Vince Cable

Sir_Humphrey

The inflation of the late 1970s was not down to interest rates. The last bubble was down to reckless securitisation and deregulation - not interest rates alone. The economy is lot more complex than "Interest Rates down, inflation up".

The chances of inflation really letting rip now must be tiny (we may well face deflation in 2009 IMO). The chances of the housing market being revived by it are infinitesimally small. The chances of a more serious recession, with mass unemployment would be reduced by cutting interest rates.

Cutting IRs is against my own self-interest, as I have a very (even by public sector standards) secure job, and have built up a fair chunk of savings over the last few years (with some lifestyle sacrifices). However, I still think that IRs need to be cut. It won't stop a recession, but it might make later recovery a bit easier.

Heyman_2

Chris2685 wrote: »

Won't the pound just die on its !!!! if they cut interest rates? Inflation is already higher than the official figure by my reckoning... If you look at the cost of food/fuel/energy in the past couple of years, it has really gone up a lot. Surely it will go up even more if interest rates are cut?

As has been said here before, they are stuck between a rock and a hard place.

The plus sides for raising rates are making the UK more attractive to foreign savers and giving UK savers something to smile about. The downside is that it will send many businesses to the wall, put the economy through the floor and push unemployment through the roof. All very well having savings - you'll need them when you don't have a job anymore!

carolt

Jennifer_Jane wrote: »

Carolt - what did you and George Osborne both read at university? Just interested in what you were saying here.

Jen
x

Thanks to poster above - and just confirmed by me on George Osborne's site - I find that me and George - I think it's OK for me to address him on first-name terms, as will become apparent - actually studied the same subject (History) at the same university, at the same time. He's actually 4 months younger than me!

We probably met, but if so, he certainly made no impression on me. All the Oxford Young Conservatives when I was there (time of poll-tax riots and all) were complete dweebs - really sad types, who misspent their youth raving about Maggie and wearing twin-sets and pearls/tweeds in an era of baggy jeans and DM's.

Whilst I went and got a proper job, he did a few months as a journo and then went to work for the Tories, at the Conservative Research Dept.

So actually, I take back my former remarks. I'm probably somewhat better qualified to do the job than he is.

Now that IS scary! :eek:

Sir_Humphrey

carolt wrote: »

We probably met, but if so, he certainly made no impression on me. All the Oxford Young Conservatives when I was there (time of poll-tax riots and all) were complete dweebs - really sad types, who misspent their youth raving about Maggie and wearing twin-sets and pearls/tweeds in an era of baggy jeans and DM's.

Sadly, most of them were still like that when was there, 1998-01.

I remember the tweed-clad eccentrics saying that public services should be provided by charities. Now Tory party policy. :rolleyes:

One of them (who was in fact fairly likeable) was pictured in the Sun snogging Christine Hamilton in an OUCA party (sadly, Neil Hamilton's "hilarious" jokes about "Unga-bunga land" and the photo of him swigging from a Whisky bottle only made it to the student press). He later featured on "Beauty and the Geek" on Channel 4 (oddly, Christine Hamilton did not appear :huh: ).

JonnyBravo

Sir_Humphrey wrote: »

The inflation of the late 1970s was not down to interest rates. The last bubble was down to reckless securitisation and deregulation - not interest rates alone. The economy is lot more complex than "Interest Rates down, inflation up".

The chances of inflation really letting rip now must be tiny (we may well face deflation in 2009 IMO). The chances of the housing market being revived by it are infinitesimally small. The chances of a more serious recession, with mass unemployment would be reduced by cutting interest rates.

Cutting IRs is against my own self-interest, as I have a very (even by public sector standards) secure job, and have built up a fair chunk of savings over the last few years (with some lifestyle sacrifices). However, I still think that IRs need to be cut. It won't stop a recession, but it might make later recovery a bit easier.

FWIW I agree.

I also think, as well as not having the usual effects, which you outline above, I really don't think it will have the desired effect of making lending all that more affordable as the majority will be swallowed up in increased margins to Joe Public.
It will of course make saving less profitable.... all round bad then!?

Sir_Humphrey

JonnyBravo wrote: »

FWIW I agree.

I also think, as well as not having the usual effects, which you outline above, I really don't think it will have the desired effect of making lending all that more affordable as the majority will be swallowed up in increased margins to Joe Public.
It will of course make saving less profitable.... all round bad then!?

I think tinkering with interest rates will not make that much difference, which is why I am not losing too much sleep about it.

I now think the crisis is so big that huge fiscal stimuli from the govt will be the way forward. We already have the Olympics, but also big infrastructure programmes (transport, green energy) will be needed in my personal opinion. Since that will cream the public finances even more, I suspect that things will end up getting much worse before that becomes politically feasible.

mewbie_2

pickles110564 wrote: »

Mewbie I dont mix my savings with my loans, mortgages for the BTL's are the banks money my money is in savings. If I used my savings I would not get my tax breaks.

So you have ten pounds in a Nat West Young Savers account (free piggy included), and half a million of outstanding BTL and mortgage debt. How does a 2% interest hike help you?