Mortgage approvals and lending slumped in June, Bank of England data showed, reflecting broader economic weakness due to extra public holidays and wet weather.
Mortgage approvals and lending slumped in June, Bank of England data showed, reflecting broader economic weakness due to extra public holidays and wet weather.
The Bank said mortgage approvals fell to 44,192 last month, down from 50,544 in May, the lowest reading since December 2010 and well below analysts’ forecasts of a reading of 49,000. Net mortgage lending also slipped, shrinking by £355m, which was the sharpest drop since December 2010.
That mirrors a general weakness in the economy, with figures last week showing that economic output in the second quarter of 2010 suffered its biggest fall since early 2009, contracting by 0.7pc. One-off effects compounded the misery faced by an economy already mired in recession and hurt by the eurozone debt crisis and public spending cuts.
While some have talked of the ‘credit-easing’ possibility a la Bank of England (which Goldman notes is unlikely due to low costs of funding for banks already, significant current backing for mortgage lending, and bank aversion to holding hands with the government again), there remains a plethora of options available for the Fed. From ZIRP extensions, lower IOER, direct monetization of fiscal policy needs, all the way to explicit USD devaluation (relative to Gold); BofAML lays out the choices, impacts, and probabilities in this handy pocket-size cheat-sheet that every FOMC member will be carrying with them next week.
With the Olympics about to kick off in all its glorious celebration, the sad reality of UK’s GDP shrinking 0.7% as the empire drops further into a double-dip. As Bloomberg Brief notes, this came along with a 5.2% plunge in construction output as the IMF estimates austerity has cut 2.5% off GDP. What is most concerning is that GDP has fallen for five of the last seven quarters and is now 4.5% below pre-crisis levels. The level of disbelief is palpable though since the BoE sees only a 10% chance of this recession lasting into 2013 and while it estimates that it will take until 2014 before the UK gets back to the 2008 level (magically), we note that that is already longer than it took during The Great Depression.
The guy who openly admitted he was getting notification from the BOE to manipulate Libor, and was advising his traders appropriately, Barclays’ COO Jerry del Missier, and who quit the same day as his boss Bob Diamond, has finally had his pay package revealed. The payoff to get him out and shut him up? £8,750,000.
The Barclays executive who presided over the falsification of the bank’s Libor submissions is to receive a cash pay-off worth almost £9m in a move that will spark a political outcry.
I can exclusively reveal that Jerry del Missier, who resigned as Barclays’ chief operating officer earlier this month, negotiated a severance deal worth at least £8.75m in the days before he quit, according to people close to the bank.
I’m told that the £8.75m figure represents just over half of a £17m potential long-term incentive award made to Mr del Missier some years ago, and which matured in March. City sources say he was asked by senior colleagues to defer receipt of the award in the spring because Barclays executives intimated that it was an inappropriate climate for such a lavish bonus to be paid out.
If the UK was desperately hoping for a “terrible” economic print, it got it this morning after preliminary Q2 GDP printed 0.7% on expectations of a -0.2% decline, following a -0.3% drop in Q1, cementing the country’s double dip collapse. Reuters explains: “The Office for National Statistics said Britain’s gross domestic product fell 0.7 percent in the second quarter, the sharpest fall since early 2009 and a bigger drop than any of the economists surveyed in a Reuters poll last week had expected. The figures confirmed that Britain is mired in its second recession since the financial crisis, with the economy shrinking for a third consecutive quarter. It will add pressure on Osborne to get the economy growing again after a crisis that has left many Britons poorer as rising prices and higher taxes ate up meager wage increases. Sterling hit its lowest in nearly two weeks against the dollar after the data, and government bond prices rallied on speculation that the Bank of England may have to provide more economic stimulus than expected. Earlier this month the BoE has announced another 50 billion pound program of gilt purchases with newly created money to soften a grim economic outlook, but Wednesday’s data is likely to add to market speculation that it may cut interest rates later this year. “This is terrible data. Frankly there’s nothing good that comes out of these numbers at all,” said Peter Dixon, an economist at Commerzbank. “The economy looks to be badly holed below the water line at this stage. It’s a far worse period of activity than we’d expected.”" Amusingly, according to Goldman “It is difficult to reconcile the weakness of today’s official GDP data with any other indicator of economic or labour market activity.” We knew the peripherals were doing all they can to sabotage their economies and be eligible for more aid and bailouts. But the UK?
