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adarmo

Rates not rising for a year http://www.bbc.co.uk/news/business-41141453

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All mathematical models have limits to their effectiveness. They're all wrong outside those limits.

Once you divorce economic incentives from productivity, as I believe has happened because of Zirp, the assumptions behind macro ir control of the monetary system no longer exist. The economy will be akin to an aeroplane totally outside it's flight envelope. The control surfaces simply won't work. The engines will have flamed out and won't restart whilst flying in an inverted spin. Once the next looming recession hits I'm not sure policy makers will have any control over its playing out.

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10 minutes ago, adarmo said:

When will they rise?

What will the trigger for forced sellers be?

Quote from the linked article:

Half the economists contacted by the BBC think wages growth will outpace inflation in the first half of 2019.

PMSL - no chance. Wage inflation is virtually non-existent. Also, looking at the chart in that article, does anyone else recall getting near 3% rises in July 2015 (excluding bonuses), when inflation was supposedly near zero? No, me neither.

Edited by dpg50000

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Just watched that on the news,, what a joke.. I still think other factors will force Carney.. There is so much going on politically and financially in the world I don't think they are actually in control.

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1 minute ago, Bruce Banner said:

If they carry on like this the trigger will be the point at which our daft government needs a negative interest rate that it can no longer support from taxation.

There simply has to be a once in a generation massive correction, bring down the govt type recession, now. These cowards simply don't have the balls to take corrective action in advance. The economy itself will have to school them.

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6 minutes ago, Si1 said:

All mathematical models have limits to their effectiveness. They're all wrong outside those limits.

Once you divorce economic incentives from productivity, as I believe has happened because of Zirp, the assumptions behind macro ir control of the monetary system no longer exist. The economy will be akin to an aeroplane totally outside it's flight envelope. The control surfaces simply won't work. The engines will have flamed out and won't restart whilst flying in an inverted spin. Once the next looming recession hits I'm not sure policy makers will have any control over its playing out.

We are going for Japan syndrome?

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1 minute ago, dpg50000 said:

Quote from the linked article:

Half the economists contacted by the BBC think wages growth will outpace inflation in the first half of 2019.

PMSL - no chance. Wage inflation is virtually non-existent. Also, looking at the chart in that article, does anyone else recall getting near 3% rises in July 2015 (excluding bonuses), when inflation was supposedly near zero? No, me neither.

Utterly laughable.But then I suppose if you look at the national mean,they might have a chance of being correct.Using regional medians......no chance.

I'm amazed at some of the predictions they come out with.

 

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5 minutes ago, dpg50000 said:

Quote from the linked article:

Half the economists contacted by the BBC think wages growth will outpace inflation in the first half of 2019.

PMSL - no chance. Wage inflation is virtually non-existent. Also, looking at the chart in that article, does anyone else recall getting near 3% rises in July 2015 (excluding bonuses), when inflation was supposedly near zero? No, me neither.

I do recall getting company wide 3% pay rises in April 2016 of 3%. They were marginally lower this year. Anecdotal though (of course). 

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2 minutes ago, Si1 said:

There simply has to be a once in a generation massive correction, bring down the govt type recession, now. These cowards simply don't have the balls to take corrective action in advance. The economy itself will have to school them.

Debt default.As many on here have stated the old transmission mechanisms are broken.

Falling prices will see banks restricting lending and BTLers offloading.

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5 minutes ago, Sancho Panza said:

Debt default.As many on here have stated the old transmission mechanisms are broken.

Falling prices will see banks restricting lending and BTLers offloading.

30% increase in people missing payments and 300'000 ccjs in the first 6 months of 2017. Credit card debt rising beyond 2007 levels as people use credit to pay bills, rise in homelessness, cuts to benenafits, rise in crime, BOE telling banks to increase buffers decreasing money for lending, loosening of credit checks by car sellers. It's like a perfect storm.. 

3% pay rise! So that's a 20% pay raise at the top and 0.5% pay rise at the bottom.. 

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4p increase on petrol apparently due to refinery damage in Texas, it demonstrates how reliant we are on outside supply. Another storm moving in today through Florida..

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There is a thing called the "natural" rate of interest. It is the rate at which economic growth is maintained at its trend rate and with and low stable inflation. Another, and more fundamental, definition is that it is the exchange rate between current and future goods in the economy.

