Bank of England Crashing Its Own Bond Market!

Рет қаралды 143,015

Күн бұрын

The Bank of England is doing something for the first time in its history. It bought just under a trillion pounds worth of UK government debt and now it has to get rid of them in a process called Quantitative Tightening. Unfortunately, it has decided to sell these bonds to speed up the process rather than wait until the bonds mature. In this video, I’ll look at the consequences of that decision and why I think it is a mistake.
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Timestamps
00:00 Introduction
00:37 Quantitative Easing
04:10 Quantitative Tightening
08:14 Why
10:18 Losses
12:28 Which Would You Sell?
13:03 Consequences
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Пікірлер: 330

@gilesjohnson 9 ай бұрын

Loved the offer of discount to members of the MPC. That really made me chuckle 😂

@Pensioncraft 9 ай бұрын

Glad you enjoyed it @gilesjohnson

@sang3Eta 9 ай бұрын

"QE has never been used before" It's been used for 30+ years in Japan. They knew exactly what would happen!

@ranban282 9 ай бұрын

I believe it has been used starting in ancient Rome.

@MartinJG100 9 ай бұрын

....and probably before then in some form or other. Nothing new on planet earth.@@ranban282

@Jalleur14325 9 ай бұрын

In different guises it has. Look at Weimar Germany. Money printing isn't new!!

@jdthompson123 9 ай бұрын

Fantastic video. I don’t think this hits home to most people. The result of all the crazy money printing is now coming to the fore. The fact that the treasury now has to pay the bank of england each month to make up for the bond losses is shameful. The tax payer is at a loss once again.

@FoobsTon 9 ай бұрын

That's just an accounting transaction. HMG owns the BofE.

@brikfiend 9 ай бұрын

@@FoobsTon But who pays the piper ?

@shaunsprogress 9 ай бұрын

@@FoobsTon BOE is a private institution like the FED. Funny isn't it!

@Mouldhead 9 ай бұрын

Completely agree. I asked at one of the regional meetings - why? They said because they no longer need the bonds because the "original" levers were back in play, basically. They just didn't care about the "losses" - presumably because they aren't real!

@morpheus9137 9 ай бұрын

Surely this means one of two things: They think rates will be higher for longer, or they need to lower bond holdings for the next round of QE?

@thenoodlebuddy 9 ай бұрын

@@morpheus9137possibly a bit of both or just being cautious incasec they need to

@thenoodlebuddy 9 ай бұрын

The BoE probably not thinking what effect that will have in public services by sucking funds out of central government

@TheLuminousOne 9 ай бұрын

It's all made up bollocks to control us anyway 🤣

@jamesfrench8610 9 ай бұрын

Likely the former, yet again the losses aren’t actually theirs as they’re covered by the APF; so they just don’t care@@morpheus9137

@2711marcus 9 ай бұрын

Bank Of England making a big mistake? There's a rarity. It would be bigger news if they actually got something right!😂😂😂

@guantou2520 9 ай бұрын

Bailey's incompetence never fails to surprise

$@fractionaldebtisfraud2187$

@fractionaldebtisfraud2187 9 ай бұрын

It's more perverse than that. The BoE's worry, it's only worry for now, is inflation. Raising interest rates isn't quite doing enough to counter core inflation. QT removes yet more money from the economy, further helping to squeeze consumer confidence. But instead of the BoE accepting ANY blame for beating down the economy, who does Bailey blame, himself and the BoE? Of course not. He blames workers wanting, "demanding," higher wages! Whereas recent research has revealed the cause of much of the price rises has been the large corporates putting up their prices for no other reason than they think they can. The revelation being their profits have risen whilst, overall, wage rises have largely continued to stagnate or been below inflation. So the workers are definitely not the problem at the moment.

@timsturbo4870 9 ай бұрын

Ex FCA so to be expected 😢

@Mrbikertomtom 9 ай бұрын

It's not Incompetence it's on purpose at this point. Which makes things far more concerning...

@bigbarry8343 9 ай бұрын

the interesting question is who is buying the bonds - considering family connections of downing street duo.

@scottmills7337 9 ай бұрын

It’s not incompetence,it’s a controlled demolition.

@dominicestebanrice7460 9 ай бұрын

i remember when the BOE base rate was nearly 15% and my first mortgage payments went though the roof. It's not that long ago....Morrissey was in the charts with "last of the famous international playboys", and Madonna had "Like a Prayer' and CnR got off Concorde to rock out "Paradise City". Happy crappy days. Since 2008 the central bankers have been in cloud cuckoo land and now the shit is about to hit the fan.

