Wednesday, June 29, 2011

Coded uttering from King

Bank of England governor warns of sluggish consumer spending

"Beleaguered Britons are likely to keep their hands in their pockets for at least the next year as high inflation eats into their living standards, the Bank of England governor, Mervyn King, has warned." So King says that high inflation is repressing economic growth. Yet highly inflated living costs might be at least partly attributed to ZIRP. Can you spot the circularity? Interestingly, King also "rejected the claim this week that the a tsunami of house repossessions would hit the UK if interest rates were to rise significantly. He said it was unlikely mortgage lenders would raise interest rates in line with rises in the base rate set by the Bank of England." Was that a hint to mortgage lenders?

Posted by quiet guy @ 01:16 AM (1801 views)
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4 thoughts on “Coded uttering from King

  • The problem of course with the idea that lenders might not raise their variable rates with any rises in the base rate is fanciful at best and King knows it.

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  • The double whammy is coming.

    Keep squeezing the lemon.

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  • general congreve says:

    Maybe they won’t, after all, what is the point is raising rates to the point where someone can’t pay and defaults in this market? All it does is help push the market over the edge and sink the banks. Of course, if the base rate rises and bank rates remain the same, then the profit margin on existing loans falls and more importantly all new loans will probably be at the higher rate, further slowing demand for mortgages and expanding stagnation in the housing market.

    At some point someone, somewhere in our global web of international debt finance, is going to lose their grip (Greek Government?), and the whole sorry house of cards will come crashing down. So, don’t worry too much about Merv’s little games, he can’t fight the tide forever. A little patience is all that’s needed. Although I would caution you to the side effects of the coming collapse. That carefully saved deposit might not go as far on that newly cheap house as you bargain for. See Iceland for details.

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  • So, the austerity package for Greece is fixed…but for how long? I’ll borrow Moneyweek’s headline of “Greece being another Lehman situation waiting to happen”. That said, the pound is trading at lows for the Euro and dollar. So, what does that say about us?

    It will be interesting if Trichet raises ECB rates again next month and whether the MPC follow. I suspect they will not raise rates for a long time. Meanwhile the £ will drop and drop… Gold to rise in £ terms (while we wait for QE3 from the Fed, or something similar).

    Anyday now some twerp from the MPC will say inflation will fall as petrol prices temporarily drop (due to release of emergency supplies).

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