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

WTF?_2

Heyman wrote: »

Yes the country is 'poorer' because of what has happened but let's strike a balance - this is not and will never be a Zimbabwe/Weimar Republic situation.

The axis of power argument (i.e. the decline of the West and the rise of the East) comes up every decade. There's nothing 'sudden' about it, it's cyclical, just like economies. I was reading a fiction book recently written in 1974 and two characters had a discussion about this exact subject all the way back then.

There is no such thing as the 'norm', the only normality is that the balance of power moves in cycles over many years. You are inferring that this is a unique situation and that is not correct.

I'm saying that the USA (and it's bloc of Western economic allies: UK, Aus, NZ, Western Europe) is losing it's hegemony.

Power has been drifting away but this crisis will see a realignment in a much shorter timeframe.

We'll also IMO see a rather large fall in general living standards for our population in a relatively short time frame. Stuff which we take for granted will become a luxury again - eating out, foreign holidays, nice cars, expensive clothes, all the latest gadgets. I wouldn't be surprised to see a fall back to early 90s standards of living. Not a catastrophe but a significant fall nonetheless.


And if our Powers That Be overcook the inflationary policies that they are using to combat the deflationary behaviour of the markets (a natural market response to over a decade of the most amazing monetary inflation) we face a very real risk of raging inflation and worthless currencies.

Dithering_Dad

The 'axis of power' won't shift until the emerging countries develop internal markets. China and India's economic miracle are based on western consumerism and the outsourcing of back office functions. Therefore they can never be immune from financial problems in the West because they're totally reliant on us for their income.

If Western consumers stop buying, then China and the other Eastern economies suffer. If Western companies go under, there is no further requirement for back office outsourcing, and so India suffers.

Because of comunism in China and the caste system in India, there will never be large enough internal markets in those countries to replace the Western consumer. Both China and India have reason to keep the majority of their people in poverty.

Heyman_2

!!!!!!? wrote: »

I'm saying that the USA (and it's bloc of Western economic allies: UK, Aus, NZ, Western Europe) is losing it's hegemony.

Power has been drifting away but this crisis will see a realignment in a much shorter timeframe.

We'll also IMO see a rather large fall in general living standards for our population in a relatively short time frame. Stuff which we take for granted will become a luxury again - eating out, foreign holidays, nice cars, expensive clothes, all the latest gadgets. I wouldn't be surprised to see a fall back to early 90s standards of living. Not a catastrophe but a significant fall nonetheless.


And if our Powers That Be overcook the inflationary policies that they are using to combat the deflationary behaviour of the markets (a natural market response to over a decade of the most amazing monetary inflation) we face a very real risk of raging inflation and worthless currencies.

Hmmm, that's quite a step back from your earlier viewpoint, although you doff your cap at it in your last paragraph. Gotta go now so can't respond further unfortunately...until next time.

WTF?_2

Heyman wrote: »

Hmmm, that's quite a step back from your earlier viewpoint, although you doff your cap at it in your last paragraph. Gotta go now so can't respond further unfortunately...until next time.

Complete disaster is a very tangible possibility once they take the path of printing money.

What I said above is probably 'best case'.

dopester

!!!!!!? wrote: »

And if our Powers That Be overcook the inflationary policies that they are using to combat the deflationary behaviour of the markets (a natural market response to over a decade of the most amazing monetary inflation) we face a very real risk of raging inflation and worthless currencies.

Which is why they are unlikely to just go smiling away in to full speed with the money printing machines.

Why hyperinflation is rare in advanced economies with bond markets.

The cure kills the patient.

WTF?_2

dopester wrote: »

Which is why they are unlikely to just go smiling away in to full speed with the money printing machines.

Why hyperinflation is rare in advanced economies with bond markets.

The cure kills the patient.

Do you trust the same authorities who kept interest rates low and borrowed like there was no tomorrow during the boom to control inflation?

They got lucky with China's rise to being the 'factory of the world' and thus cheaper consumer goods and used it to base an economy on cheap credit.

dopester

setmefree2 wrote: »

I am an optimist:D I think the BOE and government will find a middle way.

Central banks don't have magic powers. They can create liquidity by creating debt, but that isn't the same as creating capital. Whenever a central bank monitizes an asset by buying it (same as printing press money) - it creates a liability.

Running the printing presses at a higher speed destroys more wealth than it creates.

Only the market can create capital by valuing assets above liabilities.

From these levels, and surveying the pillars of the economy, the forces of contraction are way too powerful to be stopped by the Bank of England.

dopester

!!!!!!? wrote: »

Do you trust the same authorities who kept interest rates low and borrowed like there was no tomorrow during the boom to control inflation?

I trust them not to totally devalue the monies which make up their own savings and big fat pension funds.

It is reasonable to assume, most senior politicians and Bank of England officials of that age group, have more of their worth in convertible liquid savings than worth in property.

I accept there* are politicians who have got heavily into property and are leveraged.... Blair and a few others, although Blair rakes it in elsewhere... most have more in liquid savings than in bricks and mortar property.

So yes; I don't expect the authorities to fully commit hard to any policies which lead to inflating monies worth entirely away, to protect their own interests and for millions of other people's interests too. Leads to ruin.

There is still a battle to be fought over that debt liquidation though.

fatpig_2

Dithering_Dad wrote: »

Out of interest, has anyone noticed that there has been a 'sea change' on the Housing boards? To my mind, there seems to be a slight move away from the HPC hardliner posters who constantly rant about global financial devastation, BTL landlords being scum, .

Don't count your chickens too soon. :T

setmefree2

!!!!!!? wrote: »

No, I'm a realist.

That chances that the BoE will manage to inflate by exactly enough to cancel the effects of deflation is minimal.

They'll under-do it and fail, leaving the country even more indebted or they'll overcook and trigger strong inflation.

Still, your faith in the MPC is admirable given that their performance to date.

Time will tell then:D