@_permanence 9 ай бұрын

Watching my pension bleed out in this slow motion is infuriating

@esioanniannaho5939 9 ай бұрын

Yep got out of the market lady year. Then put my cash into Sprotts Pslv when I realised the Ag was money in many languages. No Bonds so Just about holding tight but expect all commodities and precious metals to boom.

@TG-ts3xn 9 ай бұрын

It’s okay, more citizens = higher UK GDP, yay

@Jalleur14325 9 ай бұрын

By the time I retire there will be no pension the way things are going.

@filippalexandrov1554 9 ай бұрын

Its not slow. They help accelerate it. Hope it makes you feel better

@dnatuner1984 9 ай бұрын

I'm using salary sacrifice to put £1000 away in my Scottish widows works pension, out of that £1000 my pension goes up about £200 a month, it just keeps haemorrhaging money.

@markoconnor604 9 ай бұрын

I've taken my (small) pension out of management & into a SIPP but I'm struggling with allocations. Currently about 50% in oil/uranium/gold & silver miners. It seems like a never-ending wait for the long-predicted equities crash, with the market being endlessly propped up

@sbain844 9 ай бұрын

12:50 You've missed the point - inflation is returning, default risk is rising, and investors are not buying long-bonds. That is what is causing yields to rise, and they are going to rise much higher in the months/years ahead. Therefore, offloading these long bonds now, before they are worthless, makes more sense. Of course, this problem would never have arisen in the first place were it not for the incompetence/corruption of out warmongering political elites, who like to fund their ill-conceived projects by borrowing to infinity... but that is another story.

@flyinghigh22 9 ай бұрын

QE has been used before in Argentina, Zim, Germany. The monetary system needs correcting it's the stocks and assets that are incorrectly valued at the moment.

@seanmcdougal 9 ай бұрын

Really well explained! Makes you wonder what they were thinking...

@sanshuma0 9 ай бұрын

Fantastic video! Wouldn't you want to add that the initial reasons for adopting QE was not only that interest-rate cut were deemed insufficient as you mention, but also this was done to provide liquidity to the commercial banks by transferring cash in return for 'temporarily' buying back their collatorell holdings and thereby not only reducing the interbank financial stress but also incentivise banks to land more into the broader economy and thereby stimulating growth. Also, point needs to be made that QE does not inject money directly into broader economy, but only expands bank reserves for interbank transactions e.g. Repo, with a side effect of 'incentivise' bank-landing into broader economy.

@bigbarry8343 9 ай бұрын

and all it did was to push house prices 300% higher.

@sanshuma0 9 ай бұрын

Yes, it inevitably leads to asset inflation as commercial banks buy more gov bonds or land into broader economy e.g. housing or corporate loans. Gov spending eventually seeps into the economy and this increase in broad money supply inflates asset prices. So yes 300% would be fair estimate if you calculate from 2008 when the West first adopted QE, albeit at the time as an emergency one-time solution, but never could dial back@@bigbarry8343

@stevetaffy8780 9 ай бұрын

Forced Higher house prices means increased, long term debt based loans. That makes total sense

@sanshuma0 9 ай бұрын

Exactly, and false GDP, win win for all if your currency does not depreciate due to additional supply, not the case with UK, and is the case with US )) @@stevetaffy8780

@uslaserguideddemocracyseed1039 9 ай бұрын

2:42': "This sounds like a money printing machine, but it wasn't the purpose". Money printing it was, that's for sure.

@Jalleur14325 9 ай бұрын

124 b of profit.....and yet austerity and standard of living crashing. As you rightly point out those billions will be taken away from other desperately needed public spending. Its sickening actually how these successive politicians treat the taxpayer like they were playing Monopoly. We are all in for a couple of decades of very hard times.

@haydenmatthews3257 9 ай бұрын

Great video Ramin, can you follow this one up with a 'How many months away the UK is from defaulting'

@tomcrane9448 9 ай бұрын

Are they selling because they believe/know interest rates will go up further so losses/yields will go up in the future. That is maybe they know we are not stopping at 5.25% interest.

@andrewestbrook4473 9 ай бұрын

Interest rates must be higher than inflation. So, they anticipate more inflation leading to more interest rate rises.

@michaelcolfer1531 9 ай бұрын

.....Great intuitive video by the way, thanks

@markuss.5872 9 ай бұрын

Great contribution - would also be interested in your views on ECB policy - I ve got a grim feeling that it might be different but not better...

