Almost there! Unemployment hits 7.1%

antrobus

MFW_ASAP wrote: »

Cash savings aren't investments. If we want people to invest in companies, and therefore invest in the economy, far better to keep savings rates low so that people invest in shares and corporate bonds to get higher returns - investing directly in the companies.

Note: this is exactly what is happening - more people are investing in shares, chasing better returns than offered by savings accounts, than ever before.

Que?

Real interest rates effect the balance between consumption and savings - the higher the interest rate, the more likely it is that someone will defer consumption i.e. save. It has nothing to do with what form said saving will take.

MFW_ASAP

antrobus wrote: »

Que?

Real interest rates effect the balance between consumption and savings - the higher the interest rate, the more likely it is that someone will defer consumption i.e. save.

Which takes me back to my original point. Do we need to get people to defer consumption at this point?

pbouk

TheFactory wrote: »

Yes, undervalued.

Yes, over the next few years.

Only time will tell.

Are you Kirsty or Phil hiding your identity?

Swafe

MFW_ASAP wrote: »

Cash savings aren't investments. If we want people to invest in companies, and therefore invest in the economy, far better to keep savings rates low so that people invest in shares and corporate bonds to get higher returns - investing directly in the companies.

Note: this is exactly what is happening - more people are investing in shares, chasing better returns than offered by savings accounts, than ever before.

This could potentially be a future crisis waiting to happen, could it not?

When people have cash in the bank, if there is a massive crash, people still have money in the bank which then rate manipulation can try and sway people to continue saving or invest (or spend!) to suit a 'recovery'

If people have all their spare money in shares, the next financial crisis will be intensified by the fact that any spare money people have will be in stocks 'chasing higher returns' if these halve over night during a stock market crash for whatever reason, all of a sudden people have no money and their investments are also worthless compounding the problem and increasing the length of the recovery, the credit crunch could in comparison be a walk in the park

In short, low interest rates have been used to reduce saving, increase spending which then stimulates the economy , manipulating what would normally happen to try and get us out of the hole we have found ourselves in, next time round if history repeats itself again and the interest rates don't increase we have our safety net taken away and we are up the creek without a paddle, at least this time we had a paddle

TheFactory

pbouk wrote: »

Are you Kirsty or Phil hiding your identity?

No, why? Because I think house prices are going to rise?

What is your problem with my opinion?

Graham_Devon

Mark Carney has now come out, speaking from Davos stating that we shouldn't focus neccesarily too much on just one indicator (that being unemployment), and that there are other factors to that indicator rather than simply it's level.

He also stated that the 7% level was a level used to "capture the idea that unemployment was going to have to fall before they even started to think about rate rises". I.e. distancing themselves from the 7% level.

The BOE has positioned itself by suggesting yesterday that looking at unemployment may well be misleading. But they said the same for inflation when they announced forward guidance.

Asked by Paxman yesterday whether he would now consider whether to lower the level for forward guidance to 6.5%, Carney answered that it was "really about overall conditions in the labour market" and he did not want to focus on one indicator.

Sounds to me as if they are trying to distance themselves from forward guidance. The headline indicator was always the unemployment level, with only "other exceptional circumstances" taking over the priority of unemployment.

He has tapped into productivity in the labour market as a reason not to raise rates. But seems to me if that goes back to normal, we'll just lean on something else.

Maybe they should just be honest and state they won't raise rates unless forced to by economic conditions? Better than setting an arbituary marker which they hope will give them time? Seems a bit silly to make it all around unemployment and then come out and suggest they don't want it to be all about unemployment.

Doubt we'll hear much more from the BOE on forward guidance anyway!!

Graham_Devon

HAMISH_MCTAVISH wrote: »

Funding for lending was withdrawn from mortgages once the lending markets recovered sufficiently.

Interest rates will rise when the economy has recovered sufficiently.

HTB will end when bank mortgage lending recovers sufficiently.

What is "sufficient" though?

Only today you were posting that posters have "nothing left to post" thanks to all the positive indicators.

So what, in your view, is "sufficient" enough to enable the withdrawal of support and increasing of rates?

Apparently we could have growth close to 4% this year. Is that not "sufficient"? Growth in house prices could well be 10%+ if trends continue. Unemployment could well be below 6.5% by year end. Manufacturing is growing rapidly according to the surveys.

If those growth levels are not sufficient enough, then I dread to think what may be.

You, and others, are simply drowning yourselves in your own excitement over the positive figures.....yet when it comes to interest rates rising, you seem to hide behind a vague notion of sufficiency and everything being "not quite good enough...".

lvader

I expect it to depend on inflation, unemployment, global growth, strength of the pound, government borrowing/deficit. For example why increase rates while inflation is low, pound is strong and the economy hasn't grown sufficiently to get the deficit below 3% despite strongish growth?

Thrugelmir

Graham_Devon wrote: »

Sounds to me as if they are trying to distance themselves from forward guidance.

Like the media. You are falling into the trap of over analysis. Nice easy soundbites. Whereas the real decisions are made of volumes of forecast data. That change every month for umpteen number of reasons.

Graham_Devon

Thrugelmir wrote: »

Like the media. You are falling into the trap of over analysis. Nice easy soundbites. Whereas the real decisions are made of volumes of forecast data. That change every month for umpteen number of reasons.

It wasn't the media stating what he said though.

It was himself, using his own words. As are Paul Fishers words. I haven't used any "media" reports. Only what they have said.

If the media are reporting on the same line, it's probably because they are questioning it a bit too. Your posts always seem to defend the BOE no matter what they say or do. I understand what you are saying, I honestly do, but it does leave the question of why time after time they seem to find themselves shooting both feet for the sheer crack of it.

Why say such things and make such a big thing about unemployment when annoucning forward guidance (again, this was not media, it was their own press conference) if 4 months later you are going to suggest it wasn't really what you said it was at all?

What you are saying is undeniably true. However, that doesn't mean the BOE haven't created a whole new radical policy which they now seem to have decided to simply slope away from and create other reasons for not doing anything.