Bank Of England Raises Alarm On Subprime Lending

Andy’s Notes: This situation should easily qualify as the perfect shining example of hypocrisy in the next release of Webster’s dictionary. The BOE has supervised the inflation of one of the world’s largest asset bubbles in the form of housing in the UK. Everyone knows (sic) that ‘good’ inflation is risking stock markets and home prices (unless you’re a buyer) and that ‘bad’ inflation is when bread and milk increase in price. Lost in it all is the exercise in futility going on here. Globally, central banks have decided that the only way to keep the game of musical chairs going is to continue to inflate asset bubbles. When they go wrong, the blame is distributed evenly at the feet of everyone except those with the best ability to prevent the mess in the first place. Meanwhile, the debt from the cleanups associated with these bubbles continues to accrue at an alarming rate, but the BOE (nor anyone else) is going to mention that. The proletariat might get wise to the whole sham and stop borrowing. We left the bit at the end about chocolate and meat prices and inflation to use as another example of how the mainstream mean has it completely backwards – inflation is a monetary event, not a price event. All else equal, prices rise because of inflation, NOT the other way around.

The Bank of England has issued a stark warning over the rapid growth in lending to indebted companies around the world, drawing parallels with the US sub-prime mortgage market that triggered the 2008 financial crisis.

Threadneedle Street said Britain was not immune from a global boom in risky lending that had alarmed financial regulators around the world this year, with the US market for such loans more than doubling since 2010 to surpass $1tn (£763bn).

“The global leveraged loan market was larger than – and was growing as quickly as – the US sub-prime mortgage market had been in 2006,” the central bank said of the rapid growth in leveraged loans, which are defined as loans to firms that already have debts worth more than four times their earnings.