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Wednesday, 10 February 2016

Peer to peer lending

Carney was on the 'phone this morning. Did I hear Lord Turner on the BBC? Peer-to-peer lending grown to £6billion. Couldn't believe it had got so big. There were only about a thousand peers, right?
Seven hundred and ninety, I corrected.
OK so that makes it ... erm..about £750k each?
Seven point five million each, I corrected (numbers were never his strong spot).
Seven point five mil each!!???
During the stunned silence that followed, I reflected upon the tawdry business that Carney had brought to my attention. It was not news to me, of course. I knew first hand that it was not possible to walk from one end of the House of Lords bar to the other without being pestered by swarm of peers offering or begging for loans. I also knew what Carney possibly didn't, that an informal derivatives market had been established in the members' cloakroom on the second floor, where IOUs were more numerous than the paper towels.
Carney's shrill voice recalled me from my reverie. How can it possibly be seven point five mil each? Surely they don't all have that kind of money, even with all the bungs?
It took time, but I finally explained, through a series of childish analogies involving the exchange of baseball cards, that the £6billion figure was a simple sum of the absolute values of each of the individual peer-to-peer transactions- many of which where simply selling a loan on, or borrowing money at a lower rate to offer it on at a higher one- rather than representing a real indebtedness of £6billion among our noble peerage. He didn't quite understand me, but he could at least appreciate that it was more complicated than he had first thought, and he signed-off promising to 'think about it a bit more before the next MPC'.

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