As expected, the Bank of England cut interest rates today to 0.25% from 0.5%.
The move leaves the US as the only major player talking about rate hikes. But as we have seen, there’s far more Fed talk than Fed action.
If you are looking for “action”, a count shows the BoE used that word eight times today in its Monetary Policy Summary following today’s rate cut announcement.
The British pound fell 1.52% but the FTSE stock market loved the “action” as BoE Mark Carney said the central would take “whatever action is needed” to promote financial and price stability.
I cannot find the word “whatever” in the BoE statement, but the Telegraph used that precise phrase.
Bank of England Delivers Action
The Telegraph reports Pound plunges as Bank of England Cuts Interest Rates for First Time Since 2009.
The Bank of England has unveiled a four-pronged stimulus package designed to boost the economy and prevent a recession following the vote to leave the European Union.
Policymakers signalled that they were likely to vote for further cuts towards zero within months.
Staff slashed their year-ahead UK growth forecasts on Thursday by the biggest margin since it started publishing quarterly economic forecasts in 1993, but stopped short of forecasting a Brexit-induced recession.
In a £170bn package of additional measures designed to stimulate the economy, the Bank announced it would:
- Expand its quantitative easing programme by £60bn, taking its stockpile of asset purchases up to £435bn over the coming six months, from £375bn today.
- Buy up to £10bn of high quality corporate debt from an estimated pool of around £150bn to drive down funding costs. While more details will be announced before the purchases start in September, policymakers said buying these bonds “could provide more stimulus than the same amount of gilt purchases”.
- Launch a £100bn “Term Funding Scheme” designed to offset the impact of cutting interest rates on bank profits. This will allow commercial banks to borrow a proportion of their outstanding lending to UK businesses and households for four years at around 0.25pc. The scheme will be funded by new money created by the Bank.
[Counting the rate cut, that is actually four actions]
Mr Carney said the Bank would take “whatever action is needed” to promote financial and price stability. “Some of the adjustments to this new reality may prove difficult and many will take time. But the UK can handle change,” he said.
The Governorsaid the steps policymakers had taken to offset the impact of lower rates on commercial banks’ net interest margins meant that there was “no excuse” for banks not to pass on the lower rates to borrowers.
“Through the actions taken today … we have improved the economic outcomes for this country. There will be less unemployment, more activity, and there will be a greater prospect of a successful adjustment to the new realities that the UK faces,” he said.
Investigating the Pound’s Plunge
The move lower today did not even take the pound to lows seen in the week following Brexit.
Today’s dip was more related to the additional actions by the BOE than the rate cut itself. The pound may very well be bottoming here.
FTSE vs. Brexit
Coordinated Counter-Action
Bonds rallied in the US today in possible reaction to the BOE stimulus actions. Party on dudes.
Mike “Mish” Shedlock
http://yuvarevolution.org/wp-content/uploads/2014/11/central_banking_101_scam_meme_fiat_interest_ponzi_bankster.jpg
That pretty well sums it up.
Time to automate all banking – let the robots take it over…….
Robots don’t have to be paid unearned Billions of Dollars…..
Funny how every country wants to debase thier currency.
They all can’t win.
And it is not a free lunch without consequences.
And people wonder why there are gold bugs.
There are no “They” as in the population of a country sharing anything in common. “They” are those closest to the Central Bankers. And “They” can all win. While the rest of us loses. Nationalism and patriotism, is nothing but a scheme by the rulers to keep their slaves pliantly toiling for the “common”, as in the rulers’, good.
“Your Queen’s face is my toilet paper” doesn’t seem like moving in the right direction. Perhaps this is “the New England” now?
Or dare I say … “New New England…
Carney is a poodle for Mario Draghi regardless the Brexit vote.
If I buy a bond you issue with zero coupon and infinite duration I have just given you a gift of free money. No interest payments and you never pay back principal. If a CB does the same they have given you free money which they printed. This is truly helicopter money. We are getting closer and closer to this. Coupon rates are near zero and durations are heading higher. For some odd reason this money is not finding its way into the economy. It’s as though oligarchic elites are intercepting this free money and using it to further line their already bulging pockets. Paul Krugman and Larry Summers are perplexed at all of this. Trump should start flogging this narrative. A little truth to power will go a long ways for him right now.
Currency is what most people think money is!
It is a medium of exchange.
A unit of account. (it’s got numbers on it!).
It is portable.
It is durable.
It is divisible. (you can make change from it).
It is fungible (interchangeable).
Currency is simply paper. This paper money is a tool for trading your time.
Currency has no intrinsic value!
Eventually, the “durability” factor comes into question, then the medium of exchange and fungiability part of the equation becomes an international problem. Trump knows all this and Everybody is wondering WTF is going on with his campaign. I’m back to square 1 right now, and I am going to end up doing what I did in all the past elections. I’m going to vote against the worst one.
It is made out to support the existing system .
It is ironic as money is a representation of exchange , that implies there must be a change on both sides . When money is used to make sure there is no change , nor has the system become balanced and therefore without need for change , nor does the resulting lack of change benefit anyone . The idea of printing money so that exchanges can continue is at about the same level as saying ‘let’s all stand in a circle and keep passing money to each other’ .
So you might end up with long periods of managed stagnation that appear supportive , but that are actually people just turning in circles saying goodbye to their future .
When they realize this they will find that they have made their way to the bottom of the pile , that those above them will still be above them , but further so because of the greater uncertainty that those at the bottom will face .
So they will ask those above them to save them , and will finally be at their mercy, as they will rely on this free passing around of money to survive , while those that actually truly earn some of it will be depreciated to the level of fools who should be accepting the money for free . By the time they are paid ,their newly earned money will be worth less , which is not the case for those who obtain it for free , as it was never worth anything to them from the beginning , only what they could take off those who actually worked , that being the value of producing something .
Therefore those at the top will be left standing over the ruins of their society , of their economy , and they will just have time to celebrate their success before they get lynched .
How this could ever be understood as positive defies me .
When will the ‘experts’ wake up to the fact that Brexit is irrelevant. The remaining EU countries as well as the USA are struggling, some far worse than the UK. Now is a good time to buy pounds before the ‘experts’ realise (after the event as usual) that the UK economy is fine and now there are multiple opportunities for new marks and free trade with the EU and with stronger economies in the Far East.
More importantly, when will there be the reduction in Corporation Tax!!!
Gold seems better and better for me, what do you guys think?