How long can/will interest rates stay this low?

scousethife

hailey00marie wrote: »

Just wondering what everyone's opinions are?

I like cheese, and Im not too enamoured with local councills painting roads with cycle boxes and hatchings etc.

Thats my opinion.

StevieJ

I wish I had a big mortgage, I feel like I am missing out :mad: I have 1.45% on £300, not fair.

Rochdale_Pioneers

ad9898 wrote: »

Nobody really has any idea, could be 12 months or 10 years, however if inflation starts to rear it's head, and after todays announcement, it's as sure as eggs are eggs, then they will on the up.

Good - thats the idea. With inflation sliding into negative figures we need to encourage inflation to keep it positive. And once it starts heading p the government simply liquidates the assets bought through QE and the inflationary push from that disappears.

If we were printing zillions of banknotes and handing them out in wheelbarrows, then your obsession would have a point to it. As we're not, and the cash in circulation stays the same, then it doesn't have a point. You seem ignorant of what QE actually means and does. Deliberately of course. You're one of the UK versions of Rush Limbaugh - desperately wanting the economy to crash and burn so you can score political points.

Its all a bit pathetic really. Although I do like your signature!

stevetodd

Rochdale_Pioneers wrote: »

Good - thats the idea. With inflation sliding into negative figures we need to encourage inflation to keep it positive. And once it starts heading p the government simply liquidates the assets bought through QE and the inflationary push from that disappears.

If we were printing zillions of banknotes and handing them out in wheelbarrows, then your obsession would have a point to it. As we're not, and the cash in circulation stays the same, then it doesn't have a point. You seem ignorant of what QE actually means and does. Deliberately of course. You're one of the UK versions of Rush Limbaugh - desperately wanting the economy to crash and burn so you can score political points.

Its all a bit pathetic really. Although I do like your signature!

I think a lot of people on this site DO think QE is like printing zillions of banknotes, I think they just don't bother to read around the subject and believe posts like the one that you are corretly criticising and as you say some seem to relish disaster

Generali

stevetodd wrote: »

I think a lot of people on this site DO think QE is like printing zillions of banknotes, I think they just don't bother to read around the subject and believe posts like the one that you are corretly criticising and as you say some seem to relish disaster

The Bank of England is talking about printing £75,000,000,000 or about 5% of GDP. That's a lot of money.

Whether it causes inflation or not depends on the actions and the state of the banks as banks are the chosen mechanism for transmitting the increased money stock to the economy. If they use the cash to bolster their reserves then it'll have no impact, inflationary or otherwise. If they lend the lot then it will have an impact on inflation.

The thing that bothers me with all this is that the Government and the BoE seem to think that they can finesse this. Firstly that they can just destroy the money again if inflation starts to rise - they won't be able to as it'll be politically impossible to run a £75,000,000,000 budget surplus. Secondly they seem to think that they can do this without a murmur from the bond market - if they keep printing money they'll find out that bond investors will want a heafty premium for lending to the UK Government. Let's face it, given the massive Government deficits around the world there isn't a shortage of sovereign debt for investors to buy.

Radiantsoul

Generali wrote: »

The Bank of England is talking about printing £75,000,000,000 or about 5% of GDP. That's a lot of money.

Whether it causes inflation or not depends on the actions and the state of the banks as banks are the chosen mechanism for transmitting the increased money stock to the economy. If they use the cash to bolster their reserves then it'll have no impact, inflationary or otherwise. If they lend the lot then it will have an impact on inflation.

The thing that bothers me with all this is that the Government and the BoE seem to think that they can finesse this. Firstly that they can just destroy the money again if inflation starts to rise - they won't be able to as it'll be politically impossible to run a £75,000,000,000 budget surplus. Secondly they seem to think that they can do this without a murmur from the bond market - if they keep printing money they'll find out that bond investors will want a heafty premium for lending to the UK Government. Let's face it, given the massive Government deficits around the world there isn't a shortage of sovereign debt for investors to buy.

No need to create a surplus. They have created a nominal liability(money) and used it to buy an asset(gilts, bonds, etc). The balance sheet of the BoE is therefore expanded.

To reverse this they will need to sell the asset and destroy the money created. The "P&L" effect is zero. All that is happening is the BoE balance sheet is growing or shrinnking.

stevetodd

Generali wrote: »

The Bank of England is talking about printing £75,000,000,000 or about 5% of GDP. That's a lot of money.

Whether it causes inflation or not depends on the actions and the state of the banks as banks are the chosen mechanism for transmitting the increased money stock to the economy. If they use the cash to bolster their reserves then it'll have no impact, inflationary or otherwise. If they lend the lot then it will have an impact on inflation.

The thing that bothers me with all this is that the Government and the BoE seem to think that they can finesse this. Firstly that they can just destroy the money again if inflation starts to rise - they won't be able to as it'll be politically impossible to run a £75,000,000,000 budget surplus. Secondly they seem to think that they can do this without a murmur from the bond market - if they keep printing money they'll find out that bond investors will want a heafty premium for lending to the UK Government. Let's face it, given the massive Government deficits around the world there isn't a shortage of sovereign debt for investors to buy.

Are you sure? I thought they had the go ahead for £150 billion but that they wanted to start with £75 billion to see how it goes. I don't think it's actually printing money I think they are going to electronically create money to buy bonds and gilts that can later be withdrawn.

I agree it is not without risk, however I believe that to it is less risky for the economy to do it rather than not do it. The problem as I see it is that its like trying to put the brakes on a super tanker ie you need to start slowing down well in advance of wanting to stop, i.e. it could easily be overdone.

Radiantsoul

I can't see inflation being a big risk. The government can resell the assets purchased and cancel the money issued to suck the liquidity back out of the system.

The bigger risks are the BoE acquires riskier assets and its credit risk rises increasing the national debt burden.

The BoE may also make a trading loss. But even a 1-5% loss is quite small beer really.

Heyman_2

There's a fair amount of rationale here to go along with the usual hysterical doom-mongering, but I guess it's worth remembering that what the BofE are attempting has never been tried before and has a lot of ifs and buts attached to it.

There aren't too many certainties ahead and I for one am just going to be monitoring it all and hoping for the best. :rolleyes:

What WOULD be a good idea, would be for Brown and Darling to try and get some guarantees out of the banks with respect to this 'new' money and how they intend to conduct themselves when QE begins.

Heyman_2

StevieJ wrote: »

I wish I had a big mortgage, I feel like I am missing out :mad: I have 1.45% on £300, not fair.

You can help me pay off mine if you like