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Stark Warning That Keeping Interest Rates Low For Long Is A Risk

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http://uk.reuters.com/article/2011/08/19/uk-ecb-stark-idUKTRE77I2AH20110819

Sir Mervyn knows better of course, thank goodness we have him this side of the channel.

Merv is now 2nd in command in Europe. Trichet retires from the ECB in October so maybe he steps down from the ESRB as well?

The ESRB is part of the European System of Financial Supervision (ESFS), the purpose of which is to ensure supervision of the Union's financial system. Besides the ESRB, the ESFS comprises: the European Banking Authority (EBA); the European Insurance and Occupational Pensions Authority (EIOPA); the European Securities and Markets Authority (ESMA); the Joint Committee of the European Supervisory Authorities (ESAs); and the competent or supervisory authorities in the Member States as specified in the legislation establishing the three ESAs.

The ESRB contributes to the prevention or mitigation of systemic risks to financial stability in the Union that arise from developments within the financial system. It takes into account macroeconomic developments, so as to avoid periods of widespread financial distress. The ESRB also contributes to the smooth functioning of the internal market and thereby ensures a sustainable contribution of the financial sector to economic growth.

The Chair of the ESRB is the President of the European Central Bank, Mr Jean-Claude Trichet. The first Vice-Chair of the ESRB is Sir Mervyn King, Governor of the Bank of England.

http://www.bankofengland.co.uk/financialstability/esrb.htm

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Merv is now 2nd in command in Europe. Trichet retires from the ECB in October so maybe he steps down from the ESRB as well?

What could possibly go wrong with Mervyn around?

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Is it riskier to leave rates low than to raise them though.

I can think of reasons why very low rates are as dangerous as very high rates, neither scenario produces pretty pictures but on balance the lower rates worry me more

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http://www.zerohedge.com/news/ecb-getting-angry-people-can-see-right-through-central-bank-lies

There's more in the interview.

Today's hilarious commentary comes from the ECB's own Jurgen Stark, whose blood pressure has obviously peaked and at this point it is just a matter of the realization that ECB (and other Central bank lies) no longer work filtering through to reality.

ECB'S STARK SAY NOT CENTRAL BANK'S JOB TO FUND DEFICITS (but, but, MMT says debt, and hence central bank monetization thereof, does not fund deficits. Heck, MMT says monetization does not exist...hmm)

ECB'S STARK: UNRESPONSIBLE TO CALL ECB A `BAD BANK' (right: the correct word is "overdue")

ECB'S STARK: ECB HASN'T TAKE ON AS BIG RISKS AS OTHER CEN BANKS (right: the risk the ECB has taken does not even fit on the same axis compared to other banks)

ECB'S STARK SAYS NOT CENTRAL BANK JOB TO LOWER RATES FOR DEBT

ECB'S STARK SAYS ECB BOND BUYS DON'T CREATE INFLATION RISKS

ECB'S STARK: BANKS USING PSI HAVE FULL GUARANTEE OF NO LOSS

And the kicker

ECB'S STARK: ALL DEVELOPED ECONOMIES HAVE PUB FINANCE PROBLEMS- said otherwise, it's everyone else's fault

http://diepresse.com/home/wirtschaft/international/686822/EZBDirektor-Stark_Wir-sind-doch-keine-Hasardeure?_vl_backlink=/home/index.do

I think it's this interview but my German is none existent thanks to Churchill.

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Thanks for the link, fortunately my German is excellent, which made me realise that the ZH 'article' is utter garbage, they mangled and distorted everything that Stark said.

Edit: don't get me wrong, I'm not saying that I agree with what Stark says, I'm only saying that the ZH 'article' does in no way bear any relation with what Stark said in the original German article.

Edited by awake_eagle

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Thanks for the link, fortunately my German is excellent, which made me realise that the ZH 'article' is utter garbage, they mangled and distorted everything that Stark said.

Edit: don't get me wrong, I'm not saying that I agree with what Stark says, I'm only saying that the ZH 'article' does in no way bear any relation with what Stark said in the original German article.

Thanks for the info, if you used say google translate would it get mangled in the ZH manner or is it deliberately poorly translated?

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As another thread here demonstrates, low interest rates have sustained mortgage rates that are now so absurdly low that many homeowners are actually making a net profit between their monthly mortgage payments out and their deposit interests in. This utter madness demonstrates just how paranoid the government, and vested interests, are in supporting the unsupportable.

There is a failure to see that for each protected existing home owner, there are probably two others who continue to be priced out of decent housing. The net result is a disaster for a viable housing policy. There is an obvious relationship between interest rates and house prices. The lower interest rates are, the higher the capital costs of housing because low mortgage rates encourage high prices to be sustained. Despite obvious signs of continuing reductions in prices, they would fall much quicker if interest rates were anywhere near sensible.

