Thursday, June 11, 2009

QE capitalism isn’t interested in savers

'Economic recovery not certain' - BofE

"The economy is not out of the woods and rates will stay low for some time – that was the message from Bank of England economist Kate Barker today, as new data showed a recovery in manufacturing." ... "I think there's a lot of concern about what's going to happen beyond this pick-up." Personally, I am concerned that QE will end badly for a lot of savers and the need to protect savers against sterling devaluation is becoming more important. If you can afford property as a long term asset then maybe OK but that's no use for millions of us. What next?

Posted by quiet guy @ 12:20 AM (1305 views)
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6 thoughts on “QE capitalism isn’t interested in savers

  • GDP dived in the first quarter of the year, and looks like stalling or making a very small uptick in Q2 – this is a not very surprising bounce of the dead cat variety, and does not indicate that the economy is on the mend.

    I expect a further contraction in Q3/4, that puts the Chancellors predictions way off target. When it becomes clear that the budget forecast really was in cloud cuckoo land, that the extended financial targets and eventual return a balanced budget are no longer possible; the credibility of the QE program – that it is only a temporary measure – will cease to be believed by the markets.

    That’s when government has to choose between slashing spending, or printing sterling into oblivion.

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  • The government are not the only people banking on a miracle recovery I think.

    I think Kate Barker (indeed the MPC) are skating on thin ice with QE, dressing it up as an essential course of action while increasingly running out of any justification for it save to prop up government spending. God help them if they get rumbled on that one – it would expose them as government patsies (which has been an increasing suspicion in recent months anyway).

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  • QE is being used for no other reason than to keep the debt party going. I can’t believe that BOE would see it as a long term solution….but nothing those idiots do would surprise me.

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  • Can we continue to have an HPC in spite of an economic recovery?

    Employment situation aside, house prices appear dependant on the supply and price of credit. On supply, I guess banks will be hesitant to lend large income multiples for a while, even if the level of debt default subsides. It is not clear they have the capacity to either, even if they wanted to…

    On price, I guess BoE rates would have to increase to stoke of potential inflation which would hurt base rate tracker mortgages… Other mortgage types may be impacted by increasing gilt yields – increasing because of higher supply and investors switching from gilts to other more cyclical assets.

    Is this wrong? Are non base rate tracker mortgages in fact priced by reference to the prevailing risk free rate? Maybe it’s a bit off thread

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  • I think the BofE are pretty smart. The QE story is a bit like letting the new sub of the bench. Fine for a while, but in the second half, there may have to be changes to at least get a penalties win. It’s a high-risk game, and I think the markets know this. Some of the market is directly benefitting the liquidity, but others are starting to see long-term. I think – as an economist wrote in one of the papers – all counting on huge cuts by an incoming Conservative government to sort the mess out. Interesting how the subject of “cuts” is being allowed to be aired more publicly to ease in this story. Radio 4s Today programme doing their bit to help the Government by making “cuts” a no brainer topic – thus removing a hitherto Conservative argument we all know is urgently required.

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  • need-a-crash says:

    “Some people comng out of fixed rate deals are already paying higher interest on their mortgages here and it’s going to get worse. As soon as interest rates rise house prices will fall again. Why can’t the government be honest so that people don’t go out and stupidly offer more for houses this summer?”

    This comment below the article says it all from our perspective.

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