Boe Meeting Today. -- multiple threads merged

[Liquid Goldfish]

2017? That suits me fine, I'm in no hurry.

me neither

but what about 2027?

[thecrashingisles]

Coutts, the Queen's bank

Coutts, RBS - the state's bank.

[shindigger]

Thats all fine until the UK Gubmint dont have any control or say in the matter.

I think we are much nearer that point than we were a year ago.

Oh yeah and don't forget to vote Labour at the next election if you want a cheaper house.

[zugzwang]

There are old articles from Q1, but am mentioning them now because I suspect savers are screwed unless gilts rise and QE can't be used to douse the rise. Apologies if already posted.

Sibley must be smiling to himself wherever he is. For the most part, he was right, and the government indeed didn't let it happen (for London and large swathes of the British Isles, not so far at least). I can recall many of us thought the blue team would bat more fairly, but now we know it's the same old rubbish, or LabourTory, as someone else called them

Actually, the Funding For Lending, which has completely smashed savers' returns, was probably just Osborne's idea. Let's be fair.

Putting aside the fact that the banking criminals all vote blue, a lot of the Tory champions on here forgot their side has a long history of using house price inflation to enhance its election prospects. Understandable in many ways since home owners make up the Tories' core constituency. It must be clear to everyone by now that Osborne intends to do the same for 2015.

[Bruce Banner]

me neither

but what about 2027?

I reckon that prices will have dropped 30% to 40% by the end of the decade, perhaps they'll be down 50% or 60% by 2027.

[inflating]

"Whacking great 220bn savers' subsidy for the UK's mortgagors so far"

"New Governor on said to have implied or stated that he has no sympathy with savers"

Video (Save our Savers on Max Keiser show) http://www.saveoursavers.co.uk/economy/the-great-savings-swindle/

[easy2012]

I reckon that prices will have dropped 30% to 40% by the end of the decade, perhaps they'll be down 50% or 60% by 2027.

Real or nominal ?

[Si1]

I don't see why savers are so special, people should consider the interest rate environment before deciding where to put their money, instead of bleating about it afterwards

[inflating]

Thats all fine until the UK Gubmint dont have any control or say in the matter.

I think we are much nearer that point than we were a year ago.

Oh yeah and don't forget to vote Labour at the next election if you want a cheaper house.

No offence but I won't be voting for any of the main parties, they can all shove it, I don't trust any of them any more

Putting aside the fact that the banking criminals all vote blue, a lot of the Tory champions on here forgot their side has a long history of using house price inflation to enhance its election prospects. Understandable in many ways since home owners make up the Tories' core constituency. It must be clear to everyone by now that Osborne intends to do the same for 2015.

Very clear

[Bruce Banner]

Real or nominal ?

Nominal, like with that other small island, Japan.

[inflating]

Nominal, like with that other small island, Japan.

Serious questions:

Is BTL big in Japan I have resisted posting the link to the video

Has Japan had a lot of immigration in those 20 years?

Aren't Tokyo property and rental prices breathtaking, and the apartments really tiny?

[Bruce Banner]

Serious questions:

Is BTL big in Japan I have resisted posting the link to the video

Has Japan had a lot of immigration in those 20 years?

Aren't Tokyo property and rental prices breathtaking, and the apartments really tiny?

.

[Bland Unsight]

I just get the nagging feeling that won't work.

The reason we have survived to date is that we are not exceptional in the market place. Everyone is doing the same thing. But once divergence occurs or divergence seems baked in then to me that is the end point.

I don't see the "let inflation rip" position as being in any way targetable.

+1

The problem for Carney is that he can't simultaneously run up inflation and keep gilt yields suppressed. If gilt yields rise then mortgage rates will rise too which will require an even greater QE subsidy to keep the housing market upright. The paradox ultimately resolves in a hyperinflation if it isn't stopped.

