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Vince Nails It: No Need To Raise I R, We Are Deflating

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http://www.telegraph.co.uk/finance/economics/8324233/Vince-Cable-says-interest-rate-rise-would-be-very-difficult.html

Vince Cable says interest rate rise would be 'very difficult'
Vince Cable has been accused of creating difficulties for the Bank of England after branding a rise in interest rates as "potentially very difficult", ahead of figures today which are expected to show inflation running above 4pc.
The Business Secretary's comments come ahead of the release of economic data today which are expected to show UK inflation climbing to over 4pc, more than double the Bank of England's target level.
Mr Cable used an interview with Bloomberg Television to suggest the Bank of England retain its loose monetary policy.
"As an outsider looking in, I take the view of the doves," he said.
"Although you have inflation, it's almost entirely imported. There's not very much evidence of British inflation taking place. It's virtually deflation."
Mr Cable said that with the Coalition's fiscal squeeze in full throw, tightening monetary policy was "potentially very difficult".
Mr Cable's views follow comments from David Cameron last month when the prime minister described inflation as "worrying". While Mr Cameron was careful to point out that he supported the independence of the Bank of England, he faced criticism from some quarters for involving himself in the debate....

The contry is in trouble. Job losses and a building HPC will mean very little by way of internal pressure to raise prices. Jobless people and those being squeezed by higher prices for imported essentials do not spend much and the economy will start to feel this in the coming months. We are on the edge of a severe recession and the last thing the muppets need to do is hike IR to push us that much faster over the cliff. The economy is, as St. Vincente De Cable, points out, deflating--it is shrinking and jobs will be the greatest sympton that that process.

One IR hike and the housing market will go into a manic free-fall. If they keep IR stable it will go into a gentle free-fall (20% this year and perhaps another 20% next year).

The fact that the "experts" and "economists" do not agree with St. Vince is evidence enough for me that he is probably right. This man sheld a real job before coming into politics whereas the rest are inexperienced numpties.

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http://www.telegraph.co.uk/finance/economics/8324233/Vince-Cable-says-interest-rate-rise-would-be-very-difficult.html

Vince Cable says interest rate rise would be 'very difficult'
Vince Cable has been accused of creating difficulties for the Bank of England after branding a rise in interest rates as "potentially very difficult", ahead of figures today which are expected to show inflation running above 4pc.
The Business Secretary's comments come ahead of the release of economic data today which are expected to show UK inflation climbing to over 4pc, more than double the Bank of England's target level.
Mr Cable used an interview with Bloomberg Television to suggest the Bank of England retain its loose monetary policy.
"As an outsider looking in, I take the view of the doves," he said.
"Although you have inflation, it's almost entirely imported. There's not very much evidence of British inflation taking place. It's virtually deflation."
Mr Cable said that with the Coalition's fiscal squeeze in full throw, tightening monetary policy was "potentially very difficult".
Mr Cable's views follow comments from David Cameron last month when the prime minister described inflation as "worrying". While Mr Cameron was careful to point out that he supported the independence of the Bank of England, he faced criticism from some quarters for involving himself in the debate....

The contry is in trouble. Job losses and a building HPC will mean very little by way of internal pressure to raise prices. Jobless people and those being squeezed by higher prices for imported essentials do not spend much and the economy will start to feel this in the coming months. We are on the edge of a severe recession and the last thing the muppets need to do is hike IR to push us that much faster over the cliff. The economy is, as St. Vincente De Cable, points out, deflating--it is shrinking and jobs will be the greatest sympton that that process.

One IR hike and the housing market will go into a manic free-fall. If they keep IR stable it will go into a gentle free-fall (20% this year and perhaps another 20% next year).

The fact that the "experts" and "economists" do not agree with St. Vince is evidence enough for me that he is probably right. This man sheld a real job before coming into politics whereas the rest are inexperienced numpties.

Yes, we are deflating, if deflation means rising prices.

The current situation proves that you can inflation with stagnant wages - there's no need to get any money into people hands!

This type of inflation is caused by money printing and ZIRP, which has created a crashing currency

Deflation my ****, he must think that we're stupid

Increasing interest rates would reduce UK inflation by reducing imported cost push ifnflation - a tighter monetary policy would stop capital flight out of sterling, and attract capital back in

Edited by Arbitrage

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"Although you have inflation, it's almost entirely imported. There's not very much evidence of British inflation taking place. It's virtually deflation."

Thank the Lord that we import so little. :rolleyes:

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The two main drivers: wages and house prices are falling quite sharply. Upon those 2 rocks all else will fall.

