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pilchardthecat

Are We Going To See Double-digit Interest Rates?

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Curious to know your predictions/timescales on medium term rates.

Should we plan for;

(early 09) low rates, dropping inflation, dropping pound

(late 09) currency devaluation and QE leads to hyper inflation

(2010) 15+% interest rates

or wot?

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Curious to know your predictions/timescales on medium term rates.

Should we plan for;

(early 09) low rates, dropping inflation, dropping pound

(late 09) currency devaluation and QE leads to hyper inflation

(2010) 15+% interest rates

or wot?

In my view, QE will fail to slow down deflation for at least three years. The transition from deflation to inflation will occur when the crushing cost of the QE gets fed through into our inability to fund our debt which feeds through into a true collapse of sterling.

This is the necessary condition for hyperinflation and is probably at least five years away from happening.

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In my view, QE will fail to slow down deflation for at least three years. The transition from deflation to inflation will occur when the crushing cost of the QE gets fed through into our inability to fund our debt which feeds through into a true collapse of sterling.

This is the necessary condition for hyperinflation and is probably at least five years away from happening.

Do you see the collapse of sterling impact inflation in the short term as we import so much of what we consume here?

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Not sure about double digit, but 4%-5% in the not too distant future might be possible if the need to do something about Sterling's value becomes pressing.

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Curious to know your predictions/timescales on medium term rates.

Should we plan for;

(early 09) low rates, dropping inflation, dropping pound

(late 09) currency devaluation and QE leads to hyper inflation

(2010) 15+% interest rates

or wot?

Yes to

(early 09) low rates, rising inflation, dropping pound

(2010) 15+% interest rates

Edited by threetimesdead

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Do you see the collapse of sterling impact inflation in the short term as we import so much of what we consume here?

It has to be the case. We are not a global reserve currency so we are not a convenient place for exporters to park their cash. Large and increasing debt to be financed leads to a weaker Sterling which leads to higher import prices which leads to inflation.

I see this as a process which has to go through the various steps sequentially. We won't go straight to the doomsday scenario immediately but I cannot see any alternate paths at the moment.

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Not sure about double digit, but 4%-5% in the not too distant future might be possible if the need to do something about Sterling's value becomes pressing.

4%-5%?

Not much really. If Sterling collapses, personally I think they might need higher interest rates than that to tempt foreign investors back.

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whatever nominal interest rates are, you can be sure they'll be negative in real terms.

same old.

"Same old" relies on the crucial assumption that we retain control over our interest rates.

With the explosion in our outstanding debts, I suspect that control of our interest rates is about to be ceded to international markets which will drive up our real interest rates.

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With the explosion in our outstanding debts, I suspect that control of our interest rates is about to be ceded to international markets which will drive up our real interest rates.

Nope:

:lol: I'm sure bond holders would love us to pay them a real rate of return but it ain't gonna happen: we're broke!

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Dear Saver

Following the Bankrupt of England's decision to reduce the base interest rate to 1.5% 3 weeks ago, please note the interest rate on your MugYou Direct Savings Account was reduced by the same amount 20 days ago and remains at that lower rate now.

We hope that you will continue to save with us as we offer safety and security compared to your mattress.

Yours sincerely

D Crosser

________________________________________________________________________________

____________________________________

Dear Saver

Following the Bankrupt of England's decision to raise the base interest rate 5 weeks ago to 7.5%, please note we are delighted to inform you that the interest rate on your MugYou Direct Savings Account will be increased to 5.25% from tomorrow.

Yours sincerely

I Laughatu

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Get out, go shopping, compare your bills with 3 weeks ago and emigrate OR BID for the No10

...happened in the early seventies...stock up on deep freezes for the garage ...buy your food now and freeze it for medium term to hedge inflation... <_<

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I've been thinking about where interest rates are going medium term.

In the short term, it seems to me the government has said, whoa, our credit markets have frozen so let's make credit cheap in an attempt to get them working again. Don't worry about inflation and as our economy has hit the buffers and deflation is more likely.

But now our pound has tanked, can they keep interest rates there? How is government borrowing or gilts linked to interest rates? Can the nation have a low base rate and still be able to borrow?

I think we don't discuss where interest rates are going on here much anymore because we know where they should have gone, and aren't really impressed by where they did go. But could they be forced to put them up? It seems to me, that they are rather stuck. If they had to put them up to a whopping 7.5 percent, you'd get heaps more reposessions.

