Interest rates so low - don't bother saving!

Glen_Clark

grey_gym_sock wrote: »

but then why would QE need to be reversed? the more obvious response to any sign of domestic inflation would be to stop any further QE (if it hadn't already been stopped) and put interest rates up by 0.5% or 1%.

In case you hadn't noticed we already have domestic inflation.
But when it really kicks off, it will take a lot more than a 1% rise in interest rates to control.

grey_gym_sock

Glen_Clark wrote: »

In case you hadn't noticed we already have domestic inflation.
But when it really kicks off, it will take a lot more than a 1% rise in interest rates to control.

i meant inflation which is caused by domestic factors. currently we have imported inflation, from rising commodity prices and rising costs in other countries. (it's also not very high.)

a 0.5% or 1% rise is meant as a possible first move. to be followed by more if necessary.

part of my point is that modest rises in interest rates would not be very painful. though very big rises would be.

Glen_Clark

Linton wrote: »

Higher tax allowance removed in the 2012 budget.

Wrong

It has been reduced. But those over 65 will still pay less tax on the same income. http://www.hmrc.gov.uk/rates/it.htm#2

Glen_Clark

grey_gym_sock wrote: »

rising commodity prices

Commodities in general are still worth the same as last year.
Its the value of the pound that has fallen.

lvader

Exactly, the current governer doesn't need to worry about unwinding QE, infact it might not ever happen. Maybe they will sell bits and pieces if and when there is a surplus.

GeorgeHowell

Glen_Clark wrote: »

So now its gone from abuse to setting up a straw man.
Where did I say that ' nobody should benefit from privately owned capital'
or that we should have 'negative real rates'
I just think that its unrealistic and unhelpful to demand positive real rates where there is no risk. Groups like 'Save Our Savers' would get a lot more support by focusing on inflation, rather than interest rates

If you think that positive real rates are unrealistic then you fail to understand the very basics of finance.

lvader

Glen_Clark wrote: »

Commodities in general are still worth the same as last year.
Its the value of the pound that has fallen.

Which commodities?, some are worth less much less than 12 months ago, some much more.

The pound is worth about the same in gold as it was a year ago.

Linton

Glen_Clark wrote: »

In case you hadn't noticed we already have domestic inflation.
But when it really kicks off, it will take a lot more than a 1% rise in interest rates to control.

One can suggest various mechanisms for internally generating inflation:

1) The creation of excess cash by high levels of lending. Currently loans are being repaid, particularly as mortgages are being paid off faster than new ones are being started.

2) Extra cash entering the economy by government spending. This is being restrained.

3) Shortage of labour forcing up wages: hardly a problem at the moment.

What mechanism do you foresee as causing inflation to "really kick off"?

I believe our current inflation is primarily caused by demand driven global commodity price rises. There's not a lot we can do to change that.

Glen_Clark

lvader wrote: »

Exactly, the current governer doesn't need to worry about unwinding QE, infact it might not ever happen. Maybe they will sell bits and pieces if and when there is a surplus.

.......in fact I don't know why we ever bothered with wealth creation when all we needed to do was to print more money

lvader

Glen_Clark wrote: »

.......in fact I don't know why we ever bothered with wealth creation when all we needed to do was to print more money

What wealth creation?, most of the growth in the last 20-30 years has been through cheap consumer credit and government overspending.