Hein-Verbruggen said:
I am puzzled. Do you have any idea who drives the order (buy/sell) trade tickets at all major bank-brokerages and Mother Merrill, JP Morgan, HSBC, Bear Stearn, Tailwind Capital, Goldman Sachs and then through the settlement skim exchanges NYSE, NASD etc....?
None of which has any bearing on interest rate policy as set by the various central banks, Hein.
Goldman Sachs, Bear Stearn : they've no input to the setting of interest rates
by the ECB, Fed, BoE.
Hein-Verbruggen said:
Interest rate policies DID NOT INVENT cheating/gaming/off-shore leverage.
I never suggested that interest rate policies did invent cheating etc.
I suggested that low interest rates were the catalyst - the first step in the supply chain if you will - promoting reckless lending to people who were never in a position to repay those loans.
And the security for those loans was offset by using instruments such as CDO's being transacted in the financial markets.
CDO's nominal value is predicated upon the loan being repaid.
If interest rates were had been kept at a realistic level - cheap credit/dodgy loans would not have been widespread and loans/CDO's would never have been issued.
Hein-Verbruggen said:
Your message seems to be cut from 30 year old methods/policies. That Big Banks control the world. They do so today, only via their cozy relationships with their hedge fund partners. It is a now much less than 100% control.
Presenty we have a huge financial crisis. The Big Banks lent money to the hedge funds--many of whom are now having to unwind CDOs & Treasuries to feed the redemption window calls. The big banks have a strained relationship with their evil creations. All of this with a blood-for-oil petro-based economy.
It was working so very well until the CDO underwriting problem reared up.
That's why any solution will involve off-shore accounts, secrecy, secret hedge fund agreements and very little to no oversight.
Yes, the hedge funds do have a problem.
And yes, the banking system has a problem because banks are not prepared to loan money to other banks - because visibility as to the extent of who's holding what worthless paper is opaque to say the least.
But let's be clear : interest rates policy in Euroland and Britain is set in the context of inflation these days.
At the time of writing, Europe and britain have set their interest rate policy on the basis that the respective economies are performing well and that the only real threat to these economies is inflation.
You appear to have a fundamental misunderstanding, hein.
If what is going on in the financial markets was of concern either in Euroland or britain - the BoE wouldn't have increased the inter-bank rate for liquidity
given to banks who are struggling, above the general interest rate.
Mervyn King would have dropped the overall interest rate.
The ECB would have dropped it's rate as well.
Neither institution did and all indications show that the recent round of interest rate policy (increases/static) will continue.
The US on the other hand has a different set of problems : to sustain it's economic performance requires the Fed to drop rates to hold off what many consider to be a real threat of recesssion.
That's why the Fed dropped it's rate a few days ago.