What the 5.5% UK base rate means for markets

As everyone knows, the Bank of England's decision to hike interest rates last week is set to make life much more difficult for homeowners. But what about the commercial property market - and equities?

Barron's recently published an article by Randall W Forsythe, headlined "Pouring over the notion of liquidity". An important point that he makes, which has often been reported in this letter, is that commercial banks, under the jurisdiction of Central Banks, no longer control credit. When they did, it was possible to measure the amount of credit by looking at the liability side of the banking system's balance sheet. Now credit is mostly created entirely outside of the banking system by the issue of corporate bonds plus a mind-blowing array of derivatives that Randall W Forsythe says "grow like mushrooms after a spring rain"!

Credit markets continue to expand

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