'Let the jury consider their verdict,' the King said, for about the twentieth time that day.
'No, no!' said the Queen. 'Sentence first - verdict afterwards.' From "Alice in Wonderland"
'Brexit' is seen as the cause of so much these days that it may be
timely to point out that: a) it hasn't yet happened; and b) not much
may actually change on the economics once things get underway.
So, what are we witness to? A ripple on the surface of things still to come?
Payback for 2008 when banks should have been allowed to exit via bankruptcy
and clear the bad debts built up from years of fraud and greed? What was
mortgaged into the future may now become due, and, in my opinion, the UK
sensed that if it was to manage its share in any collapse, it was best
done outside the control of the European Commission. And financial troubles,
being man-made, are manageable, however painful they might be, but you
have to have full freedom, at minimum, to act via your Central Bank.
Which in a way, brings me to the curious decision of the Bank of England to
suggest a cut in interest rates, some say from 0.5% to 0.25%. But before
getting down to the price of Bitcoin, lets think about the wider implications.
The announcement seemed to be a response to the market's clamour that
something, anything, must be done, which in itself was probably a
self-fulfilling result of Project Fear, and over-hyped falls in the value
of Sterling.
The BoE's mandate is for the operation of UK banks, and a cut in rates would
harm the profitability of that sector, hence the delay in taking action. So
who might profit from a cut in rates, apart fro the usual suspects who
profit from turmoil in the markets? In the long run, UK manufacturing, but
not enough to make a difference now. Property, including housing and
commercial real estate (CRE)? Since Financialisation the banks have been
bunged to the gills with this stuff. Well, thanks to government policy,
and the worldwide race toward NIRP, the rentier sector has reached altitudes
where oxygen starvation is a distinct possibility - witness the panic in
the UK property fund sector, with redemptions gated, and prices cutting back
several year's gains.
http://www.zerohedge.com/news/2016-07-06/dramatic-twist-uk-property-fund-cuts-value-its-assets-17 Hmmmm ... will it work? If debt increases, certainly yes. More debt boosts
GDP immediately, but has to be paid for later. But where will the money
come from? Usually interest rates are raised to bring money into the UK, and
it is a signal toward to instabilities in the present arrangements that
it can be suggested that cutting rates might boost sterling. Where might money
go if it wants out of the UK? Not Europe, probably not Japan, though
anything seems possible these days, Switzerland's negative rates? Hmmmm ...
The broader picture of worldwide declining interest rates has Central Banks
acting like beaters on a grouse moor, driving investors toward US corporate
debt to the benefit of global corporations such as Amazon. That has
implications best left for another day, and perhaps to another forum.
http://www.zerohedge.com/news/2016-07-07/reason-relentless-scramble-us-corporate-debt-one-chartAnd the implications for Bitcoin? That may depend on where you live, and your view
of your currency. For the UK, it remains to be seen whether Mr Carney follows
through with a cut to interest rates. He seems to have played better than his
counterparts thus far, though as they say, past performance is no indication
of future returns. Given the turmoil of UK's politics, bitcoin may seem
attractive right now.
