Guarduan/Reuters: BoE to cut to 1.5% in Dec

setmefree2

monkeymaster wrote: »

Update, now $1.49445 down about 5 cents on the day and from a peak of $2.11 a year ago. Gonna get nasty.

Of course it's going to be nasty but a weaker sterling might help.

Lowering interest rates will support the banks by helping borrowers when times get tough. The UK does not want to end up like the US with tons of foreclosures and a spiralling down scenario. Lower interest rates also helps businesses by making their borrowings cheaper which will hopefully save a few jobs. Low interest rates also puts more money into the pockets of the consumers which they will either spend or save - either is good for the economy.

Lower interest rates lowers sterling which helps exporters and also helps increase tourism to the UK. Both these things bring money to the UK.

Lower sterling makes imports more expensive but the UK is now so in danger of over-shooting into a deflationary scenario that a bit of inflation in the system will be good thing IMHO. Remember deflation is a much bigger threat to an economy than inflation. Deflation leads to a spiral out of which economies find it hard to climb (think Japan) so a bit of inflation is preferable to deflation.

The only big downside is that we will all be holidaying in the UK for the next few summers - but again that is more money for the UK economy.

neverdespairgirl

Dithering_Dad wrote: »

I'm bearish towards the stockmarket and the housing market right now because I think both will continue falling. Once I feel that the stockmarket bottoms I will start feeling bullish about the market and will be investing.

DD, I thought you said somewhere recently you thought the stockmarket had reached the bottom?

TDS_2

neverdespairgirl wrote: »

DD, I thought you said somewhere recently you thought the stockmarket had reached the bottom?

Agreed. You invested heavily when the FTSE was down at 3800 or thereabouts...

So far it looks like a shrewd move. Well Played.

kennyboy66_2

!!!!!!? wrote: »

That's a good point.

The bearish on housing tend to be savers.
The bullish tend to have large mortgage debt or property investment.

But not always. There are quite a few bearish people here who own their property outright, even multiple properties and BTLs.

Not many bullish people who haven't already bought. Mind you, if you were bullish about today's market the thing to do is buy.

I think our vastly overestimate the number of "bulls" and "bears". They exist at the margins, for the vast majority of people they are neither & often fairly disinterested, particulalrly the elderly.

People with large mortgages tend to be younger people - as they should have a decent working life ahead of them.
People with no mortgage and savings tend to be older people who are approaching retirement or retired as they have many years to live off their savings.

neverdespairgirl

setmefree2 wrote: »

The only big downside is that we will all be holidaying in the UK for the next few summers - but again that is more money for the UK economy.

Speak for yourself - we've had holidays in the UK every summer since 2005. I hope the rest of you will continue to push off to Spain and leave the UK for us (-:

Dithering_Dad

Hi NDG, I thought the market would bottom at 3500, which it got close too but hasn't hit just yet. The market is slowly getting there though. I bought in heavily at 3800 (as TDS rightly says) but as I was (and still am) bearish, I bailed back into cash at about 4300 and locked my gains away.

I missed out on a bit of money by moving to cash too early because the market went over 4500, but I'm happier to take my small gains and hold than to go for larger gains and perhaps lose.

The market is dropping to a point where I think I'll be popping back in again to grab some gains on the bounces, but I still think the trend is downward. Just a guess though really.

Really2

neverdespairgirl wrote: »

Speak for yourself - we've had holidays in the UK every summer since 2005. I hope the rest of you will continue to push off to Spain and leave the UK for us (-:

I have since 2002 but being in turkey(2001) when 9/11 happened was a bit of a eye opener. But also blonde and fair skined so unless I want to look like slapped baboons @ss the UK is the place for us.

neverdespairgirl

Really2 wrote: »

I have since 2002 but being in turkey(2001) when 9/11 happened was a bit of a eye opener. But also blonde and fair skined so unless I want to luck like slapped baboons @ss the UK is the place for us.

Same for us - Isaac and I are very fair-skinned, and avoid the sun. We do go to Israel quite a bit, and use lots of suncream and use hats, etc.OH doesn't, and gets burned, and fails to learn from it.

epz_2

neverdespairgirl wrote: »

Speak for yourself - we've had holidays in the UK every summer since 2005. I hope the rest of you will continue to push off to Spain and leave the UK for us (-:

me to, im about to start a weeks drinking holiday in glasgow as lots of my mates are back home from all over the world :beer:

WTF?_2

dougs wrote: »

your title is very misleading. It does not say that the BoE will cut rates to 1.5% in Dec at all.

Sorry, I meant to add a question mark at the end before I posted it.

I think they'll go all the way down to zero. If we actually were to experience real deflation over a longer term, that would be a reasonable response. If everything is deflating, you don't need high interest rates. Your money is getting more 'valuable' just by virtue of the fact you are still holding it. (That's happening right now with housing - interest on my savings has dropped but since I'm going to use them to buy a house and houses are dropping circa 15% per year, no great disaster).

However, long lasting deflation could be catastrophic, given the amount of personal and national debt that has been accumulated. It was tough enough back in the 30s when debt levels were a lot lower and even then the world economy was only pulled out of stagnation by WWII. We can only speculate what will happen with so much debt should deflation set in.

This is all part of priming the pump for inflation. No doubt the reasoning is that they can cancel out the deflation with an equal and opposite amount of inflation. I don't think it'll happen that way, though. The much greater likelihood is either of failure to inflate, leading to an even more catastrophic bust or rampant over-inflation leading to Zimbabwe/Weimar style disaster.

There's going to be a short window of opportunity for those of us who have saved to see the benefit of those savings. Once the inflation starts, you might as well have binged on debt for years.