Time to raise interest rates, time to stop false BRICK economy

Thrugelmir

originalmiscellany wrote: »

it now says interest rates won't go up until... the end of 2014! Gosh... That's a very long time!

Look at Japan. Been stuck in a ruck for a long time. We could be heading for the same fate.

SuperV

lippy1923 wrote: »

def agree with previous poster. Increasing rates will not make me save more, but pay my borrowing off quicker. Why post something like this anyway and delete comments which disagree with you? Isnt that the point in posting, to have peoples opinions lol?
My opinion... keep rates nice and low. My mortgage is sitting nicely under 3 % where my savings are actually doing better for me above 3%

It is not about saving as much as about economy restructuring. If you are in the right job making wealth for yourself and others you will benefit. In a wrong job playing a zero sum game you will suffer.

If nothing is done, the riots will become a constant fact, not just a temporary event.

So, the sooner QEfRD begins inflation neutered with interest rates rise, the better for all.

SuperV

Thrugelmir wrote: »

Look at Japan. Been stuck in a ruck for a long time. We could be heading for the same fate.

They don't go around burning buildings and cars ... in the UK it will be worse.

Economy needs restructuring - Quantitative Easing for Research and Development.

chucknorris

lisyloo wrote: »

Not necessarily.
If you increase my borrowing rate, I will withdraw my savings and pay off the borrowings.

If you increase interest rates a lot of people will have less to save from their income.

Me too, as soon as my mortgage rate goes over 3% I will pay off 150k of mortgage that is not claimable against tax.

SuperV

chucknorris wrote: »

Me too, as soon as my mortgage rate goes over 3% I will pay off 150k of mortgage that is not claimable against tax.

That is not a problem. What will you do then? Buy another house, invest in some business or start your own?

Thrugelmir

SuperV wrote: »

Economy needs restructuring - Quantitative Easing for Research and Development.

QE merely kicks the can down the road so to speak.

R&D doesn't always produce a viable outcome. There's plenty of venture capital for the right product.

Ark_Welder

Thrugelmir wrote: »

QE merely kicks the can down the road so to speak.

Hopefully, for long enough so that a stable environment can start. One mistake of the 1930's was the reduction of money supply at a time of recession that turned the recession into depression. QE is designed to try to avoid that same mistake. That doesn't mean that it should continue indefinately - that equally would be a mistake - just that its purpose should be recognised.

SuperV

Thrugelmir wrote: »

QE merely kicks the can down the road so to speak.

R&D doesn't always produce a viable outcome. There's plenty of venture capital for the right product.

It will take 12-24 months for R&D to start showing something.

Interesting enough, there isn't enough capital. There is much more capital for Bricks and Mortar investment ~ consuption, not creation. Everything is based upon 80 years old plan used in two countries at the moment. In one it worked so to speak, the second it didn't.

If the economy is to grow, it has to be real weatlh creator, not a paper one as at the moment.

SuperV

Ark_Welder wrote: »

Hopefully, for long enough so that a stable environment can start. One mistake of the 1930's was the reduction of money supply at a time of recession that turned the recession into depression. QE is designed to try to avoid that same mistake. That doesn't mean that it should continue indefinately - that equally would be a mistake - just that its purpose should be recognised.

Exactly! QEfRD puts money in wealth creation. Problem with Japan in 1990s and West now is that money has been put in banking.

It seems that all industries are exposed to market forces except finance and banking. Do they create wealth? They redistribute it.

In order to avoid an old scenario,QE should create wealth by creating new assets, not just try to keep the prices of old asset classes high.

SuperV

Economy is in a free fall again. The reason is simple - the current economy is based on consumption and services, mostly banking.

Consumption doesn't create new value - it is how to spend a wealth.

Banking doesn't create new value - it just reallocates it. In that process it introduces a haircut that is used ... in consumption.

The only way out of this spiral is to invest in wealth creation, not wealth bubble. It seems to me that there are few ways to make available funds:
1) Persuade current bubble wealth owners to risk and invest in real wealth creation.
2) Introduce a tax on bubble wealth.
3) Print money and finance it by increasing the interest rate.

If the wheel stops, it will be very hard to make it move again. If the wheel stops, all bubble wealth will be worth... 0.