Once inflation rises interest rates will rise rapidly as well

chucky

MiserlyMartin wrote: »

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.

but QE last time hasn't created inflation - why would the next QE (if there is any) create inflation?

Graham_Devon

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.

They may find themselves left with not much choice if they want to continue working with the rest of the world.

Graham_Devon

chucky wrote: »

but QE last time hasn't created inflation - why would the next QE (if there is any) create inflation?

It didn't create anything really did it. Apart from mass profit for banks.

StevieJ

RDB wrote: »

If you are right then how can anyone who bought a house last few years keep up with mortgage payments?

What happened last time this cycle happened?

Because he will be receiving his pension the next time rates go past 10%.

MiserlyMartin

chucky wrote: »

but QE last time hasn't created inflation - why would the next QE (if there is any) create inflation?

RPI at nearly 5%, hasn't it? Although I admit that its hard to pinpoint exactly how much of that is due to QE alone.

StevieJ

MiserlyMartin wrote: »

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

I think we were fighting a Lawson inspired boom, do you see a boom on the horizon?

chucky

Graham_Devon wrote: »

It didn't create anything really did it. Apart from mass profit for banks.

not quite, but you're not far off

but you best tell Miserly that he's wrong - he reckons QE will cause inflation.

MiserlyMartin wrote: »

What can they do, apart from print? But that will ignite more inflation.

chucky

MiserlyMartin wrote: »

RPI at nearly 5%, hasn't it? Although I admit that its hard to pinpoint exactly how much of that is due to QE alone.

why didn't you take CPI?

inflation at 5% and apparently falling isn't bad going after the worst recession since the 2nd world war.

Graham_Devon

chucky wrote: »

not quite, but you're not far off

but you best tell Miserly that he's wrong - he reckons QE will cause inflation.

Lets face it though, it was never really QE as we all assumed it would be, i.e. banks passing it out in the forms of loans.

It's been hoarded and profiteered on. Never got out into the economy to cause inflation.

We do have high inflation, looking over a period of years. But the problem is we don't have the wage inflation to go with it, neither do we any products providing savers with a means of keeping pace with inflation.

chucky

Graham_Devon wrote: »

Lets face it though, it was never really QE as we all assumed it would be, i.e. banks passing it out in the forms of loans.

It's been hoarded and profiteered on. Never got out into the economy to cause inflation.

probably not - i don't think it was ever meant to be passed on but i do get your point.

the important thing was the stabilising the balance sheet and capital requirements for their ratios. which would allow liquidity back into the markets. that happened.