The great interest rate rip off part 1

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BBC NEWS | Business | US stocks lead rebound in markets

 

US stock markets have rebounded strongly after suffering acute losses last week, which were felt in equity markets around the world. Wall Street closed higher after the worst week in four years caused by panic over the impact of higher interest rates on the economy.

Meanwhile, European shares were still jittery and ended broadly flat, with the London market closing down.

Many analysts predict that the markets will remain volatile in the near term.

"There obviously is a great deal of uncertainty in investors' minds right now and we do not expect that to be erased any time soon," said Bob Doll, vice chairman of Blackrock Merrill Lynch Investment Management.

 

Wow genius quote, "There's obviously a great deal of uncertainty in investors minds right now"!!!! You don't say I would never have guessed it's not like stocks and share have up and down like a yoyo or anything.

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TPG withdraws as finance market jitters cast doubt over Virgin Media auction - Times Online

 

The $23 billion (£11.3 billion) auction for Virgin Media suffered a setback last night after it emerged that TPG, the US private equity group, has withdrawn from the battle.

TPG, one of the world’s biggest buyout firms, is understood to have abandoned the auction in part because of concerns over Virgin Media’s business model.

The news of its retreat came as City sources said the turmoil in the financing market will probably throw the sale off track by at least a month, as banks shut down on financing and private equity firms are left scrabbling to secure debt.

The turmoil has given trade players an edge in the auction, as private equity rivals struggle to secure financing. Yesterday Liberty Global, Europe’s biggest cable operator, threw its name into the ring, saying it was exploring entering the auction. John Malone, the chairman of Liberty Global, raised the possibility of joining forces with a private equity player to bid. However the crunch in the credit markets has triggered jitters about the progress of the deal and the ability of any private equity player to raise the $15 billion debt that would be required.

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Big payouts will be but a minor irritation - Times Online

 

After pensions mis-selling and endowment mis-selling, unauthorised overdraft fees are shaping up as the next big compensation cost for the financial services industry. Scaling up HSBC’s refunds bill for the whole British banking industry suggests a higher-than-expected £1 billion may already have been paid out so far this year. That alone is four times the entire damages bill of the split capital investment trust scandal.

There will now be a moratorium for 18 months or so while the test case brought by the Office of Fair Trading wends its way through the courts. If the banks lose and their unauthorised overdraft fees are deemed illegal, there could be a great deal more bank pain to come.

Most of the claimants so far have been the serial offenders who persistently go overdrawn and have had most to gain by pursuing lenders for refunds. HSBC won’t give out numbers, but it is thought to have compensated about 150,000 customers an average of about £780. Since it has eight million UK current account customers and 10 per cent to 15 per cent of them spend into the red without permission at least once a year, the final reckoning could be much greater. In a commendable service to its customers, HSBC is prepared to send out free statements going back six years, making it even simpler to claim.

An adverse court ruling would not be too big a blow for the UK banks, which make £40 billion in profits each year, but it would change the way they price their services, possibly leading to fees for current accounts or higher borrowing rates.

 

The market has got used to higher profits so the chief execs must keep them high to validate there positions irrespective of whether the profits levels were a accurate reflection of what could justly be earned. The city continually wants higher profits, this to a large part has been fuelled by the lending growth. However that era appears to be coming to a end. It will be interesting to see how banks will maintain there profit level if lending drops off significantly.

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China has sixth go at cooling the economy - Telegraph

 

The Chinese central bank has tightened lending rules for the sixth time this year, as the government attempts to prevent the country's economy from overheating.

 

In a statement, the People's Bank of China said it would require lenders to decrease the pool of money available for borrowing by introducing a new ceiling for the level of deposits they are obliged to keep with the central bank. From mid-August, the Reserve Ratio Requirement threshold will be raised from 11.5pc to 12pc, it said.

Such measures have had little effect to date, with China's economy expanding almost 12pc in the last quarter, its fastest rate for 12 years.

