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The BOE would probably save a lot of misery tomorrow by increasing interest rates by 1/2% today. Sadly they would never have the nerve.

Edited by dog

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The BOE would probably save a lot of misery tomorrow by increasing interest rates by 1/2% today. Sadly they would never have the nerve.

That certainly has to be one of the stupidest comments i have read on this site. Who would it save misery for? The millions of homeowners who would suddenly have to pay more in mortgage payments or the small number of people hoping for a crash but miserable because it looks as though house prices are starting to go up wrong, dispelling their hopes and dreams of a 30% correction. Thankfully the BoE members have their head screwed on.

Rates are still set to drop in November, or at the very least next year, but may bottom out around 4%.

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The BOE would probably save a lot of misery tomorrow by increasing interest rates by 1/2% today. Sadly they would never have the nerve.

I'd be happy with just a 0.25% rise, I doubt they've got the balls to do it though.

This country needs to ease the borrowing frenzy.

The more my savings make money for me, the more likely I am to spend

a little money. The more houses come down in value, the more likely I will

buy one - and feed money back into the government!

Rates are still set to drop in November, or at the very least next year, but may bottom out around 4%.

Then the MPC are not independant - control inflation.....bah!!! :angry:

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Debt is rising at a faster rate than earnings, let alone net earnings. Recession now or depression later.

After the roaring 20's - a decade stuffed with lax lending and consumption based on borrowing and speculation, then came the crunch. We at risk of following the same misguided footsteps, if we haven't already.

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That certainly has to be one of the stupidest comments i have read on this site. Who would it save misery for? The millions of homeowners who would suddenly have to pay more in mortgage payments or the small number of people hoping for a crash but miserable because it looks as though house prices are starting to go up wrong, dispelling their hopes and dreams of a 30% correction. Thankfully the BoE members have their head screwed on.

ES have you not considered that it might be reasonable to hope that the bank would use monetary policy to control the credit boom? I agree with OM; recession now or depression later.

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Debt is rising at a faster rate than earnings, let alone net earnings. Recession now or depression later.

After the roaring 20's - a decade stuffed with lax lending and consumption based on borrowing and speculation, then came the crunch. We at risk of following the same misguided footsteps, if we haven't already.

Looks like the war with Iran will be used to divert our attention/get manufacturing going.

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Debt is rising at a faster rate than earnings, let alone net earnings. Recession now or depression later.

After the roaring 20's - a decade stuffed with lax lending and consumption based on borrowing and speculation, then came the crunch. We at risk of following the same misguided footsteps, if we haven't already.

I've been reading a lot on this site about how interest rates affect inflation, and how inflation is currently on the rise.

What would be the expectation for inflation if Merv and the gang decided -0.25% was the favored option today? And what (if anything) would be the implications to BoE if they pushed inflation up much higher? Would they be forced to raise the rates firther down the line?

Whilst I have learnt a lot on this site, I am no economist, so I would be interested to understand a bit more about the above.

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ES have you not considered that it might be reasonable to hope that the bank would use monetary policy to control the credit boom? I agree with OM; recession now or depression later.

Growth is slowing, consumer credit is already falling. They can cut rates by 0.25% - 0.50% and keep growth going, or raise rates, causing the excessive debts that consumers already have to be harder to manage, cut growth even further, raise unemployment and possibly precipitate a house price crash pushing us into recession. Thankfully the BoE doesn't just focus on inflation like the ECB, which is presiding over massive unemployment in the eurozone and no growth, primarily because of its obsession with inflation, or mainly focus on growth like the Fed which leads to wild swings in interest rates, which went from 6.5% to 1% in just a couple of years, and are now heading back up sharply. Falling growth often does enough itself to curb inflation and spending, something that is backed up with the fact that even though interest rates are falling, consumer debt is also falling, and will continue to do so. Surely that goes against what many of you are saying? lower IR's you think mean higher debt? Wrong, it depends on the economic circumstances of the time.

You should be happy the BoE is in the middle and has presided over a long sustained period of growth and low unemployment because it gets its sums mostly right, focusing not just on inflation but also on keeping growth in the country ticking along nicely.

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I've been reading a lot on this site about how interest rates affect inflation, and how inflation is currently on the rise.

What would be the expectation for inflation if Merv and the gang decided -0.25% was the favored option today? And what (if anything) would be the implications to BoE if they pushed inflation up much higher? Would they be forced to raise the rates firther down the line?

Whilst I have learnt a lot on this site, I am no economist, so I would be interested to understand a bit more about the above.