On occasion of the publication of his new gold report (readhere), Ronald Stoeferle talked with financial journalist Lars Schall about fundamental gold topics such as: “financial repression”; market interventions; the oil-gold ratio; the renaissance of gold in finance; “Exeter’s Pyramid”; and what the true “value” of gold could actually look like. Via Matterhorn Asset Management.
By Lars Schall
Ronald Stoeferle, who is a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe), was born October 27, 1980 in Vienna, Austria. During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign in the USA, he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income / Credit Investments. After graduating, Stoeferle joined Vienna based Erste Group Bank (http://www.erstegroup.com), covering International Equities, especially Asia. In 2006 he began writing reports on gold. His five benchmark reports on gold such as “A Shiny Outlook” and “In Gold We Trust” drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Since 2009 he also writes reports on crude oil. The latest gold report by Stoeferle was published today.
Lars Schall: What is “financial repression“ according to Ronald Stoeferle?
Ronald Stoeferle: Financial repression as a perfidious form of redistribution. It always means a combination of incentives and restrictions for banks and insurance companies, which cause the investment universe to be substantially reduced for investors. This means that capital is channelled away from the asset classes that it would flow into in a more liberal environment.
I sincerely believe that financial repression will continue to crop up in many shapes and sizes over the coming years. However, the long-term costs of the lack in efforts made towards consolidating national finances are substantial. While low bond yields in the short run suggest that the saving measures are on course, one has to bear in mind that this has mainly been achieved by market interventions.
Therefore, we regard the gradual transfer of assets as a disastrous strategy in the long run.
What happens is that none of the previous problems of misallocation are resolved, but instead redistribution takes place (at the beginning mostly invisibly) and problems are dragged out, having to be addressed later. As the dependence on these measures rises, so does the collateral damage to be expected later, and the seeds for an even bigger crisis have been sown.
L.S.: What does all that mean for gold?
R.S.: Negative real interest rates are an important cornerstone of financial repression. And negative real interest rates represent the perfect environment for the gold price. During the 20 years of the gold bear market in the 1980s and 1990s, the average real interest rate level was around 4%. Real interest rates were negative in only 5.9% of all months. The situation in the 1970s, however, was completely different: real interest rates were negative in 54% of the months. Since 2000 real interest rates have been negative for 51% of the time, which constitutes an optimal environment for gold. Due to the overindebtness (that I am also discussing in my report), I believe that this trend will continue.
With a few hours until BoE’s Paul Tucker takes the stand, the venerable institution has finally acquiesced to the Freedom of Information Act request from British MP John Mann and released all copies of emails and transcripts of telephone conversations between Tucker and Bob Diamond between 10/1/08 and 11/30/08. The emails make for some fascinating reading when one considers the sources of the conversation. The thrust of the discussion is Tucker’s concern at UK Libor rates being considerably higher than US – especially as US rates were dropping; Tucker’s ‘shock’ at the cost of funding for Barclays’ government-guaranteed debt; and finally the explanation/admission for why the BoE’s liquidity hosepipe was not fixing the solvency problem in British banks - a lack of eligible collateral. Smoking gun maybe; nail in the coffin of independent Central Banks for sure; hangings in the streets – we are not so sure.
Welcome to Capital Account. US manufacturing activity contracts for the first time in 3 years…the weak ISM data came as a shock to economists reportedly. Then orders placed with U.S. factories rose in May for the first time in three months, according to other data. We’ll talk about where figures show global confidence, crises, and slowdowns are headed with famed investor Jim Rogers.
Also…Blackrock’s Vice Chairman Byron Wien says he spoke to the smartest man in Europe, and what he had to say terrified him. He said, “basically, that massive amounts of debt will bring the decline of Western Civilization, but that in the meantime, before that happens, policy makers would pull every trick they could in order to stave off a catastrophic event.”
