Bank Underground

https://bankunderground.co.uk/ Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.

Guess you disagree with the Bank of England. https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-… Or Werner, the guy who coined the ideas behind the (since basterdized) QE: http://www.sciencedirect.com/science/article/pii/S1057521914001070 Banks are not intermediaries. Just where do you think all the new money is coming from?? $100K used to be worth something, it's worth sweet FA now for land. Banks issue money against land. There are two tiers of pricing as a result: 1. land - insane increase 2. everything else - mostly falling in price Banks are the new churches, vast open receptions with hundreds of square feet to be in awe of in city centers.

I think this is quite similar to this analysis of the effects of the more recent supply chain issues on US inflation and the Phillips curve: https://bankunderground.co.uk/2023/07/05/did-supply-constraints-tilt-t… There's a lot of technical details on how they measured this exactly, but the rough conclusion is that supply chain constraints steepen the Philips curve and cause monetary policy to have a much greater effect on inflation than it normally would, rather than having less effect as bank economists apparently wrongly thought in the 1970s. This probably shouldn't be a surprise - after all, if the oil or other basic things needed to increase production isn't there, there's no way for the expansion in production that would be needed to stop this from being inflationary to happen. Yet even now, there seems to be a widespread popular belief that because the cause of inflation is supply side, there's no reason for central banks to raise interest rates and they're just making things worse for no reason by doing so.

> interest rates are high Interest rates are lower than they have been for most of my life, and close to the average interest rate over the last 700 years. https://bankunderground.co.uk/2017/11/06/guest-post-global-real-intere… People have simply gotten used to governments in the last twenty years trying to juice their economies by dropping interest rates more and more.

Bank underground view https://bankunderground.co.uk/2016/01/20/the-cheque-republic-money-in-…

It was a real bond purchase. The money just came from the Bank of England reserves, and the BoE was private at the time (although had very strong links to the Government). Eg: The episode marked an important step on the Bank’s transformation from private institution to a central bank.. A decade after the Armistice, the altered role of the Bank prompted creation of a Parliamentary commission to examine its functions, ultimately setting it on a path to nationalisation See https://bankunderground.co.uk/2017/08/08/your-country-needs-funds-the-…

I'd never heard of this - fascinating. For others who are interested, there's a decent, referenced, account from the Bank of England's blog here: https://bankunderground.co.uk/2016/01/20/the-cheque-republic-money-in-… Doesn't sound like there was "no harm to the economy" though, except in the broader sense. A quote from an Irish building contractor cited in the article: "I employ only 10 people. If it hadn’t been for the bank strike I’d be hiring 30. I’d say I’ve lost up to £20,000 over it ... One of my problems is finding the money to pay the wages. I run round from Wednesday to Friday to scrape them up, and in that time I can do no other work."

Second post in the series at https://bankunderground.co.uk/2019/09/06/houses-are-assets-not-goods-t… with data from the UK market.

By comparison, and a heartening story against collapsism, in the Irish Banking Strike the country turned to a system of informal credit mediated through pubs. http://www.independent.co.uk/voices/comment/we-can-all-get-by-quite-we… https://bankunderground.co.uk/2016/01/20/the-cheque-republic-money-in-… https://www.quora.com/How-did-the-Irish-deal-with-the-1966-1976-bank-s…

Although the article has little evidence substantiating it, and many, many argument flaws, I do think its main hypothesis is correct, and the current unemployment is not caused mainly by automation. If you look at the graphs at [0], productivity is falling, not increasing, as is capital. It looks much more that the world is getting old-fashioned poor than automation pushing people out of work. EDIT: Forgot the link 0: https://bankunderground.co.uk/2016/11/17/there-are-two-productivity-pu…

Gilts have historically been there-or-thereabouts in terms of interest rate with respect to US Bonds. Certainly in the last decade they are near indistinguishable. https://bankunderground.co.uk/2015/08/28/the-special-relationship-uk-a…

The top post [0] leads with a factually incorrect assertion: >Peer-to-peer lending platforms (P2P platforms) emerged after the financial crisis by catering for pent-up demand for unsecured borrowing from individuals and small businesses. Prosper was started in 2005 and the article's primary example, Zopa, started in 2004. [0] https://bankunderground.co.uk/2016/05/03/the-growth-of-peer-to-peer-le…

I also groan at this. You, or readers, may be interested in this article from the Bank of England's blog, which provides a somewhat more modern/real-world version of the 'money multiplier' i.e. market operations to provide liquidity/funds/interbank/creation of liabilities to fund assets (lending)/balance banks' sheets on lending, which has been the case for years now. https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-… An excerpt: > In the simple ILF model, bank loans represent the intermediation of real savings, or loanable funds, between non-bank savers and non-bank borrowers. Lending starts with banks collecting deposits of real resources from one agent, and ends with the lending of those resources to another agent. In the real world, however, banks never intermediate real loanable funds, an activity that, correctly understood, can only amount to barter. > Rather, the key function of banks is the provision of financing, meaning the creation of new monetary purchasing power through loans, for a single agent that is both borrower and depositor. Specifically, whenever a bank makes a new loan to a non-bank customer X, it creates a new loan entry in the name of customer X on the asset side of its balance sheet, and it simultaneously creates a new and equal-sized deposit entry, also in the name of customer X, on the liability side of its balance sheet. The bank therefore creates its own funding, deposits, through…

This is a great site for anyone who is interested in macro economics and global credit issues. I've followed it for the past year and here is a list of "curated" articles from the blog that I found interesting enough to bookmark and make notes on: https://bankunderground.co.uk/2016/05/03/the-growth-of-peer-to-peer-le… https://bankunderground.co.uk/2016/03/22/1602/ https://bankunderground.co.uk/2016/03/18/ https://bankunderground.co.uk/2015/10/30/rational-and-behavioural-driv… https://bankunderground.co.uk/2015/10/20/does-oil-drive-financial-mark… https://bankunderground.co.uk/2015/10/14/is-starting-a-new-market-like… https://bankunderground.co.uk/2015/11/19/regulatory-arbitrage-in-actio… https://bankunderground.co.uk/2016/01/15/testing-the-test-how-reliable… https://bankunderground.co.uk/2016/02/29/stress-tests-the-small-print-… https://bankunderground.co.uk/2016/03/31/modelling-banking-sector-shoc… The bank of England has been very lucky with the people it has had lead it in the past 20 years. It had Mervyn King lead it up until recently and since then Mark Carney, they stole him from the same position in Canada:(, has lead them. …