There are concerns real estate development and factory building could spark inflationary pressures and result in a growing crop of heavily indebted individuals and small business-owners.

"We do not expect the RRR hike alone to have much impact on the real economy or financial markets," said analysts at Goldman Sachs.

The move by the central bank failed to dampen sentiment among traders in Shanghai Stock Exchange-listed companies, with the bourse's benchmark index closing at a record high yesterday. The Shanghai Composite Index closed up 2.2pc at 4440, well beyond the previous high.

It encapsulated a good day for markets across Asia following last week's turbulence in equities across Europe and the US. Of the major exchanges in Asia, only Taiwan posted a decline from Friday's close.

 

If at first you don't succeed try and try again. Central bankers using the exact science of economics when you do A, B will happen or maybe C, D, E, F, G, H etc.... Well we don't really know what will happen but we'll do it anyway. And remember it's only a influence and if it goes wrong "it was like that when I got here" and was completely beyond my control it was the oil price, rising food costs, it was the floods fault etc....

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Rate rises fail to slow homes market - Telegraph

 

The housing market slowdown has still not yet arrived, despite fixed-rate mortgages climbing to the highest level since the turn of the millennium, according to new Bank of England figures.

The Bank's own data shows that during June mortgage lending rose at the fastest rate in three months, despite evidence elsewhere that the market is starting to slow. It said UK banks and building societies lent £31.9bn during the month.

Economists said the figures suggested that the five increases in borrowing costs since last year had not yet cooled the market. The Bank's Monetary Policy Committee is due to start its two-day rate-setting meeting tomorrow, but is expected to leave borrowing costs on hold at 5.75pc.

 

If at first you fail, try and try again. Another Central Bank not having the effect they hope for after increasing interest rates by 21%, perhaps not enough poor people have lost there homes yet to cause a recession to bring down inflation.

 

It's a good job the BoE isn't using guessenomics to run the economy. These experts are using finely crafted mathematical algorithms which expertly predict what will happen.

 

Good on paper, sh*t on grass.

 

Don't ever question the wisdom of central bankers as they know what they are doing and we don't need any new ideas as it all works perfectly in a fashion anyway, if you accept it takes over a year for what we've done to have any effect by wish time it might have had too much of an effect as circumstances may have changed and it's all become a bit of a screw up. Luckily it won't be our fault.

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Are these the world's costliest roadworks? The M6 widening - at £1,000 an inch | Special reports | Guardian Unlimited

 

In the pantheon of Britain's great engineering feats, it remains relatively modest; the widening of the M6 motorway along a 51-mile stretch between Birmingham and Manchester. But in terms of sheer cost, the UK may never have seen its like before.Every inch of the proposed new road is estimated to cost £897. And when construction inflation has been built in - currently 9% a year - the likely figure will top £1,000. Either will make it the most expensive piece of tarmac ever laid, with the entire project, according to the Highways Agency's own figures, expected to cost £2.9bn and take three years.

Yesterday road builders tried to explain how widening a road by just one lane could cost twice as much money as Britain gives to Africa in a year.

"It is a very difficult way to build a road," said Roger Bailey, of engineering consultancy Faber Maunsell. "In a greenfield site you are in control of your construction planning. But on a live road you have to work round more traffic." The M6 widening, he said, will involve fitting the work around traffic, night shifts and widening dozens of bridges and culverts.

The Royal Institution of Chartered Surveyors said major project construction costs are now being driven up even further by the Olympics and other major schemes in Europe. "There's a lot of road building going on. The price of construction is going up because there is a lot of work around. Road building is an international market. In the last 10 years costs have gone up 7-9% a year," said a spokesman.

 

 

Cost's going up by 7-9% a year, well above the 2% inflation target. So the taxpayer foots the bill and than gets hit by higher interest rates if we dare ask for more wages to pay for all of this. So that would mean in real terms our incomes are going down!!!!

 

Luckily a BoE rate rise will curb inflation in the construction sector.....

