FED cuts by 0.5%

setmefree2

!!!!!!? I'm trying to understand your point of view.

You seem to think that inflation is more likely than deflation. By inflation do you mean a rise in CPI, RPI or a rise in the overall money supply & credit?

By believing that inflationary forces are greater than deflationary forces you seem to be discounting the possibility of a deflationary spiral. The threat of a deflationary spiral,however, must be massive since the decrease in money supply & credit following the collapse of the financial system is huge. Together with the downward movement of commodity prices I find it hard to believe that inflation is a worry here or in the US? Where are these inflationary forces coming from that you see as a threat?

I don't understand why you would advocate doing nothing in the face of deflation or the "debt deflation trap"? I agree that the the UK needs to defend sterling, so I don't think dramatic rate cuts would necessarily be the right thing. I do believe that the governement should do what little it can (agree that this is limited because of the size of our deficit) to increase the money supply in the real economy.

I definitely don't believe that free markets alone will sort this mess out - it's free markets that have got us ino this mess IMHO.

kennyboy66_2

chucky wrote: »

If you truly think that this is a solution - you should really go back and live in the 18th Century where this was the case.

some of the "interest rates up brigade" think they will be buying houses at 18th Century prices.

setmefree2

!!!!!!? wrote: »

That means returning to a credit system based on savings being leant out, not numbers magicked out of a mathematical formula.

Do you really think this is the end to securitization? Anybody else think this is the end of securitization

WTF?_2

kennyboy66 wrote: »

When did savers deposits last cover current loans ?

In terms of UK banking, I believe that as recently as 2000/2001 the banks *were not* depending on borrowing from the wholesale markets.

setmefree2

chucky wrote: »

If you truly think that this is a solution - you should really go back and live in the 18th Century where this was the case.

Ratio-based banking, savings vs lending is over 400 years old - a one to one relationship based system would probably be even more dangerous and anyone thinking that this is required simply does not understand.

Your comeback will be that the current financial system isn't working but it is due to the lack of regulation and allowing banks to do as they wish has been the real cause.

I agree IMHO I think that securitization markets will eventually come back and be much more heavily regulated. I can't see the US returning to pre mid 1990's style of lending but I could be wrong Interesting.

WTF?_2

setmefree2 wrote: »

Do you really think this is the end to securitization? Anybody else think this is the end of securitization

Once economic conditions have stabilised, house prices have returned to the norm and lending conditions are sensible, I see no reason why there cannot be a good market for securitized debt.

markelock

chucky wrote: »

If you truly think that this is a solution - you should really go back and live in the 18th Century where this was the case.

Ratio-based banking, savings vs lending is over 400 years old - a one to one relationship based system would probably be even more dangerous and anyone thinking that this is required simply does not understand.

Your comeback will be that the current financial system isn't working but it is due to the lack of regulation and allowing banks to do as they wish has been the real cause.

At some point someone is going to demand satisfaction.

where did I put my glove...

setmefree2

!!!!!!? wrote: »

Once economic conditions have stabilised, house prices have returned to the norm and lending conditions are sensible, I see no reason why there cannot be a good market for securitized debt.

I see you have put a puzzled emoticon - my comments were in response to this comment of yours

"That means returning to a credit system based on savings being leant out, not numbers magicked out of a mathematical formula."

Which seem to be suggesting a return to "old style" (pre securitization style) banking?

But anyway - where do you see inflationary pressures that mean that a cut in interest rates would be damaging to the UK? * I'm shouting now 'cos I'd really like to understand your point of view *

WTF?_2

setmefree2 wrote: »

I see you have put a puzzled emoticon - my comments were in response to this comment of yours

"That means returning to a credit system based on savings being leant out, not numbers magicked out of a mathematical formula."

Which seem to be suggesting a return to "old style" banking?

But anyway - where do you see inflationary pressures that mean that a cut in interest rates would be damaging to the UK?

Debt has always been a saleable commodity. However, lending recklessly on the basis that you can sell the debt on to some sucker who doesn't ask questions is not sustainable.

There will definitely be a market for securitized debt once the market has normalised. However, it won't be anything like as massive as the one which existed during the bubble and regulation should prevent it from ever becoming so.

I've explained many times why I think recklessly cutting interest rates would be bad - how many more times do you have to hear it?

setmefree2

!!!!!!? wrote: »

I've explained many times why I think recklessly cutting interest rates would be bad - how many more times do you have to hear it?

But I'm not a regular on this board so can you explain again for me. I'm not trying to get into an argument, I'm just trying to understand. I see 2 economic systems (here and the US) which have suffered a massive decrease in money supply due to the collapse in their banking systems, I see falling commodity prices, rising unemployment....and I can't understand why people are worried about inflation?:o

PS I just wonder if you can see something I can't - quite happy to be proved thick :-(