Bloo Loo Posted January 25, 2014 Share Posted January 25, 2014 All other things being equal I'd like interest rates to be low too (and I'm a debt free saver). I'd prefer that house prices were brought down via the supply side of the equation with more housebuilding, and that rentiers weren't rewarded at above inflation levels just for putting cash on risk free deposit. only you would like your pension to return 5% as well. Quote Link to comment Share on other sites More sharing options...
crashmonitor Posted January 25, 2014 Share Posted January 25, 2014 except this is wrong....there is only one way rates can stay low, and thats via printing...and rates stay low then because money is worthless. Meanwhile Japan managed deflation and zirp for decades as the asset prices adjusted under cataclysmic debt. Quote Link to comment Share on other sites More sharing options...
Biggus Posted January 25, 2014 Share Posted January 25, 2014 All other things being equal I'd like interest rates to be low too (and I'm a debt free saver). I'd prefer that house prices were brought down via the supply side of the equation with more housebuilding, and that rentiers weren't rewarded at above inflation levels just for putting cash on risk free deposit. The economy is saturated with debt. Banks are basically broke and are basically stealing people's money. A large proportion of people's money is spent on servicing their debts. Prices have been massively distorted by huge levels of debt. The incredibly stupid policy of zero percent interest rates has destroyed the economy. High interest rates attract savers and discourage debt. That means more people would save and banks would not be broke. Fewer people would borrow, the level of debt would decrease. Prices would correct and things would be valued according to supply and demand, instead of credit availability. Too bad Carney was selected on the basis that he is a moron who will never allow rates to increase no matter what. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted January 25, 2014 Share Posted January 25, 2014 Meanwhile Japan managed deflation and zirp for decades as the asset prices adjusted under cataclysmic debt. Japan is a massive exporter of actual stuff. We, are not. They printed like mad to ensure they banks didnt bust...even though they were bust and still are. How many Yen to the £? Also, jobs for life are virtually gone, crime apparently is on the rise and now they are looking for war with China. All worked out well then... Quote Link to comment Share on other sites More sharing options...
silver surfer Posted January 25, 2014 Share Posted January 25, 2014 only you would like your pension to return 5% as well. Not from a zero risk deposit account I wouldn't. To better inflation there has to be some risk involved, otherwise life's tipped too far in favour of rentiers. Quote Link to comment Share on other sites More sharing options...
crashmonitor Posted January 25, 2014 Share Posted January 25, 2014 (edited) All worked out well then... (Japan) I suppose the equivalent housepricecrashers over there will be very pleased with the result..... up to 90% crash in asset prices and a currency that buys you more every year. Deflation is great if you have no debt. Edited January 25, 2014 by crashmonitor Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted January 25, 2014 Share Posted January 25, 2014 Not from a zero risk deposit account I wouldn't. To better inflation there has to be some risk involved, otherwise life's tipped too far in favour of rentiers. The natural state of an improving, technologically advancing economy is..lower production costs through efficiency and innovation. This is a state of deflation. You may have been fooled into believing that inflation is necessary to cover risk. It isnt. Inflation is necessary to cover waste, ineffiency and just plain crime. otherwise, risk covered by price, and that price is interest rates. Quote Link to comment Share on other sites More sharing options...
Blod Posted January 25, 2014 Share Posted January 25, 2014 I'd prefer that house prices were brought down via the supply side of the equation with more housebuilding, and that rentiers weren't rewarded at above inflation levels just for putting cash on risk free deposit. I can't see prices being ever allowed to to drop, new houses will be price at the the current rate. The construction industry have a huge overvalued land bank and the government know that they can't let the the value of that drop. The current increase in house building is being underwritten by the various state cheap financing deals paid by us, the taxpayer. Quote Link to comment Share on other sites More sharing options...
crashmonitor Posted January 25, 2014 Share Posted January 25, 2014 (edited) I can't see prices being ever allowed to to drop, new houses will be price at the the current rate. The construction industry have a huge overvalued land bank and the government know that they can't let the the value of that drop. The current increase in house building is being underwritten by the various state cheap financing deals paid by us, the taxpayer. Never mind the house builders' land banks, think of the MPs own personal property interests or the bad home loans on the Government's books. Agree they will only release enough land to sustain prices at the present levels as a minimum requirement. Edited January 25, 2014 by crashmonitor Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted January 25, 2014 Share Posted January 25, 2014 I can't see prices being ever allowed to to drop, new houses will be price at the the current rate. The construction industry have a huge overvalued land bank and the government know that they can't let the the value of that drop. The current increase in house building is being underwritten by the various state cheap financing deals paid by us, the taxpayer. the people have the ultimate power...stop buying... Government knows this...it therefore has to entice people to keep buying. Quote Link to comment Share on other sites More sharing options...
silver surfer Posted January 26, 2014 Share Posted January 26, 2014 The natural state of an improving, technologically advancing economy is..lower production costs through efficiency and innovation. This is a state of deflation. You may have been fooled into believing that inflation is necessary to cover risk. It isnt. Inflation is necessary to cover waste, ineffiency and just plain crime. otherwise, risk covered by price, and that price is interest rates. The risk I'm talking about is the risk of forfeiture, not inflation. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 26, 2014 Share Posted January 26, 2014 The natural state of an improving, technologically advancing economy is..lower production costs through efficiency and innovation. This is a state of deflation. You may have been fooled into believing that inflation is necessary to cover risk. It isnt. Inflation is necessary to cover waste, ineffiency and just plain crime. otherwise, risk covered by price, and that price is interest rates. Natural state of lower production costs? There's no such thing. Production costs are ultimately governed by the cost of energy and food both of which have exploded uncontrollably since the Millennium thanks to Peak Oil and the global population boom. Quote Link to comment Share on other sites More sharing options...
okaycuckoo Posted January 26, 2014 Share Posted January 26, 2014 Great question, I'm sure there's a perfectly good explanation they just haven't quite got around to giving it yet what with all the vigilance over asset prices that they aren't concerned with. If five years of ZIRP isn't harmful why haven't we done it before? It's BS and everyone here knows it, but as per the Rothschild quote by interstate, the majority can't (dont want to) get their head around it. For extra comedy value we seem to now be getting forward guidance on the forward guidance You may be putting the cart before the horse: interest rates are low because of the damage that's already been done. Quote Link to comment Share on other sites More sharing options...
frederico Posted January 26, 2014 Share Posted January 26, 2014 Natural state of lower production costs? There's no such thing. Production costs are ultimately governed by the cost of energy and food both of which have exploded uncontrollably since the Millennium thanks to Peak Oil and the global population boom. This is true, however you can use technology to improve productivity at a faster rate than other costs increase, this is a fight uk manufacturers are engaged in all the time, massive improvements just to keep the price the same. On another tack, I feel comparisons with Japan are irrelevant as their economy is completely different to ours. The trade deficit will do for us if bonds don't get us first. Quote Link to comment Share on other sites More sharing options...
Hold Fast Posted January 26, 2014 Share Posted January 26, 2014 (edited) You may be putting the cart before the horse: interest rates are low because of the damage that's already been done. Yes, thats a good point. I still think interest rates that low for that long are harmful in themselves though. Is there any real point going below...(pulls number out of ar*e)...2%? Surely into diminishing returns by the time we're down past a certain point? Of course I must remember that we only care about people with "jumbo mortgages" and a certain entity that needs to borrow circa 120Bn next year. Edited January 26, 2014 by Hold Fast Quote Link to comment Share on other sites More sharing options...
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