Bank of England

Bank of England: Recession will be the worst in modern history

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– Ben Bernanke: This financial crisis may be worse than the Great Depression

Britain is facing the steepest recession in modern history, Mervyn King, the Bank of England Governor, declared as it laid bare the full extent of the damage wrought by the financial crisis.

bank-of-england

The economy will take longer to recover from this recession than it did in previous economic slumps and it will take “several years” before banks are lending normally to households and businesses, Mr King said.

The downbeat message came as the Bank disclosed that it was likely to keep interest rates low for far longer than experts had predicted as Britain shakes off the effects of the downturn.

The Bank said that it expected the economy to contract by an annual rate of 5.5 per cent at its lowest point this year – an even deeper dive than experienced in the 1930s – let alone any of the other postwar recessions.

Read moreBank of England: Recession will be the worst in modern history

Max Keiser on France 24: Goldman Sachs Are Scum (07/16/09)

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A must see!

Max Keiser:
“They are literally stealing a hundred million dollars a day. Goldman Sachs is stealing every day on the floor of the exchange. They should be in the Hague, they should be taken on financial terrorism charges. They should all be thrown in jail”

Banking System Like South Sea Bubble: Senior Bank of England Official

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returns-on-banking-shares
Returns on banking shares relative to the wider market

‘Banking became the goose laying the golden eggs. There is no period in recent UK financial history which bears comparison,’ says executive director for financial stability, Andy Haldane

A senior Bank of England official today compared the banking system over the last 20 years to the South Sea bubble of the early 18th century and said bankers had merely “resorted to the roulette wheel” to keep up with each other.

The Bank’s executive director for financial stability, Andy Haldane, said in a speech in Chicago that having been stable over much of the 20th century, returns in the banking system relative to the wider stockmarket shot up after 1986 until 2006.

“Banking became the goose laying the golden eggs. There is no period in recent UK financial history which bears comparison,” he said.

He said bankers and policymakers became seduced by the excess returns available: “Banks appeared to have discovered a money machine, albeit one whose workings were sometimes impossible to understand.

“One of the South Sea stocks was memorably ‘a company for carrying out an undertaking of great advantage, but nobody to know what it is’. Banking became the 21st-century equivalent.”

Read moreBanking System Like South Sea Bubble: Senior Bank of England Official

Hedge funds withdraw 50% of their deposits in the UK

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Financial institutions based in the Cayman Islands have halved their deposits in UK banks over the past 12 months

Cayman Islands
Banks in Cayman islands pull their deposits from UK banks. Photograph: PR

Hedge funds and financial institutions based in the Cayman Islands have been pulling their money out of Britain as they are hit by the credit crunch, according to figures from the Bank of England.

The low-tax regime and limited ­regulation of the Cayman Islands – with a population of 52,000 – has attracted 80% of the world’s $1.3tn (£790bn) hedge fund industry.

Those institutions have almost halved their deposits in UK banks over the past 12 months, from $356bn at the end of the first quarter in 2008, to $173bn at the end of March, Bank of England data shows. The drop in Cayman Islands’ deposits comes as hedge funds are being forced to return money to investors who have made big losses from the financial crisis. It also reflects fund losses from falling markets.

The outflow of funds from Britain puts the spotlight on hedge fund threats to abandon the UK because of higher taxes, tighter regulation and potential caps on executive pay and bonuses.

Read moreHedge funds withdraw 50% of their deposits in the UK

German Chancellor Angela Merkel Blasts ‘Powers of the Fed’

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Merkel: “We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years’ time.”

Only this time it will only take about one year until everything falls apart and “the same situation” will also be much worse than before. An economic/financial disaster of epic proportions: The Greatest Depression.

angela-merkel
In a speech on Tuesday in Berlin, Chancellor Angela Merkel expressed ‘great skepticism’ over the clout of central banks and suggested their aggressive moves in Europe, the U.S. and the U.K. might backfire. She is shown here at a rally later in Saarbrücken, Germany, for European Parliamentary elections. AFP/Getty Images

German Chancellor Angela Merkel, in a rare public rebuke of central banks, suggested the European Central Bank and its counterparts in the U.S. and Britain have gone too far in fighting the financial crisis and may be laying the groundwork for another financial blowup.
“I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line,” Ms. Merkel said in a speech in Berlin. “We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years’ time.” (Read excerpts of the speech.)

