Saturday, Mar 28, 2009
Oh, if only this were true...
Daily Express: INTEREST RATES SET TO SOAR, WARNS BANK'S CHIEF ECONOMIST
I don't know what sort of stupid game they are playing. Is this part of some stupid plan to stampede people into buying now and/or taking out longer term fixed rate mortgages? Our government has spent the last two years desperately trying to prop up property prices by fair means or foul (and there's no reason to assume that the Tories will be any different) so allowing the 'totally independent' MPC to up interest rates just ain't going to happen. I suppose they might just flip back to using RPI instead of CPI inflation or something.
Posted by mark wadsworth @ 12:27 PM (1287 views) Add Comment
12 Comments
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1. bidin'matime said...
I've been telling people double figure interest rates within 5 years.
2. little professor said...
It sounds true enough to me. Inflation is already rising again month on month - once the flood of printed cash reaches the system the only way to control things will be double digit interest rates.
The headline should scare quite a few people.
3. crunchy said...
A race to the bottom then to the top in defence of currencies. Blood bath!
4. str 2007 said...
Sorry, but if they were targetting inflation they should be putting interest rates up now CPI (which they use as a measure) is more than 50% above target and rising.
They won't put up interest rates for a while yet.
They will make various excuses as to why and will probably revert back to using RPI (if that gives them a lower figure) or just change the target.
I hope I'm wrong but suspect I'm right.
5. uncle tom said...
My reckoning is that the most likely course of events goes something like this:
1) The ECB decides NOT to indulge in QE
- why?
Because within the ranks of the freeloading eurocrats, MEP's and ECB policymakers lies a large contingent who desperately want the euro to displace the US dollar as the world's #1 reserve currency. They will see the current crisis as an opportunity to achieve that dream, and will take the view that making eurozone exports uncompetitive (at least in the near term) is a price worth paying.
In their eyes (financially cushioned as they are) they will argue that the ends justify the means.
They can actually make quite a good argument that it will make the eurozone a popular place to deposit savings, allowing them to borrow at low interest rates.
2) The ECB position makes the UK funding gap impossible to bridge from overseas deposits.
Thus forcing the BOE to make successive rounds of QE. The pound will fall well below the value of the euro, and the dollar will also fall against the euro. Commodities will begin to rise as the world begins to pick itself up, and will start tracking the euro more closely than the dollar. This will further increase the price of UK imports.
3) UK industry, despite a more competitive position, will be very slow to recover.
We have neglected industrial skills training, indulged far too much 'elf 'n' safety rubbish, and built houses on too much industrial land. The planning process for industrial development is much too cumbersome.
The increased price of imports will therefore impact heavily on our balance of payments deficit. Moreover, with depressed tax receipts and high unemployment, the BOE will have no option but to continue printing money. The official forecasts for growth in 2010 and beyond will not materialise.
4) Inflation will kick off, and as the MPC cannot set rates that are much below RPI, so too will interest rates.
This engine for inflation looks far more potent than the one that kicked off in the seventies, so hold tight for a rocky ride..!
6. crunchy said...
4. str 2007
If you go to your trading booked marked page, I have a link there for you that you may want to look into.
7. little professor said...
Very insightful, UT. The replacement of the dollar by the euro as the next reserve currency is a dead cert to me.
8. crunchy said...
I don't think the US will just sit back and let that happen little professor.
Not any time soon, imho.
9. quiet guy said...
"I don't think the US will just sit back and let that happen"
Cruncy, I doubt that the dollar will be will be able to maintain it's reserve currency status in the long term. Unfortunately, the only scenario I can see in which the Euro becomes a reserve currency is a dollar collapse and that will not be fun for anybody.
10. str 2007 said...
Crunchy
Cheers, got that.
11. crunchy said...
9. quiet guy
That depends on what you are doing with the possible dollar collapse. No mercy!
12. rotten tomato said...
I'm not sure that a dollar collapse will bode well for the Euro, considering that most currencies (even the Euro) are backed by US $. And considering also that most commodities are priced in $ too, a $ collapse will be the harbringer of hyperinflation. Has it crossed anyones' mind that the hyperinflationary solutions being put forward by the bankers to this debt problem, followed by drastic spendic cuts and high interest rates, are very similar in nature to the nazi type solutions adopted by Hjalmar Schacht in 1920-40 Germany? Seems to me the banksters "solution" is always the same medicine for the people. As always it's the least ready and least protected who will bear the full brunt of what's coming.
I hope that some sanity prevails (i.e. that some politicians grow a conscience) and that a different road is found. For example a two tiered credit system with a) very low interest credit for industrial and infrastructure/power projects; and b) reasonable interest rates for ordinary savers, so as to protect the savings of families and not force them to gamble their hard earned money on the stock exchange. Derivatives and other forms of higher risk gambling should be abolished.