Great news / terrible news.

kennyboy66_2

Cannon_Fodder wrote: »

.....just because they aren't prepared to accept a bit of pain as being part of the learning process so that we don't go back up the road to a bubble for a generation.

.

The way I see it, we are already in recession, unemployment will rise for the next 12 months at least, as will bankruptcies & repossessions. Cutting interest rates is no magic cure but may stop the situation from getting much worse.

Do you have a target figure for how much people should be punished before you would cut rates?

Realy

Cannon_Fodder wrote: »

Have you noticed the current Interest Rate in the US...?

http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol=USD

At 2% for most of this year, it has not helped stimulate their economy, or restore confidence in their markets. (interesting the LIBOR has grown away from the Central Bank rate, so Banking confidence is little to do with IRs?)


If UK was to drop IR to around 2%;

1) would that make any difference when it already hasn't in the US?
2) what would the effect be on our currency/exports/Balance of Trade?
3) where do we go after 2% when it hasn't worked.

.

1)The US as been in the poop for far longer than us and far more exposed to toxic debt. How can you say it as done nothing it most probably stopped a recesion being a depression, a depression that could have started over a year ago. Take a look at japans IR.
2) Exports should increase. Who knows? but if it make disposable income it should mean a boost to the economy.
3) Where do yo go if you dont do it? It looks like BOE is thinking deflation like it or not.

Generali

Sir_Humphrey wrote: »

The next step is massive, sod the deficit, Keynesian fiscal stimulus.

Yeah, leave the kids with a massive debt. That'll teach them to bounce on the bed until 11pm on Wednesday night.

Realy

!!!!!!? wrote: »

We just need to accept that we are in for a nasty recession and focus on the key concepts: Preserving your own wealth (if you have any) on a personal level and preventing a badly-damaged financial system from melting down completely at a government level.

Well there you go that is why you dont want an intrest rate cut.
Mass unenployment and business failures will cause more instability and more pressure on the system.
Savers have been saved with the banking bail out. But unfortunatly there is going to be a cost to stabalize business and that is low intrest rates.
Like it or not they are needed to save jobs and companies.

WTF?_2

Realy wrote: »

Well there you go that is why you dont want an intrest rate cut.
Mass unenployment and business failures will cause more instability and more pressure on the system.
Savers have been saved with the banking bail out. But unfortunatly there is going to be a cost to stabalize business and that is low intrest rates.
Like it or not they are needed to save jobs and companies.

Well, of course as someone with cash to my name I want interest rates to be as much as possible.

But with the price of just about all financial assets falling now, being in cash even with 0% interest is OK by me as long as that cash is safe.

I'd take 1% interest on my savings from NS&I over a promised 6% from a bank that goes bust and takes my cash with it.......

I've said it before - wealth preservation, not making money, is where it's at now.

Cannon_Fodder

We have only just cut rates. Give it a chance.

I don't say we shouldn't trim rates a bit more, as fresh economic indicators provide evidence to do so.

But jumping straight down to never before seen rates, is premature and risky.

The banks haven't passed on the full 0.5% this time, would they match any further reductions - or not like the US banks haven't - so how would businesses/mortgagees benefit anyway?


Putting a target figure on punishment? 6 lashes with the cat.

WTF?_2

kennyboy66 wrote: »

The way I see it, we are already in recession, unemployment will rise for the next 12 months at least, as will bankruptcies & repossessions. Cutting interest rates is no magic cure but may stop the situation from getting much worse.

Do you have a target figure for how much people should be punished before you would cut rates?

Remember that the root problem here is too much debt.

The solution will be for people to pay down that debt and start saving. This is what the credit markets are telling us. That will mean some very hard times indeed until we are back in balance.

So far, indicators are that governments are intent on somehow trying to magically transport us back to 2007. That's not going to work. If we somehow try to facilitate the continuation of the credit culture and resist sorting out the underlying debt problem, this thing is just going to last longer and probably get even worse.

Of course, since the financial system has been so badly abused with fantastical 'money for nothing' schemes over the last decade the real problem is that if we just leave it to it's own devices it may just collapse.

IMO the best thing we can do is try to pay down the debt, unwind the leverage and take the resulting economic lumps. It's like feeling nauseous and knowing you need to throw up. Either stick a couple of fingers down your throat and get it over with in a couple of minutes or spend hours grimly concentrating on holding the contents of your stomach in. The problem is that your system might not stand the shock of the first option.

Realy

Cannon_Fodder wrote: »

We have only just cut rates. Give it a chance.

The banks haven't passed on the full 0.5% this time, would they match any further reductions - or not like the US banks haven't - so how would businesses/mortgagees benefit anyway?

Business lending rates are different to mortgage rates.
Most mortgage companies guarantee their SVR to be say no more than 2% over BOE BR.

Realy

!!!!!!? wrote: »

Remember that the root problem here is too much debt.

The solution will be for people to pay down that debt and start saving. This is what the credit markets are telling us. That will mean some very hard times indeed until we are back in balance.

So far, indicators are that governments are intent on somehow trying to magically transport us back to 2007. That's not going to work. If we somehow try to facilitate the continuation of the credit culture and resist sorting out the underlying debt problem, this thing is just going to last longer and probably get even worse.

Of course, since the financial system has been so badly abused with fantastical 'money for nothing' schemes over the last decade the real problem is that if we just leave it to it's own devices it may just collapse.

IMO the best thing we can do is try to pay down the debt, unwind the leverage and take the resulting economic lumps. It's like feeling nauseous and knowing you need to throw up. Either stick a couple of fingers down your throat and get it over with in a couple of minutes or spend hours grimly concentrating on holding the contents of your stomach in. The problem is that your system might not stand the shock of the first option.

Would lower rates not give people the chance to pay down loans quicker and thus lowering the banks exposure to bad debt and increase incoming cash?

hethmar

If you are about to sign a 2 year fixed rate mortgage deal - should you dump it for a tracker or just hang on in. I mean are the trackers actually going to go down with the interest rate or will the Banks/BS keep the rates up so that they are preserving their capital reserves??