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Stock Markets Bombing!
Comments
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TBH, the BoE are rather screwed now.
The carry trade is coming to an end. This means that the pound is going to end up weaker in the grand scheme of things. At the same time the credit crunch is driving up real interest rates, threatening the real economy. Let's play Fantasy MPC:
1. Cut rates to support the economy. The pound falls. Exporters will love you for it but imports will rise very quickly in price thus causing run away inflation and, eventually, even more pain for the economy as you try to drive inflation out of the system (think 1974-1995, ouch!).
2. Jack rates up to support the pound. The pound drops a bit but not too much. House prices drop (quickly in areas with a weak economy). Mass default on debt by unwary BTL investors and over borrowed fools threaten the solvency of the banks. Northern Rock goes bust. One of the clearing banks is taken over by the Chinese government's Sovereign Fund.
3. Dither.
The clock's ticking.....0 -
The problems in the US with some people unable to repay loans will happen here too!
With Banks/Building Societies etc. accepting so many times income it's not supprising.
Borrowers are not blameless for requesting/accepting such loans.0 -
Gorgeous_George wrote: »The problem is that people have borrowed too much. If people only borrowed 3x salary, didn't have parents giving a 'helping hand' and stuck to 25 year repayment mortgages, house prices wouldn't be as hideous as they are.
I totally agree with you.0 -
The Federal Reserve just cut rates. They're panicking. I wonder what they know that we don't.0
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The Federal Reserve just cut rates. They're panicking. I wonder what they know that we don't.
Not that I'm an expert (very far from it) but I don't know what to make of this. Weren't the interest rates raised to keep inflation down? What has them so worried that they have dropped interest rates now, between their 6-weekly meetings (something that apparently hasn't happened since 9/11)?0 -
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Not that I'm an expert (very far from it) but I don't know what to make of this. Weren't the interest rates raised to keep inflation down? What has them so worried that they have dropped interest rates now, between their 6-weekly meetings (something that apparently hasn't happened since 9/11)?
They haven't cut baseline interest rates - they've cut the rates of their emergency 'Repo' loans to banks and other financial institutions.
This is all because of the 'credit crunch'. Lenders are extremely wary of lending to anyone - even other banks and financial institutions. They consider the risk to be large so they ask for higher interest rates to compensate.
As a result, it's difficult to obtain the large amounts of money needed to do deals. The central bank thus steps in (the Federal Reserve in this case) and makes loans available to banks who need them at lower rates than the market is demanding. This there's actually 'cash' (ok, electronic cash) out there in order to pay out when people sell stock.
But now for some reason, they've decided to lower the rates for their emergency loans by a full half percent. Seems to me that something big is afoot. The FTSE in London rocketed upwards on the news (more than 3% in about half an hour!) but I get the feeling that this is actually a sign that things are even worse than people feared.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
The problems in the US with some people unable to repay loans will happen here too!
With Banks/Building Societies etc. accepting so many times income it's not supprising.
Borrowers are not blameless for requesting/accepting such loans.
I'll quote a scenario of a work college:
He his on a temporary contract and has been for a year. He earns £6p/h which is less than half as the rest of us. His wife earns near minimum wage too. He had £20k deposit and has just borrowed £152k to buy a house. Utter madness if you ask me, especially when he comes out of his 2 year fixed and interest rates have gone up substantially more than today.
p.s Note the rally again today?
A blip indeed. 0 -
does this mean the BofE will cut rates sooner than expected (let alone actually do the sensible thing and raise rates)? any ideas. i think they are now going to cut by .25 by november. they really are that stupid. not just the BofE who are screwed then - savers too:mad:BLOODBATH IN THE EVENING THEN? :shocked: OR PERHAPS THE AFTERNOON? OR THE MORNING? OH, FORGET THIS MALARKEY!
THE KILLERS :cool:
THE PUNISHER :dance: MATURE CHEDDAR ADDICT:cool:0
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