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Mis-selling fears over new pensions | Pensions | Guardian Unlimited Money

 

After years of policy discussion and consultation, women have emerged as the principal winners from the government's reform of the pensions system. Around three-quarters of women retiring in 2010 will be entitled to full basic state pensions - compared with just over a third now. The new rules will mean more than 90% of women and men retiring in 2025 will be entitled to a full basic state pension.But raising the basic state pension was the minimum the government needed to head off a confrontation with its backbenchers who feared the central thrust of the pensions bill - to create a new "self service" pension scheme - would leave millions of low income workers in poverty when they retired.

The bill became law last week and those worries persist despite the boost for women's state pensions and the re-linking of the basic pension to earnings from 2012. Labour backbenchers such as Frank Field, and the Liberal Democrats and Tories, along with many in the pensions industry, fear that the ambitious new national pension saving scheme of personal accounts could be another mis-selling disaster in the making.

The government sought to allay those fears with the appointment of Paul Myners to head the delivery authority for the new scheme, which aims to have between 6 and 10 million members and would be one of the biggest schemes ever created.

 

Don't worry it's a govt scheme, they always run to schedule and cost..... If people are affected it will be the poor once more who end up the worst off.

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Panama Has No Central Bank - Mises Institute

 

In this modern, post-–Bretton Woods world of "monetary order" and coordinated central-bank inflation, many who are otherwise sympathetic to the arguments against central banks believe that the elimination of central banking is an unattainable, utopian dream.

For a real-world example of how a system of market-chosen monetary policy would work in the absence of a central bank, one need not look to the past; the example exists in present-day Central America, in the Republic of Panama, a country that has lived without a central bank since its independence, with a very successful and stable macroeconomic environment.

The absence of a central bank in Panama has created a completely market-driven money supply. Panama's market has also chosen the US dollar as its de facto currency. The country must buy or obtain their dollars by producing or exporting real goods or services; it cannot create money out of thin air. In this way, at least, the system is similar to the old gold standard. Annual inflation in the past 20 years has averaged 1% and there have been years with price deflation, as well: 1986, 1989, and 2003.

Panamanian inflation is usually between 1 and 3 points lower than US inflation; it is caused mostly by the Federal Reserve's effect on world prices. This market-driven system has created an extremely stable macroeconomic environment. Panama is the only country in Latin America that has not experienced a financial collapse or a currency crisis since its independence.

 

Not a central bank in sight and ultra low inflation.........

 

However Panama did have General Noriega Manuel Noriega - Wikipedia, the free encyclopedia for a period.

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Central Banks Print Money Whilst Money Market Interest Rates Fall :: The Market Oracle :: Financial Markets Forecasting & Analysis Free Website

 

Setting up the trip-wire

Gamblers shorting the dollar and bonds beware. Rumors about the imminent demise of the dollar and the bond market are grossly exaggerated. Bear in mind not only that the casino owner rigs your odds. He is also rigging the value of chips in which payoffs are made, thereby confusing the issue further.

 

The teetering of the dollar at the 80 mark, according to some the most important chart point ever in the history of charting, smells like a bear-trap. A lot of analyst predict that if the dollar violates that support, then it is bound to go into a free-fall. Nobody is seriously considering the possibility that this chart point, like everything else about the dollar, is rigged. It is the trip-wire set to trip up the bears.

The demise of the US long-bond market has been talked about for years. Analysts are so busy in writing the post mortem that they have no time to look at the charts. Yet the charts clearly show that the price of the 30-year US Treasurys is in an upward channel, where it has been for past 25 years. This in spite of the dollar index being in a downward channel, where it has been for the past 35 years. How is it that nobody sees a contradiction here that cries out for explanation? That nobody sees the hand of the master-rigger setting up the trip-wire?

Ticket to riskless profits

Here is a question for the discriminating observer. How is it that interest-rate derivatives do not obey the Law of Supply and Demand? The more there are of them, the more they are in demand. Half-a-quadrillion (500 trillion) dollars' worth are out there at last count (in comparison the US GNP is a paltry 13 trillion), and it is increasing at the rate of 40 percent per annum. At that rate volume doubles about every other year.