Moreover, this blanket policy of over-supporting many who simply do not deserve to be supported, is at the expense of others who did not behave irresponsibly several years ago.. But it goes way beyond that simple fact: We continue to have an economy that is notionally based on rewarding those who invest not in real economic growth or true enterprise, but on continued speculation and gambling as a substitute for work. That might not seem obvious given the decline in house prices, but that decline is nowhere near what it should be given the UK's lamentable debt.

Mr Pastry over at the BOE is well aware that he is fighting government debt by trying to inflate it away. It won't work. No-one with any intellgence believes that inflation is as described. How can it be when the average REAL household expense hikes, whatever the official figures claim, is approaching and often exceeding 10%. The UK still believes it can ride the storm without pain. It can't. As I have repeatedly stated on this forum for years now, house ownership is not a vehicle for money making, or even a safe haven against economic disaster.

It is perfectly possible to provide reasonable and sensible support without ruining it for everyone else. There might be a couple of million home owners who feel entitled to support owing to many of them playing roulette with the economy, but there are several million more who continue to have no stake whatsoever in the prospect of a secure home. This imbalance needs urgently to be addressed, but the interests of the minority will always win. The banks have not really changed their tune for the long term, nor has regulation significantly improved, nor has the core malaise of our economic system been properly addressed. We need a sea change but there is no evidence for it happening.

Meantime, my local Asda visits reveal a workforce, mostly women, whose hours have been cut and they now need up to three separate part time jobs to make ends meet. They are now effectively working for 6 months of the year entirely for the treasury and in support of the same old system which will consign them to wage slavery for the rest of their days.

Edited by VacantPossession

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Thanks for the info, if you used say google translate would it get mangled in the ZH manner or is it deliberately poorly translated?

Don't know haven't tried to read it via google-translate, but even if ZH based their article (if you can call it that) on a google-translation that would still say a lot about ZH and the quality (or lack thereof) of research for their article.

Edited by awake_eagle

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Meantime, my local Asda visits reveal a workforce, mostly women, whose hours have been cut and they now need up to three separate part time jobs to make ends meet. They are now effectively working for 6 months of the year entirely for the treasury and in support of the same old system which will consign them to wage slavery for the rest of their days.

A large proportiong of the population haven;t wrked ot yet that they will never retire - their savings won't pay for retureent, their pensiosn won't and neither will their housing equity such is the inflaiton being pumped into the system and the earnings / jobs / propects out of the system.

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As another thread here demonstrates, low interest rates have sustained mortgage rates that are now so absurdly low that many homeowners are actually making a net profit between their monthly mortgage payments out and their deposit interests in. This utter madness demonstrates just how paranoid the government, and vested interests, are in supporting the unsupportable.

There is a failure to see that for each protected existing home owner, there are probably two others who continue to be priced out of decent housing. The net result is a disaster for a viable housing policy. There is an obvious relationship between interest rates and house prices. The lower interest rates are, the higher the capital costs of housing because low mortgage rates encourage high prices to be sustained. Despite obvious signs of continuing reductions in prices, they would fall much quicker if interest rates were anywhere near sensible.

Moreover, this blanket policy of over-supporting many who simply do not deserve to be supported, is at the expense of others who did not behave irresponsibly several years ago.. But it goes way beyond that simple fact: We continue to have an economy that is notionally based on rewarding those who invest not in real economic growth or true enterprise, but on continued speculation and gambling as a substitute for work. That might not seem obvious given the decline in house prices, but that decline is nowhere near what it should be given the UK's lamentable debt.

Mr Pastry over at the BOE is well aware that he is fighting government debt by trying to inflate it away. It won't work. No-one with any intellgence believes that inflation is as described. How can it be when the average REAL household expense hikes, whatever the official figures claim, is approaching and often exceeding 10%. The UK still believes it can ride the storm without pain. It can't. As I have repeatedly stated on this forum for years now, house ownership is not a vehicle for money making, or even a safe haven against economic disaster.

It is perfectly possible to provide reasonable and sensible support without ruining it for everyone else. There might be a couple of million home owners who feel entitled to support owing to many of them playing roulette with the economy, but there are several million more who continue to have no stake whatsoever in the prospect of a secure home. This imbalance needs urgently to be addressed, but the interests of the minority will always win. The banks have not really changed their tune for the long term, nor has regulation significantly improved, nor has the core malaise of our economic system been properly addressed. We need a sea change but there is no evidence for it happening.

Meantime, my local Asda visits reveal a workforce, mostly women, whose hours have been cut and they now need up to three separate part time jobs to make ends meet. They are now effectively working for 6 months of the year entirely for the treasury and in support of the same old system which will consign them to wage slavery for the rest of their days.

