Sunday, August 22, 2010

Mass defaults on their way

Interest rates 'may hit 8pc' in two years

Andrew Lilico, chief economist at the influential Policy Exchange think tank, has warned of an interest rate environment not seen since the 1990s. He said the rise could happen as the recovery beds in and Government measures to stave off a recession lead to an explosion in the money supply. Mr Lilico also warned of a return to "boom and bust", as ballooning inflation threatens to tip the economy back in to recession in 2013 or 2014.

Posted by crash n burn @ 12:13 AM (2475 views)
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10 thoughts on “Mass defaults on their way

  • mark wadsworth says:

    Yawn.

    From that article: “That boom would quickly run out of control, as the £200bn of “money printing” by the Bank during the crisis would lead to “a huge expansion in the money supply, which will lead to inflation”.”

    1. QE was not money printing, it was paper shuffling. It has no effect whatsoever. The real ‘money printing’ is the UK government (or any government) running up the national debt.

    2. There is no “money supply”. If you net off all financial assets and liabilties, you end up with a big fat nothing.

    3. Japan.

    4. Alarmist Home-Owner-Ist drivel. Anybody who claims to be able to predict all this ups and downs and dead cat bounces that far into the future is missing the point.

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  • 1. mark wadsworth

    So the UK has had nothing to do with the ‘printing of money’ over the last three years.

    Give it a break mate! Yawn!

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  • to have high interest rates would be only to slow down economy. where is the boom coming from, they have had low interest rates in japan for 20 years. they are [the banks] not going to lend like before. with governments in the world cutting back and revanues not going up it would be hard for a boom to begin. they wont keep printing money forever.and keeping wages down will not make a boom.the only thing that kept american banks going was that they sold the loans to suckers in other countries ,they cant do that again so what will be thier next con trick. thats my idea what do you think

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  • What Andrew Lilico (a troll) wilfully fails to understand is the critical importance of the velocity of money (debt), and that most of the QE was spend on Gilts and FUBARed banks, so it didn’t really help the economy. The real drivers for national inflation are the cost of imports, greed, and the fractional reserve (fraudulent) banking system creating more money out of debt; the trouble is, the banking system needs an increased demand for debt to do their fraud, but there isn’t enough demand yet, so it can’t print much money, so continuing underlying Recession/Depression is more likely.

    Quite frankly, the angry bloke here makes a lot more sense than the various establishment mouth-pieces, who keep getting mentioned here:
    http://scopelabs.net/

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  • tenyearstogetmymoneyback says:

    The question is what will happen to house prices if people believe this ?

    Yesterday the sign off advert on AOL was from a mortgage broker all about the “Interest Rate Time Bomb” (they were selling fixed rate mortages.) They were predicting a return to 3% over the next couple of years but emphasising with a graph that this is six times the current rate.

    The more adverts and articles like this then the soonner the general public will realise that they can’t rely on rates being 0.5% in 2012
    and the less likely they are to spend 8x salary on a house.

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  • “a return to boom and bust”!!!???!!!??? “Return!!!” It never left us you muppet!!!

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  • I think most of what Lillico says is reasonably sound, although there are rather a lot of ‘ifs’ in his argument.

    People are getting sucked into believing that ultra low interest rates can be maintained indefinitely, so no bad thing to have someone remind them that it ain’t necessarily so.

    They should also be reminded that 8% interest rates are not that extreme by post war historical standards..

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  • Inflation cannot happen without wage increases consistently outstripping CPI, and thereby creating some sort of monetary expansion spiral.

    Private sector wages over last 12 months ran at something like 1.3%, less than half of CPI, add to that the 1 million + additional unemployed over past couple of years, and there seems to be little scope for the creation of meaningful inflation there – ignore price increases due to our weakening currency, which is a situation which has probably stablised in any event. The private sector is now being cut, so again I’d suggest limited scope for inflation to get a foot hold. The thought that the banks being recapitalised will lead to inflation, seems bogus, loans have to be repaid, and post 2008 banks will tend to only lend money where there the creditor offers some prospect of repayment.

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