Everything in human experience will tell you that such a thing is not possible. The more of anything exists, the less it will be appreciated. If the quantity of a security increases exponentially, then its value is bound to decrease exponentially for the stronger reason. Yet here we are, derivatives doubling in quantity every other year and, far from losing value, they are ever more in demand. Why?

Because derivatives are tickets to risk-free profits. As such they are the straw on which the world's banking system swims or sinks. Swims, as long as interest rates are falling; sinks, as soon as they start rising in earnest.

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http://www.bis.org/review/r070613f.pdf

 

W A Wijewardena: Why inflation tax is an evil?

Article by Mr W A Wijewardena, Deputy Governor of the Central Bank of Sri Lanka, published in Sunday Times on 10 June 2007.

 

A popular folk story talks of a villager making a chance meeting of a demon in the forest and using his craftiness to get the demon to work for him. Understandably, the demon being an untiring person proves to be a marvelous worker. His contribution to the villager far exceeds that of even a thousand workers. According to the story, everything is well and good as long as the villager is able to keep the demon under his control. But, on the day the villager loses his grip over the demon, it would set upon the villager and devour him. So, though the villager would have a jolly-good life in the short run, he runs the great risk of losing everything, including his life, in the long run.

Governments’ use of inflation as a tax to force-mobilize resources for funding government projects has been equated to the fate of the villager in that folk story. In the short run, a government could forget about all its fiscal problems and enjoy the temporary solace provided by it. But in the long run, when inflation becomes uncontrollable, it will have to sacrifice all its temporary gains. When an initially mild inflation degenerates into an uncontrollable hyper-inflation later, it has been termed as a mass killer. It would destroy the financial infrastructure and, through it, the entire social and economic infrastructure. Rebuilding a nation after this massive destruction would be a very painful and tedious challenge for everyone.

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Property market in peril with houses 'overvalued by 20 per cent' | the Daily Mail

 

Brian Coulton, head of global economics & Europe at Fitch, said: "Looking at every measure available, UK house prices are significantly overvalued."

People have coped with the growing chasm between income and property prices by taking on record mortgages.

But rising interest rates have squeezed household budgets.

 

Personal debt - including mortgages - is running at a record £1.3trillion, with interest rate repayments this year expected to top £100billion for the first time.

 

Mr Coulton said: "For most people interest rates have fluctuated around a comfort zone since 2000. But we now have a new situation of record household debt coupled with consistent increases in interest rates.

 

'If we start seeing base rates above 6 per cent that could have a pronounced effect. You are then talking about rising debt default, repossessions and bankruptcies.

 

But that will be fine, it will be induced by the central bank to purge the economy of it's excesses, what's a few poor people losing there homes any way.

 

The BoE know what they are doing. They wouldn't have allowed people to borrowed stupid amounts of money in the first place.... so we'll all be fine!

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http://www.dailymail.co.uk/pages/dmstandard/frame.html?in_bottom=http://www.thisismoney.co.uk/news

 

Lloyds TSB, Britain's fifth-largest bank, today sold its closed life insurance business Abbey Life for almost £1bn, announced the fastest rise in first-half profits for any of the High Street banks, and raised its dividend for the first time in five years.

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Profits in retail banking soared 13% while cost increases were just 6% and that would have been just 2% if the costs of overdraft settlements were excluded.

 

Only increased profits by 13%, very poor!!!!

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FT.com / In depth - Credit insurance costs soar to record

 

The cost of insurance against credit defaults hit record levels on both sides of the Atlantic on Monday amid concerns that some investors were being forced to sell assets to cover losses on subprime mortgages.

 

Investors rushed to buy contracts that would protect them against corporate credit defaults after it emerged that more European insitutions had suffered losses following the crisis in the US subprime mortgage market. IKB, a German lender specialising in providing credit to smaller companies, and Commerzbank, the country’s second-biggest bank, both warned they would be hit by losses from risky US home loans to borrowers with poor credit histories.

