I suppose we live in dangerous times!!

G-20 already seems far away. And it was only last week. I doubt if the world's leaders were worried about British government bonds (gilts). I suppose we live in dangerous times. Gilts could be a poor investment if inflation takes off unless they are the index-linked variety. These last type of gilts are a favourite investment of the pension fund of the Bank of England itself itself according to economist Liam Halligan writing in the Sunday Telegraph..
The investment expert Brian Tora writes in moneymarketing.co.uk
that corporate bonds could be hit by either inflation or by a downturn longer than forecast.
I wonder if we need a return to the Goldilocks economy, not too hot or too cold. I know there are some big bets being made over corporate bonds on the basis they are underpriced and that they could provide much-needed income. There is a ghastly alternative scenario and this is that corporate bond defaults will match the 1930s Depression.

UK quantative easing is coming our way!!

The United Kingdom government is going to carry out quantative easing to get out of the economic predicament we are in. Gold reached $820 an ounce in August and now it
stands at $1,000. British premier Gordon Brown insisted that we sold at $250 an ounce. I wonder if the two issues are linked? Sterling is not supported by masses of currency reserves unlike the China or Taiwan. Although these countries must be wondering how long will they buy U.S Treasury bonds.
www.searchifa.co.uk
So we are probably in a bit of sticky situation. British savers have been abandoned (hopefully this will change) and they should keep to mainstream institutions. There was a rush to the Post Office agent Bank of Ireland and now there is a rush back. I suppose everyone needs some certainty.
The shenanigans at Anglo Irish Bank don't look good. I think the Irish would like to have some quantative easing but the good bankers at the Frankfurt-based ECB have proved several steps behind in this current economic crisis. Perhaps, the Bank of England held interest rates too high but have certainly gone for it in a big way. Say the UK central bank buys a few corporate bonds and some gilts, it probably would provide limited help to the housing market, which needs private individuals buying residential properties from other private individuals. To help these transactions Sir James Crosby proposed a reasonable plan involving mortgage securities. This plan has been studiously ignored by the Gordon Brown administration.

Major banks could take control of New Star.

The major banks could take control of UK investment manager New Star. You would have thought that fund management was a straightforward and simple business with not much to go wrong. It seems that New Star was weighed down with debt, which was very negative when funds under management suddenly went south. When these funds go up, it can be a very profitable business if costs stay the same. It is sad that it has not worked out for New Star founder John Duffield, who is a real character amongst the grey denizens of the City.
www.searchifa.co.uk
One worrying factor is that quoted businesses are going into administration nearly every week. It seems like it anyway (Woolies, MFI, London Scottish).
It will be interesting if the Bank of England lowers interest rates to 2 pct from 3pct. If the banks are not passing on the decrease to borrowers but are applying it to savers, then the Bank might consider a pause. It does not seem to be too worried about the exchange rate but sterling does need some support to prevent a major fall.

It is interesting BOE widening range of collateral.

The UK central bank Bank of England is widening the range of collateral it takes from banks in the provision of their funding needs. The central bank is to take paper, which is not AAA rated such as U.S student loans. The Bank of England governor Mervyn King is probably pondering how to get the banks off this funding tap.
www.searchifa.co.uk
Apparently, the Governor is being more pragmatic and is less concerned at making the banks pay for their mess.

Is Bank of England governor holding up recovery of mortgage market?

I wonder if central banker Mervyn King is holding up the recovery of the mortgage market in Britain. In August moneymarketing.co.uk reported that King's
"heavy-handed rejection of proposals to help the mortgage market floated by Sir James Crosby shows there is little consensus on what needs to be done in the homeloan sector".

The Bank of England governor does not want any type of guarantee as far as lending is concerned and thinks the UK mortgage market will recover on its own accord. However, this approach has been criticsed by Wave Lending chief executive Colin Snowdon, who describes the governor as an economist first, a banker second.

Linda Will, of West Country building society Stroud and Swindon, says the problem is the financial authorities are undecided on what to do and there are major divisions between themselves.

Sir James Crosby is the former boss of HBOS (Halifax Bank of Scotland), which could be swallowed up by Lloyds TSB. HBOS has 20 pct of the UK mortgage market but in terms of new lending institutions such as Banco Santander unit Abbey National have been growing fast.

The UK mortgage market will probably recover naturally and the lenders will start lending if the spectre of negative equity falls away. I think the government might have to give a helping hand to the housebuilders, whose share prices have been shot to pieces.

Is Bank of England governor defending UK financial markets?

Is the Bank of England governor Mervyn King defending UK financial markets? Obviously, he would not like to be lectured by overpaid bankers over the need to hose
the markets with cheap cash. However, this might be necessary to get things going
again. I assume the governor is very aware of the dangers of importing inflation
with the depreciation of sterling. This should help exporters but this has never
been the priority of the Bank of England.
www.searchifa.co.uk
Mr King must be as mystified as the rest of us that the banks have not cut dividends
and raised capital. This would be allied with management changes. How many
Barclays SIVs can go bust before the management does the decent thing.
www.searchifa.co.uk