Wednesday, Dec 10, 2008
BOE expected to cut by another 1% as early as next month
Times: 0% interest rate on the horizon as economy shrinks twice as fast
Alistair Darling’s hopes that growth would resume in the second half of next year were hit yesterday by predictions that the recession could turn into a slump worse than that of the early 1980s. Experts said that the economy would shrink by 1 per cent or more this winter as it emerged that British industry is contracting at the fastest pace since 1991. Output from factories, power stations, mines and the North Sea plummeted in October by 1.7 per cent, leaving it 5.2 per cent down from levels a year earlier. The speed at which the economy is shrinking has doubled to at least 1 per cent in the past three months, from an already severe 0.5 per cent officially reported for the third quarter, according to the National Institute of Economic and Social Research.
5 Comments
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1. bertywooster said...
If the interest rate is 0% and the banks are "forced" to pass on the rate, then a loan becomes very attractive. Borrow money, wait for inflation to erode the capital sum and repay at a later date. It is truly the economics of the mad house. The moral hazard has become the new reality. It is the final nail in the coffin of self respect, and personal responsibility.
Those of us that choose not to borrow excessive sums to buy over priced property are the new underclass, ignored and exploited. The next generation of talented and educated individuals will refuse to pay the excessive debt burden piled up by this immoral government and move abroad. I know I would, if I could. Germany anyone?
2. Browneconomy said...
Isn't it time for SAVERS to get together to protect our rights?
There are 6 SAVERS for every BORROWER
Inflation is still running at 4.7% which is 2.35x the base rate. Hardly any incentive to be prudent - true (which is the aim to encourage spending and hence aggregate demand) but there are 10's of millions of people dependant on bank interest for their living and speaking for myself I am cutting back because (a) my income has dropped and (b) I am anticipating further falls in base rates & hence my income.
The authorities seem to think that 1930's & 1970's (Keynsian & Friedman) policies will be the solution to a 0's problem.
The reality is that low interest rates are exasperating the problem - prudent savers are being forced to cut back their spending & prudent borrowers (isn't that an oxymoron) are using lower interest rates to pay back borrowings (i.e. in effect prudent savers are subsidising prudent borrowers repay their loans). All the time imprudent borrowers are being let off the hook.
3. a saver said...
Browneconomy @2"Isn't it time for SAVERS to get together to protect our rights?"
Couldn't agree more, I am outraged at the ripoff interest rates and as for homebuyer bailouts don't get me started!
You wonder how many people will just vote with their feet and emigrate, I'm thinking about buying a place in the sun with my swiss francs.
4. Basil Bell said...
A saver, I hear afganistan is nice and sunny!! and I dont think they had a boom in property prices so you should be ok. There is plenty of work there, if you know what to do with poppies. The future looks bright for you, and Im happy for you. Any chance you could take some of the other moaning gits from this site with you.
5. Browneconomy said...
a saver @ no 3
What can we do?
I would love to organise a savers strike - a mass withdrawal on a particular day. A withdrawal of just 5% of balances would cause the whole system to come crashing down (ok for you with sfr!). How can I begin ? Savers as a group are just too disparate
I have written to my MP & suggest all concerned people do likewise. Nothing will be achieved I am sure but its a step - there is a petition on the no10 website, but the media wont act for us.
Thinking about a strike could we not organise a strike by the threat of not buying newspapers (unless they fight our cause) - I wonder what the % of savers2borrowers are represented by the quality newspapers?