Monday, August 2, 2010

High house prices = ‘recovery’

MPC likely to keep interest rates steady as global recovery slows

Inflation targetting appears to have beean abandoned, according to the Guardian: "Predictions of a second monthly rise in US unemployment coupled with reports of slower growth in the eurozone, China and Japan are likely to persuade the Bank of England's monetary policy committee to keep interest rates at 0.5% when it meets on Thursday. Weaker than expected UK house prices and exports, especially to the eurozone, are also expected to overcome doubts about the committee's policy of maintaining historically low rates." I will leave to the reader to count the number of times housing is mentioned in the article compared with the word 'inflation'.

Posted by quiet guy @ 08:13 AM (1329 views)
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8 thoughts on “High house prices = ‘recovery’

  • They will use any excuse they can now to keep this ponzi scheme going…

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  • This is pretty clear – though it is still a shock to see it in black and white.

    Expect interest rates to stay low for many years, and inflation to continue to rise. Once again BOE pulls the same trick that it did in 2004, when it looked like house prices were likely to be corrected; and the very same trick they will pull ad infinitum.

    They want to force everybody to spend and not to save.

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  • You have to wonder how or who could in theory, let alone practice bring them to book on their remit and end the Age of Irresponsibility that the Bank created.

    The Bank created the boom and prolonged the bust. This will cement in further decades of anaemic growth and of course keep the all-important housing ponzi going.

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  • Just as the banking credit crunch came to a rapid head, so will the sovereign credit crunch. When it become apparent that the western governments have no chance of repaying their debts the interest demands will take a sharp turn up and issues of new debt will start to fail.

    I have no doubt it’s coming, but i think there will be a few more unsavoury turns in the road before we face either a default of high inflation (i don’t want to say hyperinflation, i don’t think our highly dense urban cities would survive that)

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  • India, Brazil, Oz, NZ, interest rate rises……. and still targeting inflation.

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  • @paul “The Bank created the boom and prolonged the bust”

    Let’s not blame the Monkey. Gordon Brown was the organ grinder.

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  • [email protected] “You have to wonder how or who could in theory, let alone practice bring them to book on their remit and end the Age of Irresponsibility that the Bank created.”

    I might sound naive saying this but I cannot see any government (of any political persuasion) allowing high inflation to continue for long.

    If it did, I think you would find that wage demands would go through the roof, 1970’s style, regardless of government cuts, thus killing off any recovery and accelerating the inflationary spiral, the markets would then demand higher rates thereby forcing the government to lean on the BoE if it did not act of it’s own accord.

    This scenario might take a year or so to act out but assuming RPI inflation remains at 5% or higher, I believe they will be brought to book on their remit by the second half of 2011.

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  • I still get the impression – albeit rather conspiritorial – that teh BoE and glubberment are continually making noises about keeping interest rates low so that when tehy inevitably go up, they can distance themselves and claim that it is not what they wanted and their hand must somehow have been forced. I do not think the current government is as stupid to not realise that high interest rates now is in their best interests

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