Ms. Merkel also said the ECB “bowed somewhat to international pressure” when it said last month it plans to buy €60 billion ($85 billion) in corporate bonds — a move that is modest in comparison to asset-buying by its counterparts, the U.S. Federal Reserve and the Bank of England. Details are to be unveiled by the ECB’s president, Jean-Claude Trichet, Thursday.

The public criticism is unusual — and not only because German politicians rarely talk harshly about central banks in public. When politicians around the world do criticize their central banks, they almost always gripe that they are too tightfisted.

Read moreGerman Chancellor Angela Merkel Blasts ‘Powers of the Fed’

Bank of England to print extra 50 billion pounds

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And here we have the Zimbabwe School of Economics … again.

The pound will be very soon bad toilet paper.

Got gold and silver?


People walk through the Royal Exchange with the Bank of England (R) seen behind in central London January 16, 2009. REUTERS

LONDON (Reuters) – The Bank of England stepped up its campaign to boost the struggling economy, raising the size of its asset purchase programme on Thursday in a surprise move tantamount to printing an extra 50 billion pounds to get banks lending again.

The central bank kept rates at a record low of 0.5 percent as expected, but surprised markets by moving swiftly to reassure them that its scheme to buy up government and corporate bonds with newly-created money would last at least 3 months more.

Sterling lost ground against the euro and dollar on the news, but gilt futures more than halved earlier hefty losses that had taken bond yields back up to levels last seen in February, before Bank Governor Mervyn King had seriously mooted the policy of quantitative easing.

Read moreBank of England to print extra 50 billion pounds

U.S. Injecting Billions Into Foreign Central Banks

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For more than a year, the U.S. Federal Reserve System has been increasingly acting as the world’s central bank, injecting hundreds of billions of dollars into foreign government treasuries in an effort to increase liquidity in those countries.

The foreign central banks have used the U.S. currency to bail out financial institutions within their borders. The Fed program links its balance sheet directly to the fates of foreign central banks at a time when they’re on the ropes.

The program has so far gone unreported in the mainstream media and is a major expansion of Federal Reserve involvement in the global economy. It represents a stark break from the prior role of the Fed, moving it into territory more traditionally occupied by the International Monetary Fund (IMF).

Read moreU.S. Injecting Billions Into Foreign Central Banks

Bank of England warns tensions in banking system at fever pitch

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Dr. Sound Economy: The patient is dying of ‘Derivative Greed Failing Bankster Fever.’

Tensions in the financial system are approaching the fever pitch they reached before the collapse of Lehman Brothers last October, the Bank of England has warned.


Tensions in the financial system are approaching the fever pitch they reached before the collapse of Lehman Brothers. Photo: AP

Investors have restrained the amount they are willing to lend, banks have grown reluctant to entrust their cash to each other and levels of stress in the system have hit new peaks, according to the Bank’s Quarterly Bulletin.

The Bank’s chief economist, Spencer Dale, warns in the report, published today, that: “Against the background of a significant and synchronised weakening in international economic activity, market conditions generally remained strained. In particular, bank funding markets became more difficult again reflecting renewed concerns about the scale of potential credit losses and write-downs facing banks.”

The report lays bare the fears investors currently have about the creditworthiness of Britain’s biggest banks. It reveals that a key measure of interbank health – the spread between the London Interbank Offered Rate (Libor) and expected interest rate levels had “started to widen again” while “contacts reported some increased reluctance to lend to banks beyond very short maturities.”

The main worry haunting investors is the threat that banks could be nationalised and that financial institutions are harbouring “ongoing balance sheet constraints”.

