interest rates qe3 or 4

[malleefarmer]

australia as you guys know has
relatively high interest rates and a
stable economy, mainly due to mining
rare earth minerals are the boom at the
moment.

Anyway question is can they go lower
offical rate here is somewere between
3.5 and 3.8% not sure and the talk is if
the usa do another round of qe our rates
could drop a tad further maybe .25% im
purchasing a harvestor and rumour of
land coming up for sale just wondering
what your thoughts are?

So much money is flowing into austrlia
at present pushing our dollar up think i
read somewere our dollar is 4th most
traded currency in the world and dollars
are flowing in for so called safe haven.

If qe3 happens that may put a halt to
anymore cuts.

machinery rates long term rates are
around the 5 to 7% depending on ones
equity and risk profile.

a few months back i thought it was a
matter when not if qe 3 would happen and
election year and all but im not so
sure, the world economy is in a mess but
has it stabalized to degree or just a
dead cat bounce?

[errolanderson]

malleefarmer . . . my understanding is that the slowdown in China is affecting your economy.

Sense that you are picking some amprehension about QE3. Feeling it here too. Several notable North American economists are now warning against the U.S. printing more money. Trying to inflate out of this mess is a big gamble. Believe there is no guarantee it will work.

Bernanke and the U.S. Fed governors are meeting next at Jackson Hole, Wyoming at the end of this month. Suspect there will be no stimulus announced at that time.

The U.S. is also hinting at cutting interest rates . . . to what? They are the end of the rope on the interest rate game unless they enter the negative territory, like Japan did in the 1990's.

Personally, still believe deflation remains a bigger risk than inflation.
But that is an economic swearword for bankers and politicians.

An interesting 4th quarter lies ahead. We'll see if this deck-of-cards can hold through the U.S. election.

Errol

[Hopperbin]

Did you say you can borrow at 3.5?

[malleefarmer]

official reserve bank rates 3.5 i think
borrow rate is anywere from 4.5 to 7.

deposit rate is about 2.5

[cottonpicken]

Deflation-all levels of government bankrypt,all
programs cut,unemployment sky rockets,tax
revenues plumet as business and housholds fall
into a death spiral as one thing feeds on
another,politisitions in power hung in the streets.

Inflation-everything slowly gets more expensive
and the public gets what they want from the
people they elect,been happening a while now.

Imagine the first politico that says hay indian hay
senerio hay quebecwao,no mo money fo use.

[cottonpicken]