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FT.com / Markets / Asia-Pacific - Asian shares rise as credit fears ease

 

Most Asian stocks rose on Tuesday as credit fears eased, with the focus on earnings after gains on Wall Street, setting the scene for a positive start for European markets.

Japan’s Nikkei 225 index bucked the trend and dipped 0.2 per cent on some weak corporate results and political uncertainty after an election defeat for the government at the weekend.

”Investors are finding it difficult to make moves because of earnings. More than 200 companies are set to report results on Tuesday,” said Tsuyoshi Segawa, an equity strategist at Shinko Securities

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But investors remained cautious that ongoing U.S. subprime mortgage market woes could still spread to wider credit markets after U.S. shares had just suffered their worst week in nearly five years.

”It looks like markets will continue to rebound, though given that there’s still a lot of uncertainty, it may be hard to expect strong gains,” said Kim Hak-kyun, an analyst at Korea Investment and Securities.

 

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FT.com / Home UK / UK - CBI chief fears inequality backlash

 

Unease about the widening inequality between top and bottom earners in western societies could fuel a political backlash against free market policies, the leader of the biggest business organisation has warned.

Richard Lambert, CBI director-general, said that globalisation, technological advances and the “new capitalism” of private equity and hedge funds had created a general sense of insecurity and unfairness that companies had to address.

Speaking in London almost 12 months after taking up the job, the former editor of the Financial Times said the “recent firestorm” about private equity in the UK was a symptom of those pressures.

The industry should do more to explain its benefits to the British economy, and to give more information about particular deals to employees, creditors and suppliers.

While he rejected tax increases to redistribute income, he said the government should look again at the way private equity investors enjoyed tax breaks originally designed to help entrepreneurs. These allow profits from private equity deals to be taxed as capital gains rather than income, with tax rates of 10 per cent after two years.

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FT.com / World - High street sales grow despite floods

 

High street sales grew steadily in the first half of July, despite higher interest rates and severe flooding in parts of the country, but the growth was not as strong as retailers had expected, according to a CBI survey published on Tuesday.

The employers’ organisation found that 42 per cent of retailers surveyed said sales volumes were higher than a year ago and 24 per cent reported a decline. The balance of 18 per cent, was a touch up on June’s 17 per cent and also up on market expectations of 15 per cent.

However, retailers said sales volumes were below average for the time of year, despite summer discounts. Expectations for sales over the next month were at the weakest level since January.

According to the survey, 13 per cent of respondents said sales for the time of year were good, compared to 30 per cent who thought they were poor. The balance of minus 17 per cent was the weakest since April 2006.

The CBI said there were signs that the Bank’s three interest rate rises this year were beginning to bite as sales of big-ticket items, often bought on credit, had been depressed relative to three months ago.

 

Can anyone seriously make any judgement on anything. Everything is contradictory yet somehow people making judgements which cost the consumer several thousand pounds. It literally is pure guess work.

 

Central Bankers don't know what they are doing, they just want to give the appearance that they do. It is playing roulette with the economy, unfortunately there isn't just one zero on the board.

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BBC NEWS | Business | UK shares enjoy markets rebound

 

European shares have rebounded strongly after the heavy losses last week, which were mirrored around the world. By 1200 BST on Tuesday, London's FTSE 100 index was 125 points or 2% ahead, helped by surging banking stocks.

On Monday, Wall Street closed higher after its worst week in four years, caused by panic over the impact of higher interest rates on the economy.

Confidence in markets has been hit by fears that a credit squeeze will end an era of cheap funding for takeovers.

 

It's a boom again until someone farts.

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BBC NEWS | Business | D-day for home information packs

 

Home Information Packs (Hips), paid for by house sellers, are to be introduced into England and Wales on 1 August. The controversial packs contain title deeds, local searches and an energy performance certificate and typically cost £400-£700 to put together.