+1

I don't see why savers are so special, people should consider the interest rate environment before deciding where to put their money, instead of bleating about it afterwards

There is something very, very alarming in this suggestion, but I'm struggling to put my finger on it. I think that the problem is that by trying to be dismissive of special pleading, (which is something that should be done and that you reliably do well), you are in danger of overlooking the fact that saving should work, or rather it's bad news for the man in the street if saving doesn't work. Essentially, if I cannot keep my claim to wealth in cash without seeing it eroded, then we have created a situation where our money is no longer a store of value, which would mean by the general three part definition of money as a means of exchange, unit of account and store of value, that our money is no longer money.

I think the other thing that is a big deal for me is to ask why personal saving stopped working, or to look at the question in the way you frame it, why did the interest rate environment change? (But that's another question...)

If we are willing to accept that savers should be forced to take their chances with the "interest rate environment", then aren't we just saying that we have constructed a situation where our financial sector is extracting huge amounts of wealth through its profits, but is failing to ensure that our money is money, (and we are now happy with that situation?).

By dismissing the interests of savers are you not condoning financial repression? Are you not saying that actually that these people should not have saved, but rather they should have joined in the orgy of debt, getting themselves a telephone number IO mortgage and a string of buy-to-lets, because that was what the "interest rate environment" suggested? (But we all know where that logic takes us; as per Killer Bunny's sig, "If they raise rates, we're toast. If they don't, it's because we're toast.")

I don't think that we are seeing a story book world where saving expresses the desire of people to push their claims on wealth into the future, and borrowing expresses the desire of people to bring wealth that they will later acquire from the future and into the present. I think we are seeing a world where a global savings glut flowed through the hands of bankers with short term goals into the hands of idiots who thought that rising house prices could make us all rich. The consequences of this real world story are that financial repression is going to be used to pass wealth from the those who didn't drown themselves in debt and give it to those who thought that they could get rich shovelling debt (bankers) or taking on debt, (because house prices always go up).

One of the crucial differences, to my mind, between the story book version and the real version is that in the story book version, it's always individuals transacting. However in the real version, part of what happened is a long chain of events involving China following a growth model which held down Treasury yields, which sent money off into the MBS market, which sent money through the hands of sharks like DB, Goldman and ML on to clowns like Edeus, Paragon and Kensington and finally into the hands of a hairdresser who wanted to declare that they earned £50k pa, (when really they made £25k) so they could pay a £225k for a horrid two bed that could be had for half that 3 years earlier.

Obviously, this chain of events ended badly, and the political choice regarding how to fix things has been financial repression. Talk of an "interest rate environment" is perfectly correct, provided that it is just an innocent sounding euphemism to cover a particular aspect of financial repression.

I'm not going to get stuck into anyone complaining about lousy savings rates, because things could have been different. Brown's Treasury could have curtailed the worst excesses of the credit boom, before things got so out of hand. King's Bank of England could have laid the groundwork for more effective resolution of our insolvent banks 2 years before these measures were needed, rather than 2 years too late to be of any use. And even today we could take our chances with some Schumpterian creative destruction rather than tear any spare flesh off the economically viable in order to feed zombies. Dismal savings rates are a symptom of the choices that we have made regarding who to reward and who to punish. For me, low saving rates are like a banner ad reminding us that the UK economy has been captured by its crap banks. Complaining about dismal saving rates should be encouraged; IMO at the heart of the impulse to complain lies the simple insight that things weren't always this sh1t for people who want to save not borrow and therefore they don't necessarily have to be this sh1t now.

Edited July 4, 2013 by ChairmanOfTheBored

[inflating]

.

Japan's property prices have, until perhaps recently, been dropping for 21 years. http://www.worldpropertychannel.com/asia-pacific-commercial-news/japan-ministry-of-land-japan-property-prices-j-reits-sumitomo-mitsui-trust-research-institute-co-moodys-japan-japan-land-values-6146.php

What isn't clear is whether that's in nominal or real terms going back before 2005.

It seems from this Japan property price graph that price changes were very closely aligned in both nominal and real terms at least going back to 2005. http://www.globalpropertyguide.com/real-estate-house-prices/J#japan

Japan has 128 million people so I can understand why people would compare it to the UK, but I have some nagging doubts. For example:

Did the Japanese govt introduce property price supporting schemes years ago, like our FFL/HTB etc? I know they slashed IRs.

