BOE - Britain shows signs of depression

mardatha

You two sound like you 're married. That conversation sounds like many we have in here.. !

JP45

Graham_Devon wrote: »

http://www.telegraph.co.uk/finance/financetopics/recession/4996994/Britain-showing-signs-of-heading-towards-1930s-style-depression-says-Bank.html

It's all going Pete Tong!

No surprise to me, as I and other have been saying it for ages, to a roarcus laughther that it simply will not happen.

Basically the BOE is now warning of a 1930's style depression. Alistair Darling is also now giving warnings that more drastic action is needed.

Too much debt apparently. You'd never have guessed!

It's no surprise that the Bank's latest Quarterly Bulletin focusses on the threat posed to the economy by deflation. It would have been extraordinary if the latest report had not done so, given the radical steps beng taken (via QE) to combat the threat.

Let's hope the Bank is correct in its analysis. Bear in mind that it wasn't that long ago that the Bank was misguidedly focussing on the threat of inflation and hence delayed cutting the Bank rate. All but one of the MPC members (Danny Blanchflower being the honourable exception) endorsed the Bank's view that inflation posed the biggest threat. This was at a time when many others were calling for rates to be cut.

Even if the Bank is right this time round, the question is will it respond with sufficient speed and force to curb any subsequent inflationary presssure. As David Smith pointed out in yesterday's Sunday Times:

The Bank has to be ready to raise rates as quickly as it cut to avert any medium-term inflation problem. It would also give a powerful signal that the worst was over. That won’t happen for a while. But for once, when interest rates go up, it will be a cause for national celebration.

http://business.timesonline.co.uk/tol/business/columnists/article5908405.ece

Degenerate

JP45 wrote: »

Let's hope the Bank is correct in its analysis. Bear in mind that it wasn't that long ago that the Bank was misguidedly focussing on the threat of inflation and hence delayed cutting the Bank rate. All but one of the MPC members (Danny Blanchflower being the honourable exception) endorsed the Bank's view that inflation posed the biggest threat. This was at a time when many others were calling for rates to be cut.

I disagree, in fact I think the bank played that one perfectly, although it's highly debatable how else they could have acted within the narrowness of their remit. They did drop the base rate by a total of 0.75% back in 2007 when the credit crunch first began - then they held it at 5% because of the spike in inflation from commodity prices. Despite the long-running credit crunch, we didn't actually enter recession until the last half of 2008.

In September, Lehman changed everything, and since then the BOE has been well ahead of the curve, delivering a rapid monetary stimulous that is the envy of Europe and America. The US had the will, but had already blown it's interest rate wad, and the Euro-zone countries have to suffer under a central bank that is so hawkish it actually put UP interest rates last summer. Along with this we get the added benefit of a competitive devaluation of Sterling due to the rate cuts. No wonder some EU leaders have been sniping at Britain, they only wish they had that sort of flexibility in the Euro-zone.

If the BOE had been cutting interest rates steadily since the credit crunch began, not only would it have made the inflation spike much worse, but it would have left them with much less interest rate ammunition in their pocket for when it was really needed. Now, getting back to the Telegraph article, I don't think this is news at all. What did we think the bank was trying to say when it slashed rates to all-time lows and moved to Quantitative Easing?

PasturesNew

Graham_Devon wrote: »

It's all going Pete Tong!

It's OK, I managed to grab a couple of passable domain names for this moment ... not brilliant, but not too shabby... and each day they get higher up my "must do something with those" list.

PasturesNew

Graham_Devon wrote: »

Too much debt apparently. You'd never have guessed!

I read it... we're safe. It only mentions families and hard-working families.... which means we singles will be OK .. ah, hang on, what if it means they'll eat us to stay alive??!!