@qwaqwa420 9 ай бұрын

I agree

@mrrick6487 9 ай бұрын

Thank for such a educational video , gives me great insight to what’s going on

@Pensioncraft 9 ай бұрын

You are very welcome @mrrick6487

@cooper8t 9 ай бұрын

I'm actually slightly worried about why the BOE is doing this. Do they believe there is a "bigger storm" coming for the UK and need to offload this debt, even at a loss to able to prevent/be more resilient to cope with something worse that may happen in the future? I can't think why they would sell at a loss on purpose for any other reason?

@jinno4594 9 ай бұрын

Who are they selling to? Maybe there are UK banks that are active on the bond market at the moment? Also, how are members of the BoE incentivised to act in the best interests of the BoE and Treasury?

@Quebicrecords 9 ай бұрын

Sell bonds and buy gold perhaps, just before a war kicks off and when it does, gold prices increase?

@cooper8t 9 ай бұрын

I've thought about this, perhaps selling at a loss is in itself economically tightening. So raising interest rates is obvious, taking money out of the treasury, not very obvious but will have the same effect which is lowering inflation?

@chuaskh 9 ай бұрын

Sell bonds at a loss to private banks now and buy from them higher later.

@cooper8t 9 ай бұрын

@@chuaskh Does seem like there must be a better way..

@helixvonsmelix Ай бұрын

Interesting note. When the US of A wanted the UK out of Suez, they threatened to sell all of the UK Sterling bonds that the US held. That got our attention. The info is there if you dig for it.

@jonathanlee5185 9 ай бұрын

👍Liked the humour: a discount on your website for Members of the Bank of England's MPC👍

@Pensioncraft 9 ай бұрын

Thanks! @jonathanlee5185

@jasonlewis4686 9 ай бұрын

So how do these actions impact sterling and inflation?

@esioanniannaho5939 9 ай бұрын

Many thanks for the Explanation. It would greatly improve and be appreciated if you could include some grfx. Could it be that they want to reduce the B/S to make way for a huge market/Financial crash coming shortly. Or is this a way to give some cheap treasuries to thinsiders ?

@Jalleur14325 9 ай бұрын

I got a bit lost to be honest. But basic point about them selling before run off I got!

@ShamileII 9 ай бұрын

Thanks for the great explanation. As a US investor, I just want to ask the simple question......why? I wish you had covered their reasoning.

@paullythgoe244 9 ай бұрын

My company pension is built around government bonds and gilts ..was worth £500k two years ago as a transfer quote but now I'm 55 and can transfer it only now worth 220 k 😢🥺..so much for retiring early 💁🏼‍♂️😔

@craigk621 9 ай бұрын

Because you benefited from SMkt gains and likely you were moved to lifestyle. Your choice. Some of us converted to cash, lost out on some gains , waited and now buying bonds directly to lock in 4.5% plus. As he says you hold these to maturity all you will lose is potential opportunity cost if rates on bonds go still higher . Unless of course HMG defaults then we are all fckd. You pays yr money and takes your choice, but actually your own responsibility.

@Albo888 9 ай бұрын

Very interesting video. The only logical reason for selling these long dated bond is that the BOE think this is the best price they are ever going to get. i.e they must truly believe that rates will be much higher for longer.

@davidjamieson8365 9 ай бұрын

Excellent video Ramin. I fear as the APF losses get larger the issue will become more political and the independence of the BoE could be questioned if they decide to sell only the shorter dated bonds. On a separate point most people assume the BoE will halve the size of their balance sheet and therefore be left with lots of gilts. I've never understood why the target reserve balance has to be in gilts and worry the gilt market is not prepared for all of their gilts to be sold!

@TheLuminousOne 9 ай бұрын

BoE are told what to do by BIS (Basel).

@LurchLures 9 ай бұрын

Like someone commented below my first thought is maybe the Bank of England knows something we don't. What seems dumb to us may be the best of two or more bad options.

@diogenes9524 9 ай бұрын

Most interesting, thanks.

@Pensioncraft 9 ай бұрын

Glad you think so! @diogenes9524

@thenoodlebuddy 9 ай бұрын

Very thorough and interesting video thanks. So it still doesn't make sense why they are selling the bondss rather than letting them roll off. Only thing I can think of is they plan on raising rates further or keeping them higher for longer, but even then as you say why sell the long dated ones. If they need the cash just sell the short dated ones. None of it makes sense really. If they just let them roll they will bring cash in every month just letting them roll. If they sell now and increase rates further then that will put more strain on the pension funds which they had to bail out not that long ago, so you dont wanna do that! So I can't understand their why. If it was me in charge I would just let them roll as you need the market to have sufficient liquidity in order to buy new government bonds.... Unless they are worried they can't get inflation down unless they sell these bonds which will lead to more liquidity being sucked out of the system. So my conclusion is still inconclusive! But I'm leaning more towards they think raising interest rates isn't working on its own to bring down inflation, so they need to steadily reduce all that money that is sloshing about and get it locked up in long dated bonds to bring down inflation

@rehypotehcation3682 9 ай бұрын

I am trying to understand what is really happening. The losses on bonds bought back before term are a profit and liquidity for the seller who would otherwise have to have held them at book valve. QE has essentially created 'risk free' assets for the banks and corporations which all losses passed to the taxpayer. This smells like corruption to me. The Conservatives have been corrupted by The City.

