Sunday, September 19, 2010
The Case For Higher Rates
THE CASE FOR HIGHER RATES
An interesting article and talks about capacity tighter than thought, inflation is not BoE sole consideration (as I have long suspected, BoE is pro growth more than pro stability) and the best bit: "The longer rates stay so low, the harder it is to shift them. If the Bank had made clear 0.5% was very temporary, everybody would have been prepared for the exit strategy. The risk is that the Bank leaves it too long, having given the impression ultra-low rates are permanent, any decision to hike could look like panic." And look at all these new mortgage borrowers who assume 2%ish rate is 'very affordable'.
Posted by easybetman @ 11:39 AM (1386 views)
9 thoughts on “The Case For Higher Rates”
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will says:
We should encourage savers at a time when pension annuity rates are so low and stock markets are not for the majority of the population.
techieman says:
easybetman – im really not sure he’s right re tighter capacity, but we will have to see what is happening with demand going forward to see if this is a lagging indicator or not…. am out for the rest of today and in a bit of a rush. David smith often gets taken to pieces here. i think he doesnt do enough homework and doesnt look behind the numbers to explain them away.
i would be interested to hear what you think on the steve keen videos i posted today. “You tube: Getting to Grips with the Economy 2009”
paul says:
The trouble is, there really is no way out once the credit bust comes after the credit boom. Its worth considering that the credit ‘crunch’ has been crunching for over three years now – there is every reason to suspect that this will not change for the forseable future just as in Japan.
Which incidentally is something that David Smith said would not happen.
easybetman says:
@techieman,
Oh yes, DS writes rubb*** sometimes but think this article has few interesting points. Will have a look at your youtube post.
As for capacity – yap, time will tell but I am not positioning my portfolio for deflation.
@Paul – the way out is to clear up the zoombes (or at least the most zoombie of the zoombies). It is either short term pain or long term pain (but less pain per unit time). Also, one thing that is often overlooked was the JPY went from 160 to a dollar to 120 to a dollar (before financial crisis, and now 88 ish) which no body seemed to have take that into account when talking about Japan. What is the chance of pound going to £1 for $3 (from $1.5ish today) ?
tom101 says:
easybetman@4, Would you please would you explain in more detail how that could happen? (£1 – $3)….
easybetman says:
@tom101 – Can’t see $3 pound happening (sorry if I give the wrong message). Basically people who talks about ‘deflation’ in Japan never talks about strengthening of the Japanese currency from Y160 to Y88 (which seemed to defy classical economics as they print so much of those)
Tom101 says:
Cheers easybetman misunderstood your point
tom101 says:
Cheers easybetman misunderstood your point
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