Has Japan a thriving BTL market with people buying BTL as 'my pension innit'? If it does, the comparison to the UK is valid of course.

Has Japan admitted a million or so immigrants in the past 20 years? I wasn't aware that they had, if they have then the comparison to the UK holds true I guess. And does the UK have a population decline as Japan apparently does:

http://online.wsj.com/article/SB10001424052970204712904578090774214680736.html

This seeming bargain is no fluke. While Tokyo keeps its mantle of being the world's most expensive city, a steady migration to urban centers and the country's long-term population decline have left swaths of property that can be had for a pittance by international standards.

Mr. Leach bought his property in 2003 for ¥13 million (equal to about $120,000 at the time, now about $163,000).

I'd really like to keep the faith by comparing the UK with Japan. I'm just not at all sure it's looking similar, especially with the seeming divergence of nominal and real terms price fluctuations.

[Bloo Loo]

"Whacking great 220bn savers' subsidy for the UK's mortgagors so far"

"New Governor on said to have implied or stated that he has no sympathy with savers"

Video (Save our Savers on Max Keiser show) http://www.saveoursa...avings-swindle/

Capital is excess money saved.

Whoever said they have no sympathy with savers is an idiot of the first order...he implies that all money you have should be borrowed...good for bankers shortterm, and that also implies that firms dont have to save any profits for the weekly payroll..simply put that on the credit account, spend the profits on stuff and get the economy going....these are the thoughts of a madman.

[19 year mortgage 8itch]

+1

+1

There is something very, very alarming in this suggestion, but I'm struggling to put my finger on it. I think that the problem is that by trying to be dismissive of special pleading, (which is something that should be done and that you reliably do well), you are in danger of overlooking the fact that saving should work, or rather it's bad news for the man in the street if saving doesn't work. Essentially, if I cannot keep my claim to wealth in cash without seeing it eroded, then we have created a situation where our money is no longer a store of value, which would mean by the general three part definition of money as a means of exchange, unit of account and store of value, that our money is no longer money.

I think the other thing that is a big deal for me is to ask why personal saving stopped working, or to look at the question in the way you frame it, why did the interest rate environment change? (But that's another question...)

If we are willing to accept that savers should be forced to take their chances with the "interest rate environment", then aren't we just saying that we have constructed a situation where our financial sector is extracting huge amounts of wealth through its profits, but is failing to ensure that our money is money, (and we are now happy with that situation?).

By dismissing the interests of savers are you not condoning financial repression? Are you not saying that actually that these people should not have saved, but rather they should have joined in the orgy of debt, getting themselves a telephone number IO mortgage and a string of buy-to-lets, because that was what the "interest rate environment" suggested? (But we all know where that logic takes us; as per Killer Bunny's sig, "If they raise rates, we're toast. If they don't, it's because we're toast.")

I don't think that we are seeing a story book world where saving expresses the desire of people to push their claims on wealth into the future, and borrowing expresses the desire of people to bring wealth that they will later acquire from the future and into the present. I think we are seeing a world where a global savings glut flowed through the hands of bankers with short term goals into the hands of idiots who thought that rising house prices could make us all rich. The consequences of this real world story are that financial repression is going to be used to pass wealth from the those who didn't drown themselves in debt and give it to those who thought that they could get rich shovelling debt (bankers) or taking on debt, (because house prices always go up).

One of the crucial differences, to my mind, between the story book version and the real version is that in the story book version, it's always individuals transacting. However in the real version, part of what happened is a long chain of events involving China following a growth model which held down Treasury yields, which sent money off into the MBS market, which sent money through the hands of sharks like DB, Goldman and ML on to clowns like Edeus, Paragon and Kensington and finally into the hands of a hairdresser who wanted to declare that they earned £50k pa, (when really they made £25k) so they could pay a £225k for a horrid two bed that could be had for half that 3 years earlier.

Obviously, this chain of events ended badly, and the political choice regarding how to fix things has been financial repression. Talk of an "interest rate environment" is perfectly correct, provided that it is just an innocent sounding euphemism to cover a particular aspect of financial repression.