@paul_k_7351 9 ай бұрын

Excellent video, could be an opportunity to buy some long duration bonds at high GRYs in the near future?

@mattanderson6672 9 ай бұрын

Thank you

@Pensioncraft 9 ай бұрын

You're welcome @mattanderson6672

@MangoManZ1 9 ай бұрын

Great video as always. Why does the BoE get to buy gilts with no equivalent economic output or energy expended to match the value bought? It defies thermodynamics. We all work our buts off and they enter digits to buy debt, thus diluting our economic energy unless you risk playing the stock market, hard asset game! The system is broken… many may laugh, but I see storing wealth in BTC as a solution, escape the clasps of central planning and irresponsible fiscal policy. Rant over!

@peterellwood2103 9 ай бұрын

Very interesting, although I feel like need to watch it again to fully understand it all 🤓

@andrewestbrook4473 9 ай бұрын

If something doesn't make sense, then somebody is lying. (Judge Judy)

@grahamf695 4 ай бұрын

I invested in Legal & General UK Gilts, because I thought they were safe - and then the BoE did that!

@MarkCW 9 ай бұрын

Thanks Ramin for explaining what is going on in the bond market. As you say, the UK should be doing the same as the US by having shorter term bonds that run off naturally without having to sell long-term bonds at a loss. The US is in a much better state than the UK because the US's equivalent base rate is 5.25%-5.5% which is greater than it's inflation of 3.7%. Whereas the UK's bank base rate is 5.25% which is less than the UK inflation rate of 6.7%! The UK should bring the base rate up to 7.25% to get a control of inflation. Although this would cause a big recession in the UK it would get inflation back down to 2% faster.

@JackBoii 9 ай бұрын

recession is inevitable imo, in the long run it will be worth it. We're in a terrible situation atm, and inflation is not an option.

@MD-hd1cp 9 ай бұрын

You're kidding yourself if you believe US inflation rate is 3.7%

@shaunsprogress 9 ай бұрын

@@MD-hd1cp Yes 11.5% according to shadow stats.

@sbain844 9 ай бұрын

Lol, you've completely misread the situation. The moral of this story is that we shouldn't have allowed our irresponsible governments (on both sides of the political divide) to run up such huge debts in the first place. The US bond market is every bit as insolvent as the UK bond market, and the Japanese bond market and European bond markets for that matter... That's what we get when we allow our corrupt/incompetent political elites to sell our futures down the river just to buy votes in the short-term (or to fund foreign wars and regime change nonsense).

@djayjp 9 ай бұрын

@@shaunsprogress If you read John Williams' methodologies, you'd see he is merely estimating (his presumed) actual CPI. He's not actually measuring the cost of goods empirically. He just applies a flat % adjustment to the official stat. This is why the published curves on the chart look identical to the official chart, but just higher. So it's not actually based on some alternate cost of goods actual measurements. You'll see the 1980s one diverge more but that's just because the adjustment is additive over the years.

@blhlow4904 9 ай бұрын

Thanks, Ramin for this excellent video and for bringing up this topic. Ramin is a very measured guy but I can sense his anger coming through on this video. I don't think I fully understand this QE/QT process but it seems to be me like money is just sloshing between BOE and Treasury. Did BOE make actual profit with QE or just 'paper' profit and what happened to the profit? Now it is it making actual loss or 'paper' loss and does the previous profit offset this loss? thanks

@davidp4456 8 ай бұрын

It reminds me of parents who have handed out their pension lump sum or remortgaged to fund their child’s business venture only to see it fail and then sell what’s left to pay for the liabilities. I feel quite sick that this is the reality of how the Government is managing our assets.

@Andre_XX 9 ай бұрын

The mistake was quantitative easing, not quantitative tightening. This skewed price signals throughout the economy causing people to mis-price everything, making purchases that they should not have made. Now the piper must be paid. Good luck.

