Bank of England Head Carney Hits the Panic Button, Announces Emergency Measures To Flood the System with Liquidity
July 6, 2016 (EIRNS)—Mark Carney, the governor of the Bank of England, who doubles as the head of the Basel-based global policy-making Financial Stability Board, yesterday announced a series of urgent measures to deal with the "challenging outlook" and the "risks that have crystallized" in the wake of the Brexit vote, which include "reduced and fragile liquidity in core financial markets." The measures amount to a damn-the-torpedoes attempt to flood the system with hyperinflationary liquidity on all fronts, to forestall what is a blowout already underway.
At the same time that Carney was releasing the Bank of England’s twice-yearly Financial Policy Committee (FPC) report, which included the new measures, Chancellor of the Exchequer George Osborne was meeting with the City of London’s top bankers to discuss the crisis and measures being taken to try to prevent the inevitable meltdown of the system. As Business Insider reported yesterday:
"The talks show just how seriously Osborne is taking the threat of the Brexit vote to the UK’s national economic health. The last time such a congregation of banking chiefs was summoned to Number 11 [Downing Street, the Chancellor’s official residence—ed.] was during the 2008 financial crisis."
Lyndon LaRouche commented today that this announced British policy is a "policy disaster, which will not lead to anything except the total bankruptcy of the entire British system." He said there is zero possibility of recovery under the current system; they may try to "hide the disaster" for a short while, which they have done in the past, "but there is no solution for the bankrupt British system," which has to be entirely replaced.
Carney’s announced measures include:
Dropping the extra capital reserve ratio that British banks must hold from 0.5% to 0%, which frees up 5.7 billion pounds ($7.4 billion) in reserves, which presumably increases the banks’ lending capacity by $195 billion. The Bank of England’s stated policy, until yesterday, had been to increase the ratio from 0.5% to 1.0% in the near future. Carney announced that 0% would stay in place for at least a year.
Suggesting that the BoE will be further reducing interest rates and/or increasing quantitative easing at their July 14 meeting.
Calling for a "re-think" of the new Basel Committee regulations, especially regarding derivatives, to make it easier and more profitable for banks to issue derivatives. The Bank of England "encourages the Basel Committee to review carefully any possible unintended effects of forthcoming leverage ratio standards on the ability of the banking system to cushion shocks and to draw on central bank liquidity facilities as necessary."
Or, as the FPC report states:
"The FPC stands ready to take actions that will ensure that capital and liquidity buffers can be drawn on, as needed, to support the supply of credit and in support of market functioning.... As the outlook evolves, the FPC stands ready to take any further actions deemed appropriate to support financial stability."
Carney elaborated in comments to the press: "It’s important to ensure that there is no question about the availability of credit."