However, most worryingly, it warns that the credit default swap spread rates on large banks – a key measure of concerns about their possibly insolvency – picked up to their highest level since just before the collapse of Lehman.

The Bulletin says: “With a number of banks reporting large credit losses and write-downs for 2008 Q4, perceptions about bank counterparty risk appeared to pick up again.

Consistent with that, premia on UK banks’ credit default swaps rose, and approached levels reached in October 2008 when fears about system-wide failure were intense.”

By Edmund Conway, Economics Editor
Last Updated: 6:18AM GMT 16 Mar 2009

Source: The Telegraph

Britain showing signs of heading towards 1930s-style depression, says Bank of England

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Britain is showing signs of sliding towards a 1930s-style depression, the Bank of England says today for the first time.

The country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month, according to a Bank report published today.

Related article: Beware Bank of England’s monetary con trick (Financial Times)

The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.

The Bank is using its Quarterly Bulletin to highlight the threat posed to the economy by deflation – where prices fall each year rather than rise.

Read moreBritain showing signs of heading towards 1930s-style depression, says Bank of England

Beware Bank of England’s monetary con trick

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At the start of this month, the gilts market appeared overwhelmed by the burgeoning demands of the UK government. Then the Bank of England sprang to the rescue, announcing that it would spend tens of billions of pounds acquiring government bonds. Gilts surged in response to this news. Economists applauded. Their reactions are mistaken. Quantitative easing, as it is called, poses a grave danger to Britain’s creditors. It is a perilous policy that threatens further disruption to the financial system at some future date.

On Thursday March 5, the Bank of England said it would acquire up to £75bn of gilts over the following three months. A further £75bn of Bank purchases have been earmarked. Relative to the size of the British economy, these are vast sums. The combined figure is roughly three times the stock of notes and coins in circulation and twice the country’s monetary base. It is also equal to almost a third of the stock of outstanding gilts. Put another way, the Bank is set to finance the largest peacetime deficit in British history.

Britain’s move into quantitative easing has mostly been greeted with cheers in the City. “For holders of gilts, this can only be good news,” commented the head of fixed income research at one broker. Another financial commentator estimated that buying gilts with newly printed money would save British taxpayers some £5bn in interest payments.

Yet long-term bondholders have nothing to celebrate. The aim of quantitative easing, after all, is to dispel deflation and achieve the Bank’s 2 per cent annual inflation target. There is no question that a determined central bank can get rid of deflation. It is simply a question of printing enough money. Economists have another term to describe the monetisation of government debt. The history of “seigniorage” goes back to the debasement of the coinage under the Roman emperors. Seigniorage is really a tax on holders of money and government debt which is paid via inflation. When carried to excess, it leads to hyperinflation.

The exponents of quantitative easing dismiss such fears. They claim that liquidity can easily be removed at some stage in the future. But what confidence should we place in the authorities to act in a timely fashion? After all, this crisis is largely the consequence of the Federal Reserve’s easy money policy at the beginning of the decade that fuelled the global housing bubble. If the economy remains stagnant, the Bank will probably be slow to remove the liquidity. In which case, there will be inflation.

An early experiment with quantitative easing occurred in Japan in 1932. At the time, the Bank of Japan financed a large fiscal expansion by printing money. In no time, Japan went from a severe deflation to near double-digit inflation. This monetary easing was never reversed and inflation escalated throughout the decade. After the second world war, the Fed likewise printed money to buy bonds. As a result, a mild deflation in 1949 was followed by inflation of about 10 per cent a couple of years later. Owners of Treasury bonds suffered heavy losses.

Read moreBeware Bank of England’s monetary con trick

The Obama Deception

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See also: Ron Paul: Obama Foreign Policy Identical To Bush


1:51:21 – 12.03.2009
Source: Google Video

Record rise in gilts as Bank of England ‘starts printing presses’

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Gilts saw their biggest one-day jump in memory after the Bank of England signalled it was embarking on a policy of money creation for the first time.