@stephenbermingham6554 9 ай бұрын

Bank of england isn't making any mistakes. These policies being implemented over te last 20 years with money inflation to now regression of the money supply is part of a wider plan and lang term goals of te current global monetary system and that's to confiscate and consolidate.

$@fractionaldebtisfraud2187$

@fractionaldebtisfraud2187 9 ай бұрын

Ramin, the US Fed has a simply named, "deferred account" to park it's losses. The Fed generally makes a profit in less turbulent times. So it can manage losses by parking them in the deferred account and using future profits to clear these losses. Do you know if the BoE has a similar deferred account? Or is it simply the case, being nationalised, the Treasury has to fund any such losses from "current expenditure?"

@stopato5772 9 ай бұрын

How can an increase in interest rates be a loss for the bond holder? Is this because the bond holder does not get the new increased rate - they are stuck with the old? Or because old lower earning bonds a re sold at a lower market price?

@k_wang315 9 ай бұрын

Great video, thanks. Although, should they have sold only short-duration gilts, there would be impacts on the yield curve. Presumably, it would be more deeply inversed. I assume that BoE does not want to artificially manipulate the curve and that should be why they bought randomly in the first place. Buying everything and selling selectively would indeed be inconsistent. Moreover, once BoE can be viewed as trying to shape the yield curve, the market will try to anticipate how BoE will do that. This will not only be capitalised (for instance, short short, long long) but also complicate the communication and expectation management job of BoE. Also, I found another comment suggesting that the UK Treasury should have sold more short-duration gilts and not too many long-duration gilts like the US Treasury. I beg to differ. Should the UK Treasury have done that, instead of locking in some historically low rates for many decades, it would need to sell much more gilts now at much higher rates. Surely that would be even worse for the taxpayers. The US Treasury is already criticised for that.

@quavor1 9 ай бұрын

Do the BoE know something we don’t about the stability of long term bonds then? Could they be hedging against something? Because like you say it’s an “interesting decision” to take a much larger loss on a long term bond if you didn’t feel you had to?

@leighrichardson9950 9 ай бұрын

I assume the big investment companies like Vanguard, Black Rock etc are hoovering up these 'cheap' gov bonds to stick in their ETFs / bond funds?

@FoobsTon 9 ай бұрын

No. They already own them.

@carloschu7127 9 ай бұрын

Is this QE a reason for BTC going up ?

@jabberwockytdi8901 9 ай бұрын

BoE seem to be keen not to increase the short end of the gilt yield curve? so selling the long dated stuff is designed to help achieve that?

@56Model30 9 ай бұрын

Very clear analysis and explanation. It seems the incompetence doesn’t end with the Tory UK Government, it extends to the Bank of England

@jabberwockytdi8901 9 ай бұрын

This has been in the news since at least March with a flurry of new articles since Sept. The parliamentary committee lookking into this has been given many responses from experts that the degree of QT and the way it is being done is way over the top , and yet it continues. I presume with the chancellors blessing? In terms of wasted taxpayers money this should be getting as much of not more coverage than the PPE sourcing scandal.

@Willifog72 9 ай бұрын

Excellent video

@Pensioncraft 9 ай бұрын

Thank you very much! @TeaPovea

@dinoubatuba4941 9 ай бұрын

It depends, I don't see what is the clear objective from the BofE, maybe their intention is to reduce durable goods consumption, so that they could see the labour market finally give in. What would be the cost of a too high inflation for a longer term when compared to a faster controlled inflation although with some losses on the bond holdings? I think it might be too short sighted looking just at the financial aspect, and forgetting that if they don't push long term interest rates up, it might take a lot longer for them to control inflation. And spending longer time with interest rates 5+ percent might cost the treasury a heck of a lot more than 30-40 billions a year.

@jonathanlee5185 9 ай бұрын

Ramin, although I too sense that Andrew Bailey is indeed incompetent and the whole thing is a mess, could a good reason for the BoE's QT be that it is trying to reduce inflation by selling off its gilts ?

@robwulz3493 9 ай бұрын

Will bonds/ gilts be at a bargain price then ? Is there a positive position for a bond buyer at this point ?

@lainiwakura44 8 ай бұрын

10:30 Please, what is the difference and the relationship between the BOE Central Bank Rate and the gilt income? Isn't the gilt income the interest rate paid on UK bonds? And isn't that basically the Central Bank rate?

@akzoc 9 ай бұрын

What are the implications for GPBUSD? It has been trending down since July 2023, but it has been leveling off since early October 2023. I assume that bond sales will push down bond prices, and increase bond yields. I would think this would raise Gilt yields, and put GPBUSD in an uptrend. I realize dollar trends are also relevant. Am I thinking correctly? What have I missed? Thoughts on timing, risk, etc. ??