Warren "Da Man" Buffett warned sometime ago of a massive commodity bubble forming with the inevitabloe consequence to follow--probably quite soon.

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Why is it that these experts don't understand the correlation between interest rates and currencies. So it's all imported foreign inflation from high commodity prices, so why is inflation in Europe and the US so low then? Idiots.

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You can probably guess from which period in German history this came from.

Adam Fergusson: When Money Dies - Nightmare of the Weimar Collapse

http://university.unitedstatesliberty.org/654/textbooks/adam-fergusson-when-money-dies-nightmare-of-the-weimar-collapse/

Most successful businessmen, however, stuck happily to the heresy that only by a continually falling exchange rate could Germany compete in neutral markets. After them, the deluge. Neither they, nor the politicians, nor the bankers — with distressingly few exceptions — perceived any direct connection between inflation and depreciation. And yet, as the printing presses churned out bank notes the exchange continued rapidly to fall. What impressed the ordinary politician was the danger of social unrest which would, in his opinion, inevitably arise if there were any scarcity of currency. He could not see, or intentionally ignored, the obvious danger which proceeded from continuous inflation. Social unrest appeared, just the same.

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The technical term is stagflation. It's the worst of all worlds. Ideal is non-inflationary growth - that's the macroeconomic Holy Grail. Second best would be straight forward inflation - prices and wages both rising in tandem. We haven't even got that. :angry:

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Yes, we are deflating, if deflation means rising prices.

Could be right there.

Trouble is, this is high inflation from the boom years coming through the pipeline. High inflation last decade (including nearly five years above 10%) were kept out of the indexes by virtue of cheap imports as housing absorbed all the new money. Now it's trickling through to prices that are in the CPI/RPI at a time when we very probably don't have a problem of underlying inflation.

The time to raise interest rates is ten years ago. Failing that, nine years ago. Etc.

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The two main drivers: wages and house prices are falling quite sharply. Upon those 2 rocks all else will fall.

Warren "Da Man" Buffett warned sometime ago of a massive commodity bubble forming with the inevitabloe consequence to follow--probably quite soon.

You keep saying all this stuff but temporarily over next couple of yrs Billions of pounds in lump sum payoffs are going to be released into the economy keeping the 'front' up!

You have to be a nutter to put it in a bank and see inflation erode it away.

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Why is it that these experts don't understand the correlation between interest rates and currencies. So it's all imported foreign inflation from high commodity prices, so why is inflation in Europe and the US so low then? Idiots.

+1.

Every time I hear US / EU inflation figures, I wonder why they're not importing inflation to the same extent that we are...

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The US military has its DefCon system (Defence Readiness Condition). Where DefCon 5 is low state of readiness and DefCon 1 is war.

Perhaps the Bank needs a InVigCon system (Inflation Vigilence Condition). They have been at InVigCon 5 for the last decade at least.

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I think deflation is indeed the elephant in the room.

If you look at the expansion of global credit that has taken place over the last twenty years and the relatively low interest rates that we have had for quite some years now this has fed an investment and commodities boom that will - one day - break and precipitate deflation. What the BOE and many others are trying to do is to deflate the bubble gradually so the critical bust is minimised. Unfortunately things rarely happen that way and, at some stage, a bust is almost certain and deflation will follow this.

One reason why this Project Merlin will fail is that companies are already over leveraged or cannot find profitable investment opportunities and this is why they don't want to borrow, never mind whether the banks want to lend to them in terms of risk.

Uncontrolled credit expansion has resulted in low interest rates which, in turn, has resulted in both mis allocation of investment and excess capacity. The result of overabundance of credit is low interest rates but these encourage bubbles and mis allocate investment which is why we are in the pickle we're in.

Look what happened to Japan post 1989.

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Why is it that these experts don't understand the correlation between interest rates and currencies. So it's all imported foreign inflation from high commodity prices, so why is inflation in Europe and the US so low then? Idiots.

Exactly.

It's only because they've systematically devalued the pound that's put the cost of imports up.

Of course they're not that stupid but they pretend as if ZIRP and printing billions of pounds doesn't affect the value of the £ vs other currencies.

Edited by exiges

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I find it very hard that the politicians and media are so dumbed down that they see no irony the statement that interest rates have no effect on the level of the pound and therefore imported inflation.

It wasn't that long ago we were protecting our position in the ERM with large interest rate rises.

Are they really that thick...or are they hoodwinking us?

Sorry read what you said three times not sure what you are saying. raising interest rates to stop us falling out of the ERM didn't work is that what you are saying.

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I find it very hard that the politicians and media are so dumbed down that they see no irony the statement that interest rates have no effect on the level of the pound and therefore imported inflation.