The Bank cut interest rates by half a percentage point and committed to spending £150bn of newly created central bank money on corporate and government bonds. The news sent shockwaves through Britain’s capital markets.

Although most economists had expected the rate cut, which leaves borrowing costs at an effective zero of 0.5pc, the scale and speed of the plan to pump extra cash into the economy took traders by surprise. The Bank plans to spend £50bn of the money it creates on corporate debt and the remaining sum on government bonds.

The sheer scale of the operation is illustrated by the fact that the entire corporate bond and commercial paper market in the UK is worth only £57.5bn, while the amount of gilt-edged government debt eligible for the Bank’s auctions totals £250bn.

– The Bank’s £200bn gamble (Independent):
“The Bank of England will this week announce its intention to flood the economy with ‘helicopter money’, its latest attempt to tackle the recession. Won’t quantitative easing cause inflation? Yes – and that is the general idea. Warren Buffett, the world’s most successful investor, has warned of “an onslaught of inflation” as a result of current policies.”

Destroying the value of your money through inflation is the general idea?(!!!)

Quantitative easing = Increasing the money supply (by creating money out of thin air) = Inflation

Inflation is a hidden tax:
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes

Quantitative easing = The Zimbabwe school of economics (Stealing)


The Bank initially intends to spend £75bn on the operation, with the remaining amount likely to be committed as and when the Monetary Policy Committee judges necessary.

Read moreRecord rise in gilts as Bank of England ‘starts printing presses’

The dangers of printing money: four lessons from history

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The Bank of England voted today to begin quantitative easing –  printing money to you and me – in a last ditch attempt to save the UK from the twin threats of depression and deflation.

It is a decision that is fraught with risks.

The hope is that the money pumped into the economy will encourage banks to become more relaxed about lending to individuals and businesses.

Flush with extra cash we will all rush out to spend it, kickstarting the economy and dragging it out of recession. Governor of the Bank of England, Mervyn King, will get a well deserved knighthood, and the rest of us will all breathe a sigh of relief and carry on as before, a little poorer, a little wiser, but generally OK.

But, none of the above is certain.

Banks might prefer to sit on the cash resulting in continued gridlock in the borrowing market. Impact: a big fat zero.

If too much money is pumped into the economy inflation or even hyper-inflation becomes a real threat. Impact: an unwelcome return to the 1970s.

Read moreThe dangers of printing money: four lessons from history

Bank of England wants to print more money

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Quantitative easing = Increasing the money supply (by creating money out of thin air) = Inflation = Stealing

Inflation is a hidden tax:

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
– Alan Greenspan

“I care not what puppet is placed on the throne of England to rule the Empire, … The man that controls Britain’s money supply controls the British Empire. And I control the money supply.”
– Baron Nathan Mayer Rothschild

“Give me control of a nation’s money and I care not who makes the laws.”
– Mayer Amschel Rothschild

Watch the pound: Jim Rogers: ‘Sell any sterling you might have; It’s finished’

Bank of England seeks power to inject more money into economy to fight recession

The Bank of England’s Monetary Policy Committee has voted unanimously to seek Goverment permission to increase the amount of money in the economy as interest rate cuts lose their power to fight recession.

The 9-0 vote by the MPC was revealed in the minutes of the meeting held on February 5. The Bank’s Governor Mervyn King will now write to Alistair Darling, the Chancellor, to ask for approval to introduce measures aimed at raising the supply of money in the economy – known as quantitative easing.

The Bank hopes that by increasing the quantity of money in the economy it can encourage banks to increase lending and consumers to start spending.

Read moreBank of England wants to print more money

Bank of England sees slowdown deepening, prepares to deploy quantative easing

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Quantitative easing = Creating money = Increasing the money supply = Inflation = Stealing

Inflation is a hidden tax:

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
– Alan Greenspan

Source: The Financial Times

Mervyn King on Wednesday said the Bank of England could begin so-called “quantitative easing” as soon as next month, as he warned that the UK economy was in deep recession and that the risks to economic growth lay “heavily to the downside”.