I'm not going to get stuck into anyone complaining about lousy savings rates, because things could have been different. Brown's Treasury could have curtailed the worst excesses of the credit boom, before things got so out of hand. King's Bank of England could have laid the groundwork for more effective resolution of our insolvent banks 2 years before these measures were needed, rather than 2 years too late to be of any use. And even today we could take our chances with some Schumpterian creative destruction rather than tear any spare flesh off the economically viable in order to feed zombies. Dismal savings rates are a symptom of the choices that we have made regarding who to reward and who to punish. For me, low saving rates are like a banner ad reminding us that the UK economy has been captured by its crap banks. Complaining about dismal saving rates should be encouraged; IMO at the heart of the impulse to complain lies the simple insight that things weren't always this sh1t for people who want to save not borrow and therefore they don't necessarily have to be this sh1t now.

I'm less concerned about savings rates than I am about labour rates. It feels like I'm being paid in something which is no longer worth anything.

Is it me or is there more than a casual relationship between wages and savings rates?

[inflating]

Whoever said they have no sympathy with savers is an idiot of the first order...

I couldn't find the quote but it's what the rep from SoS said in the video with MK, so I would be very surprised if untrue. If he actually said that, I question why he was appointed to that role at the bank. Or maybe that's an oxymoron (and I'm a moron for thinking otherwise, yeah I know)

Edited July 4, 2013 by inflating

[ccc]

Bbc coverage interested me. Aside from the expected - 'isn't it great rates probably won't go up for a few years' - the point was WHEN they will rise, rather than the attitude of the past few years - where the idea of rates ever rising has been more or less forgotten.

The very fact that the BOE is trying to tell everyone rates won't rise for x number of months - immediately reminds people that they will rise eventually. And maybe sooner than they had thought.

I think this tactic may have the opposite effect of what was desired.

Or maybe the powers that be know rates are rising soon - and are just warming people up to the possibility . .

[Bland Unsight]

I'm less concerned about savings rates than I am about labour rates. It feels like I'm being paid in something which is no longer worth anything.

On the other hand, if we're about to STOP targeting inflation with monetary policy (did we ever really start? ), we can all look forward to an even more aggressive destruction of the value of our wages, (in the attempt to keep our houses overpriced). What could possibly go wrong?

[BlokeInDurham]

There is something very, very alarming in this suggestion, but I'm struggling to put my finger on it. I think that the problem is that by trying to be dismissive of special pleading, (which is something that should be done and that you reliably do well), you are in danger of overlooking the fact that saving should work, or rather it's bad news for the man in the street if saving doesn't work. Essentially, if I cannot keep my claim to wealth in cash without seeing it eroded, then we have created a situation where our money is no longer a store of value, which would mean by the general three part definition of money as a means of exchange, unit of account and store of value, that our money is no longer money.

Money can be, and is still, a store of value. Money can never be a store of an absolute amount of value. As you note saved money is a request on future value (and debts the reverse), but without knowing the amount of future value in existence (i.e. population x average value production per capita) then in an ideal non-money printing world the value of your saved money can only ever be a percentage of the overall value and not a fixed absolute value. In a money-printing system obviously your percentage diminishes with time.

It's the root of the "but I've paid in all my life for a comfy retirement" pensioner entitlement problem. People expect guaranteed value rather than guaranteed money. You can't have guaranteed value (e.g. 'comfy' retirement) only, in the best case scenario, a level of value commensurate with the overall amount of value knocking about. Anything else involves stealing value somehow or another from someone else.

[Sir Harold m]

Capital is excess money saved.

Whoever said they have no sympathy with savers is an idiot of the first order...he implies that all money you have should be borrowed...good for bankers shortterm, and that also implies that firms dont have to save any profits for the weekly payroll..simply put that on the credit account, spend the profits on stuff and get the economy going....these are the thoughts of a madman.

I don't think he's saying that at all.

It's also a completely different thing to suggest that saving is generally good for society and deserving of encouragement and another completely to request that savers stop bleating about rates being low . I subscribe to both .

My rationale is that the governments can only suppress rates for as long as sufficient people ( savers) continue to keep sufficient cash at hand at those rates .