As October melted into November last year, it was
clear that all was not right in the financial system. For
months, the debt markets had been shut to banks. As
every day passed without any sign of improvement,
what had become known as the “wall of debt” – a
£500bn-plus pool of bonds set to mature over the
next year – looked more and more of an impossible
hurdle.
Attempts to bolster market confidence had failed.
Stress test after stress test was doing little to
disprove the widely-held belief among investors that
the problems of the European banking sector were
vast and that bank debt was a needlessly risky
purchase. Once the titans of finance, many of
Europe’s largest banks now found themselves in the
strange and uncomfortable position of being unable
to raise money from the large institutions they had
made billions of pounds from over the previous two
decades.
To central bankers the problems were more than bad,
they were terrifying. To those charged with managing
the financial system, the potential calamity they saw
on the horizon was not just as bad as Lehman
Brothers’ collapse three years earlier – it was worse.
The September minutes of the Bank of England’s
Financial Policy Committee (FPC) spoke
euphemistically of “severe strains” in funding
markets. In part, this reflected the fact that British
banks were in a relatively better position compared
with many of their Continental rivals, having already
spent two years cutting risk and building up capital
and liquidity buffers to withstand any new shock.
However, to those fluent in central banker-speak, the
tone of some of the language was shocking,
suggesting that despite all the preparations, the
British banking system was far from the fortress that
was being portrayed.
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“I started seeing them use the word 'threat’ a lot
more. From my memory, threat was a word that was
rarely used and its inclusion certainly made me sit up
and take notice,” one former Bank of England adviser
recalls.
The hunch was right. Inside the Bank of England
something close to panic had gripped the institution.
Among senior managers a sense of foreboding had
taken hold. A couple of months earlier, Christine
Lagarde, the head of the International Monetary Fund,
had revealed why everyone was so fearful. She said
European banks should be forced to raise more cash,
such was their perilous position. The world economy
was entering a “dangerous new phase”.
In late October, the Bank made clear its fears to the
heads of Britain’s major lenders. The Old Lady of
Threadneedle Street was worried the UK’s biggest
banks could be swept away by the financial calamity it
saw building up in the eurozone banking system.
At a meeting at the Financial Services Authority’s
Canary Wharf headquarters at the end of October,
Paul Tucker, deputy governor of the Bank of England
and the man responsible for the financial stability of
the British financial system, shocked the assembled
banking elite as he opened the private session.
“Gentlemen, you could all be out of business by
Christmas,” Mr Tucker, a candidate to be the next
Governor of the Bank, said to his shocked audience.
He went on to explain the situation he saw
developing and how threatening he thought it could
be to even the largest and most financially strong of
institutions. Repeating the September minutes of the
FPC, Mr Tucker urged all the banks to build even
larger liquidity buffers and raise yet more capital.
“We were left scratching our heads,” said one senior
banking executive present. “As soon as I got out, I
reported back what Paul Tucker had said and I
immediately called my team in to go through every
risk exposure we had to see if there was anything we
had missed.”
Others present were less than impressed by Mr
Tucker’s dramatic warning and critical of the Bank’s
performance in the months after the meeting.
“They certainly made some strong statements to us,
but they then did very little about it,” complained one
banker also present at the meeting.
“It was obvious the financial system was in a very
difficult place, but it’s not exactly constructive to
predict doom and gloom and then do nothing.”
Even some of the other regulators present were
shocked by the directness of the warning. “There was
some flowery language,” admitted one senior
regulator.
Bank of England officials were not alone in their sense
that something was going very wrong at the heart of
the financial system.
Like the pit boss of a Las Vegas casino, interdealer
brokers have, in many ways, the best view of who is
winning and losing in the financial markets. Acting as
middlemen between the world’s largest banks on
billions of pounds of trades every day in everything
from foreign exchange to interest rate swaps, the
brokers such as ICAP, BGC and Tullett Prebon have a
better view than all but the most clued-in of
regulators of what is going on in the financial system.
“Very, very close indeed,” is how one senior broker
now describes the edge towards the financial
precipice the banking system took late last year.
“We see the flows in between banks. Most interbank
products are broked as 'name give up’ – foreign
exchange, derivatives, they are all done this way. The
bank rings up, says 'We want to do something’ and
after the trade we give out the names to either side.
The banks want that so they are facing known
counterparties,” explained the executive.
But in the autumn of last year some very odd things
began to happen. “From time to time in the market,
they [the banks] will say 'I want to do X, but don’t
give up my name to Y’. That means they don’t want
to deal with them anymore. If you start hearing that
against a bank in the energy market, it doesn’t really
matter, but if you hear it in FX [foreign exchange] or
interest rate swaps, you think 'Hmm, blimey, this is
really a problem’.
“You could tell it in the autumn of 2008 as you
started to hear that about Royal Bank of Scotland –
they’re dead. We did start to hear that at the back end
of last year.”
In France, the summer months had been particularly
cruel to the country’s largest banks and the fear was
that the UK could be next.
What happened in France last year is an object lesson
in what happens when confidence evaporates. As
euro break-up fears flared, attention had begun to
focus on the large potential losses lenders such as
Credit Agricole, BNP Paribas and Societe Generale
would have should Greece exit the currency.
To US money market funds stung by the collapse of
Lehman Brothers, which famously led several to
“break the buck” – meaning their supposedly ultra-
safe investments were worth less than the amount of
money their investors had placed with them – this
rang alarm bells.
In a matter of months, funds more than halved their
exposure to the French banking system, removing a
crucial short-term source of dollar funding to the
banks. For the banks, this raised several problems, as
they relied to a greater or lesser extent on the money
market funds to provide the liquidity that supported
the US investment banking operations they had all
developed over the previous two decades.
However, it was not just money market funds that
were getting nervous about France. In mid-
September, a Deutsche Bank call for clients hosted by
analysts saw bankers peppered with questions from
Middle Eastern companies, including oil giant Saudi
Aramco, about the health of French banks.
The collapse of Royal Bank of Scotland and HBOS in
October 2008 provided a vivid warning of the danger
of market seizure as both suffered a global run by
corporate depositors that within weeks forced them
to go to the Government to seek emergency funding.
The move ended up costing the taxpayer more than
£70bn in direct support and hundreds of billions of
pounds more in state loans and guarantees.
It is impossible to know the composition of a bank’s
corporate deposits, however Middle Eastern wealth
funds and conglomerates have hundreds of billions of
dollars in cash held with banks around the world. The
hint they could be getting ready to pull their money
could spell death for any bank.
Effectively, the problem faced by the French banks
was that without a large pool of dollar denominated
assets it was becoming increasingly hard for them to
fund parts of their asset books that relied on frequent
and plentiful access to dollar funding.
At BNP Paribas and Societe Generale, the banks with
the largest US operations, the decision was made to
begin cutting their dollar funding needs by selling
assets to reduce their reliance on short-term funding.
But whatever banks were doing themselves to salvage
the situation – and with the UK looking into the abyss
as well – for central bankers the risks had grown far
too great, and on November 30, six central banks,
including the Bank of England, the Federal Reserve
and European Central Bank, led by Mario Draghi,
announced a co-ordinated intervention to provide
cheap dollar funding to lenders.
Just over a week later, the ECB went even further with
the establishment of two new long-term refinancing
operations (LTROs), effectively dirt-cheap three-year
loans, to provide eurozone lenders with all the money
they would need to keep operating and fund the debt
they had maturing over the following 12 months.
On December 21, eurozone banks, including some
British lenders, borrowed €489bn (£384bn),
immediately staving off the acute funding problems
that had come close to bringing down several of
them.
In February, banks borrowed a further €530bn, taking
the total size of the programme to in excess of €1
trillion, as the ECB allowed lenders a second chance
to sort out their funding problems. Among bankers
and policymakers, it was generally agreed that central
banks had done enough to stave off the immediate
crisis Mr Tucker relayed at that tense meeting in
October.
Although the banks had made it past Christmas, the
cost was immense and the various schemes have not
removed the fundamental problem for many banks
that are still loaded up with toxic loans likely to cost
them billions of euros in losses over the coming
years.
British banks have done more than most to come to
terms with their toxic legacy, but few think they are
out of the woods yet and the prospect of a new crisis
is an ever-present worry for central bankers and
regulators.
Mr Tucker’s warning remains: “Gentlemen, you could
all be out of business by Christmas.”