Initially, only properties with four or more bedrooms will have to have a Hip but the government plans to extend the scheme to all properties soon.

Critics argue Hips make house-selling more expensive and bureaucratic.

Scotland is set to get its own version of Hips in 2008.

 

Another stealth tax.

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BBC NEWS | Business | India moves to control inflation

 

India's central bank has sought to cool inflation by raising the proportion of funds that the country's lenders must keep in reserve rather than lend out. Aiming to reduce the amount of rupees in circulation, the Reserve Bank of India has raised the cash reserve ratio to 7% from 6.5%.

The move comes a day after China's central bank did the same, as both seek to control rapid economic growth.

Separately, a study criticised general living standards in the two nations.

The report by the Asian Development Bank said that despite China and India's stellar economic growth, the living standards of most of their citizens were still lagging behind other countries in the Asian Pacific and South Asia regions.

It found that while China and India together account for 64% of economic output of the 23 economies surveyed, they were ranked 15th and 17th respectively according to consumer spending per capita.

The report - which did not include Japan - found that Hong Kong had the highest standard of living, followed by Taiwan and Singapore.

 

I wonder what would happen if people actually had to pay back what they borrowed??? Naive idea I know....

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BBC NEWS | Business | Why oil will hit $100 a barrel

 

Last Updated: Wednesday, 15 February 2006, 00:33 GMT

 

The era of easy oil is over, but growing demand from countries like India and China is forcing oil firms to enter unusual territory.

Mike Watts is a man of deep convictions. For years he was convinced that there was oil in large quantities deep beneath the sand of the Rajasthan deserts in Western India.

Few other people in the industry agreed with him.

Mike's company - Cairn Energy - was in partnership with the Anglo-Dutch giant Shell to explore the area.

Eventually, after some discouraging early forays, Cairn paid Shell £7m to buy Shell out of the project.

Then, just over two years ago, it struck oil in a big way.

The find was big enough to propel Cairn from a small exploration business to a company with a value of nearly £3bn.

 

Perhaps producing more energy efficient products may help, and just use the same amount of oil??

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FT.com / Markets / US - Wall Street set for bullish opening

 

Wall Street was set for a higher start on Tuesday, after a key measure of inflation arrived in line with expectations and credit markets showed further signs of stabilising.

Less than an hour before the opening bell, S&P 500 futures were up 9.3 points at 1,490.20 and were trading above fair value of 1,479.24.

On Monday, the S&P rose 1 per cent to close at 1,473.91, bouncing from an earlier low of 1,454.32. Volatility, as measured by the Chicago Board Options Exchange’s Vix index, fell 13.7 per cent to a reading of 20.87.

Nasdaq futures were up 9.8 points at 2,003, above a fair value reading of 1,987.16.

Futures for the Dow Jones Industrial Average were up 84 points at 13,495.

The yield on the 10-year bond was up 2 basis points at 4.82 per cent, and down from an earlier high of 4.86 per cent. US crude oil prices were higher and trading at $77.65 a barrel.

The bearish mood in credit continued to abate. The cost of insuring a portfolio of investment grade credits in the CDX index was at 67.5 basis points early on Tuesday. The CDX index rose towards 100bps on Monday, before easing back to 69.75bp late in the day. The index has jumped from 35bp since mid June as fears over a $300bn backlog of pending debt deals sparked a reversal in risk appetite for corporate debt.

 

Stable until interest rates are pushed higher.

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Investors should buy shares again, UBS says - Telegraph

 

UBS has raised its head above the parapet to call the bottom of the current stock market correction, advising investors to put their money in large caps with cheap valuations and low debt.

Last Thursday's 3pc fall in European and US equity markets sparked fears of a wider pullback amid concerns of a global credit crunch that could hit the appetite for M&A activity and leveraged buyouts.

But Nick Nelson, London-based strategist at UBS, argued today that "the majority of our indicators suggest the that we are close to the trough of the correction".

