Once inflation rises interest rates will rise rapidly as well

Really2

RDB wrote: »

What happened last time this cycle happened?

People wages went up in both inflation lead booms and people lost houses in all busts.

A fact people seem to wish to discount on here is what feeds sustained high inflation.

IveSeenTheLight

Radiantsoul wrote: »

A lot of people lost their houses in the 1990s and real house prices fell below the 1987-88 peak for about a decade.

On average.

In some local areas, they fully recovered within one year.

I say focus more clearly on your local area and less so on the UK average.

Really2

Generali wrote: »

History tells that base rates are more likely to be > 10% than < 1% and I think that it's very likely that I will see base rates of > 10% before I die (I'm 39) and very unlikely that after the current mess clears that I'll see base rates of < 2% in the same period.

Edit from my last post old fella .

What I am saying is not that it cant happen. I am saying it can only happen (going on the past) if we get sustained inflation like previously.

In both of those cycles pre the busts we got in to a wage-price spirals.

If you look at history the same way, the way of sustaining the inflation would have to be the same also.

Graham_Devon

Radiantsoul wrote: »

Yeah, but it probably won't happen soon. There are two many people who are in a similiar position to you. And so the situation would have to be pretty dire for a government to suddenly act in that manner. A lot of debt needs to be repaid first.

If prices keep increasing and outstripping wages there will ALWAYS be people in the same position. There is no way of getting out of it as prices out so out of line with wages.

MiserlyMartin

Element47 wrote: »

"To keep inflation down to only 10%... the economy has to tolerate interest rates of perhaps 8%. The risk is that households will not... reduce their debts by enough, and so the economy will not be able to tolerate this... Rates may have to be kept lower for an aditional 9 months and the consequence will be inflation peaking at 20%."

Andrew Lilico Policy exchange

Think back to 1989 when 8% inflation was the figure. Its not that long ago. But rates were much higher then.

MiserlyMartin

Milarky wrote: »

Even the BOE admit it hasn't worked....

"There is a risk that expectations will become de-anchored, and it is that risk that underpins the upside risks to inflation," [Spencer Dale, BOE Chief Economist] said, noting inflation has been above target for 41 out of 50 months since 2006, and averaged over 3 percent for 2 years.

If most people failed in their job for 41 months out of 50 they would be out the door a long time ago, so fast.....! Time to fire Marvin Mervin and his team of idiots on the MPC.

Radiantsoul

Graham_Devon wrote: »

If prices keep increasing and outstripping wages there will ALWAYS be people in the same position. There is no way of getting out of it as prices out so out of line with wages.

I feel it is unlikely any government would crank up interest rates wildly. At least not without significant wage inflation. Most inflation at the moment is being "imported" and so it seems unlikely to create a vicious cycle.

Low interest rates are a political as well as economic necessity.

MiserlyMartin

Radiantsoul wrote: »

Yeah, but it probably won't happen soon. There are two many people who are in a similiar position to you. And so the situation would have to be pretty dire for a government to suddenly act in that manner. A lot of debt needs to be repaid first.

But people cannot pay back debt as this inflation eats into their take home pay and taxes rise. Its payback time. The BoE are stuffed. The economy on life support. Rates can't go lower, inflation rising, people overstretched on stupidly over priced housing. What can they do, apart from print? But that will ignite more inflation. All options are expired. No wonder they are sitting on their hands stuck for ideas, hoping it will all get better on its own.

MiserlyMartin

Radiantsoul wrote: »

I feel it is unlikely any government would crank up interest rates wildly. At least not without significant wage inflation. Most inflation at the moment is being "imported" and so it seems unlikely to create a vicious cycle.

Low interest rates are a political as well as economic necessity.

Oh but the MPC are totally independant from government influence, supposedly.

Radiantsoul

MiserlyMartin wrote: »

Oh but the MPC are totally independant from government influence, supposedly.

I don't think that is true, or anyone believes it. The government can always simply take back interest rate policy.
And fiscal and monetary policy need to be somewhat co-ordinated.