The Last 5 Major Uk Recessions

JayScottGreenspan

Broadly, I see four scenarios that could (have) play(ed) out:

1) Raise interest rates during the boom. Control growth and lending (regulation required). No recession.

2) Keep interest rates too low during the boom. Credit bubble. Credit crisis. Recession.
a) Subsequently keep interest rates too high. Deep recession. Much structural damage to economy.
b) Subsequently lower interest rates too far. Initially mild recession. Then inflation pops up. Recession deepens. Much structural damage to economy.
c) Interest rate policy spot on. Recession. Recovery.

(1) would have required intelligent government. Probably <5% of MPs would have managed this, given their short-term, hubrisitic nature. Besides, whether we like it or not, we're stuck with (2).

Does anyone have any ideas as to how we steer ourselves along path (2c)? Best I can think is just continue to let the MPC target 2% CPI until this all blows over. (Though change the rules to let the MPC keep an eye on house prices and credit in the future.) So rates are gradually tweaked in anticiaption of and in reaction to the deflationary pressures in the pipeline.

StevieJ

kennyboy66 wrote: »

The major 5 UK recessions of the 20th Century were 1920-21, 1929-33, 1973-75, 79-82 & 1989-1991.

Here is what happened to interest rates during those periods, peak to trough.

http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

Has BoE rates going back to 1694

1920-1921 7%

---

3%
1929-1933 6.5%

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2.5%
1973-1975 13%

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9.75%
1979-1982 17%

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9.125%
1989-1992 14.75%

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5.375%

2008- ??? 5.75%

---

I am not saying that history always repeats itself, but makes sense to try and learn from history rather than just ignore it.

With this in mind, does anyone really think rates should go up ?

Is there anyone out there who actually think rates will go up ?

Tell you what, back to basics.

Realy

going2die_rich wrote: »

Being a saver, I'd love for "1979-1982 17%" interest rates. But even I am not selfish enough to really wish it, as it would cripple far too many people (even though I think those who over borrowed should be penalised financially to be taught a lesson).

For the benefit of the country, I think rates can only go down for now, regardless of inflation.

Thank you the first honest, sensible saver of the day.:beer:

StevieJ

JayScottGreenspan wrote: »

Broadly, I see four scenarios that could (have) play(ed) out:

1) Raise interest rates during the boom. Control growth and lending (regulation required). No recession.

2) Keep interest rates too low during the boom. Credit bubble. Credit crisis. Recession.
a) Subsequently keep interest rates too high. Deep recession. Much structural damage to economy.
b) Subsequently lower interest rates too far. Initially mild recession. Then inflation pops up. Recession deepens. Much structural damage to economy.
c) Interest rate policy spot on. Recession. Recovery.

(1) would have required intelligent government. Probably <5% of MPs would have managed this, given their short-term, hubrisitic nature. Besides, whether we like it or not, we're stuck with (2).

Does anyone have any proper argument as to how we steer ourselves along path (2c)? Best I can think is just continue to let the MPC target 2% CPI until this all blows over. (Though change the rules to let the MPC keep an eye on house prices and credit in the future.) So rates are gradually tweaked in anticiaption of and in reaction to the deflationary pressures in the pipeline.

Lower interest rates to 2.5-3% otherwise we will undershoot the MPC target.

purch

Best I can think is just continue to let the MPC target 2% CPI

The only problem I have with that is............that was the path followed that got us into this situation to begin with.

The MPC should target something.........but a "made up" number like HM Gov's CPI is not the answer !!!

Does anyone have any proper argument

Hang on mate...........

This is the HPC board..........can't expect proper arguments here !!!!!!

Realy

JayScottGreenspan wrote: »

1) Raise interest rates during the boom. Control growth and lending (regulation required). No recession.

Agree with all but we may not have been able to avoid the recession perhaps not as deep. but spot on otherwise.

WTF?_2

JayScottGreenspan wrote: »

Broadly, I see four scenarios that could (have) play(ed) out:

1) Raise interest rates during the boom. Control growth and lending (regulation required). No recession.

2) Keep interest rates too low during the boom. Credit bubble. Credit crisis. Recession.
a) Subsequently keep interest rates too high. Deep recession. Much structural damage to economy.
b) Subsequently lower interest rates too far. Initially mild recession. Then inflation pops up. Recession deepens. Much structural damage to economy.
c) Interest rate policy spot on. Recession. Recovery.

(1) would have requierd intelligent government. Probably <5% of MPs would have managed this, given their short-term, hubrisitic nature.

Does anyone have any proper argument as to how we steer ourselves along path (2c)? Best I can think is just continue to let the MPC target 2% CPI until this blows over. (Though change the rules to let the MPC keep an eye on house prices and credit in the future.)

It's just a crapshoot at this stage. Who knows where interest rates should really be? Probably as high as we can get away with though where that border lies is hard to define.


Personally, I think it's all the money that the governments are magicking up to pour into the banking system that is likely to do the long term damage.

Probably hundreds of billions of dollars are going to end up being leached from the future income of the taxpayer base ... just to keep the banking system from totally imploding, not for anything productive. It's like a heroin addict spending thousands of quid a week just to feel close to 'normal'.

That will impose a massive burden on our future net productivity making it hard for the population to work their way out of recession.

The temptation will be to simply print up the money. Generalli has highlighted how the US government is issuing 'unsterilized' bonds of late and there are reports from all over about authorities having problems selling bond issues on the market (including the UK treasury). Then we could face hyperinflation.

StevieJ

going2die_rich wrote: »

Being a saver, I'd love for "1979-1982 17%" interest rates. But even I am not selfish enough to really wish it, as it would cripple far too many people (even though I think those who over borrowed should be penalised financially to be taught a lesson).

For the benefit of the country, I think rates can only go down for now, regardless of inflation.

I am with you, I have no debts or mortgage to speak of but I don't want people to be thrown out of work so that some HPCrasher can buy a cheap house.

Realy

!!!!!!? wrote: »

It's just a crapshoot at this stage. Who knows where interest rates should really be? Probably as high as we can get away with though where that border lies is hard to define.


Personally, I think it's all the money that the governments are magicking up to pour into the banking system that is likely to do the long term damage.

Probably hundreds of billions of dollars are going to end up being leached from the future income of the taxpayer base ... just to keep the banking system from totally imploding, not for anything productive. It's like a heroin addict spending thousands of quid a week just to feel close to 'normal'.

That will impose a massive burden on our future net productivity making it hard for the population to work their way out of recession.

The temptation will be to simply print up the money. Generalli has highlighted how the US government is issuing 'unsterilized' bonds of late and there are reports from all over about authorities having problems selling bond issues on the market (including the UK treasury). Then we could face hyperinflation.

But we can only face what is in front of us which at the moment is recession,
Inflation looks at the moment like it should come down.
Neither deflation or hyperinflation are somthing we can combat at the moment as they are not here.

WTF?_2

StevieJ wrote: »

I am with you, I have no debts or mortgage to speak of but I don't want people to be thrown out of work so that some HPCrasher can buy a cheap house.

How very noble of you - why not finally close your mortgage by paying off that 300 quid balance you said you are maintaining and free up the credit for the bank to lend to someone else then.....