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A Vicious Circle Fuelled By Cheap Money

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http://www.telegraph.co.uk/finance/8326700/A-vicious-circle-fuelled-by-cheap-money.html

Yesterday’s letter to the Chancellor from Mervyn King, the Governor of the Bank of England, explaining why the Consumer Price Index (CPI) measure of inflation remains way above the Government’s 2 per cent target, was the fourth such missive he has been forced to write in the past nine months. Given that the sole remit of the Bank’s Monetary Policy Committee (MPC) is to hit that target, this does little to inspire confidence in its credibility. Nor does the fact that just before Christmas the MPC forecast (to general incredulity) that CPI would peak at 3.5 per cent in the course of this year, before falling back. Sure enough, just two months later, the index has hit 4 per cent and is expected to rise as high as 5 per cent in the coming months. Indeed, the Retail Prices Index (RPI), which includes mortgage costs and is seen by many as a more accurate barometer of living costs, is already at 5.1 per cent.

It would be churlish not to acknowledge that these are exceptional times, as the economy struggles to recover from the nastiest recession in 80 years. Even so, the Bank’s generally inept performance at controlling inflation – which is far lower in the US and the eurozone – is threatening to spook the markets. Mr King attributed the latest spike to measures outside the Bank’s control, such as the January VAT hike, rising global commodity prices, and the fall in the value of sterling which began in late 2007. In fact, the Bank’s policy of keeping interest rates at 0.5 per cent for 23 consecutive months has directly influenced the exchange rate.

Cheap money has thus not only fuelled inflation, but has created a climate in which talk of any rate rise triggers concern that we may be tipped back into recession. Stuck in this vicious circle, it is no surprise that Mr King openly acknowledged yesterday that the MPC is split on the future direction of policy.

The markets have already factored in a rate rise by May and perhaps two more by the end of the year, expectations from which Mr King did not demur in his letter to the Chancellor. The MPC must oblige or there really will be a credibility problem. Mr King argued that drastic corrective action would risk slowing the recovery, but the case for an early quarter-point rise is now overwhelming. The combination of rock-bottom interest rates and soaring inflation is a cruel one, particularly for retired people reliant on income from their savings, which has been virtually non-existent for the past two years. A rise in the cost of borrowing would not only ease the pressure on them, but would also start to take the heat out of inflation before it feeds through into wage demands. The recovery is too fragile to cope with the turbulence of a pay explosion.

A HPC editorial in the Telegraph?

If there is going to be a see change of opinion within the public the press has to get on message, still soon be time for Britain's got talent.

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Read the comments, Mystic Kunt's cover has been blown, article readers must read comments for time to time and people are beginning to see through the banksters' scam (which is led and supported from the top). It would be surprising if month after month the readership of such articles is more accurate in predicting the future than the article writers themselves will begin to question previous beliefs too.

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http://www.telegraph...heap-money.html

A HPC editorial in the Telegraph?

If there is going to be a see change of opinion within the public the press has to get on message, still soon be time for Britain's got talent.

Even so, the Bank's generally inept performance at controlling inflation
This is pure misinformation. Pretend criticism while you deflect people from the real issue: the BOE is currently very successful at reaching its real objective which is to generate higher inflation. Keeps the masses dozing, get them to read the MSM. Edited by _w_

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This is pure misinformation. Pretend criticism while you deflect people from the real issue: the BOE is currently very successful at reaching its real objective which is to generate higher inflation. Keeps the masses dozing, get them to read the MSM.

http://order-order.com/2009/03/31/bank-of-england-pension-fund-surges-betting-on-inflation/

The Bank of England pension fund is managed on behalf of a very select and savvy group of people with access to a lot of market insight – the employees of the central bank. With great market timing the fund sold out of equities entirely at the end of 2006 cutting a 21.6% holding down to 0.1%, thus avoiding a 35% drop in UK equities since that time. Awesome market timing, the fund was consequently up 12% last year when all around markets crashed.

The fund’s holding of Index Linked Gilts has shot up from 25.6% of assets to a 70.7% proportion of assets during the same period. That is a big bet of the pension pot owned by everyone who works at the Bank of England. Index Linked Gilts are linked to RPI – the inflation rate – you buy them if you are worried about inflation. They are a hedge against inflation.

Clearly the most blatant insider dealing ever. Still when is Britain's got talent back on?

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http://www.telegraph...heap-money.html

A HPC editorial in the Telegraph?

If there is going to be a see change of opinion within the public the press has to get on message, still soon be time for Britain's got talent.

Biggest larf I had from a similar front page BBC link was "he wouldn't raise interest rates in case he stalled the economy but he thought it had already stalled" B):lol:

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http://order-order.c...g-on-inflation/

Clearly the most blatant insider dealing ever. Still when is Britain's got talent back on?

It's so blatant isn't it. What gets to me is that after years of these BOE shenanigans you still get the MSM trying to keep us blind to what's going on. Denninger may be nuts IMO but there's still more truth in one of his sentences than there is in a year's worth of MSM. These outfits really are instruments of state propaganda.

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http://www.telegraph.co.uk/finance/8326700/A-vicious-circle-fuelled-by-cheap-money.html

A HPC editorial in the Telegraph?

If there is going to be a see change of opinion within the public the press has to get on message, still soon be time for Britain's got talent.

But imagine what would've happened if the MPC had raised IRs during the good ol boom years.

One for Private Eye's 'Things You Never Hear':

"Crumbs, I'm glad interest rates have risen to stop me speculating to get rich. It was all getting out of hand and someone needed to step in to stop it

It's particularly funny when these articles start appearing in papers like the Telegraph who are fully paid-up members of the 'debt is wealth' and 'high property prices make us rich' clubs.

Funny old world.

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But imagine what would've happened if the MPC had raised IRs during the good ol boom years.

One for Private Eye's 'Things You Never Hear':

"Crumbs, I'm glad interest rates have risen to stop me speculating to get rich. It was all getting out of hand and someone needed to step in to stop it

It's particularly funny when these articles start appearing in papers like the Telegraph who are fully paid-up members of the 'debt is wealth' and 'high property prices make us rich' clubs.

Funny old world.

of course you dont hear this..its why the Austrian Boom persists, and why the bust is delayed....people LIKE the boom.

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But imagine what would've happened if the MPC had raised IRs during the good ol boom years.

One for Private Eye's 'Things You Never Hear':

"Crumbs, I'm glad interest rates have risen to stop me speculating to get rich. It was all getting out of hand and someone needed to step in to stop it

It's particularly funny when these articles start appearing in papers like the Telegraph who are fully paid-up members of the 'debt is wealth' and 'high property prices make us rich' clubs.

Funny old world.

:lol:

August 2005 wasn't it? - surprise cut in interest rates sparked off the surge again when the housing market was slowing. Bang! - and off it went again for that final bubblicious blow-up. The MPC/BoE reinflated the bubble at that point and there is no way Merv should be in that job now. He's as complicit as Brown/Balls/Banksters.

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:lol:

August 2005 wasn't it? - surprise cut in interest rates sparked off the surge again when the housing market was slowing. Bang! - and off it went again for that final bubblicious blow-up. The MPC/BoE reinflated the bubble at that point and there is no way Merv should be in that job now. He's as complicit as Brown/Balls/Banksters.

To be fair to him, Merv voted against that cut,

Peter.

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To be fair to him, Merv voted against that cut,

Peter.

You're quite correct, but he had plenty of opportunities to redeem the situation between then, the top of the boom in 2007, and the banking bust in 2008, but didn't. And I believe (correct me if I'm wrong) that he never once voted for a rate increase after that date.

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  • 312 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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