He pointed out that previous bull market corrections have seen an average 8.4pc gap between the peak and the trough.

With European shares having fallen by 6.7pc from recent highs over the last nine trading days and stocks looking cheaply valued, UBS thinks it could be time to buy shares again.

Mr Nelson explained: "The market is now trading on a sub-12x price/earnings multiple for 2008, towards the bottom of its four year range and the pressure on earnings is on the upside."

Despite fears of a global credit crunch, he said that corporate balance sheets actually remained underleveraged, as shown by the ongoing vogue for buybacks.

The investment bank also thinks it unlikely that widening credit spreads will mean an end to leveraged buyouts or M&A activity in general.

 

It appears that everything is booming again, forget that interest rates may go up again and this whole mess may start again!

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Rate rises fail to slow homes market - Telegraph

 

The housing market slowdown has still not yet arrived, despite fixed-rate mortgages climbing to the highest level since the turn of the millennium, according to new Bank of England figures.

The Bank's own data shows that during June mortgage lending rose at the fastest rate in three months, despite evidence elsewhere that the market is starting to slow. It said UK banks and building societies lent £31.9bn during the month.

Economists said the figures suggested that the five increases in borrowing costs since last year had not yet cooled the market. The Bank's Monetary Policy Committee is due to start its two-day rate-setting meeting tomorrow, but is expected to leave borrowing costs on hold at 5.75pc.

Mortgage providers have dramatically ratcheted up mortgage fees over the past two years, prompting fears that 1.5m customers who switched to a two-year deal in 2005 will soon be hit by large increases in costs as they step up to a higher rate.

The Bank's own figures showed yesterday that the rates on a two-year 75pc mortgage had increased to 5.99pc in June - the highest rate in seven years. This increase does not take into account the most recent MPC decision to raise base rates to 5.75pc in July.

Recent figures from Halifax and Nationwide have shown house prices starting to moderate in recent months, but the slowdown has been less marked than that in 2004, when prices rises almost ground to a halt.

 

Maybe buy and sell before the end of the year when things could get very interesting.

 

It's boom boom boom for the minute.....

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Banks reporting season: the full results - Telegraph

 

First half pre-tax profits: £1.99bn, +12pc | Total bad debt provision: £837m, +5pc

 

No repossession figures again. But only profits of just under £2bn.

 

The banks policy of lend, lend, lend is doing wonders for all of their profits figures. So far not one bank has posted a decline in profits.

 

Yet we're all paying for banking excesses with higher interest rates, the banks are laughing all with way to the bank.

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Credit crunch 'threatens growth' - Telegraph

 

Market turmoil in London and Wall Street threatens to slice almost half a percentage point off Britain's economic growth and leave a major dent in the housing market, the City has been warned.

It came as the cost of corporate borrowing on credit markets scaled new peaks and it became clearer still that the evaporation of cheap money will be a longer and more drawn out process than traders had hoped. In a volatile day of trading, the closely watched iTraxx Cross-over index, a key measure of sentiment in European debt markets, breached the 500 basis point level for the first time on record.

Britain's reliance on the financial sector for around half its recent economic growth means the rising cost for banks of the debt squeeze and equity slump will be felt far beyond the Square Mile, according to a report published today from Oxford Economics.

The independent consultancy warned that Britain is even more vulnerable to a downturn in financial services output than the US, since Britain's sector has been growing even faster.

"In the recent past, financial sector [GDP] growth has been quite sensitive to asset price movements - both stock prices and corporate bond spreads - so a slowdown looks quite possible should financial market conditions weaken. A halving of growth in this sector - which would only take it back to its long-term average - would directly cut 0.4pc off GDP growth."

Such an eventuality could mean Britain's GDP growing by a sluggish 2.2pc this year, compared with a Treasury forecast of 3pc, with employment and asset prices among the biggest economic victims.

 

So debt has fuelled growth!!! Now we all get to pay for the growth with higher interest rates, even though in reality nothing got produced apart from debt? But money doesn't grow on trees???