Sunday, April 6, 2008

Banks to receive more cheap money

Teresa Hunter: Why the Bank needs to cut the interest rate by 0.5%

This is quite a good article, especially the bit about CPI not including HPI, but Teresa Hunter completely forgets to mention the dire state the currency would be in, if such massive rate cuts happened, maybe she holidays in the Scottish lochs but for all who eat, use, sell imported goods or travel in the eurozone it is all going to get very, very expensive. UK tourism is about to get very, very busy. Influx of eurozone tourists, making the most of their exchange rate and UK households who cannot afford to go th the Costas or Tenegrief, so buy a hotel or two. This may be the only section of the UK hosing market which bucks the trend, at least until sterling recovers, or we begin to use the euro.

Posted by bystander @ 10:21 PM (514 views)
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4 thoughts on “Banks to receive more cheap money

  • “They are directly responsible for encouraging millions to take on massive debts by setting a framework which allowed mortgages to be priced too cheaply.”

    Can it be that the Labour government didn’t see this coming? a bit unlikely in my opinion…. If so does anyone have any explanation as to who may actually benefit from all this, apart from the city bankers etc with their massive bonuses…

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  • it_is_going_with_a_bang says:

    “To be fair to the Bank of England, the Treasury forced it to set interest rates by shadowing the CPI inflation index, in which housing costs are stripped out. History will judge this a major strategic error which kept interest rates too low for too long, feeding a credit binge which pushed house prices up for an unprecedented 15 years, amid boasts that we had abolished the cycle.”

    Yes, no prizes for guessing which ugly gloating politician made the pledge to abolish to the cycle with his fundamentally fantastic ideas.
    It wasn’t a strategic error, when you take into account the strategy being deployed was to keep Labour in power and money in whatever form in people’s pockets. It was in fact a complete success.

    This is not just an issue of avoiding a House Price Crash. It is how to run an economy without house price inflation.

    “To avert catastrophe, lenders must be made to open their doors again,”
    Made? How on earth do you do that. So much for the Free market.

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  • it_is_going…

    Yes, there is increasingly widespread acknowledgement that CPI targeting was a mistake. In future banks may decide to target asset prices explicitly, or they may target some combination of both. It might seem odd to the man on the street but it’s our best chance of regaining a sane economy.

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  • justwatching says:

    ‘ When will they ever learn you never bust the cycle?’

    Then why implore them to interfere at the top?

    ‘Youngsters and other borrowers who took on mountains of debt over the past couple of years haven’t a cat in hell’s chance of remortgaging at a decent rate.’

    And the question which should be being asked is why were they allowed to do so in the first place?

    ‘lenders must be made to open their doors again’

    No, the drunks had enough, time to sober up. (Alternatively, you could allow him to get so bladdered he just keels over, and then we don’t need to worry about tomorrow)

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