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Economically Senseless

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I thought I would go for the title of the most economically senseless buffoon on this forum and ask a few probably stupid questions.

I read somewhere that the biggest buyers of us$ currency was now central banks rather then private investors, and it is done in order to keep the $ stronger than their own currency (e.g. yen).

If that is the case then does it mean that central banks rather than market forces now set the exchange rates?

Assuming the above is correct, we have interest rates, and foreign exchange rates set by the central banks.

Would it then be easy to flood the country with £ in UK, or $ in US, by for example making everyone a employee of the government and not have a currency crises? Is this what is happening now?

And if most people are employed by the government, house prices should never crash? no?

As long as central banks work in coercion and fix exchange rates. When does it all fall apart?

When oil hits refinery limits maybe causing inflation to appear anyway, thus forcing central bankers to increase interest rates or strengthen the currency?

Or do I win the most economically senseless buffoon title?

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And if most people are employed by the government, house prices should never crash? no?

TBH I couldn't make heads or tails out of most of your post, but I liked the bit above. :D

I thought I'd welcome you as a new member with a reply to your thread though, don't get disheartened, most people seem to like to keep it simple here, it makes them feel better about their lives.

;)

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most people seem to like to keep it simple here, it makes them feel better about their lives.

LOL, you're the simplest one on here mate!

"Property is BEST, property prices ALWAYS RISE, property gives you FREE MONEY etc etc" ad nauseam

You're like a stuck record.

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I thought I would go for the title of the most economically senseless buffoon on this forum and ask a few probably stupid questions.

I read somewhere that the biggest buyers of us$ currency was now central banks rather then private investors, and it is done in order to keep the $ stronger than their own currency (e.g. yen).

If that is the case then does it mean that central banks rather than market forces now set the exchange rates?

Assuming the above is correct, we have interest rates, and foreign exchange rates set by the central banks.

Would it then be easy to flood the country with £ in UK, or $ in US, by for example making everyone a employee of the government and not have a currency crises? Is this what is happening now?

And if most people are employed by the government, house prices should never crash? no?

As long as central banks work in coercion and fix exchange rates. When does it all fall apart?

When oil hits refinery limits maybe causing inflation to appear anyway, thus forcing central bankers to increase interest rates or strengthen the currency?

Or do I win the most economically senseless buffoon title?

The trouble is you have to effectively print lots of your own currency to buy up everybody else's and to pay all your own public sector workers.

If you keep doing that you can end up with Weimar Republic-style hyperinflation and massive political instability.

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I believe that the answer is that they print their own money, then they sell it to each other, so rather than saying 'my currency is backed by gold', they can say 'my currency is backed by $X's, £X's & €X's.

LOL, you're the simplest one on here mate!

"Property is BEST, property prices ALWAYS RISE, property gives you FREE MONEY etc etc" ad nauseam

You're like a stuck record.

But its OK if I'm right..... :D

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The trouble is you have to effectively print lots of your own currency to buy up everybody else's and to pay all your own public sector workers.

If you keep doing that you can end up with Weimar Republic-style hyperinflation and massive political instability.

Exactly. Argentina is printing loads of pesos to keep it a 3 to 1 with the dollar. And as a consequence they now have 10% inflation there.

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With large sections of the electorate having huge debts I think higher inflation is politically more palatable than high interest rates for the UK government.

Edited by jackalope

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With large sections of the electorate having huge debts I think higher inflation is politically more palatable than high inflation rates for the UK government.

I assume you mean higher inflation is politically more palatable than high interest rates.

In which case I agree, and I would not be the least bit surprised if the MPC's target inflation range was raised in the next year or two.

The general public would be perfectly happy to see the value of their debts and mortgages inflated away - a disastrous scenario for savers and STRs. Of course this would also make the UK a much less attractive place for foreign investment and we'd eventually get the unemployment/stagflation scenario of the 1970s :(

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I assume you mean higher inflation is politically more palatable than high interest rates.

In which case I agree, and I would not be the least bit surprised if the MPC's target inflation range was raised in the next year or two.

The general public would be perfectly happy to see the value of their debts and mortgages inflated away - a disastrous scenario for savers and STRs. Of course this would also make the UK a much less attractive place for foreign investment and we'd eventually get the unemployment/stagflation scenario of the 1970s :(

Yes! That's what I meant. It could be an attractive option for GB to let inflation tick up a few points. This would allow him to prop up the housing market with low interest rates and at the same time erode the debt mountain. He could then blame it all the price of oil or something.

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Yes! That's what I meant. It could be an attractive option for GB to let inflation tick up a few points. This would allow him to prop up the housing market with low interest rates and at the same time erode the debt mountain. He could then blame it all the price of oil or something.

Aha! someone who has seen what is really going on with IR's.

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  • 302 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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