Why do you have to be the un-named smartest man as christened by a Blackstone bigwig for that to hold weight? Just watch a lot of smart men and women who break this down openly any given day on Capital Account. Today, commodities guru Jim Rogers will do the honors.
And it’s one, two, three strikes you’re out – Barclays top three executives resign in the wake of the LIBOR manipulation scandal. Chairman. CEO. COO. Why haven’t we seen this kind of fallout at big banks in the US from any settlements and scandals? We’ll muse over it as what do you know – JP Morgan finds itself under investigation for manipulation of electricity markets.
As was first reported two days ago, and confirmed today, Barclays’ natural response to allegations it single-handedly manipulated the interest rate complex for up to $500 trillion notional in IR-sensitive swaps and other products (it didn’t – everyone else did it too), was to drag everyone into the scandal, starting off with the Bank of England (and about to drag Whitehall into it too), and specifically the man who was next in line for governorship of the English Central Bank: Paul Tucker. What does this mean? Well, as we suggested also two days ago, now that the natural succession path at the BOE has been terminally derailed, it brings up those two other gentlemen already brought up previously as potential future heads of the BOE, both of whom just happened to work, or still do, at… Goldman Sachs: Canada’s Mark Carney or Goldman’s Jim O’Neil. Granted both have denied press speculation they will replace Mervyn King, but it’s not like it would be the first time a banker lied to anyone now, would it (and makes one wonder if this whole affair was not merely orchestrated by the Squid from the get go… but no, that would be a ‘conspiracy theory’.) Yet the fact that Goldman is hell bent on global domination by stretching its tentacles into every monetary policy administration is no secret: it is only a matter of time before GS also runs the English CTRL-P macros. More interesting is that in addition to the BOE, Barclays today also dragged America’s very own Federal Reserve into the fray.
The BBC this morning has published details from a 2008 meeting with the Bank of England’s Paul Tucker with Barclays Bob Diamond in which the BOE allegedly advised Barclays’ submitters to provide data to the British Banker’s Association LIBOR setting committee’s that the bank was paying lower borrowing rates than was actually the case.
Tyler Durden is already all over the report, pointing out that JP Morgan and Bank of America at the time were reporting borrowing rates far below even nationalized competitors (which intuitively should have had lower borrowing costs than still private banks such as The Morgue).
With market rumors that a US bank will be dragged into the LIBOR scandal, Zerohedge predicts IF the SEC actually decides to hand down a wrist slap to a US bank over LIBOR manipulation (more like outright fraud), it will be either Bank of America or JP Morgan as the most egregious offenders.
We already know that Barclays has been exposed to be manipulating Libor on an epic scale. And even with all this, it still could manage to only be in the third best quartile? If they were manipulating their Libor submissions they sure sucked at it. Which of course is why even the BOE got involved.
However, it begs the question: what about the Libor submissions of the three then “healthiest” banks: Bank of America, JP Morgan and Deutsche Bank. If Barclays was manipulating and gaming Lie-bor, only to fall even below the median submission, does this mean that these three banks were all furiously coming up with totally meaningless numbers? And how long until the SEC comes up with a US scapegoat bank to mimic the FSA’s bold action on Barclays?
If, and this is a big if, the SEC does for once do something proactive in its illustrious career of corrupt, incompetent complacency and co-option, not to mention pornoholic hypnosis, the next and final question becomes: will it be Bank of America, or JP Morgan… and just how will the market react to the knowledge that two of the world’s biggest non-nationalized banks participated in what as many have been warning for years, the biggest market manipulation fraud in history.
While some have talked of the ‘credit-easing’ possibility a la Bank of England (which Goldman notes is unlikely due to low costs of funding for banks already, significant current backing for mortgage lending, and bank aversion to holding hands with the government again), there remains a plethora of options available for the Fed. From ZIRP extensions, lower IOER, direct monetization of fiscal policy needs, all the way to explicit USD devaluation (relative to Gold); BofAML lays out the choices, impacts, and probabilities in this handy pocket-size cheat-sheet that every FOMC member will be carrying with them next week.