If they don't raise interest rates, then wealth will start to be destroyed. If this starts and takes hold, they will have no hope of controlling it and we will all be much poorer.

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Guest Charlie The Tramp
or raise rates, causing the excessive debts that consumers already have to be harder to manage,

Well that`s a new one, the BoE are now in the business of helping the irresponsible borrowers?

What was it Mervyn said last year?

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You should be happy the BoE is in the middle and has presided over a long sustained period of growth and low unemployment because it gets its sums mostly right, focusing not just on inflation but also on keeping growth in the country ticking along nicely.

Most of the growth has been debt - you can only use it once and in the end it backfires and has the counter effect of reducing spending down the line and not only the debt having to be paid back, but the interest too.

Accounting trick, nothing else.

The BOE has failed miserably IMHO and has put the future of the country in extreme jeopardy. The last country to cripple the public with similar levels of debt was Japan.

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I've been reading a lot on this site about how interest rates affect inflation, and how inflation is currently on the rise.

What would be the expectation for inflation if Merv and the gang decided -0.25% was the favored option today? And what (if anything) would be the implications to BoE if they pushed inflation up much higher? Would they be forced to raise the rates firther down the line?

Whilst I have learnt a lot on this site, I am no economist, so I would be interested to understand a bit more about the above.

There are conflicting theories. Some schools of thought hold that you have to always raise interest rates to curb inflation, however they have found that this is more prevalent in a period of growth, as it curbs consumer spending. However in a downturn it has been found that the slowdown in growth and increased unemployment are often enough to curb inflation (less consumer spending means retailers drop prices to encourage spending), hence why they think it is going to be a bargain christmas this year.

So in this scenario, as long as core inflation (stripping out volatile energy and food prices) remains under control it is possible to cut interest rates to prevent consumer spending slumping (as this makes up 70% of the UK economy). This is the path that that the Bank of England policy makers follow. However if inflation does get out of hand, this is still their primary concern so they will raise rates at the expense of growth, or at least leave them on hold, to reduce inflationary concerns. At the moment the issue is not the high oil prices, but how they will affect underlying costs and so core inflation.

So yes if inflation was pushed higher they would have to raise rates later, but it depends on growth and a number of other factors. They are currently terrified that raising rates will lead to consumer spending dropping off too steeply, pushing us into recession.

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I've been reading a lot on this site about how interest rates affect inflation, and how inflation is currently on the rise.

What would be the expectation for inflation if Merv and the gang decided -0.25% was the favored option today? And what (if anything) would be the implications to BoE if they pushed inflation up much higher? Would they be forced to raise the rates firther down the line?

Whilst I have learnt a lot on this site, I am no economist, so I would be interested to understand a bit more about the above.

You cannot create wealth via printing money. You are simply taking it from elsewhere. The banks have printed a LOT of money.

We have had a money boom with everyone not unfortunate enough to hold thier money as savings, but holding real assets - even lost making shares, or property getting incredibly richer.

We now face a great slump as cost-push/money inflation on firms inputs means the normal production of goods is more expensive and people are noticably poorer, the huge booms in employment and immigration to fill it is over in the production structure. If the input costs keep rising then firms will lay off staff. We are now clearly seeing this stage even in the service economy.

The bank must act with real rates - driving down the prices of these inputs. Driving down the price of gold.

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Growth is slowing, consumer credit is already falling. They can cut rates by 0.25% - 0.50% and keep growth going, or raise rates, causing the excessive debts that consumers already have to be harder to manage, cut growth even further, raise unemployment and possibly precipitate a house price crash pushing us into recession. Thankfully the BoE doesn't just focus on inflation like the ECB, which is presiding over massive unemployment in the eurozone and no growth, primarily because of its obsession with inflation, or mainly focus on growth like the Fed which leads to wild swings in interest rates, which went from 6.5% to 1% in just a couple of years, and are now heading back up sharply. Falling growth often does enough itself to curb inflation and spending, something that is backed up with the fact that even though interest rates are falling, consumer debt is also falling, and will continue to do so. Surely that goes against what many of you are saying? lower IR's you think mean higher debt? Wrong, it depends on the economic circumstances of the time.

You should be happy the BoE is in the middle and has presided over a long sustained period of growth and low unemployment because it gets its sums mostly right, focusing not just on inflation but also on keeping growth in the country ticking along nicely.

I am not sure you are right about the consumer debt thing but I don't have the facts to hand. Problems in the Eurozone are linked to tax, red tape and the self interest of minority groups (and not interest rates which are already very low). These problems are spreading to the UK.

