Complete silliness reigns in the UK as Prime Minister Brown, Chancellor Darling, and BOE Governor Mervyn King Urge Banks To lend.
U.K. house prices dropped to the lowest level in almost three years in November as banks starved the property market of credit, Hometrack Ltd. said.
The average cost of a home in England and Wales fell 8.1 percent in the past 12 months to 161,400 pounds ($248,000), the lowest since January 2006, the London-based property researcher said in a statement today. Values declined 1.1 percent on the month, compared with a 1.3 percent drop in October.
Prime Minister Gordon Brown urged banks to free up credit last week as political pressure mounts for him to implement measures to force them to lend. The Bank of England will cut the benchmark interest rate this week to 2 percent, the lowest since 1951, as policy makers combat the recession and the housing market slump, economists say.
Chancellor of the Exchequer Alistair Darling pledged last week to do “whatever is necessary” to get banks lending again. Bank of England Governor Mervyn King refused to rule out nationalizing financial institutions to revive credit.
With home prices plunging and unemployment rising the last thing banks should do is go on a lending spree. Forcing banks to lend will force them to incur more losses. It is as simple as that. The Chancellor, Prime Minister, and Governor have all lost their minds.
Elsewhere, the Bank of Japan is on the verge of fiscal insanity as well.
Public Broadcaster NKH says Bank of Japan to Hold Emergency Policy Meeting to encourage banks to lend.
The Bank of Japan, the country’s central bank, will hold an emergency policy meeting this week, NHK reported, without saying where it obtained the information.
The bank will discuss creating a system to lend money to commercial banks and to encourage them to provide financing to businesses, public broadcaster NHK said.
Banks are in trouble because of excessive lending yet everyone seems to think the cure for excessive risk taking and poor lending practices is excessive risk taking and pool lending practices.
UK ‘closer’ to adopting the euro
The BBC is reporting UK ‘closer’ to adopting the euro
The UK is “closer than ever before” to joining the euro, according to the president of the European Commission, Jose Manuel Barroso.
Speaking on a French radio show, he said British politicians were considering the move because of the effects of the global credit crunch.
“I’m not going to break the confidentiality of certain conversations, but some British politicians have already told me, ‘If we had the euro, we would have been better off’. “
“I know that the majority in Britain are still opposed, but there is a period of consideration under way and the people who matter in Britain are currently thinking about it”, he said.
The value of sterling compared with other currencies has fallen during the credit crunch, and the UK government has had to spend massively in recent months to try to support the economy.
China’s November Manufacturing Contracts by Record
Bloomberg is reporting China’s November Manufacturing Contracts by Record.
China’s manufacturing contracted by the most on record and export orders slumped as a slowdown in the world’s fourth-biggest economy deepened.
The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e- mailed statement. Export orders, output and new orders all contracted by the most since the survey began in 2005.
China’s export orders declined to 29 in November from 41.4 in October, the survey showed. A reading above 50 reflects an expansion, below 50 a contraction. The output index fell to 35.5 from 44.3, while the index of new orders dropped to 32.3 from 41.7.
Weaker demand for Chinese goods and a slump in construction are undermining growth. China last month announced a $586 billion stimulus package and the biggest interest-rate cut in 11 years to revive the economy and counter the risk of spiraling unemployment and social unrest.
With stimulus running rampant, and monetary mistakes everywhere one looks, those looking for a complete collapse in the US dollar are unlikely to see it.
Mike “Mish” Shedlock
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