+1

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Because he has savings?

A very lucid reasoned argument, not!

Moreover, this blanket policy of over-supporting many who simply do not deserve to be supported, is at the expense of others who did not behave irresponsibly several years ago..

Well hold on many of us saw our pensions disappearing, stock market returns stagnating, and looked for something to invest in. Housing seemed to provide a reasonable way to provide a relatively passive income for out twilight years. Sure we piled in as prices continued to rise. It was a case of get in before prices get out of reach. Not all of us were aware of the deception that was being encouraged by financial institutions nor fully aware of the unsustainable economic reality. Lets not forget lots of economists failed to see the impending crash.

When did you forecast the way events turned out? Or are you an expert in hindsight?

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Well hold on many of us saw our pensions disappearing, stock market returns stagnating, and looked for something to invest in. Housing seemed to provide a reasonable way to provide a relatively passive income for out twilight years. Sure we piled in as prices continued to rise. It was a case of get in before prices get out of reach. Not all of us were aware of the deception that was being encouraged by financial institutions nor fully aware of the unsustainable economic reality. Lets not forget lots of economists failed to see the impending crash.

When did you forecast the way events turned out? Or are you an expert in hindsight?

But as you have seen, in the long term, the reliance on housing as an investment, which ever way you look, is a direct and singular reason for bankruptcies in half of Europe, American and beyond. It is not so much that economists failed to see the crash coming, they were deliberately blind to it because their whole fundamental thinking about what creates real wealth, as opposed to apparent short term wealth, centred around theories that a bright 10 year old could work out were wrong. Just circulating property over and over again at an ever increasing price is nothing to do with wealth, except for a fortunate minority who spin the roulette wheel at a lucky time.

I haven't posted here for a while, but assuming my posts are still there, you'll see posts from me and many other HPC members from years back who didn't believe a word of the spin banded around by economists, academics, bankers and especially journalists. So no, I am not an expert in hindsight. I just applied common sense and reasoning while half the country encouraged by the Blair/Brown government allowed their short term greed to take over their wisdom. In fact this website was conceived for the very purpose of warning that gambling on property would lead to a catastrophe, and it has.

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When did you forecast the way events turned out?

1983.

My first professional job after graduating, and my first opportunity to join a company pension. I stayed out for several reasons, one of which was the demographic inevitability of the collapse of pensions as they then were, long before I could expect to draw one. Though to be fair, I didn't foresee the political inevitability of our powers-that-be doing so much to make it worse when the housing bubble tried to deflate in 2005 and since 2007.

And yes, if I could've afforded it, I'd've bought property back in the 1980s. But I emigrated instead, and thus missed my generation's buying opportunity in the 1990s. Fail!

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But as you have seen, in the long term, the reliance on housing as an investment, which ever way you look, is a direct and singular reason for bankruptcies in half of Europe, American and beyond. It is not so much that economists failed to see the crash coming, they were deliberately blind to it because their whole fundamental thinking about what creates real wealth, as opposed to apparent short term wealth, centred around theories that a bright 10 year old could work out were wrong. Just circulating property over and over again at an ever increasing price is nothing to do with wealth, except for a fortunate minority who spin the roulette wheel at a lucky time.

I haven't posted here for a while, but assuming my posts are still there, you'll see posts from me and many other HPC members from years back who didn't believe a word of the spin banded around by economists, academics, bankers and especially journalists. So no, I am not an expert in hindsight. I just applied common sense and reasoning while half the country encouraged by the Blair/Brown government allowed their short term greed to take over their wisdom. In fact this website was conceived for the very purpose of warning that gambling on property would lead to a catastrophe, and it has.

Very well said and 100% agree. The bloody general public in the UK are a sickening bunch of clowns and no mistake.

"House prices only ever go up" was the call. Now they will all pay for their greed as the UK is well and truely fooked for the next 50 years imo.

Disgraceful behaviour by just about everybody has brought us to this. What a complete disaster. :rolleyes:

Edited by Wait & See

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The bloody general public in the UK are a sickening bunch of clowns and no mistake.

"House prices only ever go up" was the call. Now they will all pay for their greed as the UK is well and truely fooked for the next 50 years imo.

Disgraceful behaviour by just about everybody has brought us to this. What a complete disaster. :rolleyes:

Why should the general public be economic experts. The track record of housing post WWII has been a trend of steady increase in prices puctuated by sudden bursts of higher increases. If I recall there have only been two short periods where prices declined. Why would you think it unreasonable for the general public to think that after a sudden burst that prices would plateau until wages caught up.

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I just applied common sense and reasoning

I regret to inform you Mr Vacant Possession that your application for a post as an economist was on this occasion unsuccessful- we felt that you were significantly overqualified for the role.

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  • 333 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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