wash at all.”

Hindsight is 20/20, but the fact they relied on refinancing long term obligations, is a big risk. People like to borrow a mortgage for 20 years often. Most people don't like to lend money for that long. As such when people issue bonds, they expect to pay less for a short duration, than they do for a long duration.

So you think that the run on the bank OK? That it wasn't the result of irresponsible, ill thought out legislation, with alarmist reporting that does little to educate?

But also what's up for debate! Hindsight makes the analysis of Northern Rock easy. They sold money at decade long repayment intervals, and bought money at shorter durations. Thus they had a vulnerability to the market. They had to turn to the BoE, who following Browns rules had to disclose this fact. That ment that all of a sudden the markets perceived NR (rightly or wrongly!) to be a serious risk. If that hadn't happened, they would have had less issue raising money.

I should also point out, at the time this happened, I worked for an entity which had strategies involving NRs packages and their common stock, so I am very familiar with the prices for things which professionally I can't talk directly about.

More drivel from you, shame really.

The money markets dried up in July and August 2007. This had an liquidity issues effect on Northern Rock and had to go with a begging bowl to the Bank of England in September 2007. Clearly, the BoE was not responsible for NR demise.

The idea that BoE loan to NR should not be disclosed is ludicrous. Banks, like any other PLCs, have a legal duty to disclose to shareholders anything that is likely to have a material impact on the value of their shares. Northern Rock had a risky business model and the markets lost faith. End of story.

[wasabi]

Actually, I first saw the recession chart through a real Economist called James Meadway a couple of years ago.

'real Economist'? The chap who works for the nef?

So talking to Occupy and to Student Union Marxist groups makes a real economist?

[Top_gun]

'real Economist'? The chap who works for the nef?

So talking to Occupy and to Student Union Marxist groups makes a real economist?

Oh no, another weird rhetorical question. In a word no, but what it does mean is that Occupy and Student Union Marxist groups understands more about Economics than you.

Please remind me, where exactly did George Osborne learned his Economics?

[peterb]

Please remind me, where exactly did George Osborne learned his Economics?

George Osborne studied modern history at Oxford University. Much the same as Gordon Brown, who studied history (to PhD level) at Edinburgh University.

Alistair Darling was a law graduate from Aberdeen. The only economics graduate is Ed Balls, who after graduating from Oxford (where he was a member of both the Labour Club and Conservative Association "because they had top flight speakers" and alo founded an all male drinking club "The Streamers") He lectured at Harvard before entering politics.

Just goes to show that just because you study a subject, it doesn't mean you can apply it.

However, as Chancellor, as with any Ministerial post, there are a whole host of specialist advisors in the Department.

Philip Hammond has never served in the armed Forces (although he does have a fist class joint honours degree in Economics). Neither did 'Buff' Hoon before him, who graduated from Cambridge University with a law degree.

So I'm not sure what point you were trying to make. Ministerial position is about implementing and taking responsibility for departmental policy in support of Government policy which is set collectively by the Cabinet, supported by the Cabinet Office.

[TheAnimus]

Actually, I first saw the recession chart through a real Economist called James Meadway a couple of years ago. The same chart is found on the BBC website and the fact that the information I've conveyed is widely reported can safely be treated as facts.

It's true I often ignore your views because you're not Economist and clearly deluded in right wing thinking. Treating information from obscure websites as facts. Anyone who disagree with your views is immediately labelled as 'socialist'. What an incredible stupid simplistic thinking. I didn't know I was a 'Socialist' and don't align myself to any particular political party.

Let me just clarify, you still refute the formal definition of recession?

More drivel from you, shame really.

The money markets dried up in July and August 2007. This had an liquidity issues effect on Northern Rock and had to go with a begging bowl to the Bank of England in September 2007.

Which is what I said, they used the lender of last resort facility.

Clearly, the BoE was not responsible for NR demise.

Depends. If you consider that NR through a bad business practice was unable to re-finance it's obligations for a short period of time due to iliquidity of their funding market, could have survived when the market stabilised, then no, the legislation about disclosure of NRs use of BoE facilitiy is responsible for having all the chaos that ensued. Including a run on the bank.

The idea that BoE loan to NR should not be disclosed is ludicrous. Banks, like any other PLCs, have a legal duty to disclose to shareholders anything that is likely to have a material impact on the value of their shares. Northern Rock had a risky business model and the markets lost faith. End of story.

It's not ridiculous it used to be the legal case. It was changed by the MAD rules.

The idea is that when an entity is being propped up by the state, disclosing this fact puts them at a weaker situation, meaning that they will be less able to re-finance, thus meaning the BoE has to prop them up more, creating a vicious cycle. Then once the immediate short term problem has been resolved, the BoEs involvement can be disclosed, and eventually the BoE repaid at above market rates to prevent state interference providing an unfair advantage.

But I guess my economics courses were a bit more in depth than yours.

Btw, where in this construct have I called you a socialist? I've called you demonstrably ignorant / wilfully blind (which you have shown yourself to be, see the whole understanding what a recession is), but not a socialist.

[Top_gun]

Let me just clarify, you still refute the formal definition of recession?

I haven't refuted anything. All I'm simply saying is that the chart I've shown paints a more accurate picture of a recession than a technical definition of a recession. The problem here is that you want to pick your own facts to support your deluded world view. Hence why you're acting so desperately over another definition of a recession.

I'll be referring more to that chart in future and expanding on its credibility as well.

Which is what I said, they used the lender of last resort facility.