@pauluttridge2876 9 ай бұрын

Interesting video and good to get a view on potentially poor choices to sell off at a loss. What is the proposed benefit of them selling these bonds early for the gov/treasury and is there any scenario them selling early is a good thing? One thing that did strike me is that the selloff started before the interest rates started to rise to recent historic levels. Does this mean they were smart to start selling off early before the net losses caused by the recent rate rises?

@silveriorebelo2920 8 ай бұрын

it's part of the plan for the infamous reset

@PL-ev2mw 8 ай бұрын

I assume this is why my ‘safe’ pension is taking a ‘hit’ at the moment. Bonds not such a safe option then?

@tatradak9781 9 ай бұрын

But why? Who gains? Can an question be asked in Parliament, if so what should the question be and how to ask it. Are other Nation Reserves doing this or is it only the Bank of England

@benmcdermott8575 9 ай бұрын

So will the gains made during QE be wiped by the losses from selling off their bonds?

@ASC63Funky 9 ай бұрын

The bond holder recieves the coupon. they would only sell if it is a negative carry and that is why they are selling them off, it is a simple way of saying we have lost control of inflation and we do not want to be holding worthless Bond. In an inflationary environment your currency loses value so debt desolves as well. when you buy Debt as stated the value of the debt disolves or is diluted by the inflation (printing of currency) A clear indicator of future hyper inflation. CPI is inacurate also doctored to stop panic in the market. you have to remember that currency is debt and real money is gold and silver. I wonder what the bank of England are buying with the sell off of their Bonds ?

@Eddie.Mootsen 9 ай бұрын

Im sure risk of gilt issuance death spiral is appreciated but long dated gilts have to be got rid of too. No win situation from moment QE was followed by a rise in rates. Downrating from AA3 may well happen and would make all this worse 😬

@jabberwockytdi8901 9 ай бұрын

BoE has the extra problem that by comparison with other central banks they had to buy more than just for QE due to the fall-out of Kwarteng-Truss-Gate.

@MrHotrod79 9 ай бұрын

What about the coupons on the bonds held by the BOE….

@TheDailydubstepfeed 9 ай бұрын

Let members of the MPC have free access please, they obviously don't have access to this type of information

@ianthomsonGM0URD 9 ай бұрын

QE created more cash, devaluing the £. It also resulted in lower borrowing costs with savers subsidising borrowers. Now with massive debts and the introduction of QT this will increase the value of the £ and make borrowing more expensive with less cash going about. Savers should get a better deal for cash type investments. However if savings rates start to outstrip bond return rates then the bond market will suffer.

@niceguy3148 9 ай бұрын

markets are clearly choking on all this duration supply...imo the path to lower inflation must start with fiscal policy but we all know that would never happen

@goober-ll1wx 9 ай бұрын

Within the next 12 months, the liquidity taps will be back on in full force....🌊

@simony2801 9 ай бұрын

Why did the boe issue such long dated bonds in the first place when the Americans issue shorter durations.

@rsmickeymooproductions4877 9 ай бұрын

I wonder how this affects pension funds as they have a great exposure to gilts.

@DarrenSmith-zz6fk 9 ай бұрын

All person funds are carrying unrealised losses on their balance sheet this is going to get worse I'm expecting another liquidity crisis banks have no deposits no loans and no deals bank of America Deutsche bank Barclays JPMorgan's are all carrying huge losses on their derivatives book Jamie Dimon has just sold 140 million dollars worth of shares we are heading to a global hyperinflationary depression

@Ganok 9 ай бұрын

Hi Ramin, how do I claim the MPC pensioncraft discount? Asking for a friend

@voice.of.reason 9 ай бұрын

Which friend, Andrew Bailey?

@Finderskeepers. 9 ай бұрын

Given QE was never meant to be about profit/losses but stimulus, does it not follow that prior profits, £124bn profits was mentioned, are available to offset losses being incurred now ? Is there also a possibility that there are interest rate swaps or other instruments hedging some of the BOE exposure that are now in the money and consequently were are not getting a true picture of the profit and losses ?

@catatonickuala 9 ай бұрын

If the BoE held onto the bonds until they increased the base rate again wouldn't it make the losses greater? Is this just an indication that they know they will have to raise rates much further than initially expected given the UK's current inflation data?

@raygun717 9 ай бұрын

7:35 BoE/US Federal Reserve mixed up there?