I agree with your comments on the risk issue. However we will have to face higher interest rates sooner or later and the longer we wait, the more painful the correction will be. Interest rates have been artificially low because house prices were removed from the formula.

People have had their party and the sooner we pay the bills the better.

Prevention of inflation is less painful than cure.

Edited by dog

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So in this scenario, as long as core inflation (stripping out volatile energy and food prices) remains under control it is possible to cut interest rates to prevent consumer spending slumping (as this makes up 70% of the UK economy).

Thanks for the info, so from what I read, inflation up puts upwards pressure on rates, but it is not as clear cut as rates must go up, it will depend on a number of factors.

ES, I picked up on the above, and I know it has been debated before, but I cannot understand why volatile energy and food prices are stripped out. Surely if they go up, then this pushes inflation up? Or is someone trying to fudge the figures a bit?

Is it not like saying that average house prices have in fact gone down in price if you strip out all of the houses above the average price because they were volatile?

(Hope that makes sense!)

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Thanks for the info, so from what I read, inflation up puts upwards pressure on rates, but it is not as clear cut as rates must go up, it will depend on a number of factors.

ES, I picked up on the above, and I know it has been debated before, but I cannot understand why volatile energy and food prices are stripped out. Surely if they go up, then this pushes inflation up? Or is someone trying to fudge the figures a bit?

Is it not like saying that average house prices have in fact gone down in price if you strip out all of the houses above the average price because they were volatile?

(Hope that makes sense!)

Because food prices and energy prices are traditionally volatile, so focusing too much on them will lead to volatile interest rates every time the price of crude jumps higher or food prices slump lower. If food prices and energy prices are not absorbed then it will affect core inflation anyway, pushing it higher. But on the other hand if energy prices at the pump and food prices go up, the necessities in life, people tend to cut back on other purchases such as clothes, DVD's etc. which is deflationary. The focus on core inflation is because this covers a much wider spread of items that people buy on a regular basis. If you think about your spending a month, how much actually goes on food and energy every month? It doesn't tend to alter too much because its a nessity, but your spending on other items will do.

Hence why the core inflation is a much better indication of the market. So now with inflationary pressures coming from higher energy prices, consumers are cutting back their spending in other areas as consumer confidence is lower, which is reflected in lower retail sales and lower debt levels, despite the falling interest rates. This in turn gets retailers to cut prices to lure customers in to their shops, which is then deflationary.

So overall inflation may rise, but core inflation will stay steady when growth is slowing as it is currently. However if energy prices do force up core inflation above 2% (which is a target, not a roof), then yes the BoE will get worried and start to raise interest rates, or keep them on hold.

Wait for the sales before Christmas this year instead of January, that will give you an idea of how badly the retailers are doing.

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Guest Charlie The Tramp
Wait for the sales before Christmas this year instead of January, that will give you an idea of how badly the retailers are doing.

Did not the same thing happen last December?, and still they did not spend.

The Retailers have had their great past bonuses, so now back to basic pay I fear.

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Economic Sensation

I dont know what school of economics you follow but you cannot

get economic ideas from the scum/times.

Money is still too cheap. As a saver IRs should doubled. Why should

the BoE bail out all the fools in the UK who are in debt ??

[ Text removed by Moderator ]

Let the global crash happen.

Wesite for you to look at.

http://www.kwaves.com/kond_overview.htm

Remember it is different this time ??

Hows that deposit for the house for your kids coming along.

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If you think about your spending a month, how much actually goes on food and energy every month?

Those two items along with housing are the "core" costs for most ordinary people. "Core inflation" in terms of average workers means food, electricity, gas, petrol, housing, car costs etc. "Non-core" for most people is restaurant meals, DVD's, computers, holidays etc. that most people just don't buy every day and which are absolutely non essential - the very definition of "non-core".

They just look at the inflation of whatever isn't going up too much to keep the figures down. How can anyone possibly justify not putting house prices in the data given they are the single largest cost for most people?

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Growth is slowing, consumer credit is already falling. They can cut rates by 0.25% - 0.50% and keep growth going, or raise rates, causing the excessive debts that consumers already have to be harder to manage, cut growth even further, raise unemployment and possibly precipitate a house price crash pushing us into recession.

ES the arguement you put foward is limited; it seems to implicitly assume that growth is largely a function the interest rate. Have you considered that the economy has run out of steam. If you take away a cuts ability to stimulate growth is there an arguement for a cut?