It wasn't that long ago we were protecting our position in the ERM with large interest rate rises.

Are they really that thick...or are they hoodwinking us?

Well, the ERM fiasco didn't work out so well for those in charge... I'm not surprised to see a different tack being taken - any different tack... it doesn't much matter... The politicians can't forecast, so they - like bankers - look for whatever short-term gains present themselves as opportunities.

It was always obvious to me that raising interest rates would be very politically difficult... as any increase is likely to lead to rapidly rising bankruptcies and unemployment - both far more emotive than mere inflation. Personally, I consider that the problem we find ourselves in today is caused by almost ~20+ years spent targeting "inflation" while promoting spiraling asset prices. Asset prices can't easily fall as this would lead to bank insolvency - and that means 'inflation' is now the path of least resistance. The only constraint on inflation is that (total) wages are deflating - which means that widespread hardship and poverty are the barrier to escaping by re-valuing everything except assets. We need to see moderate to high 'inflation' coupled with falling asset prices and (unfortunately, but necessarily) falling wages... we need to hope that the ensuing hardships do not lead to effects that are too devastating. The only alternative I see is explicit large-scale re-distribution of assets... and, given that the only people who could instigate something like that would be seen (probably rightly) as corrupt thieves... I see no pragmatic way to escape quickly. The only game in town is high inflation, and static or falling asset prices and wages... for many, many years... assuming catastrophe can be averted. It is all too easy to imagine an impoverished majority deciding that revolution promises a more timely resolution - and then targeting any arbitrary demographic. The game all falls down to how commercial banks manage their business... if they bolster their capital with the credit-risk spread, while foreclosing on the worst risks - putting their assets up for auction and precipitating falling asset prices - then there's hope. On the other hand, if their balance sheet risk continues to escalate while the vast sums arising from large credit-risk spreads is accounted as profit and siphoned off... the world becomes steadily more precarious. We need bankruptcies - lots of them - those with the smallest systemic influences on employment first... luckily, banks are in a position to do this - if their executives could be appropriately motivated.

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Thanks to his globalist mass immigration narrative, we are overpopulated, with nearly half of our food being imported. We have to import energy, again, exacerbated by too many consumers for UK energy production - we have to buy power off france FFS. And our productive sectors have been offshored.

Its funny how there are no downsides to globalization. When its good, all the benefits come here, when its bad, the inflation is 'somewhere else'

Pull the other one you spineless gimp.

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I find it very hard that the politicians and media are so dumbed down that they see no irony the statement that interest rates have no effect on the level of the pound and therefore imported inflation.

It wasn't that long ago we were protecting our position in the ERM with large interest rate rises.

Are they really that thick...or are they hoodwinking us?

The ERM was all about Europe dominating us. Politics, not economics.

Globalist politicians dont care about interest rates being low or high. What they do care about is achieving their NWO of global slavery.

All three parties (most liebour and libdem MPs supported the ERM too) raised interest rates purely to please their european masters.

It was an act of submission by GB PLC to show whose boss. Namely, unelected stalincrats in Brussels.

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I think deflation is indeed the elephant in the room.

If you look at the expansion of global credit that has taken place over the last twenty years and the relatively low interest rates that we have had for quite some years now this has fed an investment and commodities boom that will - one day - break and precipitate deflation. What the BOE and many others are trying to do is to deflate the bubble gradually so the critical bust is minimised. Unfortunately things rarely happen that way and, at some stage, a bust is almost certain and deflation will follow this.

One reason why this Project Merlin will fail is that companies are already over leveraged or cannot find profitable investment opportunities and this is why they don't want to borrow, never mind whether the banks want to lend to them in terms of risk.

Uncontrolled credit expansion has resulted in low interest rates which, in turn, has resulted in both mis allocation of investment and excess capacity. The result of overabundance of credit is low interest rates but these encourage bubbles and mis allocate investment which is why we are in the pickle we're in.

Look what happened to Japan post 1989.

That makes sense to me.....one thing deflating is the tax take. ;)

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The two main drivers: wages and house prices are falling quite sharply. Upon those 2 rocks all else will fall.

Surely there is a third driver : "credit" ? Well in modern times anyhow.

Still , with all the printing going on all i see in the pipeline is rapidly rising prices , like i have said many times i expect house prices to rise this year (by year end) due to inflation.

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The only game in town is high inflation, and static or falling asset prices and wages... for many, many years... assuming catastrophe can be averted.