@user-ww3jr1uh1n 9 ай бұрын

I'm a novice in this area, but to me is the BoE just reducing the treasury available finances. In so doing, they curtail potential spending. Either tax cuts or new spending which would potentially be inflationary. Thus helping the BoE reduce inflation, their key metric?

@badass6656 9 ай бұрын

When the Bank of England makes a loss who does the treasury have to pay the money to? Doesn't it just end up as a reduction in the money supply as the bank now has less money to return to the government when it makes a profit.

@davidp4456 8 ай бұрын

This is so frustrating to hear. The strategy is clearly deliberate, so who are the beneficiaries? Or does it actually work to mitigate even bigger potential losses? You explain this very well but there must be a counter argument for these actions which may sound more positive?? The realisation is shocking; Are they actually using the tax payer to underpin the markets? The question as an individual is how will this impact my pension?

@alang911 9 ай бұрын

The whole corrupt system is falling apart!

@agsmith001 9 ай бұрын

Kinda seems like the federal reserve is also crashing the bond market maybe to a lesser degree but the long end sure has shot up! I dont know if warning people really makes a big difference, for a long time the bond market wasn't believing the fed, plus so many buyers are structured as forced buyers. Millions and millions of people have their retirement savings in target date funds. A lot of employers default to these so if you just put money in they will use their target date method. Everyone in these who is near retirement is getting crushed. I guess we'll see how many and of what duration they try to push onto the market next week. I will be looking for tips.

@erongi233 9 ай бұрын

In addition the BoE holds billions of US treasuries in its balance sheet. The Bank of England has been a major buyer of US Treasuries, not gold, for many years, and its holdings currently total around $800 billion. Average duration is 7 years so losses will be substantial. Any losses that the Bank of England makes on its US Treasury holdings would have a number of negative effects. First, it would reduce the Bank's profits, which are used to support the UK government's finances. Second, it would reduce the Bank's ability to conduct quantitative easing in the future. Third, it could damage the Bank's credibility and make it more difficult for it to carry out its other functions.

@dallassukerkin6878 9 ай бұрын

The consequences of this? My investments plummeting because I followed everyone's advice and have a fairly evenly balanced mix of bonds and stocks. Not a happy fellow at the moment as I regretfully push retirement some more years along the already long road :sigh:

@janetjacks3406 9 ай бұрын

I think this portfolio is typical in that most are 60/40% (bonds/stocks) and bonds were seen as safe and even stipulated as a forced buy in some countries, and also bank reserves were forced into the same investments, which I believe is why some are now struggling.

@moldenm5239 9 ай бұрын

bonds are ok and only incur losses if you bought bond funds or sold them before maturity

@janetjacks3406 9 ай бұрын

@@moldenm5239 Are you sure that is true as I've heard that even if some go to maturity they still can incur losses, such as in the US as I understand it.

@Nernst96 8 ай бұрын

The ongoing banking crisis is far from reaching a resolution. Those with more than a decade of experience understand that credit crises do not dissipate within a mere two weeks. It's amusing to witness some people believing that everything has already concluded so swiftly. We are currently witnessing a credit contraction that will inevitably result in a substantial overall contraction.

@grumblewoof4721 9 ай бұрын

I have a vanguard 80/20 ISA in the UK... how do I get into short term BOE bonds and reap the returns when they mature ?

@Lotrhome154 9 ай бұрын

That’s a risky investment. I would steer clear of the uk isa for a few years, either put it in a bank and take the 5% interest they are offering or go global index to spread the risk.

@enigma1000 9 ай бұрын

They aren’t BoE bonds they are just uk government bonds. You can buy those through most investment platforms. If you buy a longer maturity bond you have more risk if interest rates rise further but more potential profit if long term interest rates fall.

@dunkTheFunk 9 ай бұрын

Give men the opportunity to print money and eventually they will.

@Ultrajamz 9 ай бұрын

I’m a believer that the US Fed should be abolished - however then that would leave the US Dollar to the whims of foreign country equivalents… all countries should stop their manipulations and just pin their currency to something stable.

@janetjacks3406 9 ай бұрын

The only solution in my opinion is having the ledger belong to the people, so long as central banks have control then nothing will change and they will bring in the CBDC's and start the whole sorry fiat debt show all over again. Even though I don't own Bit Coin I can see the sense of it as it's the only way I can see the ledger being with the people and not manipulated to enrich the top 1%.

@NationalEconomicsForum-mk7vo 9 ай бұрын

Why hang on to bonds which are rapidly losing their value due to the real rate of inflation?

@rolandveshengho3913 9 ай бұрын

What's in your pension scheme? CDO s etc. UK local authority pension schemes are churned regularly for comission profits. I just buy silver these days after finding out the horrible secret of where all them duff property loans were dumped.