Related article: ‘This is the worst recession for over 100 years’ (Independent)

He was speaking as the Bank unveiled its latest inflation report that suggested inflation will fall to 0.5 per cent and may remain well below the Bank’s 2 per cent target for much of 2010 and 2011.

In order to get more money flowing in the economy as interest rates approach zero, the governor of the Bank also said he was preparing to deploy quantitative easing – creating money to buy assets.

He said that interest rates would not have to fall to zero before starting quantitive easing, signalling that the Bank’s monetary policy committee could vote for such a move at its next monthly meeting. It also suggests that such unconventional measures could begin with gilt purchases.

Quantitative easing is aimed at increasing the money supply, getting banks to lend more, lowering interest rates and raising the level of inflation. (…and destroying the pound.)

Read moreBank of England sees slowdown deepening, prepares to deploy quantative easing

Hyperinflation is a possibility, say Morgan Stanley

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That’s not in Zimbabwe by the way.

Morgan Stanley’s Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary (our emphasis).

One stark lesson from the ongoing financial and economic crisis is that so-called black swans – large-impact, hard-to-predict and seemingly rare events – can occur more frequently than generally believed.

With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation.

While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view. We discuss the historical evidence, the conditions that can lead to very high or hyperinflation, and whether and how it might happen again.

Read moreHyperinflation is a possibility, say Morgan Stanley

Another day, yet another bail-out: £50bn to rescue ailing firms

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Quantitative easing: The Bank of England will “create money out of thin air” and inject it into the financial system, this will “increase the money supply” (= “Inflation”). Inflation is a hidden tax.

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes

The government and the Bank of England are robbing the people of their wealth.


Economic jitters: Alistair Darling has set out the details of a £50billion scheme to head off a slump

The Bank of England was put on standby to print more money last night amid growing signs of Labour jitters about the Prime Minister’s strategy for escaping a political wipeout.

Alistair Darling set out the details of a radical £50billion scheme to head off a slump by injecting hard cash into the stricken economy.

The move represents a major step towards so-called quantitative easing, whereby the Government creates more money to ease the shortage of credit in the economy.

But it also takes the Bank a step closer to losing the independence it won from Mr Brown more than a decade ago, as ministers prepare to seize control of monetary policy.

The Chancellor wrote to Bank Governor Mervyn King to confirm that the £50billion fund will be used to effectively purchase companies’ debts and even give them extra cash.

Read moreAnother day, yet another bail-out: £50bn to rescue ailing firms

Bank of England Governor paves way to start Bank print presses

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Bank of England Governor Mervyn King leaves 10 Downing Street in London

The Bank of England’s Governor paved the way last night to unleash the (Zimbabwe) weapon of “printing money” in a last-ditch drive to combat the rapidly deepening recession.

Mervyn King braced Britain for a further sharp slump and a “difficult year for all of us”, and laid the groundwork for the Bank to turn to “unconventional measures” as interest rates fall towards zero.

Related articles:
– Jim Rogers: ‘Sell any sterling you might have; It’s finished’ (Times)
– Jim Rogers: ‘UK has nothing to sell’ (Financial Times):
 “The City of London is finished, the financial centre of the world is moving east.”
– Sterling hits 23-year low against dollar (Financial Times)
– UK cannot take Iceland’s soft option (Telegraph)
– Gordon Brown brings Britain to the edge of bankruptcy (Telegraph)

The Governor made clear that the Bank is preparing to turn soon to so-called “quantitative easing” measures – pumping money into the economy by buying bonds from banks, firms and the Treasury – after interest rate cuts to a record low of 1.5 per cent left it short of ammunition.

Read moreBank of England Governor paves way to start Bank print presses

Global Economic Crisis Accelerating

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– Jim Rogers: ‘UK has nothing to sell’ (Financial Times):
 “The City of London is finished, the financial centre of the world is moving east.”