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Just curious as to what a crap rate of return re sterling vs the dollar will do for our economy, considering commodities like oil are priced in dollars. If you are to look at a graph of the dollar v sterling, you'll see that from the start of the year, one pound would have bought around $1.95..........now the rate is near $1.77. That would seem to me to indicate that the dollar has got stonger as the yanks have raised their interest rates. Yanks are still raising their rates, and the mood on rate rises there is hawkish. Would rising commodity prices and a weakening currency be bad for us? Genuine question.

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That certainly has to be one of the stupidest comments i have read on this site. Who would it save misery for? The millions of homeowners who would suddenly have to pay more in mortgage payments or the small number of people hoping for a crash but miserable because it looks as though house prices are starting to go up wrong, dispelling their hopes and dreams of a 30% correction. Thankfully the BoE members have their head screwed on.

Rates are still set to drop in November, or at the very least next year, but may bottom out around 4%.

Look, most homeowners owe nothing like current cost against their homes..

and I guarantee that there are many more waiting for homes to become affordable then owe huge amounts of money..

There is a lot of debt held out there.. but it is held by the minority..

sorry.. the great minority..

and house prices going up.. the average cost of sold homes is not the average home, or even close to the average house that was being sold.

BTL and FTB's mortgaging themselves to the hilt bought a lot of two bed flats..

These are now not selling..

What are selling are more expensive homes..

The stats way what they say.. the average price of homes selling have not massivly changed..

but only the niave would think that the type of home that is selling has not changed...

Same happened last time..

and the same people who convinced you that the prices could be sustained are the same people who want you to believe that things have not changed.

They have.

I have seen a £170,000 development offer me a flat for £130,000

that is a 23% drop..

Mind you that is the south west..

and our prices trebbled..

Still we needed a boom.. it create loads of new housing stock...

happens every time.. builders don't make much money.. prices climb... builders see prices climb.. the pound signs light up in their eyes.. they build tonnes of new homes.. the market stalls as apeculators step back to leave the "last men holding" wandering where everyone went... greater debt burden stalls the economy.. everything has an embolisim.. and oversupply nocks some properties right down..

It happens every time..

and sucker... thanks for the new housing stock..

Without you it would now have happened..

and dropping rates.. they may.. but they need to stop the borrowing now.. they need to reduce costs before economic injections into the economy can happen....

The economy, the boe the government needed you to be in a large amount of debt..

but if everyone was...? imagine the revenue they would loose just on VAT...

you think 1% stamp duty is a lot.. well the extra cost used to be taxed at 17% for vat when it was spent.. now 1%... hmmmnnn...

Edited by apom

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Just curious as to what a crap rate of return re sterling vs the dollar will do for our economy, considering commodities like oil are priced in dollars. If you are to look at a graph of the dollar v sterling, you'll see that from the start of the year, one pound would have bought around $1.95..........now the rate is near $1.77. That would seem to me to indicate that the dollar has got stonger as the yanks have raised their interest rates. Yanks are still raising their rates, and the mood on rate rises there is hawkish. Would rising commodity prices and a weakening currency be bad for us? Genuine question.

BAD.

Expect:

Rising petrol prices

Rising costs for manufacturers

Rising cost of imports - remember the chinese yuan is (almost) pegged to the dollar

Rising inflation

A falling pound is one of the ingredients for stagflation.

If the US and UK rates cross over in the next few months things will start to get interesting!

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What Economic sensation describes is the effects of an inflationary shock under neutral money.

But what we are witnessing is rising prices in general throughout the supply chain. Not just energy, but steel, bricks, coal etc...

The expression that when America catches a cold, we end up bedridden has a lot of truth to it in this context - as the prices of these raw materials are in dollars, and if we cannot produce competitive output through production vs the US we see the pound fall against the USD - thus crippling us with a massive inflationary 'cost-push' shock wave.

Prinitng more money through lowering interest rates, without rising productivity in the economy simply makes the situation worse.

Are we productive as a country or are we heading to a public sector, crippled, bureocratic unproductive country like Italy?

The difference between a rich country and a poor country is in productivity - the increases in quality (and thus revenue) in the goods and services they sell to the rest of the world. This is the essential truth unlying all economics - and why policy, red tape and bureocratic regulations and rising taxes matter so much.

Without some rate hikes to a neutral rate - we may find many other companies pulling out of the UK and sacking workers, while the growing divide in the economy between landlord and tenant, propertied vs saver destroys all prospests of innovation.

Edited by brainclamp

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  • 301 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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