Bank of England

Zero Hedge has been warnings about the scourge of High Frequency Trading long before most in the general public had even heard about the concept. Over the past 2 years, and culminating with the Flash Crash it became all too clear that HFT is nothing but a parasitic phenomenon which churns volume in stocks providing the best liquidity rebates, while pretending to be adding liquidity. Recently the best we can do is to provide glaring examples of HFT algos gone wrong in hopes that some regulator somewhere will finally take the long overdue step to establish a minimum bid/ask time delay and thus put virtually the entire HFT frontrunning math Ph.D. crew out of business. The latest development in the ongoing saga against these parasites comes from none other than the Bank of England's Andrew Haldane who prepared a speech to the International Economic Association Sixteenth World Congress in Beijing China, titled "The race to zero" which essentially recaps the hundreds if not thousands of posts we have written on the matter of risks posed by High Frequency Trading, and blasts the concept, as well as the toothless captured regulators who continue to exist in their zombie, porn-addicted state, and refuse to move one finger to finally end this next Flash Crash-in-waiting.

Both completely in line with expectations. And since the BOE is anything but the PBOC which is actively tightening, the GBP barely budged on the priced in news. The minutes of the meeting will be published on July 20 and 9.30 am. And now everyone shifts their attention east to the ECB where in a 45 minutes Trichet is expected to hike rates by 25 bps or else China will have a full day on its hands buying the EUR dumpathon.

The stealth (or not so stealth any more) take over of the world by Goldman Sachs continues. Following the withdrawal of Axel Weber from ECB contention, and his almost guaranteed replacement with one Goldman alumnus Mario Draghi, now Goldman is set to take over the trifecta of Central Banks (since another Goldmanite Bill Dudley already controls the New York Fed): the BBC reports that: "the new member of the Monetary Policy Committee (MPC) will be Ben Broadbent, a senior economist at Goldman Sachs." Not at all surprisingly "he will replace the leading proponent of rate rises, Andrew Sentance, when he leaves the Bank of England's interest rate committee in May." We wonder what Goldman's "bent" on dovishness will be. Next up: Goldman just needs to plant its operative at the BOJ and the SNB and the company's global take over will be complete.

Mervyn King confirmed in 2008 what many people have been saying for years ...

All in favor, say "Aye"

As part of the reactivation of its FX swaps with the Federal Reserve, the Bank of England also reactivated its dollar repo operation. As announced, "these operations will be at fixed interest rates with counterparties able to borrow any amount against eligible collateral. The first tender will be held on Tuesday 11 May. The Bank will keep the frequency and maturity of its US dollar operations under review, in light of market conditions." And in light of the assumed scarcity of dollars in Euroland it was somewhat surprising that today's dollar repo reopening after a 5 month hiatus (the last such transaction occurred on January 27) saw exactly zero bids. We speculate that since the dollar repo was attempted at 10 am GMT, that the swap line is now active, although we have not yet seen anything in the form a term sheet or a press release from the Federal Reserve. But who are we to presume that the Fed would be accountable to anyone, let alone us, and disclose something as irrelevant as information to the general public. Yet the take home is that England, at least so far, is not in need to dollar denominated funding. Which means, as we have long speculated, that "lack of USD liquidity" ground zero is most likely France, and Germany is probably in second place.

"As Nobel-prize winning physicist Richard Feynman observed, to call these numbers
“astronomical” would be to do astronomy a disservice: there are only hundreds of billions of
stars in the galaxy. “Economical” might be a better description. It is clear that banks would not have deep enough pockets to foot this bill. Assuming that a crisis
occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of
$1.5 trillion per year. The total market capitalisation of the largest global banks is currently only
around $1.2 trillion. Fully internalising the output costs of financial crises would risk putting
banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite." Andrew Haldane, Executive Director Bank of England

An article written by University of Tennessee professor John R Garrett, "Monetary Policy and Expectations: Market-Control Techniques and the Bank of England, 1925-1931" which describes in exquisite detail the gold falsification measures undertaken by the Bank of England in the interwar period in order to impact interest rates in a favorable direction, performed with the full criminal complicity of the Federal Reserve Bank of New York, may mean paranoid "gold bugs" could soon be forever absolved of their "tin hat" wearing status as outright gold, and other data, manipulation by a major central bank is now proven beyond doubt. The implications regarding the possibility of comparable deceitful and treasonous acts by modern central bankers are staggering.

In the latest attempt to prove that nobody ever learns anything from history, the Bank Of England is practically betting the Devonshire farm that by putting the UK's economy on nitrous, it will recapture all the lost output during the recession, and that it will be able to time the stimulus exit perfectly, thus avoiding hyperinflation, or so thinks Citigroup economist Michael Saunders. We are fairly confident that the Weimar Republic also did not have hyperinflation as a policy end goal. Saunders was quoted by Bloomberg, that “Policy has been set to produce a boom to close the output
gap in the next few years.”

The Bank Of England has announced that it is excluding the 5% 2014 and 8% 2021 gilts from buybacks until notice. As this is likely indicative of the major weakness in the gilt curve, the US better sell all the 5-12 year comparable Treasuries it can asap.

UK faces quite considerable headwinds
UK banking system not in strong position to lend
UK recession put downward pressure on inflation
BOE has bought GBP 96 billion of assets in APF
"If you withdraw stimulus too quickly face risk of renewed downturn"

UK faces quite considerable headwinds
UK banking system not in strong position to lend
UK recession put downward pressure on inflation
BOE has bought GBP 96 billion of assets in APF
"If you withdraw stimulus too quickly face risk of renewed downturn"
"Obvious first step to tighten policy is to raise bank rate, not on verge of doing this"
"More concerned about below target inflation than deflation"
"We do need more powers to control the growth of financial sector"