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There is so much UK gov't debt that the UK gov't simply cannot afford to pay any positive real rate of return on their bonds. It's that simple.

Is there any reason why you contradict yourself in this post to an earlier post by yourself in this thread?

Or you just happened not to notice it?

Edited by threetimesdead

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I think we don't discuss where interest rates are going on here much anymore because we know where they should have gone, and aren't really impressed by where they did go. But could they be forced to put them up? It seems to me, that they are rather stuck. If they had to put them up to a whopping 7.5 percent, you'd get heaps more reposessions.

While the base rate may be low, mortgage rates aren't especially if your a first time buyer. Lets be honest the level of interest rate is to sucker people into onto variable rate mortgages, the punch comes when the government does have to increase base rates.

In my opinion anyone who is not fixing their mortgage for as long as possible is going to be in trouble. Anyone buying at this time on a variable rate mortgage needs their head examining, while they may be able to afford the mortgage now what happens if the interest doubles in a very short space of time.

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Curious to know your predictions/timescales on medium term rates.

Should we plan for;

(early 09) low rates, dropping inflation, dropping pound

(late 09) currency devaluation and QE leads to hyper inflation

(2010) 15+% interest rates

or wot?

its a no brainer that people will not leave savings in accounts paying less than inflation.

it might take time to get the message out, but the penny will drop. = flight of capital.

the government expect flight to home, tat spending,

but thats not the nature of a saver in hard times.

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I would expect the collapse to come sooner rather than later. Doesnt the govenrment have to roll over and raise a large amount of cash this year? If they cant sell their debt which I suspect is unlikely given the amount the rest of the world will need as well then they will have to print. I suspect this is when things will start to fall apart.

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Eventually, Godron and Manic Merve's "Strategy" if it can be dignified thus, of synthetically depressing base rates, will have to be reversed: simply to defend the pound.

With a hugely overheated supply side economy anyway, this ought to have been seen two or more years ago!

We know precisely why Godron didn't want to insist Manic Merve and his coterie of tossers on the MPC resisted raising base rates: since to have done so, would have instantly tripped the housing market into meltdown.

When rates do inevitably rise, those over-mortgaged pillocks will not be able to debt sevice their obligation: let alone repay principal!

How many? 2 million is a good estimate.

All of which of course, creates another instant problem socially, financially and fiscally for Godron and his mentally-challenged sidekick Dysfunctional Darling

At present as we know, B of E's Base Rates are in any case wholly disconnected from market reality.

If anyone knows a bank lending at around Base + 2, please do let us all know!

That said, as banks are not particularly lending vigorously into the market right now, it is impossible to really state what the level of disconnect actually is.

It is very much like the nonsense emerging from lender's Chief Economists (Finola springs to mind!) and the RICS: since the housing market is fundamentally static, there are far too few real sales out there from which to adjudge what the market level actually is.

Expect G7 and IMF to insist on rapidly rising sterling base rate: in any case, the market will set the true level, when Godron and Manic Merve try and flog hundreds of billions of £sworth of new Gilts: at the same time as depreciating the currency by churning out too many notes.

As I've said before, two nice words come readily to mind: Paint and Corner!

:rolleyes:

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4%-5%?

Not much really. If Sterling collapses, personally I think they might need higher interest rates than that to tempt foreign investors back.

Yes but that keeps the crash going increasing bank losses further.

Debt levels are unsustainable.

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There is so much UK gov't debt that the UK gov't simply cannot afford to pay any positive real rate of return on their bonds. It's that simple.
QUOTE (InternationalRockSuperstar @ Jan 24 2009, 10:54 PM)

There is so much UK gov't debt that the UK gov't simply cannot afford to pay any positive real rate of return on their bonds. It's that simple.

Things get interesting when debtors cannot afford to pay what borrowers demand.

It seems like we both see the endgame as a quick call to the IMF. They may be the only body that has the fortitude to force us to deal with the size of our public sector spending relative to the size of our economy.

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Things get interesting when debtors cannot afford to pay what borrowers demand.

It seems like we both see the endgame as a quick call to the IMF. They may be the only body that has the fortitude to force us to deal with the size of our public sector spending relative to the size of our economy.

how much money have the IMF got in reserve

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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