Many on here talk about policy being "normalized" by which they mean getting back to rates of say 4-5%, sky high today but quite reasonable when you look at the record and it may well be that for most of our post war history at least the "natural" rate has been consistent with market rates of this level. However since 2008 the total debt levels in the economy have grown inexorably and the natural rate is much lower than before but the point is that those debt levels are increasing still and not by trivial amounts. This means that the "natural" rate is still going down and not up. When folk talk of "normalizing" rates they talk in terms of "un needed emergency measures" as if its time we got back to the status quo ante but the fact is that we are not getting nearer the point when we can normalize rates; we are actually further away and the rate is still deceasing.

Another point about the fundamental definition of the natural rate is that it is always positive, that is the value of goods now always exceeds the future value because the future is contingent. This should rule out negative rates in principle but, as we already have them in Europe, I would not at all rule out a visit to the wacky races, in which case I expect all hell to break loose.

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Am I the only one who doesn't want rates to rise for quite a while? I do want to see a crash but I want to see a really severe one. The more they delay the rise, the greater the eventual crash. The bigger the bubble, the greater the burst.

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3 minutes ago, crouch said:

 

Another point about the fundamental definition of the natural rate is that it is always positive, that is the value of goods now always exceeds the future value because the future is contingent. This should rule out negative rates in principle but, as we already have them in Europe, I would not at all rule out a visit to the wacky races, in which case I expect all hell to break loose.

If you have monetary deflation then nominal interest rates can be negative but real interest rates can remain positive, I think (!). This is when the value of things deflates faster than the value of money in your bank account at minus 1% interest.

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8 minutes ago, lombardo said:

Am I the only one who doesn't want rates to rise for quite a while? I do want to see a crash but I want to see a really severe one. The more they delay the rise, the greater the eventual crash. The bigger the bubble, the greater the burst.

I want the correction to come sooner rather then later so as to mitigate the longer term damage from it to stuff besides house prices.

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2 minutes ago, Si1 said:

I want the correction to come sooner rather then later so as to mitigate the longer term damage from it to stuff besides house prices.

You are right the longer they avoid a rise, the greater the harm to the long-term economy. I don't want to see people suffering when the rise happens but it seems inevitable that many will go into negative equity and banks will suffer a lot with the crash. It will be 2008 all over again but with no means to lower rates.

My fear for an early IR rise is that when the correction does happen, the IRs will be reduced again and thus it will be a means to pump up prices again. I wonder if the best time for a crash is when rates are low so that central banks can't do what they did 10 years ago. I don't want a repeat of the QE bubble. 

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8 minutes ago, Si1 said:

If you have monetary deflation then nominal interest rates can be negative but real interest rates can remain positive, I think (!). This is when the value of things deflates faster than the value of money in your bank account at minus 1% interest.

Indeed but that is slightly different; look at it from the point of view of the lender and borrower.

Why would you lend money at a negative rate? It isn't just a matter of where the price level is now; it's where it might be in twenty years time and what if you default during the loan period? Clearly if you were a borrower you'd like to borrow at a low rate and a negative rate means you are actually paid for borrowing.

However, and to revert to your scenario where real prices were in decline, it might be that prices are so low that your output value reduces and you are less able to repay the loan from the cash flow generated by your output. In this case low prices cause the real value of the debt to increasevia a reduced operating cash flow; a classic case of Irving Fisher's debt deflation.

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1 hour ago, dpg50000 said:

Quote from the linked article:

Half the economists contacted by the BBC think wages growth will outpace inflation in the first half of 2019.

PMSL - no chance. Wage inflation is virtually non-existent. Also, looking at the chart in that article, does anyone else recall getting near 3% rises in July 2015 (excluding bonuses), when inflation was supposedly near zero? No, me neither.

Which of course means that a few people must have had MASSIVE rises which bumped the average from 0%. Now I wonder who they were ....?

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It's all balls. Write an article, base it those who agree with the authors opinion, then publish it. Judging by the responses, it created emotional responses. The author gets paid; and moves on. 

The public determines what happens to the economy through what is earned and spent, which is fact. All these predictions are speculative to build a position, nothing more.

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  • 295 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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