As an ex-STR, I realised the same thing. When there is little to look forward to in terms of falling nominal house prices or rising wages and the STR fund is being flushed away by inflation whilst paying rent, the only choice was to buy. An "event" is now the best hope for a real-terms HPC.

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http://www.telegraph.co.uk/finance/economics/8324233/Vince-Cable-says-interest-rate-rise-would-be-very-difficult.html

Vince Cable says interest rate rise would be 'very difficult'
Vince Cable has been accused of creating difficulties for the Bank of England after branding a rise in interest rates as "potentially very difficult", ahead of figures today which are expected to show inflation running above 4pc.
The Business Secretary's comments come ahead of the release of economic data today which are expected to show UK inflation climbing to over 4pc, more than double the Bank of England's target level.
Mr Cable used an interview with Bloomberg Television to suggest the Bank of England retain its loose monetary policy.
"As an outsider looking in, I take the view of the doves," he said.
"Although you have inflation, it's almost entirely imported. There's not very much evidence of British inflation taking place. It's virtually deflation."
Mr Cable said that with the Coalition's fiscal squeeze in full throw, tightening monetary policy was "potentially very difficult".
Mr Cable's views follow comments from David Cameron last month when the prime minister described inflation as "worrying". While Mr Cameron was careful to point out that he supported the independence of the Bank of England, he faced criticism from some quarters for involving himself in the debate....

The contry is in trouble. Job losses and a building HPC will mean very little by way of internal pressure to raise prices. Jobless people and those being squeezed by higher prices for imported essentials do not spend much and the economy will start to feel this in the coming months. We are on the edge of a severe recession and the last thing the muppets need to do is hike IR to push us that much faster over the cliff. The economy is, as St. Vincente De Cable, points out, deflating--it is shrinking and jobs will be the greatest sympton that that process.

One IR hike and the housing market will go into a manic free-fall. If they keep IR stable it will go into a gentle free-fall (20% this year and perhaps another 20% next year).

The fact that the "experts" and "economists" do not agree with St. Vince is evidence enough for me that he is probably right. This man sheld a real job before coming into politics whereas the rest are inexperienced numpties.

He just doesn't get globalisation, that's for sure. So one country might deflate against a background of world inflation. So what. Having shifted much of its own manufacturing abroad, guess what happens...

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What the BOE and many others are trying to do is to deflate the bubble gradually so the critical bust is minimised. Unfortunately things rarely happen that way and, at some stage, a bust is almost certain and deflation will follow this.

Not sure you can deflate away a debt bubble. I thought you can inflate it away but deflation means the debt gets harder to pay off.

Anyway, I believe deflation is the underlying condition within the UK (M4 money supply is going down gently at -1.5% I believe). Obviously the BoE have devalued (at the behest of the new govt) and this has caused externally-driven price rises. However, to push IR up would have little effect on this as at the same time we're seeing massive competition for the same resources and consequently increases in prices. I can't see that pushing IRs up by 1% (I doubt the UK economy would sustain any more than this) would lessen the desire of the chinese to be buying commodities like crazy. Will an interest rate rise of 1% make the dollar-sterling rate change sufficiently for our imported oil to get cheaper while there is increasing demand for oil around the world????

Personally I doubt it. On balance its probably best to keep IR low (and accept the inevitable external cost inflation) and keep more people in jobs paying back the debt they owe. This will run on for 5-10 years. We have to swallow the reality of paying back 10 years worth of debt IMHO. I think this is what Ken Clarke was getting at.

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I think deflation is indeed the elephant in the room.

If you look at the expansion of global credit that has taken place over the last twenty years and the relatively low interest rates that we have had for quite some years now this has fed an investment and commodities boom that will - one day - break and precipitate deflation. What the BOE and many others are trying to do is to deflate the bubble gradually so the critical bust is minimised. Unfortunately things rarely happen that way and, at some stage, a bust is almost certain and deflation will follow this.

One reason why this Project Merlin will fail is that companies are already over leveraged or cannot find profitable investment opportunities and this is why they don't want to borrow, never mind whether the banks want to lend to them in terms of risk.

Uncontrolled credit expansion has resulted in low interest rates which, in turn, has resulted in both mis allocation of investment and excess capacity. The result of overabundance of credit is low interest rates but these encourage bubbles and mis allocate investment which is why we are in the pickle we're in.

Look what happened to Japan post 1989.

Agree Merlin will just fail.

Is a bust considered to be GDP shrinking? People still have to buy food, energy, consumer items that break etc so perhaps you are just going to your "natural level" of GDP (however that is calculated).

I still need convincing that deflation is a bad thing. Japans issues are being caused by an interfering Government. Is Japan still technically further forward than the UK?

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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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