When interest rates to go back to normal many more distressed sellers?

purch

Something between 5-10% is probably what most people would consider normal and healthy with a little room either side.

At last :eek:

stellaconcepts

whatyadoinsucka wrote: »

but the economy or the world is not normal..

Very true, and things are looking like they will get worse........

Really2

stellaconcepts wrote: »

Very true, and things are looking like they will get worse........

So with people spending less due to wages lowering in real terms because of tax and inflation what will feed long term inflation and how will it be controlable by raising rates.

MrPThomas

Really2 wrote: »

So with people spending less due to wages lowering in real terms because of tax and inflation what will feed long term inflation and how will it be controlable by raising rates.

I think it will not be controllable they are losing control now. But they will still try and raise rates to bring inflation down.

Inflation is caused by increasing money supply and more units of fiat currency chasing the same amount of goods and services. Next few years the world is going to see big inflation if they carry on expanding the currency supply every month like is happening now.

Really2

MrPThomas wrote: »

Inflation is caused by increasing money supply and more units of fiat currency chasing the same amount of goods and services.

Interesting,so everyone has increasing available cash in this country? Or could inflation not also be increased by taxes or supply/demand based issues. (wheat oil etc)

RenovationMan

MrPThomas wrote: »

I think it will not be controllable they are losing control now. But they will still try and raise rates to bring inflation down.

Inflation is caused by increasing money supply and more units of fiat currency chasing the same amount of goods and services. Next few years the world is going to see big inflation if they carry on expanding the currency supply every month like is happening now.

A lot of the austerity measures have anything upto 2 years before they come in, so its not that the government have lost control, its just that they have a long lead time on some of their fiscal policies. The BoE wont risk tightening monetary policy until they see what the result is of the governments tightening of fiscal policy. This is one of the reasons why I believe we will see low rates for years.

MrPThomas

But they will try and control inflation or stop it getting out of control by raising interest rates.

RenovationMan

MrPThomas wrote: »

But they will try and control inflation or stop it getting out of control by raising interest rates.

Raising rates (aka Monetary Policy) is one method and the other is via raising taxes and reducing public expenditure (Fiscal policy). The government are in the process of doing the latter, so my argument is that the bank wont do the former until they see how the latter progresses and this wont be for a while because a lot of the austerity measures have a long lead time.

whatyadoinsucka

Renovation Man, you summed it up perfectly, inflation isn't top of the priority list, i just wish the daily mail writers would appreciate this.

IMHO key indicators required before inflation is 'key' consideration
1, economy => Stable
2, government spending / cutbacks / redundancies => a degree of understanding impacts
3, unemployment => lower
4, non controllables Energy / Fuel / Food prices
5

Inflation

MrPThomas

Its obvious when rates rise there will be more distressed sellers. The question is how many, if there is a lot of foreclosures then this will have a big effect on house prices.