I'm assuming that people saving in our environment are doing so because they need or desire liquidity . Tptb have set the price and savers are freely taking it.

If savers are annoyed then they should move into assets, pm's , equities , foreign currency etc etc . If they don't like the risk reward then they should stop bleating .

I agree that it's a sorry state of affairs to discourage saving but the rates are being allowed to stay low because there is not sufficient capital flow away from gilts or cash ( both credit notes issued by UK plc)

When there is sufficient outflow then tptb will have to turbo charge the printers or raise rates , both will ultimateky lead to a correction with different groups feeling pain. Savers are preventing this from happening by freely lending cash to the system at these low rates .

Edited July 4, 2013 by Sir Harold m

[inflating]

On the other hand, if we're about to STOP targeting inflation with monetary policy (did we ever really start? ), we can all look forward to an even more aggressive destruction of the value of our wages, (in the attempt to keep our houses overpriced). What could possibly go wrong?

Apologies if this is stating the bleedin' obvious, but are you referring to this new fangled Nominal Level GDP Targeting smoke & mirrors http://www.saveoursavers.co.uk/bank-of-england/the-next-governor-of-the-bank-of-england-brought-to-you-by-loreal/

[inflating]

I don't think he's saying that at all.

It's also a completely different thing to suggest that saving is generally good for society and deserving of encouragement and another completely to request that savers stop bleating about rates being low . I subscribe to both .

My rationale is that the governments can only suppress rates for as long as sufficient people ( savers) continue to keep sufficient cash at hand at those rates .

I'm assuming that people saving in our environment are doing so because they need or desire liquidity . Tptb have set the price and savers are freely taking it.

If savers are annoyed then they should move into assets, pm's , equities , foreign currency etc etc . If they don't like the risk reward then they should stop bleating .

I agree that it's a sorry state of affairs to discourage saving but the rates are being allowed to stay low because there is not sufficient capital flow away from gilts or cash ( both credit notes issued by UK plc)

Not everyone has the ability, expertise or courage to do so. Would you also not agree asking savers to do forex, the ftse, pms etc, is asking them to switch from being risk averse to far more adventurous and potentially seriously loss-making activities? People who have saved a nest egg are not going to want to chuck it all on some shares or PMs, those investment or speculative vehicles are a whole different animal to the safety of seeing an above or equal inflation return from a savings bank.

When there is sufficient outflow then tptb will have to turbo charge the printers or raise rates , both will ultimateky lead to a correction with different groups feeling pain. Savers are preventing this from happening by freely lending cash to the system at these low rates .

Yes and for the very reasons I mentioned, they aren't speculative in nature, on the whole, and the BofE is milking that big time. But ofc you're right.

[zugzwang]

Capital is excess money saved.

Whoever said they have no sympathy with savers is an idiot of the first order...he implies that all money you have should be borrowed...good for bankers shortterm, and that also implies that firms dont have to save any profits for the weekly payroll..simply put that on the credit account, spend the profits on stuff and get the economy going....these are the thoughts of a madman.

+1

An economy that consists mostly of bankers and asset holders but has almost no firms or workers... is a Ponzi scheme!

[zugzwang]

I don't think he's saying that at all.

It's also a completely different thing to suggest that saving is generally good for society and deserving of encouragement and another completely to request that savers stop bleating about rates being low . I subscribe to both .

My rationale is that the governments can only suppress rates for as long as sufficient people ( savers) continue to keep sufficient cash at hand at those rates .

I'm assuming that people saving in our environment are doing so because they need or desire liquidity . Tptb have set the price and savers are freely taking it.

If savers are annoyed then they should move into assets, pm's , equities , foreign currency etc etc . If they don't like the risk reward then they should stop bleating .

My rationale for going back to cash is that global volatility makes me fearful of a stock market crash!

You have things back-to-front, the market sets the price for everything - not Bernanke, not Abe, not the BoE. If the market determines that QE has been overdone (i.e. if China's shadow banking system has reached a point of maximum expansion) then the market will force Bernanke's hand and make him desist.

.

Edited July 4, 2013 by zugzwang