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Bear Goggles

Watch Asset Prices, King Stresses

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Policymakers must closely watch the price of assets such as bonds, oil, gold and property to keep inflation in check, Mervyn King has said

Well that is exactly what they have been doing, watching them and totally ignoring the inflationary effects.

Watching them and then watching one manufacturer after another go to the wall as soaring costs have destroyed an already weak comeptitive position.

Watching them as they have been printing money to keep consumer spending going - a whole chunk of it going straight out of the back door creating the burgeoning trade deficit.

Watching them as the govt have used the cheap money to fund one batch of useless public non-jobs after another, putting further furture tax burdens on creators of growth in the future, but buying grace and favour and another 4 years in office.

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He also appears to be saying that IRs will remain low for the foreseeable future.

The BoE followed Greenspan down and it must also follow Bernanke up. US and UK share similar deficit problems and vulnerable currencies. Lower IR and another Black Tuesday beckons.

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This sort of stuff is simply ars3 covering.

The truth is that he sees that there are growing calls for the US to start sorting out the mess they are in rather than robbing Peter to pay Paul once again.

There is a likelihood at the moment, with oil prices on the way up, Iran tensions, etc that we could be shifting into a higher interest rate environment once again.

The global pressures are building in the big economies for some of this mess to be cleared out.

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Policymakers must closely watch the price of assets such as bonds, oil, gold and property to keep inflation in check, Mervyn King has said.

I didn't realise gold caused inflation? I have a lot to learn evidently.

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Policymakers must closely watch the price of assets such as bonds, oil, gold and property to keep inflation in check, Mervyn King has said.

I didn't realise gold caused inflation? I have a lot to learn evidently.

If gold becomes a speculative bubble it may cause inflation. The big problem with gold, IMHO, is its uncanny ability to turn on a dime. One day its soaring and the next it crashes, almost as if someone has manipulated the price and knew when to sell. :ph34r:

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If gold becomes a speculative bubble it may cause inflation

Is gold in the CPI basket? can't be a large component can it? Hope someone more knowledgeable can wade in and clarify this.

Gold is historically low against oil and houses and stuff like that so how can it be causing inflation?

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LONDON (Reuters) - Developments in Britain's housing market are very satisfactory, with activity picking up while property prices are broadly stable, Bank of England Governor Mervyn King told a radio station.

"It's clearly the case that house prices are not rising at the rate that they were in the first half of 2004 and that's a good thing," King said in comments made on Monday to radio station KMFM but which were not broadcast. The station, based in Kent, provided the comments to Reuters on Tuesday.

"At present, activity in the housing market is picking up and house prices are broadly stable and that's a very satisfactory position. Let's hope we can keep it roughly there," King said.

"If we can keep this broad stability of the economy that we've experienced now for over 10 years then there shouldn't be very sharp or sudden changes in the finances of homeowners or indeed anyone else from year to year."

http://today.reuters.co.uk/news/newsarticl...RITAIN-KING.xml

Nope, It's full steam ahead for house prices. A fair few Rtrs journos have BTL portfolios, I'm told. I know one who quit about 2yrs ago after amassing a dozen properties in Brighton.

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"If we can keep this broad stability of the economy that we've experienced now for over 10 years then there shouldn't be very sharp or sudden changes in the finances of homeowners or indeed anyone else from year to year."

Broad stability - producer prices rising at nearly 20%.

Debt rising at nearly £100Bn a year.

Broad money rising at 10% a year through printing the stuff.

That is not stability, that is printing your way out of trouble and creating greater trouble for the future and destroying the real economy as you go, oh sorry the real economy doesn't matter any more we can keep on borrowing and spending on other people's products ad infinitum.

Edited by OnlyMe

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The big problem with gold, IMHO, is its uncanny ability to turn on a dime. One day its soaring and the next it crashes, almost as if someone has manipulated the price and knew when to sell. [Realistbear]

That would be Durch.

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Is Mervin talking in a round-about way about Bond Yield Inversion?

My understanding is that it's occurence is frequently an early indicator of severe economic trouble?

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Isn't this bit the crux of the matter:

Either the price of goods and services would rise to catch up with asset prices, through higher inflation, or asset prices would fall.

Isn't this good news for bears, whichever way it goes. i.e. higher inflation leads to higher IRs, falling asset prices equals lower HPs?

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Yep, it is simply a matter of time.

"the boat" sailed years ago.

Anyone who jumps on now is going to end up as an oarsman all the way across the Atlantic for the next 10 years just trying to keep the thing afloat.

Mervyn knows the score, these speeches he keeps giving are simply a blame diversification exercise.

Lets hope rates go up this year. I would love to see David Smiths fat face.

Edited by BubbleTurbo

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Agreed. But there seems to be a rumour going around that a rate cut in February is a done deal. He needs to dampen these expectations now to avoid 'disappointment' next month.

He's probably up to his sly games again. He knows his words can influence and perhaps he's trying to dampen rate cut expectations.

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Is Mervin talking in a round-about way about Bond Yield Inversion?

My understanding is that it's occurence is frequently an early indicator of severe economic trouble?

under normal circumstances it would be.

...we are not in normal circumstances,there is still a big backlog of bonds in the market bought from when IR's were really low and it looked like a safe bet.

...we will most likely have a recession along with rising bond yields and IR's either held here or heading up.

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perhaps he's trying to dampen rate cut expectations.

I don't think there's much "perhaps" about this. It seems to be a warning to the market that a rate cut isn't a done deal.

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Isn't this bit the crux of the matter:

Either the price of goods and services would rise to catch up with asset prices, through higher inflation, or asset prices would fall.

Isn't this good news for bears, whichever way it goes. i.e. higher inflation leads to higher IRs, falling asset prices equals lower HPs?

sounds spookily accurate!!!

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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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