No, you've missed the point. The Bank of England was not responsible for the demise of Northern Rock. Northern Rock struggled to obtain money from the wholesale markets and was close to being out of business. Interesting enough, their share price dived downwards at the end of 2006. This suggest the markets knew Northern Rock was in a precarious position.

Depends. If you consider that NR through a bad business practice was unable to re-finance it's obligations for a short period of time due to iliquidity of their funding market, could have survived when the market stabilised, then no, the legislation about disclosure of NRs use of BoE facilitiy is responsible for having all the chaos that ensued. Including a run on the bank.
It's not ridiculous it used to be the legal case. It was changed by the MAD rules.

It was standard practice to disclose bail out money even in the United States. Good old Barclays Bank refused to take money from the BoE to give an impression they were safe haven while sneakily taking money from the Federal Reserves. We wouldn't have known this if it weren't for disclosure.

The idea is that when an entity is being propped up by the state, disclosing this fact puts them at a weaker situation, meaning that they will be less able to re-finance, thus meaning the BoE has to prop them up more, creating a vicious cycle. Then once the immediate short term problem has been resolved, the BoEs involvement can be disclosed, and eventually the BoE repaid at above market rates to prevent state interference providing an unfair advantage.

The problem in the banking crisis wasn't just about short term liquidity issues but one of toxic securities. No one knew the depth of the problem and the banks certainly failed to disclose their level of toxic securities. The banking crisis was about confidence.

But I guess my economics courses were a bit more in depth than yours.

Wishful thinking. I suggest you ask for your money back as obviously you've wasted your time! Perhaps if wean yourself off obscure right wing websites then maybe I take you more seriously.

Btw, where in this construct have I called you a socialist? I've called you demonstrably ignorant / wilfully blind (which you have shown yourself to be, see the whole understanding what a recession is), but not a socialist.

You have called me a socialist elsewhere but to try to say you didn't mention it in this construct does suggest you being of a dishonest persona.

[TheAnimus]

I haven't refuted anything. All I'm simply saying is that the chart I've shown paints a more accurate picture of a recession than a technical definition of a recession. The problem here is that you want to pick your own facts to support your deluded world view. Hence why you're acting so desperately over another definition of a recession.

I think you mean a depression.

A depression is a period where GDP (or output) has fallen and failed to rise above the previous level.

You can think of a recession as a period when the output is still falling.

I trust you appreciate why it's such an incredibly important difference.

It has taken 6 years for our GDP to grow to where it was before the first recession of the crunch.

I'll be referring more to that chart in future and expanding on its credibility as well.

Good-o, tell me, what moving average did they use to generate it? How did they discount it? What about the effects of the deflation in the oil and fuel market, not to mention the miners....

No, you've missed the point. The Bank of England was not responsible for the demise of Northern Rock. Northern Rock struggled to obtain money from the wholesale markets and was close to being out of business. Interesting enough, their share price dived downwards at the end of 2006. This suggest the markets knew Northern Rock was in a precarious position.

Oh boy did we. But it wasn't half as bad as when it was announced they'd needed to use their begging cap. Due to the nature of the institute I was working for, we had a lot of cash, so obviously we were following this closely.

It was standard practice to disclose bail out money even in the United States.

But it wasn't in the UK until MAD came along. With the benefit of hind site, the run on the retail bank was just a communications disaster, most queuing up to get their money had no idea.

The problem in the banking crisis wasn't just about short term liquidity issues but one of toxic securities. No one knew the depth of the problem and the banks certainly failed to disclose their level of toxic securities. The banking crisis was about confidence.

It depends which area you worked as to how true that was, for me there was little that was toxic, it was just a case of correlated risk not being priced, this made it hard for us to do any trades, because we couldn't accurately do any CVA on each one. The fear was that the correlation of our counter-parties would bring down our entire book for an unrelated event. Even at the heights of NRs problems they only lost about £2bn. When you consider that they had £100bn of obligations, that means even if you considered their loans 'toxic' it's only effected by a 2% net financing change.

You have called me a socialist elsewhere but to try to say you didn't mention it in this construct does suggest you being of a dishonest persona.

I'm not calling you a socialist, I'm calling you disingenuous and wilfully ignorant. To suggest I'm calling you a socialist in this setting is bizzare, because I'm not.

[Top_gun]

I'm not calling you a socialist, I'm calling you disingenuous and wilfully ignorant. To suggest I'm calling you a socialist in this setting is bizzare, because I'm not.

I'm sorry if my views are not compatible with your deluded right wing world. Perhaps if I was disingenous and wilfully ignorant then I'd gladly accept every word you say. But to be honest, you're coming across as a nut job who pretends to know a bit of economics.

ETA: I shall not respond to your other meaningless drivel.

[opel80uk]

What's wrong with being a Socialist?! Some of the greatest minds throughout history have been Socialists; Einstein, Marie Curie, Grandpa from The Waltons

[TheAnimus]

I'm sorry if my views are not compatible with your deluded right wing world. Perhaps if I was disingenous and wilfully ignorant then I'd gladly accept every word you say. But to be honest, you're coming across as a nut job who pretends to know a bit of economics.

Which bit am I incorrect on?

Wikipedia, ONS, BBC all agree with me on the definition of a recession, your original point that we've had the longest one in 100 years is therefore clearly not true.

If I, the BBC or Wikipedia gang have made a mistake, please highlight it.

ETA: I shall not respond to your other meaningless drivel.

Toodles!

[Top_gun]

What's wrong with being a Socialist?! Some of the greatest minds throughout history have been Socialists; Einstein, Marie Curie, Grandpa from The Waltons

I fully agree that some of the greatest minds are socialists.