BOE's Andy Haldane Channels Zero Hedge, Reveals The Liquidity Mirage And The Collateral Crunch

Tyler Durden's picture


It's not as if this should come as a major surprise to ZeroHedge readers, but to hear officials from the Bank of England pointing out the sub-optimal nature of the financial system's information asymmetries is refreshing. Be it via any one of Andrew Haldane's three so-called arms-races (Returns - the past, Speed - the present, and Safety - the future), analogizing to the winner-takes-all 'sex-fest' blubberiest-optima of elephant seals and their 'extinction' implications, these socially 'bad' financial system outcomes are channeled superbly by the comedic Brit.

Returns to financial capital and financial labor rose to extraordinary levels by historical context in the lead-up to the crisis and were a key driver or propagator of the market's financial instability. Forget "keeping-up-with-the-Jones", this was "keeping-up-with-the-Goldmans" as the returns-race was achieved by leverage.

The current Speed-race, specifically trade-execution times and high-frequency-trading, where he crushes the hopes of every quote-stuffing algo's dreams of 'helping' the financial markets pointing to the mirage of liquidity that is provided as well as the fact that it removes bandwidth from the slower 'rest' of the market and warns "The Flash Crash was no one-off".

Finally he shifts to the future noting that we have seen since the crisis morph to a quest for safety, as opposed to risk/return, as, for example, bank debt investors increasingly seek security or collateral as "everyone wants to be senior or first in the queue" and just as we noted, the central banks have been willing and self-fulfilling participants in this safety race via their loan, purchase, and QE programs and its implicit subordination of everyone else as banks balance sheets become more and more encumbered.

Focusing on macro-prudential (as opposed to micro-based focus) solutions, he suggest capping leverage (and maybe bonuses), enforce order-cancellation rules to end quote-stuffing, and finally a limit on how much a central bank can encumber bank assets may be needed. A must-watch to reassure one's self that some central bankers really get it as unlike before, when nobody would touch on topics covered by ZeroHedge with a ten-foot-pole, at least they do now, if with a one-year delay.


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Mon, 04/23/2012 - 09:59 | 2366576 Squishi
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ZH mainstream...

Mon, 04/23/2012 - 10:09 | 2366602 SilverTree
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Be sure to donate to z/h so they can keep the servers up-to-date and ready for extreme loads like we saw last summer.

Mon, 04/23/2012 - 10:29 | 2366715 Fluffybunny
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Capping leverage/bonuses is something you'd hear out of Obama's/Krugman's mouth though.

Mon, 04/23/2012 - 14:35 | 2367817 Eric L. Prentis
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ZH is leading—intellectually—MSM and academe.

Mon, 04/23/2012 - 09:59 | 2366578 SilverTree
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It's all about the Flow.

Mon, 04/23/2012 - 10:00 | 2366583 Dick Darlington
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Thumbs up for the great work you do!!!

Mon, 04/23/2012 - 10:01 | 2366590 Buzzworthy
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Better early to the party then never to have made it, Tyler.  This is why you keep us coming back.

Mon, 04/23/2012 - 12:40 | 2367302 Imminent Collapse
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Buzzworthy, when you come late to the party, you have to get your own unique Avitar.  Protocol, dude.

Mon, 04/23/2012 - 10:05 | 2366603 midgetrannyporn
midgetrannyporn's picture

Twenty plus minutes is too long for me, especially given the faulty premise. Socially useful parasitic scumbag maggot shitheads? Impossible!

Mon, 04/23/2012 - 10:10 | 2366624 resurger
resurger's picture
Creating a Socially Useful Financial System!

When you are on the sidelines, then maybe!

Mon, 04/23/2012 - 10:14 | 2366637 Stoploss
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The re education must continue at any cost.

Mon, 04/23/2012 - 11:37 | 2367053 Koffieshop
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Be sure to check the other talk given at that presentation:

Dirk Bezemer, IMF ecomist, claims that policies should be adapted right now to SHRINK the financial sector, instead of stimulating it.

Mon, 04/23/2012 - 12:24 | 2367245 prains
prains's picture

stunned silence from the branksters, nice


Mon, 04/23/2012 - 12:59 | 2367399 Sandmann
Sandmann's picture
Andy Haldane talks a lot of sense
Mon, 04/23/2012 - 13:08 | 2367451 proLiberty
proLiberty's picture

Anytime someone uses the word "social" with respect to economics or finance, they are realy attempting to justify socialism, where criteria other than economics are allowed to destroy property rights.


Mon, 04/23/2012 - 13:10 | 2367460 GCT
GCT's picture

They need to send some of the ZH writer's and commenter's to these conferences to speak they may learn somthing.  But that would mean honesty in the markets.  Politicians cannot have the sheeple being taken care of without their intervention.  After all in the end they want people dependent on the governement for their basic needs.  Sad indeed.

Mon, 04/23/2012 - 13:52 | 2367585 q99x2
q99x2's picture

They are covering it now because as society begins to collapse they are no longer certain that they are among the chosen.

ZH cleanses banksters and restores their sight. Do we have a witness? Yes we have a witness. Yes we have a witness.

Can I get a witness?

The ending is hilarious.

Mon, 04/23/2012 - 16:40 | 2368322 smiler03
smiler03's picture

"the Bank of England pointing out the sub-optimal nature of the financial system's information asymmetries is refreshing."


That is what I was just about to type, looks like you beat me to it.

Mon, 04/23/2012 - 22:28 | 2368958 TwoShortPlanks
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"The average American family"...ROFLMAO

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