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BoE had a superstar: https://en.wikipedia.org/wiki/Mark_Carney Not sure what happened if he got ousted or what but that was a huge mistake on their part. They seem to be realizing their mistake now.
I asked this in a different post but did not get any answer, so asking it here hoping someone can help me understand this. Can someone more financially literate than me explain how BoE buying government bonds is going to restore financial stability? Will it slow down the falling pound? Will it reduce inflation? What mechanisms are at work here?
This is basically QE, the Bank of England is printing money to buy the long duration bonds since no one else will buy them due to expectations of rate increases. Check out 30 years US bond TLT, https://finance.yahoo.com/quote/TLT?p=TLT&.tsrc=fin-srch which have gone from 150 to 100 in one year.
I asked this in a different post but did not get any answer, so asking it here hoping someone can help me understand this. Can someone more financially literate than me explain how BoE buying government bonds is going to restore financial stability? Will it slow down the falling pound? Will it reduce inflation? What mechanisms are at work here?
I asked this in a different post but did not get any answer, so asking it here hoping someone can help me understand this. Can someone more financially literate than me explain how BoE buying government bonds is going to restore financial stability? Will it slow down the falling pound? Will it reduce inflation? What mechanisms are at work here?
> Will it reduce inflation? No. Apparently the BoE is worried about other things right now, rather than inflation. Which sounds pretty bad, because it seemed like inflation should be the #1 concern right now. But BoE has other economic data and are clearly worried about something else... > Can someone more financially literate than me explain how BoE buying government bonds is going to restore financial stability? No…
Like some clod announcing they're going to decimate revenue by cutting taxes for their rich mates and plug the hole by massively increasing borrowing?
Earlier quoted context omitted.
1) Pension funds (and other institutional investors) own government bonds. 2) They have also purchased risk/hedging products and posted these bonds as collateral. 3) As interest rates rise, the value of these bonds fall. 4) As the value of these bonds fall, these institutions are asked to post more collateral. 5) To come up with more collateral, they sell more of their bonds, dropping the price even more. 6) They are…
> 4) As the value of these bonds fall, these institutions are asked to post more collateral. Why do the pension funds (and other institutional investors) need to post collateral? Where do the pension funds post their collateral to? I guess I will understand why collateral is required if you can explain me what would go wrong if the pension funds were not made to post collateral.
Now it looks like while these products work in a low interest rate - low inflation environment, in this environment this "protection" is pretty worthless at best and actually harmful even.
That's why the current UK gov is under fire, because their tax-cut proposal has been perceived to have precipitated this crisis.
Earlier quoted context omitted.
1) Pension funds (and other institutional investors) own government bonds. 2) They have also purchased risk/hedging products and posted these bonds as collateral. 3) As interest rates rise, the value of these bonds fall. 4) As the value of these bonds fall, these institutions are asked to post more collateral. 5) To come up with more collateral, they sell more of their bonds, dropping the price even more. 6) They are…
> 4) As the value of these bonds fall, these institutions are asked to post more collateral. Why do the pension funds (and other institutional investors) need to post collateral? Where do the pension funds post their collateral to? I guess I will understand why collateral is required if you can explain me what would go wrong if the pension funds were not made to post collateral.
And a large portion of voters want an increase in taxes. You cant make this up.