How to solve the interest rate problem

Generali

HAMISH_MCTAVISH wrote: »

1. Put everyone who wants interest rates to rise in a room.

2. Split them up in groups of 20.

3. Tell them we'll raise rates as soon as each group comes up with one volunteer to lose their job, and another two volunteers to suffer financial hardship from reduced working hours, as the country tips back into recession.

That should focus their minds somewhat....;)

Or you could explain the problem more fully and tell them that 3 will lose their jobs and most of the rest suffer hardship if interest rates are kept very low for too long and inflation really kicks in.

If inflation is the answer to your prayers, you're praying for the wrong thing, generally speaking.

DervProf

HAMISH_MCTAVISH wrote: »

1. Put everyone who wants interest rates to rise in a room.

2. Split them up in groups of 20.

3. Tell them we'll raise rates as soon as each group comes up with one volunteer to lose their job, and another two volunteers to suffer financial hardship from reduced working hours, as the country tips back into recession.

That should focus their minds somewhat....;)

4. Give a pensioner the keys to room, and let the pensioner decide when to let them out.

ILW

Batchy wrote: »

From WIKI...



Systemic reasons for deflation in Japan can be said to include:

• Fallen asset prices. There was a large price bubble in both equities and real estate in Japan in the 1980s (peaking in late 1989).

• Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, many loans went unpaid. The banks could try to collect on the collateral (land), but due to reduced real estate values, this would not pay off the loan. Banks have delayed the decision to collect on the collateral, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks make even more loans to these companies that are used to service the debt they already have. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy.

• Insolvent banks: Banks with a large percentage of their loans which are "non-performing" (loans for which payments are not being made), but have not yet written them off. These banks cannot lend more money until they increase their cash reserves to cover the bad loans. Thus the quantity of loans are reduced and less funds are available for economic growth.

• Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in a bank account. People also save by owning real estate.

I think this is where Hamish is coming from!

What are the interest rates in Japan?

HAMISH_MCTAVISH

DervProf wrote: »

4. Give a pensioner the keys to room, and let the pensioner decide when to let them out.

Or better yet, let the pensioner decide which of their children and grandchildren should lose their job.....;)

shortchanged_2

Hamish seeing as you never answer awkward questions I will ask you again my question from post #5

Hamish are you saying because of HPI this country is now well and truly shafted because any increase in interest rates will be too devestating for the economy?

Graham_Devon

Whatever happened to you posting actual articles defending your position Hamish

HAMISH_MCTAVISH

Graham_Devon wrote: »

Whatever happened to you posting actual articles defending your position Hamish

Here you go....;)

Specific features exacerbate the UK inflation picture, including a rise in value added tax from 17.5 per cent to 20 per cent this month and sterling’s weakness over the past few years.

Without these, inflation would be close to the 2 per cent target and the Bank would not be trying to counter claims that it had gone soft on inflation.

Very subtly, Bank insiders, including members of the monetary policy committee, are beginning to complain that the criticism is overblown and the Bank should not be in the line of fire for specific price rises about which it can do little.

Would it be better to bring down inflation quickly with a large immediate tightening of monetary policy and ignore the consequence on jobs and growth, some insiders ask in rhetorical asides.

Others are open that the Bank is really targeting nominal gross domestic product growth of about 5 per cent a year regardless that this is not consistent with the Bank’s strict 2 per cent inflation target objective.

They complain that the real problem is the remit given by government. It requires the Bank to keep inflation at 2 per cent “at all times” rather than giving a broader challenge to promote economic and price stability, allowing greater discretion for times when the UK is importing significant price changes.

http://www.ft.com/cms/s/0/0d46d3a4-1e7f-11e0-87d2-00144feab49a.html#ixzz1Audx8Inp

shortchanged_2

Still avoiding the question Hamish?