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Hypothetical Situation

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Guest Skint Academic

Hopefully a hypothetical situation, but I was wondering what people imagine would happen if the BofE lowered interests rates at the next meeting?

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pound would weaken, inflation would rise, and interest rates would end up rising to beyond where they would have been had interest rates risen this month instead of being cut.

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Hundreds of thousands of people locked in on Standard Variable Rates would breath a sigh or relief, Tony Blair who has a huge mortgage albeit interest free as its a government loan would not be bothered.

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Hopefully a hypothetical situation, but I was wondering what people imagine would happen if the BofE lowered interests rates at the next meeting?

They would be following the economics of Robert Mugabe.

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Guest grumpy-old-man
The Earth would wobble off its axis, fly into the sun and explode violently.

sorry, but this scenario is already pre-booked for the 2012 mayan olympics I believe.

good answer though. :D

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Hopefully a hypothetical situation, but I was wondering what people imagine would happen if the BofE lowered interests rates at the next meeting?

I'd seriously look at giving up and going back to New Zealand.

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Hopefully a hypothetical situation, but I was wondering what people imagine would happen if the BofE lowered interests rates at the next meeting?

Your post highlights the real crux of the matter, something Ive spoken of many times and that is the 'submarine effect'.

Could it be the BOE have abolished the crash by gently tweaking the subs valves to ensure an even keel is more or less maintained?

Realistbear and co never pay enough attention to this core issue - probably the single most important factor in the HPC debate.

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Guest Bart of Darkness
I forgot to add, David Blanchflower would cream his pants in excitement.

No wonder his wife left him for another woman.

:lol:

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Make no mistake, if a serious house price crash does indeed come, then the BOE will lower rates drastically. This will cause the pound to collapse and inflation to rise due to higher import prices. We will then enter a period of high inflation, which will somehow be spun away by fiddling the figures. This will largely mask the house price crash, like in the 1970s. Wages will not rise to match the inflation, because they cannot due to continued deflationary wage pressure from Asia and from immigration. Britons will be poorer overall, but they may not even be smart enough to notice it.

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You may be right, BP, but seeing the negative publicity that has attached itself to the BoE when CPI inflation went to 3.1%, don't you think there will be a big political storm if/when CIP goes even higher? 2% is still the publicly stated target, don't forget.

Also don't forget that more and more of the electorate are retired - at least those that will bother to go out and vote - and they will be hammered by inflation. The echo of the boomers will ring for some time and politicians will have to listen.

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Yes, but the electorate will not know what hit them. All they will know is that somehow they are not as wealthy as before, but government spin will blame it on the world economy or some other scapegoat.

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Guest Skint Academic

Can the house prices go much higher with absolutely no hope for FTB'ers and rent inflation not matching HPI? Can you continue to MEW and take on more personal debt forever even if interest rates are lowered? There has to be saturation point somewhere. There is also the human factor to take into account. The way I see it, something has to break whether it's the economy or society. At the moment a small house is just about within reach if you are prepared to spend your entire life in financial slavery. But what about if a one bedroom flat becomes the equivalent of several million pounds to a factory worker? Would the newer generations become increasingly discontent to the point of rioting? We can already see an increase of thuggishness and a loss of community values. People need something to lose. And in the long term, wouldn't all the talent that missed out on the initial HPI leave the country and affect its economic prosperity and consequently bring down house prices?

Please don't think I am suggesting that interest rates should be lowered, I was just wondering how it would play out if they were. Could the BofE sustain the bubble for another few years as they did in 2005?

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Your post highlights the real crux of the matter, something Ive spoken of many times and that is the 'submarine effect'.

Could it be the BOE have abolished the crash by gently tweaking the subs valves to ensure an even keel is more or less maintained?

Realistbear and co never pay enough attention to this core issue - probably the single most important factor in the HPC debate.

err 10% a year HPI. This sub is nice and steady :lol:

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Guest grumpy-old-man
Make no mistake, if a serious house price crash does indeed come, then the BOE will lower rates drastically. This will cause the pound to collapse and inflation to rise due to higher import prices. We will then enter a period of high inflation, which will somehow be spun away by fiddling the figures. This will largely mask the house price crash, like in the 1970s. Wages will not rise to match the inflation, because they cannot due to continued deflationary wage pressure from Asia and from immigration. Britons will be poorer overall, but they may not even be smart enough to notice it.

so why did rates go to 15% then in the 90's crash ?

a genuine question

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