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pandora's box

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  1. Some of the world’s leading investors have turned bearish on government bonds from developed countries as they warn of the growing danger of inflation. Data this week showing the UK’s consumer price index hit 3.7 per cent in December fuelled that concern and sent benchmark British borrowing costs to an eight-month high of 3.72 per cent. In Europe, inflation has risen above the European Central Bank’s target for the first time in more than two years, leading investors to bet on interest rates rises in the eurozone and UK this year. The trend has caused homeowners to rush to fix their mortgage rates as lenders withdraw their cheapest fixed-rate deals. “Why would you want to be a bondholder with bond yields so low and that sort of inflationary trend,” Bill Gross, who runs the world’s largest bond fund at Pimco, told the Financial Times. “If CPI continues above 3 per cent in the UK and 2 per cent in the US, then we are accepting negative real interest rates, and that is not an attractive investment.” Jim Rogers, a veteran investor based in Singapore, said western governments were concealing the extent of inflation. He would avoid bonds and continue his long-held preference for commodities. “There has been inflation but the US and UK governments lie about it ... Money all around the world is becoming more and more debased so you need to own real assets.” Markets have been pricing in higher inflation expectations since the summer. Break-even rates, which measure investors’ expectations for inflation, have risen steadily since August in the US, UK and Germany to 2.2 per cent, 3.1 per cent and 2 per cent respectively, but they are still reasonably subdued. UK mortgage brokers have reported a surge in demand from private clients for fixed-rate deals in the past week, spurred by the shock rise in inflation. “We’re getting more and more enquiries from clients wanting to fix their mortgage for five years,” said Simon Gammon of Knight Frank Finance. First Direct, Halifax, Yorkshire Building Society and Barclays Wealth became the latest lenders to pull their most competitive fixed-rate products and increased rates by as much as 0.5 percentage points. A survey by Northern Trust found 62 per cent of investors thought global inflation would rise in the next six months, while 53 per cent thought market interest rates would rise this quarter. But their concern was tempered by faith in strong economic growth. Inflation has been strongest in emerging markets such as China, where inflation was 4.6 per cent in December, just below a two-year high, and economists expect strong price increases early this year. However, other well-known investors are sanguine about the inflation outlook. Anthony Bolton, the Fidelity stock-picker who deferred his retirement to invest in China, said: “I don’t think inflation is going to be a major problem ... In this two-speed world, I expect that, despite the higher inflation in emerging markets, the flow of money will still be from the developed world into the emerging one.” Bankers said there was increasing demand among investors for floating-rate debt, where interest payments increase as rates do. But borrowers such as companies are rushing to lock in cheap fixed-rate deals. “There is a big battle brewing here,” said one senior debt banker in London.
  2. There has been inflation but the US and UK governments lie about it. Money all around the world is becoming more and more debased so you need to own real assets. Jim Rogers FT link
  3. The euro project has not gone according to plan... I believe the European bureaucrats have badly misjudged the public mood. Perhaps they are too closely aligned with the plutocracy of the financial and banking sector. FT link
  4. Neither. The Bank of Spain will re-capitalise Santander and the rest with freshly printed euros. Ireland has shown them the way...
  5. Better than that, Spain can now print its own euros as and when required. Fantastico!
  6. Spain will have to print its own euros, no doubt, as Ireland has had to do. WSJ link
  7. The big difference now is that 'those strange goings on' have been confirmed by the ECB.
  8. I was amused to find that The Daily Bell article on the same theme, features a quote from earlier in this thread: It's a small world!
  9. The numbers who voted for and against will not be revealed. The ballot papers were shredded immediately after being counted. Telegraph link
  10. Good work tonight, interestrateripoff. Well done.
  11. And the effect of that will be? (Sheesh! It's like getting blood out of a stone, on here.)
  12. This might be a stupid question, but why will interest rate rises curb inflation?
  13. European finance ministers have increased their support for a bigger rescue fund for debt-laden eurozone countries, but EU paymaster Germany said there was no rush and it could be March before a package of wider changes would be approved. Telegraph link
  14. Britain will be better off when, and only when, the ponzi scheme which is the banking system collapses, and the perpetrators are brought to justice.
  15. Thanks libspero. I suspect there is a huge untold story unfolding; and, for obvious reasons, none of the protagonists is inclined to tell it.
  16. As I write, 158 users are reading this topic. Surely one of you can answer my question!
  17. I think people will stop paying their mortgages and use the money for day to day living. What is the average time from first missed payment to repossession, nowadays?
  18. What would fiscal union look like in the case of the Eurozone, scepticus? (Please try to keep it simple).
  19. What do you think the implications are of the realisation that any central bank within the Eurozone can print its own Euros if it needs to?
  20. I think the repossession process has been dramatically lengthened since the start of the credit crunch. Can anyone confirm this?
  21. This is a horror story: it shows the cataclysmic condition of the Irish banking system, said Tim Congdon from International Monetary Research. "The banks have borrowed €183bn in total, or 110pc of Irish GDP. They have burned through all their capital and a lot of their deposits as well. This is going to end up on the national debt". Ambrose Evans-Pritchard link
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