@timhulme6103 9 ай бұрын

Thank you for this explanation. I take the BoE is not selling bonds at a loss just to spite the tax paying public so can you suggest a possible 'good' reason why the Bank thinks it is a good idea to do this (even if mistaken). Comments posted suggest 'a bigger storm ahead'. Do you agree? Mad idea: if the BoE is holding up to 1/3rd of public debt, why not simply cancel it? The bank loses coupon income but then it not there to profit on UK's reliance on debt issuance. Cancelling would save the Treasury money. What would happen if the UK/BoE were to do this?

@Hal10034 9 ай бұрын

A cancelation could make borrowing more expensive for many years to come. It indicates that the government views reneging on its obligations as an option if things get tough.

@matthewStapleton 9 ай бұрын

I think they are doing it to pull as much money out of the economy as possible so that inflation should reduce quickly and then they can start reducing interest rates quicker. The longer that money is on their books the longer interest rates stay up

@IanPritchard 9 ай бұрын

Managed destruction of the western economy to assist the rise of the new empire.

@Pensioncraft 8 ай бұрын

Hi @timhulme6103 they don't think it's moving markets. That's clear from the fact that they increased the rate at which they're selling. Secondly, they want to have some dry powder in store in case something bad happens again and they have to stimulate the economy. And thirdly given inflation is so high they want to tighten credit conditions rather than loosen them so having a trillion in government bonds isn't helping achieve their goal. Cancelling debt might be considered a huge default by the UK government and cause a huge loss of faith in the credit worthiness of the UK so that would never be considered. Whether the Bank of England holds that debt or someone else would be immaterial. An obligation is an obligation. Thanks, Ramin.

@timhulme6103 8 ай бұрын

Thanks Ramin@@Pensioncraft for answering my, perhaps a little, idiosyncratic question!

@paulb1034 9 ай бұрын

QE had devalued the pound too much and caused inflation especially for imports. QT is being used to bring inflation under control. Run off has the potential to be disruptive, when Gilts mature, the Treasury rolls over the debt, if the BoE aren't rolling over i.e. run off then the Treasury have to find new buyers.

@bfyrth 9 ай бұрын

It's only a big mistake if you know what their end game is

@andredehavilland98 9 ай бұрын

Bailey needs to go .Too busy being over paid and overfed in dining rooms and sleeping it off

@jonathanmontgomery5178 9 ай бұрын

Couldn’t the Bank of England just hold the loss until it recovers through coupons and maturity on its remaining holdings? That’s what the Fed plans to do…

@djayjp 9 ай бұрын

I really don't understand why overnight interest rates affect long dated bonds so drastically. The market shouldn't expect rates to stay at this level for the next 50 years. We're obviously at/near the peak of an increasing interest rate cycle. I guess it's just an issue of too much supply?

@detectiveofmoneypolitics 9 ай бұрын

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@Pensioncraft 9 ай бұрын

Glad you enjoyed it @detectiveofmoneypolitics

@therighteous802 9 ай бұрын

It makes zero difference what you sell. Whether you realize the loss or not is irrelevant, it's still a loss. It's like saying that if you held PTON when it was 50% down you should not realize the loss. Well, it depends what your assumption about the future is. If you think rates will go back to 0%, ok, you can wait for that. But it's still an assumption. What if inflation gets worse (it does tend to come in waves)? You have to realize that the current level of public debt and fiscal deficits in the US and EU has only 1 solution: inflation.

@davidallen513 9 ай бұрын

Government and BoE seem to be both financially illiterate. All of this really worries investors and puts the UK taxpayers on the hook for bad policy decisions.

@rafaelvalerofernande 9 ай бұрын

The BoE has to keep inflation within certain target and to do that has a range of tools. BoE should not be a profit creator for governments but to control the monetary supply. If as a consequence the Treasury get lost it is indeed an intended consequence, namely to reduce the money supply. As the inflation is higher than interest rate the government debts maybe reducing creating the incentive to the government to borrow more and consume more. As you can see otherwise the BoE may need to further increase the interest rates what could affect a lot to people with mortgages.

@stever197037 9 ай бұрын

I'm sure it took profits and now it will take taxpayers money to buy it back. Double down profit isn't anything new for fiat banks. Common for them to rip of the taxpayers.

@mda99das 9 ай бұрын

Also why is no one talking about this, Ramen mentioned UK debt, but we are the 3rd largest holder of US T Bonds. China dumped a bunch was was king of the tree, but now that title goes to Japan, China second, and UK 3rd