Possible Tax Cuts on the way

StevieJ

Paul_N wrote: »

During what period of time are you talking about here (when interest rates were rising)?

Yes you are correct, I checked they actually went down (1990) from around 15% to around 14%, it just felt like it had gone up. Then again they had started dismantle MIRAS.

StevieJ

Generali wrote: »

And in the one before that too.

This is different from the last couple of recessions and IMO has more in common with the 1930s US/1990s Japan than anything from C20th UK.

That's not to say things will be as bad as those depressions but that is where we should be looking to see how transmission mechanisms will work and ways things could get really nasty (don't bail out banks and don't bring in protectionism seem to be the lessons we could learn potentially).

But surely those periods are what the authorities have been using as a response template, we hear all those tales of Bernanke being a student of the 1930's depression.

Paul_N_4

Generali wrote: »

And in the one before that too.

When did these rises come though? I believe we were in recession from 1990 - 1992

Here are historic BOE base rates:
http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx

This is different from the last couple of recessions and IMO has more in common with the 1930s US/1990s Japan than anything from C20th UK.

That's not to say things will be as bad as those depressions but that is where we should be looking to see how transmission mechanisms will work and ways things could get really nasty (don't bail out banks and don't bring in protectionism seem to be the lessons we could learn potentially).

You mean 0% interest rates and 70% house price crashes.

StevieJ

Paul_N wrote: »

When did these rises come though? I believe we were in recession from 1990 - 1992

Here are historic BOE base rates:
http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx



You mean 0% interest rates and 70% house price crashes.

Try 1981 GDP fell 2.2% and interest rates went up

Generali

Paul_N wrote: »

You mean 0% interest rates and 70% house price crashes.

Not necessarily. What I mean is that if you want to look for clues as to what could happen then look at other similar economic situations and what happened afterwards.

There's that old quote, "History doesn't repeat itself but it rhymes".

StevieJ wrote: »

Try 1981 GDP fell 2.2% and interest rates went up

That's what i meant. I clearly had my timings wrong in the early 90s.

StevieJ

Generali wrote: »

Not necessarily. What I mean is that if you want to look for clues as to what could happen then look at other similar economic situations and what happened afterwards.

There's that old quote, "History doesn't repeat itself but it rhymes".



That's what i meant. I clearly had my timings wrong in the early 90s.

You didn't actually mention the 90's you said the one before that (unless you changed it).

Paul_N_4

StevieJ wrote: »

Try 1981 GDP fell 2.2% and interest rates went up

I'm aware they increased during '81, but you did say "the last recession", which is why I wanted clarification of the time period you meant.

Also, depending on how long we're in recession for, we could be a little premature saying interest rates have not risen.

So in conclusion we could have a recession like the '90s because interest rates fell during both. A recession like the early '80s because they could still rise within this recession. Or a recession like Japan because we're heading for 0% interest rates and deflation.

I think its safe to assume no one knows how the next few years will pan out.

Paul_N_4

StevieJ wrote: »

You didn't actually mention the 90's you said the one before that (unless you changed it).

Generali wrote: »

And in the one before that too.

Doesn't matter. If in doubt make it up eh?

StevieJ

Paul_N wrote: »

I'm aware they increased during '81, but you did say "the last recession", which is why I wanted clarification of the time period you meant.

Also, depending on how long we're in recession for, we could be a little premature saying interest rates have not risen.

So in conclusion we could have a recession like the '90s because interest rates fell during both. A recession like the early '80s because they could still rise within this recession. Or a recession like Japan because we're heading for 0% interest rates and deflation.

I think its safe to assume no one knows how the next few years will pan out.

Agree, but we are all trying to set ourselves based on our best estimate, success depends on how you adapt to what actually happens.
BTW I mentioned 90 as the last recession but Gen didn't.
Goodnight, interesting discussion.

neverdespairgirl

StevieJ wrote: »

That is fine, but when they are slicing hundreds of pounds off consumers mortgage costs, I am not convinced it is going to work that way, In the last recession interest rates were actually rising.

I don't think what I'm talking about is really related to interest rates. If people fear they might lose their jobs, and want to put away a bit for a rainy day, they'll do so.

In the last recession, interest rates were falling a lot.

In 1989, it was 15%. That fell to 14% in October 1990, and a whole series of cuts in 1991 down to 10.5% by October. In 1992, excluding the ERM fiasco, they continued to fall, down to 7% by the end of the year. In 1993, they dropped further, to 5.5% in 2 cuts:

http://www.moneyextra.com/dictionary/interest-rate-history-003455.php