– Jim Rogers: Obama administration run by people who caused the latest financial problems (BBC News)

– The Obama Stimulus Plan Won’t Work (Lew Rockwell)

– SERIOUSLY ALARMED (Telegraph):
(Even Mr. Ambrose Evans-Pritchard is now alarmed!)

– King paves way to start Bank print presses (Times Online)

– Sterling hits 23-year low against dollar (Financial Times)

– Geithner pledges ‘dramatic’ action (Financial Times)

– Portugal says S&P downgrade due to global crisis (Reuters)

– Singapore Economy May Post Biggest Decline on Record (Bloomberg)

– Emerging markets face $180 bn investment decline (Business Standard)

– French government to pump €6bn into ailing car industry (Guardian)

– Japan’s ‘Severe’ Recession May Last Three Years, Yoshikawa Says (Bloomberg)

– BHP Billiton to cut 6000 jobs and close mine (Times Online)

– Eaton to Cut 5200 Jobs in a 2nd Wave of Reductions (Bloomberg)

– Record redundancies push unemployment to 1.92 million (Times Online)

– Ecuador to Cut $1.5 Billion in Imports to Defend Use of Dollar (Bloomberg)

– Ex-Scots bankers could face Holyrood inquiry (Times Online)

– Ireland’s Banks Sink With Decline of ‘Celtic Tiger’ (Bloomberg)

– Patrick Rocca, ‘poster boy’ of Ireland’s Celtic Tiger, kills himself (Times Online)

– Bankers accused in crisis could face trials in US (Guardian)

– Hedge Fund Run by Ex-Car Salesman Is Scam, SEC Says (Bloomberg)

– Federal Home Loan Banks may have to borrow from US (Los Angeles Times)

– Merrill Clients Pulled $10 Billion in Fourth Quarter (Bloomberg)

– Standard Life investors demand compensation after ‘cash’ fund invests in toxic debt (Telegraph)

– Toyota Tops GM in Global Car Sales in 2008 (Washington Post)

– Citigroup Makes Stock Incentive Awards to Executives (Bloomberg)

UK cannot take Iceland’s soft option

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The British government faces an excruciating choice. It cannot let Royal Bank of Scotland and its fellow mega-banks go to the wall. Yet it risks being swamped by the massive foreign debts of these lenders if it takes on their dollar, euro and yen exposure by opting for full nationalisation.

Britain has foreign reserves of under $61bn dollars (£43.7bn), less than Malaysia or Thailand. The foreign liabilities of the UK banks are $4.4 trillion – or twice annual GDP – according to the Bank of England. The mismatch is perilous.

It is why sterling has crashed 10 cents from $1.49 to $1.39 against the dollar in two days. The markets have given their verdict on Gordon Brown’s latest effort to “save the world”.

Related article:
– Gordon Brown brings Britain to the edge of bankruptcy (Telegraph)

Credit default swaps (CDS) measuring risk on British debt have reached an all-time high of 125 basis points, just below Portugal. The yield spread on 10-year Gilts over German Bunds has doubled to 53 basis points since last week.

Standard & Poor’s has quashed rumours that it will soon strip Britain of its AAA credit rating – an indignity averted even after the International Monetary Fund bail-out in 1976. But there was a sting yesterday as it responded to the Treasury plan for the banks. “Market confidence in the sector has eroded to such a degree that it is not clear whether these measures by themselves will bring about a material improvement,” the IMF said. “As a result, full nationalisation of some banks remains a possibility in our view.”

Spain was relegated from AAA to AA+ on Monday, and Spain’s public debt is a much lower share of GDP.

Read moreUK cannot take Iceland’s soft option

Banks bailout: Bonds tumble as Government admits no cap on taxpayer risk

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Bank shares plunged and Government bonds tumbled after Gordon Brown announced plans to insure lenders for losses on bad loans which could amount to billions of pounds.

The Prime Minister announced a scheme to allow banks to exchange cash or shares for a Government guarantee on their “toxic” debts, transferring any losses they suffer from the banks to the taxpayer.

