Monday, November 23, 2009

Surely not before the election

A speedier stimulus may mean a quicker exit

The Bank of England has raced ahead of its peers along the quantitative easing road, but it could overtake other central banks in the reverse direction when the time comes to tighten. Despite the Bank's insistence that all options remain on the table, few expect it to amass any more gilts beyond February, when the current programme will be completed

Posted by waitingtobuy @ 09:52 PM (1351 views)
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4 thoughts on “Surely not before the election

  • The BoE says in muted tones that it will use interest rates to head off any inflationary effects of QE, but we all know that they will be very relaxed about letting inflation rip.

    After all it was the BoE letting house price inflation rip that got us here in the first place! Why oh why does the mainstream media not see through this ruse while the bank gets away with it year after year?

    I can almost hear Mugabe saying in years past “Infleetion is ookey. We will just reeze our interest reets!”

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  • And Mugabe will be proved right for a change! Lets grow up and rescue the British nation from this financial nuclear bombs in the offing. Does Her Majesty’s Government deserve this make belief policies of BoE? In my view “House prices” will plummet further more – 30 to 40 percent by autumn 2010 and destroy the fabric of Great Britain. Thanks to the astute policies of the Independent BoE – Inflation followed by DEPRESSION.

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  • If QE ends in Feb and interest rates rise over the following months, then 10% drop in housing predicted by some for 2010 might be at best conservative.

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  • Deficit of 14%, savings rate of 5%, deficit only comes down slowly, so who will the government sell the gilts to?

    At some point we are going to be forced to reconnect with reality. The only reason “saving” works is because you forego consumption at one point in time to allow another, and then when you later spend the other foregoes consumption to allow you payback. There is little inflation at the moment, truly whatever the future brings, so somebody is foregoing consumption, and I don’t think its UK people, sounds much more like foreigners through our trade deficit.

    So, the breakpoint must be when foreigners won’t fund us. For a foreigner looking at a different currency this must be when it becomes impossible to save using sterling, because ongoing devaluation exceeds the interest rate received, compared with the domestic interest rate. But the UK government can’t raise rates quickly, so that aspect is sort of fixed, so it only makes sense for foreigners to fund us if sterling devalues -below- a fair exchange rate i.e. they lend 110 pounds costing 100 euros at a time when really 100 euros=100 pounds, and that difference compensates for the lack of return. Put another way, our borrowing requirements are going ultimately to come out of sterling. Or put even another way, our borrowing costs are going to put onto the consumer by increasing import prices. I’ve confused myself now. Savers get shafted. I wonder what the losses on pension funds will be a decade from now?

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