But the Government has conceded that it can’t estimate how much taxpayers’ money will be on the line in the latest bank assistance package.

UK bond prices fell sharply as the financial markets digested the prospect of further Government borrowing. Bank stocks also tumbled with shares of Royal Bank of Scotland losing more than half their value. Lloyds, Barclays and HSBC also fell.

Ministers say the new package, which comes only three months after another £500 billion bailout, is vital to restore bank lending and help companies get credit and stay in business.

Read moreBanks bailout: Bonds tumble as Government admits no cap on taxpayer risk

Brown gives the Bank of England unprecedented power to buy securities

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As I said before:
The Bank of England is destroying the pound and the government is taking care of the rest. If I would live in the U.K., then I would most probably flee from the coming meltdown. It seems difficult – to me – to hide from the coming collapse there. Please stock up food, water, clothes, gold, silver etc., especially if you can’t run from what is about to happen. Do not live in the cities. Don’t panic, prepare!

Brown Tightens Grip on Banks as Recession Worsens

Jan. 19 (Bloomberg) — Prime Minister Gordon Brown’s government tightened its grip on Britain’s financial system, guaranteeing toxic assets and giving the Bank of England unprecedented power to buy securities.

The Treasury authorized the central bank to buy 50 billion pounds ($73 billion) of assets and plans to raise its stake in Royal Bank of Scotland Group Plc to spur 6 billion pounds of lending. It’s also backing hundreds of billions of pounds of securities hurt by market turmoil.

Related articles:
– British banks are ‘technically insolvent’ (Independent)
– RBS shares dive 70% on mounting debt fears (Times Online)
– RBS Plummets Amid Concern Bank May Be Nationalized (Bloomberg)
– Royal Bank of Scotland Sees $41 Billion Loss as Government Increases Stake (Bloomberg)
– ANOTHER £100BN BAIL-OUT FOR ‘INSOLVENT’ BANKS (Daily Express)
– UK is in freefall, warns think-tank (The Observer)

“In return for access to any government support, there will have to be an increase in lending, and that will be legally binding,” Brown said at a press conference in London today. “I will not sit idly by and let people and businesses go to the wall.”

The measures extend the U.K. government’s October rescue plan, which included 50 billion pounds to recapitalize banks and a 250 billion-pound credit line for banks. Brown said he is “angry” institutions are rationing loans, pushing the economy deeper into its worst recession since World War II.

Read moreBrown gives the Bank of England unprecedented power to buy securities

UK is in freefall, warns think-tank

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Asking for more incompetent, outdated, taxpayer looting government spending.
The Bank of England is destroying the pound and the government is taking care of the rest.

Alistair Darling is bracing himself for official confirmation that Britain is in the grip of a deep recession this week, as the Ernst and Young Item Club warns that 2009 will see the sharpest peacetime contraction in the economy since 1931.

In its quarterly health check of UK plc, the think-tank, which uses the Treasury’s economic model, warned that GDP would slump by 2.7% this year – much worse than the 1% decline forecast by the chancellor just two months ago in his pre-budget report.

“Things are in freefall, and it’s very hard to know just how far they’ve got to fall,” said Peter Spencer, the report’s author. “Companies are planning for the worst in 2009, slashing investment plans and the workforce.” He predicted the economy would continue to contract throughout 2010, instead of bouncing back later this year, as the Treasury has predicted.

Related articles:
– British banks are ‘technically insolvent’ (Independent)
– ANOTHER £100BN BAIL-OUT FOR ‘INSOLVENT’ BANKS (Daily Express)

Spencer urged the chancellor to implement more radical measures immediately to rescue the embattled banking sector and unfreeze lending to firms and consumers. He warned that the “paralysis” that has been afflicting the financial sector for months is rapidly spreading right across the economy.

Official figures will reveal on Friday that the economy shrank for a second successive quarter in the final three months of the year – the usual definition of being in recession.

Read moreUK is in freefall, warns think-tank